Social Security Facts and Fiction

SeaBreeze

SeaBreeze

Endlessly Groovin'
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Seven myths about Social Security, full article here.

Social Security benefits are likely to be a big part of your retirement plan. Around 63 million Americans will receive approximately $1 trillion in benefits during 2018, according to the Social Security Administration. Yet understanding exactly how this program works, as well as the best time to start taking benefits, isn’t always easy. Here are some of the most common misconceptions surrounding Social Security, as well as the truth behind them.
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SeaBreeze said:
Seven myths about Social Security, full article here.
Click to expand...

Social Security seems to be the Most Important, and Most Neglected social program our government has ever devised. Millions of Seniors are dependent upon this program for their sole source of income...yet, this program has not been substantially changed/improved in many years. Instead, Washington just releases "gloom and doom" reports about how this vital program is headed for serious troubles in coming years....instead of taking actions now to keep the program viable for future retirees. I guess our politicians are too busy engaging in Partisan Politics to do anything that might better prepare our people for the future. There are numerous actions that could prevent these future troubles...removing the caps, increasing the withholding, even "means testing" for those with substantial other sources of income, etc. But, so long as people keep sending the same old hacks to Washington, things will never change, until a crisis occurs.

The "Big Thing" now seems to be to encourage people to delay applying for benefits as long as possible. That sounds good if a person knew for sure how long they will live. Personally, we signed up as soon as we became eligible, and have already received several times more than I paid in over my working career...my wife never worked outside the home....and we are probably a classic example of why this program is headed for trouble.

The Best and perhaps Only approach our people can take to insure this program for the future is to find out Where their politicians stand on Social Security, and then get out and Vote in upcoming elections, and start ridding Washington of the politicians who do little other than pandering to their biggest campaign donors.

I hope Matrix allows this discussion to continue...even though it is bound to "reek" of politics...this is ONE political discussion that NEEDS to be taking place.
 
Don M. said:
I hope Matrix allows this discussion to continue...even though it is bound to "reek" of politics...this is ONE political discussion that NEEDS to be taking place.
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So true, Don.

Although it swings into politics, discussing the future of SS and suggesting various personal financial strategies with each other surely can't hurt. Rare indeed is the American of SS age who would argue that the potential SS shortfall was caused by one party, that the problem has been kicked down the road by only one party, or that it can be solved without compromises across the aisle.
 

Don M. said:
Social Security seems to be the Most Important, and Most Neglected social program our government has ever devised. Millions of Seniors are dependent upon this program for their sole source of income...yet, this program has not been substantially changed/improved in many years. Instead, Washington just releases "gloom and doom" reports about how this vital program is headed for serious troubles in coming years....instead of taking actions now to keep the program viable for future retirees. I guess our politicians are too busy engaging in Partisan Politics to do anything that might better prepare our people for the future. There are numerous actions that could prevent these future troubles...removing the caps, increasing the withholding, even "means testing" for those with substantial other sources of income, etc. But, so long as people keep sending the same old hacks to Washington, things will never change, until a crisis occurs.

The "Big Thing" now seems to be to encourage people to delay applying for benefits as long as possible. That sounds good if a person knew for sure how long they will live. Personally, we signed up as soon as we became eligible, and have already received several times more than I paid in over my working career...my wife never worked outside the home....and we are probably a classic example of why this program is headed for trouble.

The Best and perhaps Only approach our people can take to insure this program for the future is to find out Where their politicians stand on Social Security, and then get out and Vote in upcoming elections, and start ridding Washington of the politicians who do little other than pandering to their biggest campaign donors.

