Social security

[SLB_SA]

Maybe, but I doubt that any politician is going to touch ROTH. It’d be easier to collect FICA on capital gains, and I suspect that would actually raise more money. But even that would get really complicated. What about options, short sells, capital losses, etc…

I agree that applying FICA taxes to long term capital gains would be a mess and even applying FICA taxes to short term capital gains would cause some chaos. Applying FICA taxes to all untaxed distributions from retirement accounts (IRA, 401k, 403b, 457, Roth or otherwise) should yield plenty of money to fund the shortfalls in social security and medicare. The people in most need probably do not have retirement accounts and hence pay no additional taxes while the "wealthy" would pay FICA taxes. Could the IRS eliminate income taxes on social security in return for FICA taxes on retirement distributions?

 

[SLB_SA]

How would this work?
Short term capital gains, pensions and distributions from IRA, 401k, 403b, etc. accounts are taxed as ordinary income. No FICA taxes.
Long term capital gains, distributions from Roth accounts and inheritances are tax advantaged. Apply FICA taxes.
Remove the income cap for FICA taxes on earned income.
Eliminate income taxes on social security.

 

[SLB_SA]

Slightly off topic. This video The Social Security Trap: When Waiting Until 70 Becomes a Huge Mistake is interesting but a bit misleading in my opinion. The video assumes a real (inflation adjusted) annual portfolio growth of 8.8% and does not seem to take risk into account. It also starts with a 62 year old couple whose net worth is $1,700,000. The idea of the video that an unemployed person must draw down assets in order to delay taking social security benefits is accurate, as I know personally. This is one piece of data which can inform a person but one that should be taken with a HUGE grain of salt.

 

[towboater]

Will you hire me as a 74 year old electrician (after my four year apprenticeship beginning in 2024)?

Of course! I would make u my live circuit tester

 

[towboater]

I have a couple of acquaintances that were capable of working to full retirement age but took SS at 62 because they were tired of working. Now moaning and groaning about their financial status. I m no way directing this at those who because of health or family issues etc had to quit the workforce early

 

[WanderingRose]

And some of us fled a highly toxic work environment, lived carefully on savings for a few years and then took our SS at 62 because we’d been told this was our best chance at getting back what we had paid in.

My husband then died a month past his 65th birthday.

Most of us would do some things differently if we could go back a few…or more…decades, but we made some good decisions at a few critical points and that allowed us to leave and have some retirement time together.

People drawing SS can still work, and many do, so if the cash flow is inadequate there is always finding ways to bring in some extra cash.

And there’s work-camping.

 

[bullfrog !]

I never planned to live past 30 years old. Once I hit 62 years old I decided to take early reduced Social Security as the average average life span in the USA was in the upper 70’s and I would have to live into my mid 80’s to get the same amount of money. I’m 72 now. If I live past my mid 80’s I will have less monthly coming in than if I had waited to start my Social Security. I watched my parents quality of life greatly deteriorate after they turned 85 and mentally they were unaware of anything they had or didn’t have. The way Medicaid works you can’t have anything of value and qualify basically at least in their cases it was that way. If I have difficulty surviving or notice in time my mental capacity is deteriorating I may choose a more adventurous lifestyle and let the problems resolve themselves. Just tell your buddies to start living simply and get a seasonal job, if it doesn’t work for them to start living a more adventurous life and stop trying to just survive. Enjoying life is an important part of living.

 

[mpruet]

I was fortunate to have a good job which I could do remotely and which also provided a lot of benefits. I was considered a highly productive employee so received a lot of promotions. I continued with my job until I was 66. During my last couple of years at work I had some bonus options I had received many years earlier which I had to exercise before they expired. That pushed my taxes up rather high and since medicare premiums are based on the AGI from your taxes, my medicare premiums were really high. I found out from the medicare folks that if I had some years with a low AGI on my taxes that my medicare premiums would be adjusted back down. So I decided to move enough cash into a CD ladder to cover a couple of years expenses. This was a taxable event, but that year I was still working so knew I would have to pay a lot of taxes any way.

So after I retired, I lived on CDs for a couple of years and since I had already paid taxes when I moved the cash, the only taxable money was on the interest I got from the CDs. This gave me a couple of years with practically a zero AGI which soon caused my medicare premium to be reduced significantly.

