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I was looking at my annual Social Security statement today and played around with the Social Security calculator you can download from the SSA site.

http://www.ssa.gov/oact/anypia/download.html

The last few years I've been getting about $9,000/yr of royalty income on some engineering continuing education courses I authored years ago and I pay about $1,000 in FICA taxes on that income as a "self-employed worker".

If I continue to get $9,000/yr in FICA earning for the next 9 years until I'm 65, I'll pay about $9,000 in FICA and my monthly Social Security benefit will increase by $45/month.

I was wondering what a GOP-approved, for-profit insurance company would charge a 65-year-old for that same $45/month inflation-adjusted benefit? Given that private insurance companies are much more efficient due to being managed by multi-million dollar CEOs instead of a Gov't bureaucrat making less than $200,000/year, I expected a significant discount to the fortune I'm paying in FICA on my paltry royalty income.

Imagine my surprise when I learned a $45/month annuity from an insurer costs $12,000 at today's rates -- $3,000 more than I'd pay in FICA taxes for the same benefit.

My Republican friends tell me Social Security is a bad deal. Maybe it is, just not as bad as buying the same benefit from a private insurer.

intercst
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Not only that, but Social Security also provides disability and dependent benefits for its lower cost, and a COLA.
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Social Security will be a very bad deal for anyone earning over $100K and under age 40.

I prepare a tax return for a young couple
Each earn about $100K
When the current 2% SS tax cerdit expires, they will pay $6200 each and their employers will match the $6200 => for a total of $24800 per year

IMO, their expeced return = $0 .... Why => They will be means tested at age 70+ and will not qualify for social security

PS
I'm self emplyed => If I make $50,000 in 2012, I will get $6 more per month than I would get if I made $0

10-4
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If I continue to get $9,000/yr in FICA earning for the next 9 years until I'm 65, I'll pay about $9,000 in FICA and my monthly Social Security benefit will increase by $45/month.

Imagine my surprise when I learned a $45/month annuity from an insurer costs $12,000 at today's rates -- $3,000 more than I'd pay in FICA taxes for the same benefit


Social Security benefits are typically computed using "average indexed monthly earnings." This average summarizes up to 35 years of a worker's indexed earnings.

You might want to check your math - If your average earnings for the 1st 26 years you worked was indexed at less than $9000, then $9000 for the last 9 years might increase your SS benefit

For me, $9000 for the last nine years prior to 65 that I work = $0 increase for me

http://www.ssa.gov/oact/cola/Benefits.html
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doubtit writes,

Social Security benefits are typically computed using "average indexed monthly earnings." This average summarizes up to 35 years of a worker's indexed earnings.

You might want to check your math - If your average earnings for the 1st 26 years you worked was indexed at less than $9000, then $9000 for the last 9 years might increase your SS benefit

</snip>


The math is correct. But I'm an unusual case since I retired in 1994 at age 38 once I'd accumulated enough capital to quit working. I have 13 years where I paid maximum FICA up to 1994, and mostly zeros in every year since.

intercst
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My Republican friends tell me Social Security is a bad deal. Maybe it is, just not as bad as buying the same benefit from a private insurer.

intercst


This is not true:

not as bad as buying the same benefit from a private insurer
====================================================================


It might be good for someone that retires before 40 and has low earnings. Bad deal for almost everyone making $50K + and under 50.

At age 66, I think the rate of return on my contributions is about 1%.

10-4
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The math is correct. But I'm an unusual case since I retired in 1994 at age 38 once I'd accumulated enough capital to quit working. I have 13 years where I paid maximum FICA up to 1994, and mostly zeros in every year since.

My case isn't quite as extreme, but because of early retirement (age 49 in my case), my Social Security calculation series was filled with some zeroes and some very small amounts from summer work during high school. Once I retired I was pleasantly surprised to find that my SS calculated benefit grew every year as my royalty payments replaced those zeroes. I haven't checked recently, but I think I'm still replacing low wage summers with royalty payments each year.
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Many people wonder how their benefit is figured. Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or “primary insurance amount” (PIA). This is how much you would receive at your full retirement age — 65 or older, depending on your date of birth.


For people born in 1946:

90% of first $711
32% of excess above $711 (up to $4288)
15% of amount above $4288

+ COLA for people working past age 62.

http://www.ssa.gov/pubs/10070-08.html

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

Used excel to compute the increase in benefit if I earn $100K or if I earn $0 in 2012 = $28 per month difference
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I think the rate of return on my contributions is about 1%.

You also had disability insurance, widow/orphan insurance, and spousal insurance (at 50% of your benefit)--all included in the amount you paid for Social Security. Has a monetary value. I think you made a lot more than 1% when you consider particularly the value of disability insurance in your 50s/60s and the value of 50% spousal support even if they never contributed a penny to the SS fund.

At age 64, the hubster & I will get ~2000 + 1500/month that we don't have to manage or worry about...market crash? low inflation? high inflation? dividend cuts? recession? depression? losing our marbles? poor investment decisions? doesn't matter!