I hope Matrix allows this discussion to continue...even though it is bound to "reek" of politics...this is ONE political discussion that NEEDS to be taking place.
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social security is already means tested . it is means tested tax wise and it is means tested because those who pay in more get smaller benefits proportionately then lower incomes .so i am not in favor of any more means testing . i paid in to fica which is insurance and no one should be told after paying in to an insurance plan that you can't get what you paid in to get because you have to much ..

of course those who talk about means testing "substantial assets " will always consider substantial as not including them .

is someone generating 40k a year pretax income from a million dollars to live different than someone who has a 40k pension and no assets ? not really when it comes to what you have to live on , as that 40k generated by the portfolio assumes the spending of principal too when needed to sustain that income flow .

social security should have ssdi split off an made part of welfare . it has drained social security retirement and because of all the fraud and abuse money is transferred constantly to sure it up.


What most people don’t know is that our employment tax dollars don’t all buy the same amount of future benefit. Some of our employment tax dollars buy six times as much in benefits as others.

According to the most recent Trustees Report, for instance, the first $767 of “average indexed monthly earnings” (a complex formula that adjusts earnings over time) is credited at a 90 percent rate, assuring the lowest wage workers of a retirement benefit nearly equal to their earned wage.

Wages of more than $767 a month but less than $4,624 a month are credited at a 32 percent rate. This means retirement benefits increase at a much lower rate. The benefit pinching, however, does not end there.

More means less

For wages of more than $4,624 a month up to the wage base maximum ($113,700 for 2013), the crediting rate is only 15 percent. Thus, all the wages earned — and employment taxes paid — over that $55,488-a-year “bend point” gain benefits at only one-sixth the rate of the lowest wage earners.

In effect, the Social Security benefits formula functions as a sharply graduated benefits “tax,” reducing the benefits that accrue to higher wages by 85 percent. The higher your means, the lower your benefit.





 
I agree with removing the wage cap and capping benefits but I'm against additional forms of means testing.

I also think that current income taxes on some SS benefits should be returned to the SS trust and not become part of the general fund. Taxing SS benefits seems like sleight of hand to move the pea under the walnut shell.

I also believe it is time to think about phasing out SS and putting the responsibility for funding retirement squarely on the shoulders of the American people. The government could and should still provide some education programs, tax incentives, guidelines, and insurance programs similar to the FDIC. I believe that over time a self-funded retirement program would actually put more dollars in the average American's pocket and help strengthen the economy. I realize that we would still need some form of government benefits for the destitute similar to welfare or Medicaid but I still think the country and the average taxpayer would be better off in the long run.
 
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They need to eliminate the tax on Social Security...
or at least increase the income thresholds for that tax
which were never to be indexed for inflation and have
never been increased since the tax became law in 1983.
 
Don M. said:
The "Big Thing" now seems to be to encourage people to delay applying for benefits as long as possible. That sounds good if a person knew for sure how long they will live. Personally, we signed up as soon as we became eligible...

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Me too.

That "big thing" is aimed at baby boomers so they will put off claiming SS to benefit SS.

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actually social security is not actuarially neutral and has not been for years . more of us are living longer , the odds of one in a couple reaching 90 today is almost 50% . if everyone delayed it would hurt social security way more so that is not true at all .

social security is making up a larger percentage of a seniors income than it was ever designed to. delaying where one has choice can at least increase that income .
 
I very strongly agree with removing or substantially increasing the wage cap on SS contributions.

I also like Aunt Bea's idea of returning income taxes on SS benefits to the SS trust.

I think the idea of phasing out SS would only lead to a greater pool of elderly poor. Making everyone responsible for their own retirement is a great idea in a vacuum, but as a practical matter, at least now, there is a huge number of people who can barely keep food on their tables, much less saving large amounts for their retirement. I live in a pretty poor state, and this is very widespread here. I am not talking about those living extravagant lifestyles beyond their means, but rather about families who are working, many adults working more than one job, who can barely make ends meet in humble circumstances, especially with the high cost of healthcare and the rising costs of just about everything, including food.
 