Since I already had two years worth of expenses, I deferred starting SS until I reached 68. I still have a bucket of near cash for the next few years of expenses, only now they are in tax free muni bonds. The rest of my nest-egg remains invested. My thoughts are that since I have the next few years covered, I don’t have to worry too much about a recession. I feel that I’m covered so don’t have to pull money out in a recession to cover expenses.

I’m glad I waited for SS. Not only did that increase my initial income, but it also has increased the dollar amount of my COLA because the COLA percentage is based on a higher base.

 

[mpruet]

Slightly off topic. This video The Social Security Trap: When Waiting Until 70 Becomes a Huge Mistake is interesting but a bit misleading in my opinion. The video assumes a real (inflation adjusted) annual portfolio growth of 8.8% and does not seem to take risk into account. It also starts with a 62 year old couple whose net worth is $1,700,000. The idea of the video that an unemployed person must draw down assets in order to delay taking social security benefits is accurate, as I know personally. This is one piece of data which can inform a person but one that should be taken with a HUGE grain of salt.

I believe strongly that it is very wise to create simulations of what your situation will be prior to making any financial decision. Spread sheets are a good and fairly inexpensive way to do this if you don’t have a great fiduciary to work with. I know that I spent a good year running simulations my last year prior to retirement. It helped to make the best decisions that I could. I only wish I had be doing that when I was much younger. I might have gained a greater understanding of the power of compounding back then.

 

[bullfrog !]

I “retired” at 53 years old with a very small pension that I was able to live on by living simple in an RV and working seasonal jobs. I drew early Social Security at 62 because it allowed me to take some time to take care of my parents. After they passed it allowed us to travel and recreate while we were still physically able a little more. Now at 72 I have pretty much decided I will no longer seasonally work. During the last 10 years I have been able to save and with the aid of my son invest in property so I basically will have an RV lot to park on rent free and if necessary possibly build a ground level handicap accessible casita type additional housing unit (ADU) in an area I enjoy with family near by. It could have worked out a lot worse but planning ahead made it possible for me. I highly recommend making a plan and sticking to it as much as possible.

 

[RonDean]

I don't think we should make government policy OR base our own opinions solely on a few individuals who might be outliers. (exp: I have a couple of acquaintances...) (I was fortunate...) etc.
There are some legitimate reasons to take Social Security distributions at age 62, according to financial experts.

• You have health issues.
• You're done working for good (for whatever reason.)
• You need cash to cover your expenses.
• You're facing a financial emergency.
• You need to get out of debt.
• You want to maximize spousal benefits.

Even if you wait to collect SS and manage not to die first, there is still no good reason I can think of to cut your SS benefits. Unless, of course, you are one of those highly successful people who consider SS money to be their "fun money." If you are one of those who planned well and were financially successful, good on you. Many were not so blessed and not necessarily because of factors within their control. I would submit that much of our collective life experiences were thrust on us and have very little to do with what we might have planned or deserved. Good or Bad.

As far as the government budget issues, I have seen zero response to my suggestion that we could easily pay any SS shortfall by increasing taxes on the more fortunate and successful. Or upon churches, if they are so concerned about the needy. Or on profitable corporations that many of us worked for, provided infrastructure for, or given our money to in one way or another. If this is the most affluent country in the world, why do most European countries do so much better for their old people and some people here seem to think we are helping elders too much? Makes no sense to me!

 

[mpruet]

I don't think we should make government policy OR base our own opinions solely on a few individuals who might be outliers. (exp: I have a couple of acquaintances...) (I was fortunate...) etc.
There are some legitimate reasons to take Social Security distributions at age 62, according to financial experts.

• You have health issues.
• You're done working for good (for whatever reason.)
• You need cash to cover your expenses.
• You're facing a financial emergency.
• You need to get out of debt.
• You want to maximize spousal benefits.

These are valid points. Everyone has different situations which can lead to different actions. However I would still strongly suggest developing some means to simulate what the results will be of the actions that you take now. Your goal should take actions which are best for you and running simulations can really help you make the best decisions.

I’d also strongly urge folks to avoid debt at all cost, Having debt causes you to end up paying more for an item due to interest, and also that you are not in control of your income because it is already spent before you actually earn it.

I chose to continue working at least until medicare kicked in because we had a good health insurance plan. And that was a very good thing to do because I had some major health issues requiring multiple surgeries and about 6 weeks in the hospital, including a week in intensive care. If I was no longer on company health insurance that that time, I would have been in major trouble.

