Tell me it ain't so...
 

just received my monthly Edward Jones Newsletter. It's called "Investment Perspective" and covers all kinds of topics each month.

This month there was a segment entitled, "Social Security and Taxes In Retirement". This part blew me out of the water: The taxable amount of Social Security Benefits for a couple filing jointly whose provisional annual income is more than $ 44,000 is up to 85%. 85%!!!! After contributing to this fund for over 40 years we can expect to get back 15% of our benefits. I shoulda invested with Bernie Madoff.... a better ROI. Somebody tell me it ain't so.:cus:

OK... I'm a dummy.... I just realized that is the precentage SUBJECT to taxation... NOT the percent tax....

It ain't so!

You are paying taxes on up to 85% of your Social Security benefits not losing 85% of your benefits.

I realized that 10 minutes after my original post....

Let's go a little farther with this, for me, who is ignorant on this subject. I'm about 7 years from being eligible to collect SS.

What is "provisional income"? Is that any income you receive from investments, pensions, IRAs, and/or employment beyond SS?

itis--> 1/2 of soc security benefits; all tax free bond income; all other 1040 taxable income

It doesn't matter. You are being taxed on money you were already taxed on.

We're Going To Have To Get Used To It...Just Like Our Kids
 

Neither of my sons believe that they will get anything, or certainly nothing of any substance, from Social Security when they retire. They are both making their alternative savings plans based on no portion of their retirement income coming from Social Security -- and Medicare, as well.

Those of us that are getting payments and those that are just "close" better just get used to the idea of some major cutbacks in Social Security. The "numbers" simply don't work and the Congress has ignored even beginning any discussion of correcting the financial underpinnings of the program. We were within 7-8 years of the insolvency of Social Security before the current financial crisis became apparent. It's pretty sure that we're closer now.

Personally, I think that both Social Security and Medicare payments are going to have to be "means tested". That is, if you have enough income or assets that would indicate that you don't need the SS payments or if you can afford to pay for your own healthcare insurance, that's what will happen.

Something like that HAS to happen. As I said, the "numbers" simply don't work for Social Security and they absolutely don't work for Medicare. Blame all those Congressmen and Senators who simply refused to even discuss the problem for the last twenty years. Any arguments of how you contributed all those years or whether limiting both Social Security and Medicare to only low income folks thereby "redistributing income" from the wealthy to the poor will fall on deaf ears. The amount of revenue being collected is simply not enough to pay for the projected benefits to the number of those already retired and those who will retire within the next decade or so. And the SS Trsut Fund that had been allocated to pay for future benefits was rolled into the general budget of the government about 4-5 Presidents ago. SS is now on a "pay as you go" basis.

VK, how old are your sons?

I'm 55, and I pretty much figured that out about 30 years ago. Then the SS Administration started sending me my yearly "statement" with all of my years of income and what my projected benefit would be.

I have always lived within my means, setting up every kind of retirement savings plan that was available, maximizing my contributions. Saving for my retirement. I actually started to believe that retirement might work out.

A trillion dollar war, a trillion dollar bail-out or two, the SS fund rolled into the general "budget" (now there's a Ponzi scheme), a couple of market melt-downs...

I pretty much figure even if they don't actually take my SS benefit away, they'll find a way to tax it into nothingness, or inflation will make it close to meaningless.

Meanwhile, I better figure out a way to keep myself useful and productive after I hit The Villages.

Misunderstandings About Social Security
 

It is a common misconception to hold the position that social security is an additional tax levied on gross income or income before federal and state taxes have been paid. It certainly seems to be the case. But actually what is happening is that the government is forcing you to buy a government sponsored annuity called Social Security. Actually this annuity has both advantages and disadvantages over typical life insurance annuities. You can't make a deal with the government to take a lower monthly check in order to get some rights of survivorship. However, the social Security pay-out is generally better than what you would get from most private annuities. In addition, the monthly pay-out is at least fifteen percent tax free. (For some with lower incomes the pay-out could be fifty percent tax free or entirely tax free.)

As to the viability of Social Security, I believe that most politicians know that the voting block with the greatest participation rates is senior citizens. I think that most politicians, wanting to be re-elected, will shy away from hurting their biggest constituency. Of course I could be wrong.

But to reiterate, one of the biggest problems with understanding Social Security is the fact that we all have gotten so used to calling the regular attachment of our earned income "Social Security taxes" when in reality it is a forced annuity purchase. I know there does not seem to be a big difference but at least you get something back for your purchase. With a tax, you get nothing back.

that's because the sleazebag bottom feeding congressmen have no worries... they have a pension and healhcare plan unequaled... thus will start the revolution in the streets....

The company that I retired from factors SS into our retirement plan. When I turned 65, my pension went down by the estimated amount that SS was going to provide so that I would not "lose" the total amount of my retirement income.

What kind of "means testing" is going to figure out what I need to live on. I planned my retirement with the SS included.

I paid in the max for many years and I want my part of the "annuity" as someone called it.

Maybe the government should address the SSI payments to deadbeats that know how to work the system.