Retirement Targets

[SEIOWA CLONE]

Because it is a tax. It’s not an investment portfolio. The difference is substantial:
People have direct access to all funds in their investment portfolio. Most retirement accounts require a person to be 59.5 years before withdrawing money to avoid paying much higher taxes on those funds

But since SS is paid into the government and paid out by the government, it is much more like a tax. There is no guarantee people who are currently paying into the program will ever see a dime when they reach retirement age. Rather it’s a government program to assist elderly/disabled people. How is that any different than people contributing funds (tax) to help fund roads, food stamps, Medicare/Medicaid, or any other government program designed to assist people in need of certain services? All of these programs ensure a higher quality of life

Businesses have to pay 50% of their employee’s SS contribution. Businesses classified their portion as a payroll tax.

This is 100% a tax. And if people view it as a tax, they would then invest into their own retirement account more appropriately, thus becoming less reliant on government assistance

OK, let's call it the Investment into the People of the United States tax if it makes you feel better. What difference does it make or are you one of those that believe that you should be able to leave to your heirs the money you paid in if something happens to you? Or invest this money into the stock market so you can get a better return on your investment?

SS is not an investment, it is not a 401K program, it's a program set up to help those that have a disability, that are older age, those children that lost their parent. It's a program that allows people to enjoy their Golden Years without living in poverty. It also is one of the most important social contracts and programs the government has ever come up with, and needs to be enhanced and made safe into the future.

 

[BCClone]

I copied and am posting an article below from Successful Farming that summarizes key details regarding how Social Security benefits are calculated.

Combined employer/employee payments into the SS trust fund for someone earning $20,000 equal $2,480; at $59,000, $6,200; at $150,000, $18,600. These represent levels someone in my demographic (retired and taking SS) might have earned and have paid (including employer match) into the SS trust fund through a working lifetime.

That SS benefits are paid based on the highest 35 years of earnings was something I watched as I approached retirement. While it is not true for everyone, in many people’s working lifetime they earn more, and pay more into SS in later years than before, during or in the early years after college,This was true in my life, and I watced annual SS statement of how my retirement benefits would increase as the higher earnings and higher payments into SS later in my working life rolled the earlier, lower earnings and paymns out of the 35 year calculaton.

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Social Security for Farmers​

Tax benefits depend upon how you have filed over the years.
By
Shawn Williamson

Published on January 25, 2017


According to the Social Security Administration, nine out of 10 Americans over 65 receive Social Security benefits, and for over half of them, it makes up more than half of their income.

It's important to understand this benefit if you're in a business without a pension plan, like farming. In fact, over 1 million of those receiving Social Security benefits are farmers.

First of all, to qualify for Social Security, you have to have either wages or net profit to earn credits. One credit is earned for each calendar quarter you have the minimum required wages or profit. If you don't have at least 40 credits earned in the system, you'll get no Social Security retirement benefit (unless you are married to someone with enough credits or used to be married to that someone for at least 10 years.)

If your farm operation is an S-corporation or a C-corporation, you're probably paying yourself some wages. That's good. You get a credit for each quarter you pay yourself at least $1,300. If you are an LLC or Schedule F, you earn credits based on your farm net income. Profit in excess of $5,200 for the year gets you four credits. No profit yields, of course, no credits.

Getting to 40 credits makes you eligible for some benefits, but how much you'll receive is based on the 35 highest years of earnings. Mathematically, this means that you keep adding to your benefits until you have worked at least 35 years. Also, if you are making more now than you did decades ago, you'll keep improving your benefit as recent higher earning years are replacing the old McDonald's wages from 1983.

If you spend your life as a Schedule F farmer, you will have to put up 35 years of profits in order to maximize your Social Security. What is the maximum benefit, and how do you get it? According to the Social Security administration, if you worked until age 70 and retired in 2016, the maximum benefit is $3,576 per month. You'll get that maximum benefit if you have been earning the maximum wages or profit that is subject to Social Security tax each year - $127,200 for 2017.