 

[RonDean]

These are valid points. Everyone has different situations which can lead to different actions. However I would still strongly suggest developing some means to simulate what the results will be of the actions that you take now. Your goal should take actions which are best for you and running simulations can really help you make the best decisions.

I’d also strongly urge folks to avoid debt at all cost, Having debt causes you to end up paying more for an item due to interest, and also that you are not in control of your income because it is already spent before you actually earn it.

I chose to continue working at least until medicare kicked in because we had a good health insurance plan. And that was a very good thing to do because I had some major health issues requiring multiple surgeries and about 6 weeks in the hospital, including a week in intensive care. If I was no longer on company health insurance that that time, I would have been in major trouble.

mpruet, Your points are not lost on me. Proper planning IS a good idea. I was also one of those that had a pretty good income and made provisions such as maxing out my 401k and making fairly intelligent investments. But the unexpected happened and many of my plans and investments came up short. Absent finding a time machine, I can only do my best with what I have now.

Telling people that are already retired what they SHOULD have done is of absolutely no help. Nor is telling us what we should have done really addressing the threat of reducing SS benefits, which is what started this most recent thread.

 

[WanderingRose]

Telling people that are already retired what they SHOULD have done is of absolutely no help.

Thank you.

 

[jasper]

Proper planning can cause you to have to pay federal income tax on 85% of your Social Security income.

Meanwhile, others view tax time like winning an annual lottery, and qualify for a variety of assistance programs due to improper planning.

Possibly the best planning would be to not properly plan, limit your reportable income, and hope all the assistance programs, especially since The War On Poverty, remain.

My Mom went to her grave still angry and embarrassed about a prominent church member's 22 year old daughter, fresh from college in the sixties, out drumming up food stamp recipients. My Mom refused, and we had plenty to eat.

The 22 year old retired quite comfortably after a career in the rapidly expanding government sector. So have three generations of her family afterwards.

I can't imagine an answer to any of our social ills, and don't believe anyone that says they do, without reflecting at an advanced age that attempting to be self-sufficient was all it's cracked up to be.

 

[bullfrog !]

^^^It is difficult for someone that has been self reliant to navigate what seems to be constantly changing systems or if you move across state lines on a yearly basis does change. A lot of laws, regulations and programs are different in different states. I have always tried to be law abiding. I have always avoided getting paid benefits that I hadn’t contributed to or even making money off money earned as it is important to my sense of self reliance and values instilled in me from my youth. Because of these beliefs I’ve been a hermit avoiding society as much as possible in my day to day life as I just don’t fit in. I was fortunate to go into the military and get VA benefits which I felt I earned which as they are available in all states really made nomadic life easier. I feel the same way about Social Security as I contributed to it during my working life. I have always paid my taxes gladly after seeing what little monetary reward soldiers get for their service and the freedoms we have in this country considered it a privilege to be able to pay them and a real bargain. When I was young and still believed in religion as an institution I tithed to help others in need. After in my opinion finding religion caused more killing and hate than kindness and consideration I stopped. I believe in democracy and freedom for everyone and hope this country isn’t allowed to become in my view like organized religion. Government programs need to help people that need help. There will always be people that abuse the system but that doesn’t mean to prevent that you deny those that really need help. This is just one person’s opinion.

 

[Morgana]

I guarantee you that whatever system we come up with, /somebody/ will rip it off. The only realistic goal is to minimize that as much as possible (and to make sure that the most vulnerable are protected as much as possible). That's all you can hope for.

We all have war stories. We've all been disappointed. We've all seen outrageous things. For every war story supporting a conservative view, there's a war story supporting a progressive view. \_(**)_/ people (some people) suck, that's never going away.

I was a nontraditional (ie, old) student with a reading disability and no $$$, and I sweated bullets to get through school. I remember agreeing to tutor, for free, a fellow classmate who was having difficulty. "I'll bring lunch," she said. She was much wealthier than me and I spent a couple days anticipating a nice treat to relieve my humdrum diet. She brought baloney sandwiches. ("Yeah," I thought to myself, "that's how rich people stay rich.") I remember being told by a counselor that I was "sabotaging myself", IOW that I had psych problems because I hadn't been able to find a cheap apartment in one of the most expensive cities in America. I remember working exhausting jobs to claw out enough hours to study part time. I remember watching a fellow graduate student laugh about how he was spending his scholarship money on a car (I assume/hope it was a non-needs-based grant), and other graduate students talk about "marrying a language" (your foreign wife does all your translations for you for free). And I remember being labeled an oppressor because of my skin color, by classmates of a different skin color who'd never known a day of want in their lives.

