Taxing SS

[surviver]

Is AARP Helping to fight The SS Tax?

We Worked for This and Paid Taxes for many Years

Just What Is AARP's Stand on This?

[larryk678000]

Those with lower incomes do not pay tax on their social security benefits.  The Social Security Administration estimates that about 56 percent of Social Security recipients owe income taxes on their benefits, the other 44% receive their benefits tax-free because their overall income is low.

You will dislike the truth I am about to tell you and you can argue that I am wrong all you want but facts are facts.  You now receive social security benefits that EXCEED what you paid in.  Yes, younger generations subsidize your social security. That is fact and you can get educated or continue to believe a myth that it's all "your money."  Getting educated means you need to READ AND EDUCATE yourself and not believe what some fool tells you.  So the fact that IRA taxes social security benefits are offset by the fact that it is not all your money.  By the way, if you want to start getting educated, you can start with this analysis: https://retirementincome.net/social-security/social-security-benefit-statement/

[Tonster521]

@larryk678000 The SS Program is a complicated federal entitlement program. It is funded by dedicated employee/employer payroll taxes, interest on SS Trust Fund Special Treasury securities, and income taxes paid on SS benefits. Mortality credits should also be considered. However, those credits are actuarial and indirect. It should be clear that employee/employer payroll taxes include all generations, not just younger generations. I am linking an article from Pew Research that indicates in 2018, baby boomers represented about 29% of the workforce. https://www.pewresearch.org/fact-tank/2019/07/24/baby-boomers-us-labor-force/ I suspect that the pandemic has affected that percentage and it is less today. At any rate, SS benefits are not correlated to the amount of FICA tax an employee pays. SS benefits are determined using 35 years of earnings to develop an Average Indexed Monthly Earning (AIME). The earnings are indexed up until age 60 using inflation adjustment factors. If you work less than 35 years, zeroes are averaged in. If you worked more than 35 years, you just paid more FICA taxes and do not receive a refund. After developing the AIME, you receive various percentages as determined by the Primary Insurance Amount (PIA) formula which is adjusted each year for inflation. So, comparing employee FICA taxes to a person's SS benefit can be a fun mathematical exercise, but it is of little value. Also, it should be noted that folks without a survivor may not receive SS benefits equal to the amount of FICA taxes paid should they die after a few years of commencing SS benefits.       

[Bdog47]

Hello;  Bdog47 here; Please forgive me if I don't know where to post or have missed something in the instructions to use this forum. Bottom line is I am ok struggling with things that have come up since I retired in April '15, although I have had a smalll business on the side for some 15-16 years ago finally closing down in Dec '2020. I lost money the last 2 years in business so the decision was easy.  Back in 2015 I learned something that I probably should have discovered about the FICA tax structure.  I'm assuming that much of SS and Medicare is funded with these taxes and since every paycheck I rec'd since I started working at 15 had this tax taken out and as you might know any monies from my small business gets taxed double as a self employment tax. Still OK with that and in fact my earnings from my business just added to my employment and it increased my benefit every year. In 2015 was listening to a favorite stand up of mine (Lewis Black, an angry old **bleep** of a Jew {that's his hook as the saying goes}, though I've heard he is a very thoughtful and caring person with a very thoughtful mouth of foul language. No matter but the decussion about SS funding came up and he informed his audience about FICA TAXES with a ?.  Went something like this: Did you know that once your income reaches a certain cap you no longer pay FICA taxes? I DIDN'T!  He then went on to say it was $128k in 2015 and is raised a little each year. That's no an exact amount but about and I think last year was around $138k. I just couldn't get that fact out of my mind. He asked for a raise of hands and only about 10% of the people in the theater knew that. I hardly ever hear the subject being brought up but I'm thinking why?  I mean you know know I haven't made over that cap in any year with my full time job as a driver/wh mgr and my small business. I'm thinking back since I was 15 and today I hear people talk about entitlements like it's a gift and I never contributed at all. Yes, I know since the gov't uses and moves funds around it can't sustain so there needs to be some other taxes used to fund it. Still, can't see why this cap exists and think gee, If I had been making $200k, 300k, 400k and so on why would I not be able to continue to contribute? Sure, maybe I won't need it to retire but surely someone in my family or extended family would benefit or maybe just a friend or neighbor. Am I missing something here? Would welcome any comments please. Sorry to camp on your post but guess I need to figure how to initiate a post. We used to have a nice lady come in every week and help clean the house.  She was 63 and was looking forward to reaching 70 in order to retire. Her health seemed really not that good. I would always clean the stairs leading to a room over my garage just so she didn't need to climb them. She worked driving for Uber as a full time job and cleaning off hours. I made her sit down on day and showed her how if she took early retirement she would make the same amount when she was 80 that she would make if she started her retirement at 70. Check it out. It's fairly accurate. Only consideration is if you are making over a certain amount then you'll not get your full amount depending on how much you make. For every $2 you  make over the limit (this limit changes every month) they subtract $1 from you SS. She talked to a financial guy and called me a little while later (she had quit cleaning) thanking me and saying she was getting some SS every month so she quit her job driving, and her son helped her get a newer auto and now she drives for Uber but is her own boss. Was so glad to hear. So go ahead and take that early retirement. You can regret your decision at 80. I took mine at 64 and haven't lost any SS yet. Ask me about it in 6 more years, huh?  I love all of you out there and just hang on one more day.  bobby.....

