Skip to main content
No. of Recommendations: 1
Hawkwin: "I fully expect to profit from SS - but then I am an upper middle class married white male with a working spouse. As long as we both live to our average life expectancy, we will do just fine.

If I was a single black man with adult children, I would not be too excited about the possibility of me or my heirs getting back at least what I put in."

I am not co certain why so fully expect to profit?

Two career couples can get whacked pretty easily.

You wife, even she had never worked, would have been entitled to a spousal benefit equal to one-half of your benefit (while you were alive). Given that you said she worked, she paid into the system, too, but will she be collecting more on her own account? If yes, then all that she paid in SS taxes is paying only for the incremental amount above what she would have collected in spousal benefits. And if she earned more, than it would work similarly in the other direction with respect to you as the lower earning spouse.

And once the higher earning spouse dies, the surviving spouses in entitled to a spousal benefit equal to the amount the deceased spouse was previously collecting. Thus, once the higher earning spouses dies, anything the surviving spouse paid into the SS system as taxes has zero marginal benefit to her (or him) because it does not affect the amount that the surviving spouse would collect.

And higher income earners do, too.

From some old notes:

A. Social Security is expected to replace about 40 percent of pre-retirement earnings of average earners; 80 percent for the lowest earners; and 27 percent for those at the maximum taxable wage base of $80,400 [2001], according to the Social Security Administration.

B. SS Benefits

The benefit formula is a three step formula based on AIME (Average Indexed Monthly Earnings). The annual earnings on which this average earnings figure is based have the same caps as were used on the tax side. The formula for the benefit is then 90% of the first $x of AIME plus 32% of the next $y of AIME plus 15% of the balance of AIME (where x and y are indexed yearly).

Thus, the benefit formula has two sharp inflection points.

You may have run all the numbers, but if not, then I am not sure that you expectation to fully profit is as certain as you assert.

Regards, JAFO
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.