Then I got out in the work world, and worked my forking tail off for decades. I lost my last staff job because I wasn't quick enough to shut up about an unethical practice. Freelancing is twice as much work for less money and endless anxiety, but at least you're free. People in my field earn anywhere from McDonalds wages to swanky consultant fees. I got about a third to half way up that ladder. You do all the hard work, and all the scary risk taking, and then you're still at the mercy of luck. So yes I've spent a career listening to oblivious privileged idiots lecture the rest of us about how hard and smart they've worked, because they have the luxury of ignorance about where hard work /really/ leaves off and luck /really/ begins.

I have never done anything but work my tail off. I worked hard, I worked smart, I did every ******* thing in the manual and a few things outside it. And now I am living on a pension that is apparently well below the Social Security median /or/ mean, scrambling for enough paycheck gigs to pay for medical bills and a few occasional treats.

Do I use my negative experiences to bash one segment of society or another? No, and neither do I respect it much when other people do, because all you have to do is look around to see that there's plenty of that on every side. You make your own personal choices on how to deal with it and you carry on. There's no Great Junior High School Homeroom Teacher in the Sky to make the asshats stop being asshats.

But I will say that people who think they got to where they are by merit alone are living in a fool's dream. NOBODY gets through this without VAST amounts of help from other people. A FEW people get by without personal effort (though whether you'd really enjoy living their life is another question); that's the price of living in an organized society. And if you ever think you're justified at resenting that, just think about all the military members who died or were maimed to give you the freedom and prosperity you enjoy right now, and were kicked to the ditch if/when they got home. If they can deal with what's been done to them in our name, then we can deal with life not being totally fair to us every minute, too.

This got long. To anyone who read it, thanks for listening.

 

[mpruet]

mpruet, Your points are not lost on me. Proper planning IS a good idea. I was also one of those that had a pretty good income and made provisions such as maxing out my 401k and making fairly intelligent investments. But the unexpected happened and many of my plans and investments came up short. Absent finding a time machine, I can only do my best with what I have now.

Telling people that are already retired what they SHOULD have done is of absolutely no help. Nor is telling us what we should have done really addressing the threat of reducing SS benefits, which is what started this most recent thread.

How is suggesting that folks think about the impacts of their current decisions, avoiding debt, and trying to make wise decisions with what income you have saying what you should have done in the past? I would think that for folks on a limited fixed income it would be even more important to do that.

if your vehicle breaks down and you don’t have an emergency fund - what then? Put it on a credit card? And then increase your debt and lose an additional percentage of your income to interest?

I may be stupid, but I would think that using a budget (I.e. planning for future expenses) and having an emergency fund (I.e avoiding debt) would be even more crtitical for folks who have to live solely of social security than for someone with significant assets.

 

[RonDean]

How is suggesting that folks think about the impacts of their current decisions, avoiding debt, and trying to make wise decisions with what income you have saying what you should have done in the past? I would think that for folks on a limited fixed income it would be even more important to do that.

if your vehicle breaks down and you don’t have an emergency fund - what then? Put it on a credit card? And then increase your debt and lose an additional percentage of your income to interest?

I may be stupid, but I would think that using a budget (I.e. planning for future expenses) and having an emergency fund (I.e avoiding debt) would be even more crtitical for folks who have to live solely of social security than for someone with significant assets.

Need I rephrase? Many of your posts (it seems to me) refer to what people should have done back when. I believe that people that are now on SS and reacting to proposed changes in that system is another conversation entirely. As several others have explained, s*** happens. We all have our own stories and I won't bore anyone with mine except to say I DID make reasonable decisions. I just didn't see an expensive divorce and a business failure during the 2008 recession coming. I also didn't anticipate some medical expenses, etc. etc. And when someone now tells me what I should have done differently back then, it sort of irritates me.

Perhaps I misunderstood. What advice, beyond trying to stay out of any new debt, should current retirees depending on SS benefits do? You were clearly lucky or wise, so I am certainly willing to listen to that.

 

[WanderingRose]

Thank you, RonDean.

I agree wholeheartedly.