[GailL1]

@Bdog47 wrote

Did you know that once your income reaches a certain cap you no longer pay FICA taxes? I DIDN'T!  He then went on to say it was $128k in 2015 and is raised a little each year. 

Still, can't see why this cap exists and think gee, If I had been making $200k, 300k, 400k and so on why would I not be able to continue to contribute?

=============

Hi, @Bdog47, Gail1 here -

Now I would like to give you the rest of the story on several things which you mentioned.

First, Let's talk about the Maximum Earnings Cap which you mentioned.  You only got part of it - This is the figure which SS comes up with every year as to the top earnings amount that is taxed by SS every year in withholding taxes.  They do this because the Maximum Earnings Cap is the figure by which the MAXIMUM benefit is based.  If it were not there and people paid their SS payroll tax on a higher earnings amount, then their benefit when they retire would get higher and higher.    So, SS sets the annual Maximum Earnings cap; but they also set a MAXIMUM benefit amount too and the two correlate each year.

If this Maximum earnings cap is raised without a SS law change to recalculate the Maximum benefit, then those who are paying in MORE during their working years, will get a HUGE benefit.

The 2022 Maximum Earnings cap is $ 147,000 and it does raise every year; some years greater than others since it has to do with the average wage index.  

The 2022 Maximum Benefit for those who retire at their full retirement age is $3,345.  

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@Bdog47 wrote

. . .. today I hear people talk about entitlements like it's a gift and I never contributed at all.

=====================

"Entitlement" in government legal definition means a benefit that has been declared by law.  That's why Medicare and Social Security are entitlements because they have been set down by law.  Same with many other benefits.

============================

There are many reasons why both Medicare and Social Security are experiencing some financial problems - A lot of it has to do with (1) technology taking the place of human workers (2) not being prepared for the number of baby boomers - they are retiring at a rate of 10,000 per DAY and have been since 2010 and will continue at this rate until 2030.  (3)  people living longer

@Bdog47 wrote

if she took early retirement she would make the same amount when she was 80 that she would make if she started her retirement at 70.

================

You might not know about the Delayed Retirement Credits - if one stays their SS retirement until 70 - they earn 8% per year on their FRA benefit - 

People should make their own decision about when they want or need to retire under the SS system BUT taking early retirement does reduce ones benefit.  The reduction is based on the number of months from when one does retire to their full retirement age (FRA).  And since that FRA is getting higher and higher (on its way to 67) but yet the early retirement age of 62 hasn't changed - then those that are retiring early especially at 62 are losing about 35% of their benefit.  That's a lot.

Sounds like you are interested in the Social Security System - it pays to read all about it and how it actually works.

[Bdog47]

Thanks so much for setting me straight...think I even discovered one of your explainations when I said the extra I paid in with my business account gave me an increased benefit.  Didn't consider what if I had made a lot more at my business. Be just like the benefit increase you talked about from raising the cap too much. Well, now I guess i'm the bitter old **bleep**, just not jewish, YET!  I think kids should be schooled a lot more about social life in general. I didn't realize I needed to also invest, guess I thought my SS would pay for my extravagant retired lifestyle.   I am a severe ADD person and jump into things like this w/o doing the research that you have obviously done.  Thanks again so much  I love you all....bobby

[ReTiReD51]

.

As long as Social Security is predicted to deplete $2.5 trillion in its asset reserves by 2035, the taxation of benefits is here to stay.

[surviver]

As Long as  We Give SS to anyone it will deplete

Why Not Respect the ones that worked for their SS

[kb4949]

It’s actually obscene to tax the elderly AND we shouldn’t have to pay property taxes either.

[sktn77a]

@Bdog47 wrote

"For every $2 you  make over the limit (this limit changes every month) they subtract $1 from you SS."

Yes, they subtract this from your current SS check but you don't "lose" this money - it's simply added back into your SS check when you stop working (or make less than the threshold).

[Tonster521]

@sktn77a I am providing a link to a SS pamphlet, How Work Affects Your Benefits, https://www.ssa.gov/pubs/EN-05-10069.pdf Pages 6 and 7 describe how your SS benefits are reduced and reinstated. For clarity purposes, it is only the monthly amount of the reduction that is added back to your monthly SS benefit. You do not receive a retroactive payment of all SS benefits that were reduced. In the example on pages 6 and 7, a SS benefit of $910/month is reduced to zero ($0.00) due to the Earnings Limitation for the period of 5 years (i.e., ages 62 thru 67) which totals $54,600 ( $910 X 60 months). You do lose $54,600. However, at age 67 (i.e., Full Retirement Age), the SS benefit is reinstated at the initial Primary Insurance Amount (PIA) of $1,300 ($910 divided by 70% or .70). I suppose one can rationalize that after 140 months (11 years 8 months), one will receive the $54,600 initial reduction ($390/month X 140 months). Please note that I did not use the time value of money. In other words, I used 0% to make the math easy to comprehend.