Butterfly said:
I think the idea of phasing out SS would only lead to a greater pool of elderly poor. Making everyone responsible for their own retirement is a great idea in a vacuum, but as a practical matter, at least now, there is a huge number of people who can barely keep food on their tables, much less saving large amounts for their retirement. I live in a pretty poor state, and this is very widespread here. I am not talking about those living extravagant lifestyles beyond their means, but rather about families who are working, many adults working more than one job, who can barely make ends meet in humble circumstances, especially with the high cost of healthcare and the rising costs of just about everything, including food.
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A return to the "grapes of wrath."

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Butterfly said:
I also like Aunt Bea's idea of returning income taxes on SS benefits to the SS trust.
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There should not be an income tax on SS. Or at least the income levels should be greatly increased.

The tax on SS began in 1983 and at the time the income levels [$25,000 single/$32,000 married couple] at which the tax kicked in were high [ie, back then, the tax only affected the well-to-do.] But those income levels were never indexed for inflation. So now, after 35 years of inflation, people with low incomes are subject to the tax on their SS income.

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mathjak107 said:
we are double taxed in fact . we all are taxed when we earn it and then we are taxed when it is means tested again based on income so the same money is taxed 2x
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And when IRA RMD kick-in, many more people [like me] will be subject to that double SS tax.

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i have always had my ss taxed and i have no rmd's yet .

the worst is when you lose a spouse , have rmd's and have to file single . this is where planning around permanent life insurance which is tax free can be a big help and surpasses the results you get trying to invest instead
 
mathjak107 said:
i have always had my ss taxed and i have no rmd's yet .

the worst is when you lose a spouse , have rmd's and have to file single . this is where planning around permanent life insurance which is tax free can be a big help and surpasses the results you get trying to invest instead
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Because I have zero debt, I can live comfortably on a relatively small income.

Since age 62, I have been able to live on SS plus a small distribution from my IRA
while still staying below the IRS tax threshold. Not only have I paid zero income tax
the past several years, I didn't need to file tax returns. That all comes to an end
in a few years when I turn 70 and forced to take out much larger IRA distributions
which will cause my Social Security to also be taxed. Soon there will be a whole lot
of government hoops I will have to jump through. It's really unfair to suddenly burden
old people with those draconian tax laws. For the first time ever, I will probably have
my taxes done professionally... bummer.

It's not paying taxes that bothers me so much... it's paying taxes to the "enemy"...
to a government whose policies contradict my values.

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mathjak107 said:
well you know the answer to the problem -move to another country .. i am not sure any gov't holds my values in mind .
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There you go. That's why moving to another country is not only futile... one might be moving from the frying pan to the fire.

At least here in Texas, I only have to worry about federal income taxes [no state income tax.]

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KingsX said:
Because I have zero debt, I can live comfortably on a relatively small income.

Since age 62, I have been able to live on SS plus a small distribution from my IRA
while still staying below the IRS tax threshold. Not only have I paid zero income tax
the past several years, I didn't need to file tax returns. That all comes to an end
in a few years when I turn 70 and forced to take out much larger IRA distributions.
Soon there will be a whole lot of government hoops I will have to jump through.
It's really unfair to suddenly burden old people with those draconian tax laws.
For the first time ever, I will probably have my taxes done professionally... bummer.

It's not paying taxes that bothers me... it's paying taxes to the "enemy"...
to a government whose policies contradict my values.

.
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To be fair, paying taxes on withdrawals from IRAs is exactly the deal we struck when placing money into those accounts. Deposits were made with deferred income so it was tax-free at that time, upon withdrawal we must pay the piper. Those funds are now added to current income and taxed at today's rate. The gamble and presumption was that one's income level and tax rates would be lower in retirement than during earning years.

Everyone pays taxes for some things we heartily support and some we vehemently disagree with. It's part of the social contract we all have to live with. Don't like policies? Move or vote to change them.
 
StarSong said:
To be fair, paying taxes on withdrawals from IRAs is exactly the deal we struck when placing money into those accounts.
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That is not my complaint.

My complaint is having to pay extra taxes on my SS because at age 70
government RMD laws force me to withdraw huge amounts from my IRA.



StarSong said:
Don't like policies? Move or vote to change them.
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Unfortunately, we can't vote on government policies... only for some officials who might change those policies.