Most employees have 6.2% of Social Security tax and 1.45% of Medicare tax withheld from their pay, and their boss pays the other half. However, self-employed farmers get to pay both halves via something called self-employment tax, which is 15.3%. You do get to escape 12.4% of that 15.3% on any wages or profits you earn above the current $127,200 limit. The Medicare tax of 2.9% applies to every dollar, no matter how much you make. As you can see, getting the maximum monthly benefit takes a lot of years of work and a good bit of earnings.

A couple small things to clarify. If you pay yourself in PIK wages or rent, you pay no FICA on that. Also, if you are self employed, you get a self employed credit that equals 10% of your FICA tax. So while you pay that in, you get to subtract 10% from your income taxes. Seeings how the government is not in surplus, it’s all going to the same pot so you kinda are only paying about 13.8% in FICA. Still getting credit for the 15.3 though.

 

[BCClone]

SS is not a Ponzi scheme as some have insinuated. It’s a pay-as-you go system where collected funds (e.g. payroll taxes) are immediately paid to qualified recipients, primarily the elderly. Around 2034, collected funds will only by sufficient to pay approximately 78 percent of the promised benefits. Hence, should the government do NOTHING, a person who should receive $1,000/month in 2034 wound only receive $780. Under a Ponzi scheme, which is essentially fraud, that person wound receive zero.

Fortunately, there is time for the government to make changes that would eliminate the projected shortfall that will occur in 2034. Examples include eliminating the income cap on which SS is taxed, increasing the retirement age, altering the inflation formula used to calculate benefits, and increasing the payroll tax. The problem is that Republicans and Democrats strongly disagree on the best way to fix the system. Consequently, they keep “kicking the can down the road.”

For those younger individuals, I am confident they will receive something if they are fortunate to live to the age where they qualify for benefits. In other words, they system is NOT going away. However, these individuals will likely have to wait longer to receive their benefits and/or the benefits will not be as great as previously promised.

A Ponzi scheme is when you can only receive funds when someone else puts money in. That’s literally what is happening here.

 

[KnappShack]

A Ponzi scheme is when you can only receive funds when someone else puts money in. That’s literally what is happening here.

Except the ROI is pretty ****** compared to a Madoff scheme

 

[CascadeClone]

SS is not a Ponzi scheme as some have insinuated. It’s a pay-as-you go system where collected funds (e.g. payroll taxes) are immediately paid to qualified recipients, primarily the elderly. Around 2034, collected funds will only by sufficient to pay approximately 78 percent of the promised benefits. Hence, should the government do NOTHING, a person who should receive $1,000/month in 2034 wound only receive $780. Under a Ponzi scheme, which is essentially fraud, that person wound receive zero.

Fortunately, there is time for the government to make changes that would eliminate the projected shortfall that will occur in 2034. Examples include eliminating the income cap on which SS is taxed, increasing the retirement age, altering the inflation formula used to calculate benefits, and increasing the payroll tax. The problem is that Republicans and Democrats strongly disagree on the best way to fix the system. Consequently, they keep “kicking the can down the road.”

For those younger individuals, I am confident they will receive something if they are fortunate to live to the age where they qualify for benefits. In other words, they system is NOT going away. However, these individuals will likely have to wait longer to receive their benefits and/or the benefits will not be as great as previously promised.

What happens to the funds currently collected that are not paid out "as you go"? Thats my smarta$$ response.

Really though, good summary of the actual problem and potential solutions. Too bad neither side is interested in actually solving problems.

 

[CascadeClone]

OK, let's call it the Investment into the People of the United States tax if it makes you feel better. What difference does it make or are you one of those that believe that you should be able to leave to your heirs the money you paid in if something happens to you? Or invest this money into the stock market so you can get a better return on your investment?

SS is not an investment, it is not a 401K program, it's a program set up to help those that have a disability, that are older age, those children that lost their parent. It's a program that allows people to enjoy their Golden Years without living in poverty. It also is one of the most important social contracts and programs the government has ever come up with, and needs to be enhanced and made safe into the future.

I agree that we, as a society, should ensure the eldery and disabled can live a life of dignity. Else we would be cruel.

However, i also think we should encourage people to save and take care of themselves. Else we would become lazy and dependent.