SS makes me feel secure in a way that investments do not. And we could live on just SS ($42k) if we really had to, there's an additional sense of security.
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"At age 64, the hubster & I will get ~2000 + 1500/month that we don't have to manage or worry about...market crash? low inflation? high inflation? dividend cuts? recession? depression? losing our marbles? poor investment decisions? doesn't matter! "


You forgot half of that may disappear with means testing, and in 20 years, SS will only be able to pay 2/3rds of that. It's broke.....


Hope you saved a bit to compensate for that!



t.
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I think you made a lot more than 1% when you consider particularly the value of disability insurance in your 50s/60s and the value of 50% spousal support even if they never contributed a penny to the SS fund.

My wife's return is less than 0% - At age 66, she will have worked for 48 years for a $200 per month ss benefit - Her benefit will be $1400 per month or $1200 if she takes 50% of my benefit -

at age 66, she plans to take the 50% (based on 50% of my benefit) and start collecting on her benefit at age 70 = $1900 per month.
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You forgot half of that may disappear with means testing, and in 20 years, SS will only be able to pay 2/3rds of that. It's broke...

Half of our investments may also disappear.

Not sure what form means testing may take, but likely wouldn't affect us. Maybe those with incomes over $1MM or $250k or $100k. Or maybe top-level SS benefits...we aren't there. I think the very top right now is $2500/month for one person at full retirement age.

SS can be fixed by raising the taxable income limit, ending the temporary 2% tax cut, and phasing down the 50% spousal benefit. These days women work and earn their own benefit. I worked part-time or at low wages for 13 years and only made a professional salary for 13 years, so I have a bunch of zeroes in my SS benefit calculation (SAHM for 10 years and retired early), and yet SS on my own work record will be $1500/month if I collect, as I plan to, 2 years before my full benefit. Most women these days can manage the equivalent (more years of work replacing my professional years in many cases). I only exceeded the income cap for SS twice, maybe 3 times.

Hope you saved a bit to compensate for that!

Yes, but I want to conserve it as much as possible. If we live to be among the old-old, we'll need it.
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alstro:"Half of our investments may also disappear."

Very true..folks anticipate a 35% drop in the market in the next few years.

------

alstro:":Not sure what form means testing may take, but likely wouldn't affect us. Maybe those with incomes over $1MM or $250k or $100k. Or maybe top-level SS benefits...we aren't there. I think the very top right now is $2500/month for one person at full retirement age."

Right now, the IRS will tax only 85% of your SS as regular income...so first they'll take it up to 100%......

then, they'll just keep the medicare bracket where it is, so with the nominal 4% real inflation, you'll be jacked up to the level where you pay the $248/per person for Medicare...except, of course, by then, that will only be worth half as much as today....but you'll get in the higher bracket.

Then, they'll cook the books on inflation and tell you it is only 1.7% a year...so you won't gt much in the way of COLA increases...or any at all if they figure it is only 0.3%.....when it really is running 4% a year.....

Then, you'll have to report your assets...and they'll determine first you have to take 5% a year of them. They subtract that from your SS.....if it is still positive, you get that amount to bring you up to your SS level. Simple. If that 5% of your assets is more than your SS amount, you don't 'need' that SS and it goes to another welfare weenie who didn't save anything.

Simple.

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Alstro:"SS can be fixed by raising the taxable income limit, ending the temporary 2% tax cut, and phasing down the 50% spousal benefit. "

Yes, it could be.....or , worse, they could try to force it upon your savings income too!.....and since you don't have an employer, they'd grab 13^ of your investment income. Right?

And that could go up to a bazillion bucks a year......whatever your income or Buffet's income....He wouldn't like that for sure.... but he is 'rich'...so we need to screw with him and his 'fat cat' income. ANd yours.

Phasing out the 50% spousal? What happens to 'stay at home moms' who never worked. Would you have them starving to death? or forced to marry or mooch of another for survival? Surely the libs won't stand for that!....

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alstro:"These days women work and earn their own benefit."

Some of them do. many take a decade or two off to raise the kids. Many women don't have the job skills to earn but a minimum wage type job , maybe only part time.

And 'some' women choose not to work but raise the kids. Maybe 8 of them for those Catholic, Mormon and Islamo families.

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alstro:" I worked part-time or at low wages for 13 years and only made a professional salary for 13 years, so I have a bunch of zeroes in my SS benefit calculation (SAHM for 10 years and retired early), and yet SS on my own work record will be $1500/month if I collect, as I plan to, 2 years before my full benefit. Most women these days can manage the equivalent (more years of work replacing my professional years in many cases). I only exceeded the income cap for SS twice, maybe 3 times."

And there are 22 million now that can't find a job!...in the obama economy!.....and 350,000 dropped out of the work force just iast month.

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alstro:" If we live to be among the old-old, we'll need it. "

You will, but the question is: Will Obama and the drones let you keep it?

or do like Argentina where the gov't confiscated all the private pensions and savings plans....nationalized them.....now gives them 3% 'bond like' interest on their money when inflation there is 25% a year. In other words, screwed them over big time. Now they are forced to live on hamburger helper and dog food.

t.



t.
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"These days women work and earn their own benefit."

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

And those that don't are to sent into exile?


