SS question

Discussion in 'The Watercooler' started by klmno, Jun 8, 2012.

  1. klmno

    klmno Active Member

    I'm estimating my social security retirement so I can choose how much retirement to save for thru my new job. I found the "calculator" on the SSA website so now I have what is probably a dumb question- is that amount taxed at all or is that all tax-free? I know the retirement will be taxed because it is being funded with tax-deferred money.
    Last edited: Jun 8, 2012
  2. Marcie Mac

    Marcie Mac Just Plain Ole Tired

    I think it depends on how much you get a month - My mother filed taxes on hers because she had annunity earnings as well- SO's mother doesn't on hers as it is her sole income and under poverty level. If my job tanks like I think it will, I will let you know in October :)

  3. klmno

    klmno Active Member

    Does that mean that look at SS checks with the retirement pay and they both count as income for tax purposes?
  4. witzend

    witzend Well-Known Member

    SS income is taxed as income at the regular rate.
  5. witzend

    witzend Well-Known Member

  6. klmno

    klmno Active Member

    Ughh.....and ok- let me give you the scenario-

    I was in the military from 18yo-22 1/2yo then went to college for 5 years. I didn't work much during the time I was in college but have worked 95% the time after getting out of college and of course, at a higher pay, but then I had the 18 mos unemployed and have worked at this job for about 18 mos at a low to mid-range pay. Now I'm getting ready to start a higher paying job that I hope to stay at until I retire at 67 yo.

    Am I interpreting from SSA correctly that my SS will be determined by taking an average of all the pay I've earned, meaning they will go back to when I was 18yo and average it over all the years between 18 and 67? (If so, young people need to be aware that there's a difference in retirement if you wait to go to college and start in the work force right away.)

    And I've read confusing info about a cap on income. I can't figure out if they are not taking SS payments from any salary over the cap amount or if that means you can't get SS retirement on any salary over that amount or if they mean that any salary over that amount won't be included in their average when calculating the retirement amount per month.
  7. muttmeister

    muttmeister Well-Known Member

    The social security office is one of the few that I've had contact with where the people were totally helpful. I'd make an appointment and go in with my questions.
    I've been getting SS for awhile and also get teacher's retirement. My understanding is that SS is taxed but by a different method than reguar pay. It depends on how much you get and what your other income is. In my case, I have taxes taken out of my retirement pay claiming just myself since I am alone and it is enough that I don't have to pay anything else.

    It gets confusing but the people at SS have been extremely helpful. Now that I've said that, if you go you'll probably get a jackdonkey but that was not my experience.
  8. klmno

    klmno Active Member


    That's usually my luck!

    I'll see if I can squeeze in time to at least call before I start the new job.
  9. keista

    keista New Member

    The calculator you are using on line is just an ESTIMATE. Even though you have to give them your SS# to use it, they do not pull up your records to do your estimated calculation. Hopefully when the economy improves, they will start sending out those statements again that gave you realistic estimates based on your actual earnings. the only assumption on those was that you would continue earning at your current rate.

    To reduce your tax liability in retirement, put money away in a Roth IRA (or Roth 401K if available) With the ROTHs, you pay taxes this year, but all earnings on that money are tax free in the future.

    Hypothetically speaking, if SS plus your retirement is over 50K, you get taxed at the 25% tax bracket. If your retirement is in a ROTH, those withdrawals dont' get taxed and if your SS is on 20K, then you're only taxed on 20K at the 10% bracket. (these are just hypotheticals, I have no clue where the brackets change.)
  10. klmno

    klmno Active Member

    Yeah but that would be at a higher tax rate. That's why most people avoid the Roth. Plus, I'm supporting a minor who will need help in college and/or getting started in his own adult life next year and that financial responsibility won't be there when I retire.

    About those written estimates- I found those helpful in writing a will when E was very young and was wondering why it seemed like I hadn't gotten one in a while. I noticed it used to list my estimated retirement as higher each year, but then that was when my income was increasing every 2-3 years.
  11. keista

    keista New Member

    That's very shortsighted thinking. The other benefit to the Roth is that you can withdraw deposits at any time since you've already paid taxes on it. For example you deposit $10. After five years it doubles to $20 (dreaming, I know) You can withdraw the original $10 without penalty and leave that interest in there to keep growing tax free. However, if you are on the line between tax brackets it may be beneficial to be in a regular IRA to reduce income to the lower tax bracket.

    Supporting the minor has it's own tax benefits. If you're paying for his college as well you get more deductions there.
  12. Marcie Mac

    Marcie Mac Just Plain Ole Tired

    They don't send you SS info anymore by mail - you get it off their site. When I did get the paper ones, they had on the left what I made every year, so I don't think they are basing the numbers on their web site on just what you made for one year.

    I am not good with handling money, so I opted for a 401K LOL They take it out every payday and I don't even think about it, plus what I save with it being pre tax its well worth it.
  13. DammitJanet

    DammitJanet Well-Known Member Staff Member

    One thing to remember...I believe SS is based on your last 10 years of your highest years of salary.

    I will never have to worry about retirement money along with social security money. Just not happening in this lifetime unless I suddenly get Or hit the lottery. We dont have any retirement and I pulled all my 401 and retirement funds out from my job when I was let go. I had to live on something. I know I dont have to pay taxes because I dont make enough money but then I make well less than poverty level.
  14. klmno

    klmno Active Member

    MM, there is a way to get your statement online and that should be as accurate as the paper ones we used to get. I used the retirement estimater (calculator) because I was hoping it would let me project future earnings and include them in the estimate.