Reasonable people can disagree where the line is between those two things. But there IS a line.

 

[JP4CY]

Some good info in this thread and some perspectives I hadn't thought of. Thanks.

 

[SEIOWA CLONE]

I agree that we, as a society, should ensure the eldery and disabled can live a life of dignity. Else we would be cruel.

However, i also think we should encourage people to save and take care of themselves. Else we would become lazy and dependent.

Reasonable people can disagree where the line is between those two things. But there IS a line.

Anyone thinking you are going to be able to survive on SS alone is setting themselves up for serious problems at retirement time. I used to tell my students that retirement saving is a 3-legged stool, and one of those legs is SS. It's up to each of you to figure out the other two legs, find a job that has a pension plan, save or invest enough that you have those 3 legs to retire on.

 

[BCClone]

Anyone thinking you are going to be able to survive on SS alone is setting themselves up for serious problems at retirement time. I used to tell my students that retirement saving is a 3-legged stool, and one of those legs is SS. It's up to each of you to figure out the other two legs, find a job that has a pension plan, save or invest enough that you have those 3 legs to retire on.

If you have one big hunk of wood, you don't need three legs though.

 

[CycloneSpinning]

Anyone thinking you are going to be able to survive on SS alone is setting themselves up for serious problems at retirement time. I used to tell my students that retirement saving is a 3-legged stool, and one of those legs is SS. It's up to each of you to figure out the other two legs, find a job that has a pension plan, save or invest enough that you have those 3 legs to retire on.

I like this, but I’m curious whether you would give that same advice today? Pensions are less common and how SS will be paid out seems a little less certain. Would you tell them to count on a certain percentage of their promised SS, and then make up the rest with a 401k and Roth IRA? Or would you still recommend they seek out a pension?

 

[BCClone]

I like this, but I’m curious whether you would give that same advice today? Pensions are less common and how SS will be paid out seems a little less certain. Would you tell them to count on a certain percentage of their promised SS, and then make up the rest with a 401k and Roth IRA? Or would you still recommend they seek out a pension?

I’m not a fan of them, but you could purchase an annuity which would be the same as a pension basically.

 

[dmclone]

Gotta love the people on here that are like... "I've got 7 million in the bank, but it's BS that I'm paying into SS and won't get any benefit from it! I've worked hard sitting at my desk on CF all day, I deserve more!".

If you don't get any benefit out of knowing you're helping people that need it, while you're sitting on 7 million and living the high life... then I got nothing for you.

I'm completely irreligious, but I get a LOT of 'benefit' from knowing I'm helping others, and I don't just call them lazy unworthy people. I see people living in tents on the street... and I don't look down on them.... I want to find solutions that help them. But hey... that's just how I roll.

You're probably right but I've noticed a trend where people have no problem spending other people's money. Everyone's cutoff is different and it's usually about 5% more than they have. $100k is a lot of money to some people, a million may be a lot, a positive net worth may be a lot. If you'd like to give your social security to others, feel free to do that but I'd rather not have you decide what I'm going to get based on my savings.

 

[dmclone]

I put less faith in penions then SS. Over the years, my pension has become more and more worthless. I have a couple of friends with states pensions and they seem to have held up well.

 

[CycloneSpinning]

I’m not a fan of them, but you could purchase an annuity which would be the same as a pension basically.

That’s an interesting thought. I agree, I don’t personally want to get one either (at this point), but it would give you a guaranteed income (like a pension as you said). Good call.

 

[SEIOWA CLONE]

I like this, but I’m curious whether you would give that same advice today? Pensions are less common and how SS will be paid out seems a little less certain. Would you tell them to count on a certain percentage of their promised SS, and then make up the rest with a 401k and Roth IRA? Or would you still recommend they seek out a pension?

There are still many occupations that still offer a pension to their workforce. Education, civil employees, many hospitals, people on the railroad. If you are not in one of those fields, I would tell them to start your retirement planning when you receive your first paycheck. Take out $25, $50 whatever you can afford, and as you move along, making more in salary, increase that donation out of every check. You never had it, so you are not going to miss that money.