Howie52
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Right now, the IRS will tax only 85% of your SS as regular income...so first they'll take it up to 100%

TAXES isn't one of our higher expense categories, I'm not worried about it. If we have to cut back on discretionaries or hit our savings harder, so be it.

then, they'll just keep the medicare bracket where it is, so with the nominal 4% real inflation, you'll be jacked up to the level where you pay the $248/per person for Medicare...except, of course, by then, that will only be worth half as much as today....but you'll get in the higher bracket.

It certainly hasn't been 4% lately. And our income is nowhere near $170k, the next bracket for higher Medicare premiums. This will happen to some people, who apparently can afford it (higher income, ya know?), but not likely to us.

Then, you'll have to report your assets

We already do when we report what we put into retirement accounts and what our interest and dividends are.

they'll determine first you have to take 5% a year of them

You already have to do that starting at age 70 with minimum withdrawals from IRAs. If I had to start doing that at age 65, meh. Then I'd spend down IRAs before taxable, whatever. And the taxable momey is, er, already being taxed.

since you don't have an employer, they'd grab 13^ of your investment income. Right?

Maybe for folks under age 65 (or whatever the heck Republicans are trying to change the retirement age to-), or income over $250k or something. Not likely middle income retirees.

Phasing out the 50% spousal? What happens to 'stay at home moms' who never worked. Would you have them starving to death? or forced to marry or mooch of another for survival? Surely the libs won't stand for that!

I don't care to pay for the "retirement" of some wife of a high income earner to home school their 6 kids to age 18 or whatever.

The few women I know who never worked married young to wealthy men and do volunteer work. People like Ann Romney and my second cousin. They don't need America's SS taxes to pay for their retirement--unless they;re staying home with a disabled family member--that I have a great deal of sympathy for.

Most of the women I know married to high-income men worked most of their adult lives, whether they had children or not. None were SAHMs for as long as I was--10 years at home followed by 6 years of "mother's hours" (9-2) is rare indeed. I do know women who worked for many years and still earned less than 50% of their husband's benefit, but that's because they're married to men who did so well they had very high SS benefits. Those women whose husbands didn't make much earned more than 50% of the hubby's benefit. It's really kind of a boondoggle for the stay-at-home or low-earning wives of the wealthy and professional class.

A friend never had kids, worked for 40 years, and earned a small SS benefit, less than 50% of her husband's. However, he'll have 2 decent pensions (totaling $3-4k/month), a high SS benefit, plus savings. They don't need her 50% benefit. I'd prefer to see that $$ improve the benefits of the disabled and those who care for them.

Many women don't have the job skills to earn but a minimum wage type job , maybe only part time.

Most of them are married to men in the same boat, so they still out-earn that 50%. Whatever we're cutting back on these days, it shouldn't be job training.

And 'some' women choose not to work but raise the kids. Maybe 8 of them for those Catholic, Mormon and Islamo families.

Maybe we could afford to give such women a free pension years ago, but not any more. Big families are voluntary--unlike disabilities, chronic illness, or low IQ/low EQ, which can prevent someone from getting or keeping a job. I don;t want to cut the SS pension of those who earned them in favor of women who churned out "extra" kids on purpose for an excuse to avoid the work force (yes, I know women who did this--yikes).
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"These days women work and earn their own benefit."

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

And those that don't are to sent into exile?


What were they living on while they weren't working? If govt assistance, that continues. If a husband's income, that continues.
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""These days women work and earn their own benefit."

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

And those that don't are to sent into exile?

What were they living on while they weren't working? If govt assistance, that continues. If a husband's income, that continues. "

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Life used to be quite a lot simpler - now more folks get
divorced even late in life. Without the "half" benefit, there
would a few ladies hurting more than they already are.

Now if they are widowed - then they could collect. But there would still
be pain. Kind of goes with the territory.

Howie52
Not an expert on such things - but this is as I read it.
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now more folks get divorced even late in life.

I know--and so does everybody else, which is why we can phase out this benefit. I knew this in the 70s, and it's one reason I went back to work even though I didn't really want to at the time. The percentage of women taking the 50% spousal benefit is dropping as women who worked, and worked full-time, increase with every generation--also as women who never marry increase in number.

The poverty rate among elderly women is about the same among the never-married as the divorced. Why should divorced women get a higher SS benefit than never-married women with the same earnings history?

As for women who marry young and become SAHMs (and I was among them)...well, children grow up. If you take 5, 10 or even 20 years off the work force, there are still another 35, 30, or 20 years to earn your own Social Security. I did it, and I ain't so exceptional. I know a couple of women IRL and read about some online who use every excuse to avoid going bak to work (can;t earn much, like my life the way it is, I don't waaanna), but I don't think those excuses should dump more precious SS dollars into their pockets than go to women who actually worked for decades.
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Life used to be quite a lot simpler - now more folks get
divorced even late in life. Without the "half" benefit, there
would a few ladies hurting more than they already are.

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

I'm pretty sure some one is entitled to the spousal benefit if they were married for 10 years.

Jean
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"I'm pretty sure some one is entitled to the spousal benefit if they were married for 10 years."

if...they don't remarry..


t.
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