    Kiesta, the employer will match up to a certain percent if I do their typical retirement savings. They have an option for Roth but I think I read that they won't match that if it's chosen. All I remember is that I read something in that section that made me eliminate it as a viable option for me.

    DJ- do you get disability? Is it on top of retirement SS?

    I sat here for 2+ years thinking I would have to work until the day I die due to the BK and having to deplete all savings, 401K, and E's 529 accounts and not having a job in my profession. This job offer has been a Godsend.

    Over the past few years, I have been reminded thru reality how fast things can change for the worst and how fast things can change for the better. Whether or not that is karma or a Higher Power or just coincidence, it has happened in my life a few times. I hope I never take good things for granted again nor let bad times seem forever hopeless again. I'm trying to get that message imbedded in E's mind, too.

    Going Occupational Therapist (OT)- I can't begin to tell you how good it felt to sleep late (until 7:30) this morning! Now, to have my coffee and jump into house cleaning!
  15. Marcie Mac

    Marcie Mac Just Plain Ole Tired

    The paper ones were as about as accurate as the ones are on line thru the SS website. You have put put in your SS number so what you get is a complilation of your paychecks over the years (I called them and checked). There are a lot of sites out there, MSN money being one, where you can do calculations. The institution that handles my 401K has a few but I don't do them anymore - its too depressing. I will be 62 in October - I can claim mine then - a whopping 1,800 a month which won't even cover my mortgage,taxes and insurance let alone all of the other stuff, or I can wait till I am 70 and get like 3,400 a month (that is so not going to happen and I am so not going to work that long voluntarily). One of my major problems is I can't qualify for medi care till I am 66 which means out of pocket till then.

    My 401 has done a yoyo the past couple of years. I have a ton of options for investments but have gone with consertative. My goal was to get enough in there to pay off my house so I wouldnt have to worry about THAT payment, and put the house in a trust for the boys that payoff goal I have met but now that I am inching closer rapidly, my options are constantly changing-do I now want to sell it eventually and move to a cheaper state..sigh... I put away 14% of my annual, plus what the boss kicks in and I thought a few years ago that would be enough-not with the way the stock markets going it isn't. If my job goes I will pull it all out and set up a Schwab account or similar. They will take 20% of it for taxes but I won't have another 10% penality due to my age.

    The one thing in all of my planning I never took into account was if you go on medi care/medi cal here, they look for ways to pay themselves back. Shoot, you even have to turn over your life insurance -we just put SO's mom on medi cal, and had to give them bank statements and a copy of her funeral policy which will pay out 1,800 to have her creamated - Ca only allows you 1,500 to do that so they get the extra. They wanted to make sure they got their money and went over the contract with a fine tooth comb to make sure SO wasn't going to get any money, that it wasn't a true "life insurance" policy. And SO just went thru the same thing - they do an audit of your bank account and saw that he had an automatic payment for what they thought was life insurance-it was burial insurance but again they wanted the contract. I think they can research back 5 years to make sure no one in your family has gotten any money out of your estate as Medi Cal/Medi care -they are first in line.

    It hovers to do all of this planning and thinking and then realize that you could lose everything based on one catastrophy LOL

  16. klmno

    klmno Active Member

    Geez.... I am hoping I live long enough to just buy my own burial plot and have arrangements planned so E won't have to deal with so much since there isn't any other family we can count on and he'd be clueless about this sort of stuff.
  17. DDD

    DDD Well-Known Member

    As of this year when I do our IRS paperwork the SS #$'s are not taxed at full value. If you go on the website it has a directory where you can read about SS benefits and a formula that shows you what % is taxable. on the other hand the formula is in direct relation to your total income so I doubt there is anyway to "know" what you can exactly antiicipate drawing at the time of retirement.

    Sad to say husband and I have always had too many dependents to provide for our safe retirement years. The one thing we did that was beneficial for us was use the Roth IRA so that the funds pulled out post retirement would be tax free. Just wish we had been able to stash more. DDD
  18. DDD

    DDD Well-Known Member

    PS: Don't forget that you Medicare and Mecicare supplemental insurance premiums come from the SS so the net figure is not what you anticipate either. DDD
  19. donna723

    donna723 Well-Known Member

    The "estimates" can be a little deceiving. I did all that before I retired, but then when I started actually receiving benefits, I was pleasantly surprised to find out that I was getting quite a bit more than the estimated amount! The amount you get from Social Security is based on your "highest years" but what I didn't know was that they go back and and refigure your past years earnings into today's dollars and base it on that. It wouldn't be the same for everybody but I worked for the state for many years. Considering the economy and with all the politics going on, we went for many years with no raises at all or very small ones, while inflation crept up, making the value of our paychecks smaller and smaller. So when they went back and refigured those amounts from years ago, turns out my tiny little paychecks from a long time ago were actually worth more then than the bigger ones I was getting more recently, and those became my "highest years". Kind of pitiful but it worked to my advantage when I retired.
  20. klmno

    klmno Active Member

    It sounds like it's impossible to accurately estimate this right now- I guess I'll have to wait for 2-3 years after I'm at the new job then get an actual statement from SSA of their estimate. I'll still be able to change retirement contributions periodically.

    Fortunately, DDD, this is a pretty secure job and being gov, we are able to look online and get expected raises, which are almost guaranteed and automatic. They can change but if/when they do, it's due to an inflation increase.