The biggest mistake people make saving for retirement is thinking they have plenty of time to start, and thereby put it off. Then they wake up one day and they are in their 40's and have nothing there.

If you want to plan like SS is not going to be there, go ahead, you have more in saving when you get ready to retires. I think it's too important a program to too many Americans that they are going to have to come up with a way to fix it. Now what the fix is, no one knows, but there will be money there for even those starting employment now when they get to retirement.

 

[Mr.G.Spot]

Been thinking about this lately. I imagine the small amount of election talk and/or inflation concerns have stirred this up.

It seems to me those at or near retirement are very protective of social security. (Don’t touch it, it’s mine, so paid into it, etc.). The vibe I get from most millennials is that we don’t even think about social security, the fact that we have to pay in, or are really planning on getting anything out of it. Curious as to whether others feel they see the same opinions…and also interested as to how the Gen Xers view this.

Again, kind of feel millennials mostly take the stance that we have to save 25x annual cost of living…

Thanks!

Very normal thoughts. My parents didn't expect to receive anything. I don’t either, but it looks like it might be around a while.

 

[Stormin]

Totally agree with what you are saying. But some people in the younger generation view SS as a Ponzi scheme run by the government. They are paying money into a program which is paying other people at the present time. They are led to believe the money will be there when they retire, but as we know, that's not a guarantee.

I'm in my mid 40's. I view SS not as an "investment" but rather as a tax. It's a tax to ensure people who are elderly, disabled, and children with a deceased parent can have some financial support. It's no different than any other tax program. I don't budget my retirement on any SS money as I view it as a necessity based tax program.

But if it was a true tax program, people wouldn't receive statements in the mail showing their estimated monthly allowance once they reach qualifying age. Hence why one could view the entire program as a government Ponzi scheme.

Republican propaganda works. You need to stop listening to their lies.

Republicans refuse to eliminate the cap on earned income subject to SS tax. Solution is pretty simple. But people making OVER $160k of earned income (passive income exempt) would pay more tax.

Republicans will not raise taxes on rich people. Rich people give political donations. Rich people get tax CUTS. Permanent tax cuts. Poor people get to work for the rich. Cradle to Grave.

 

[clonedude]

The SS system should have worked wonderfully. While all the boomers were working, the system was bringing in more money than what was going out... and they should have taken that surplus and banked it for now when all the boomers are retiring and it's needed.

But no... instead we spent that SS surplus on other things. The government f'ed it up... they owe it to all the people that have paid into it to fix it.

 

[Cyhig]

OK, let's call it the Investment into the People of the United States tax if it makes you feel better. What difference does it make or are you one of those that believe that you should be able to leave to your heirs the money you paid in if something happens to you? Or invest this money into the stock market so you can get a better return on your investment?

SS is not an investment, it is not a 401K program, it's a program set up to help those that have a disability, that are older age, those children that lost their parent. It's a program that allows people to enjoy their Golden Years without living in poverty. It also is one of the most important social contracts and programs the government has ever come up with, and needs to be enhanced and made safe into the future.

Yes. It’s a tax program to benefit elderly and disabled people. But since it’s a tax program, why do I receive annual statements from the government of what I will be eligible to receive at retirement age?

It’s because they are using current tax $$ to pay the current beneficiaries. When those beneficiaries pass away, and new beneficiaries enter the program, other new tax payers will then fund those new beneficiaries.

And since it’s really a tax, people planning for retirement really shouldn’t assume the tax program will be available to them when they reach retirement age. It’s just another 6.2% of their wages being spent by the government

 

[BCClone]

Yes. It’s a tax program to benefit elderly and disabled people. But since it’s a tax program, why do I receive annual statements from the government of what I will be eligible to receive at retirement age?

It’s because they are using current tax $$ to pay the current beneficiaries. When those beneficiaries pass away, and new beneficiaries enter the program, other new tax payers will then fund those new beneficiaries.

And since it’s really a tax, people planning for retirement really shouldn’t assume the tax program will be available to them when they reach retirement age. It’s just another 6.2% of their wages being spent by the government

12.4 % of their wages.