And speaking of that, I recently read that a second tax reform package is now in the works. So I have spent time today, contacting my congressman and Congressman Brady about this specific important senior issue.

Here is what I emailed:

Please help seniors who are forced to pay draconian income taxes on their IRA RMD and Social Security income.

The tax on SS began in 1983 and at the time the income levels [$25,000 single/$32,000 married couple] at which the tax kicked in were high [ie, back then, the tax only affected the well-to-do.] But those income levels were never indexed for inflation. So now, after 35 years of inflation, people with low incomes are subject to this draconian tax on their SS income.

In a few years when I turn 70, the federal government will force me to take out much larger RMD IRA distributions than I need which will cause my Social Security income to also be taxed. Soon there will be a whole lot of related government hoops I will have to jump through. It’s really unfair to suddenly burden old people with these draconian tax laws.

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Good post for people who had erroneous information about SS. One thing...most analysts tout waiting to take SS but most people take it early for a variety of reasons. If someone lives to the break even age, they wind up with the same amount of money. If they die before that age...well good thing they took it early. If they live several years beyond that age, according to what they did with their SS payments, it may be unfortunate that they didn't wait or fortunate (if they invested that money and did well).
 
The Only recourse Seniors have on maintaining their finances is to begin to put pressure on the politicians...and then, VOTE. Any relief we might see in this latest round of tax reductions will most likely be eaten up by increases in the Medicare withholding. Then, the paltry rates at which Social Security payments are increased rarely keep up with inflation. About the ONLY thing the government has done in decades that can help retirees is the adoption of the IRA/401K plans, which allow those who could afford it to put aside some of their own funds for retirement. Company "defined pension" plans are becoming increasingly rare, so even that once faithful source of income is beginning to disappear. Even government workers may find themselves facing problems as increasing State and National debt forces governments to cut back on the generous pensions offered by those entities. I sometimes wonder just how future retirees are going to be able to live decently if present trends continue.
 
OneEyedDiva said:
Good post for people who had erroneous information about SS. One thing...most analysts tout waiting to take SS but most people take it early for a variety of reasons. If someone lives to the break even age, they wind up with the same amount of money. If they die before that age...well good thing they took it early. If they live several years beyond that age, according to what they did with their SS payments, it may be unfortunate that they didn't wait or fortunate (if they invested that money and did well).
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most of us will go on past break even and of course break even can vary for all of us.spousal benefits and whether the bigger gains are in the early part of our retirement or later on effect your outcome too .

the biggest reason to delay is not what if i die but what if i live ? it really boils down to whether you want to be more stock market and interest rate dependent or longevity risk dependent .

your 70% bigger check at 70 has you far less dependent on what markets or rates do once ss kicks in .survivor benefits are bigger too if that matters
 
Don M. said:
I sometimes wonder just how future retirees are going to be able to live decently if present trends continue.
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I think that the biggest thing that we can do is to right size our own expectations and our own individual standard of living.

For far too long Americans have tended to use 110% of their income on immediate needs/wants and not take the long view when it comes to their finances.

Over the years I've noticed that people always seem to find the time and the money to do the things that are important to them. We can choose a secure retirement, healthcare, education for our kids or we can choose consumer spending and consumer debt.
 
once we get beyond living in a tent in a camp ground in a warm climate , everything we do from that point on is a lifestyle choice . there is always somewhere cheaper we can live or make cheaper lifestyle arrangements . our needs really are very little which is why we have those living on just social security .

i know people like to compare what they do to others and then talk about how others are spending to much on other things but they don't realize they too can do things far cheaper .

so where and how we all live are wants and not needs in most cases . the more money we have the more the choices in life we can have as far as lifestyles but at the end of the day just about every thing we do is a lifestyle choice and not a need regardless of income ..

many who live on lower incomes could live golden girl style and save money, they choose not to so there living expenses are not needs as they like to think , those choices they make are still wants .
 

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