patrick.net

It would be cheaper and more productive to increase the interest rates.

From the article:

As it stands, workers get 90 percent of the first $10,700 of their average pay. They get 32 percent of the next $50,100, and 15 percent of their average wage above this amount up to the maximum. If the formula were changed to give workers 100 percent of the first $10,700 of their average pay it would amount to an 11 percent increase in benefits

A worker with average pay of $20k receives 90%*10700 + 32%*9300 = $12606. That's 63% of their usual working pay.
A worker with average pay of $100k receives 90%*10700 + 32%*39400 + 15%*50000 = $29738. That's 30% of their usual working pay.

So, really, the high-income workers are the ones getting screwed by social security.

It should be tied to the 'eight ball commodity index'. If it doesn't amount to 20 eight balls a month in local currency, it isn't enough to keep #sniff toke# body and soul together.

Others have suggested the 'lottery ticket commodity index'.

SunnyvaleCA says

From the article:

As it stands, workers get 90 percent of the first $10,700 of their average pay. They get 32 percent of the next $50,100, and 15 percent of their average wage above this amount up to the maximum. If the formula were changed to give workers 100 percent of the first $10,700 of their average pay it would amount to an 11 percent increase in benefits

A worker with average pay of $20k receives 90%*10700 + 32%*9300 = $12606. That's 63% of their usual working pay.
A worker with average pay of $100k receives 90%*10700 + 32%*39400 + 15%*50000 = $29738. That's 30% of their usual working pay.

So, really, the high-income workers are the ones getting screwed by social security.

Actually I think you made a mistake on the $100,000 earner calculation. Should be:

A worker with average pay of $100k receives 90% of first $10,700 + 32% of next $50,100 + 15% of next $39,200= $31,542. Not much of a difference from your example, but a difference nonetheless.

There are the clawbacks, too, because Social Security becomes 50 percent, then 85 percent taxable at certain income thresholds. If you had the common sense and restraint to garner your own retirement savings, SS punishes you with higher taxes.

SunnyvaleCA says

So, really, the high-income workers are the ones getting screwed by social security.

Also remember, the maximum social security payment at normal retirement age is $2861, so if you're an above average wage earner, you don't get anywhere close to what you were earning while working.

Ceffer says

There are the clawbacks, too, because Social Security becomes 50 percent, then 85 percent taxable at certain income thresholds. If you had the common sense and restraint to garner your own retirement savings, SS punishes you with higher taxes.

This is also true. You get taxed on your income before they pull the SS. tax, then when you start receiving it in retirement, they wack you again. Pulling $50K - $60K a year from your 401K will make approximately 85% of your SS taxable. The government penalizes the "savers" for being responsible.

It truly is better to be a Socialist in the country and mooch off of the system.

This is why you see so many fucks trying to claim disability before retirement.

ForcedTQ says

Actually I think you made a mistake on the $100,000 earner calculation. Should be:

A worker with average pay of $100k receives 90% of first $10,700 + 32% of next $50,100 + 15% of next $39,200= $31,542. Not much of a difference from your example, but a difference nonetheless.

Thanks, Forced, for the correction. I was reading the $50,100 as a "tax bracket" type thing, but your interpretation looks like the correct one. This being the case .... woo hooo! I'm retiring right now! :-)

Pulling $50K - $60K a year from your 401K will make approximately 85% of your SS taxable.

This why some did the Roth IRA bit. Forgo the tax deduction on the contributions, but tax free on withdrawal. Not sure if Roth withdrawals count toward making SS taxable, though.

HeadSet says

This why some did the Roth IRA bit. Forgo the tax deduction on the contributions, but tax free on withdrawal. Not sure if Roth withdrawals count toward making SS taxable, though.

The ROTH is a great idea, but you need to get in early, so the money can grow. After all, you're pre-paying the tax, versus sticking money in a 401K with deferred tax.

But, the withdrawals in the future from a ROTH are tax free and they have no RMD at 70-1/2. Plus, any withdrawal from a ROTH DOESN'T make any of your SS taxable.

We got into the front end Roth game late, and didn't get all the benefits, but we roll a ton backdoor into the Roth.

The problem with Roth is stupidly low income limits they put on it. I can't do it anymore, because my income is above the limit.

People who need it, don't make enough money to put away into Roth. And those who make enough, can't do it because they are above the limit.

Roth thing is fucked up.

I never put any money into Roth. To me it makes no sense to give the IRS/gummint my tax money early.
1. Inflation can and is more likely to go hockey stick north. Even if it doesn't, they're lying to you. So the longer one delay paying a debt, the less the money is worth.
2. I may die earlier than expected or have life changes that require money to solve. Better have the money than give it to the IRS.

3. Roth is a future promise by the IRS that the conditions and laws will not change to my detriment. I don't trust the IRS. When push comes to shove, they have your money and that's that. They may not have a choice when the petro-dollar is dethroned and we have to live within our means.

4. I feel I can invest it better with the money today and generate more than enough to cover future taxes tax obligations from simple IRA.
5. Study after study show that as one gets to 70's and above, discretionary spending tamps down. I'd rather have my money now so I can do thing I like than later when I may not be able to due to health or just old age.

Roth sounds like a good idea, and if you have excess after tax bux washing around you may as well go for it. However, I went through the Monte Carlo estimates about paying tax now vs. playing the margins on paying less tax after retirement a while ago and the break even points were at the point where you would be quite the old crock before realizing any significant financial benefits. Old and creaky but marginally richer IF the taxation margins AND investment margins worked out in your favor.

My estimate was it was place to put money that was already 'after tax' when you had the opportunity if you had such monies, but that taking money out of an already tax sheltered non-Roth wasn't necessarily going to make that much of a difference and could even have a downside depending on market conditions, tax conditions and various unpredictable fluctuations. If you are in a position to remove the money at a very low tax rate, that might be OK, but usually that would be if you were underemployed or marginally employed, anyway.

The government gets it's pound of flesh and Roth is kind of a way of exploiting people who feel that having a fund that pays no taxes is somehow beating the system.

FortWayneIndiana says

The problem with Roth is stupidly low income limits they put on it. I can't do it anymore, because my income is above the limit.

Does your 401K allow you to put money in after tax, that you can roll backdoor into a Roth? There are no income limits if you do it that way.

kt1652 says

I never put any money into Roth. To me it makes no sense to give the IRS/gummint my tax money early.

It makes sense if you have a long enough timeline, like at least 5 years. Through tax free investment growth, you'll get the tax paid back.

kt1652 says

. I may die earlier than expected or have life changes that require money to solve. Better have the money than give it to the IRS.

Wrong, if you put the money in tax deferred account (like a 401k or IRA) and you need it, you'll pay the tax plus a penalty. If you put it in a Roth and need it later, you can take it back out tax free. The IRS has nothing to do with it.

kt1652 says

4. I feel I can invest it better with the money today and generate more than enough to cover future taxes tax obligations from simple IRA.
5. Study after study show that as one gets to 70's and above, discretionary spending tamps down. I'd rather have my money now so I can do thing I like than later when I may not be able to due to health or just old age.

This is the typical ignorance about saving and investing. It doesn't matter if your money is in a pre-tax 401K or a Roth. They both grow at the same rate, depending on the actual investments you choose. The plus to the Roth is, at 70-1/2 you won't get forced to take a RMD of a large amount when your spending has slowed down.

Ceffer says

However, I went through the Monte Carlo estimates about paying tax now vs. playing the margins on paying less tax after retirement a while ago and the break even points were at the point where you would be quite the old crock before realizing any significant financial benefits. Old and creaky but marginally richer IF the taxation margins AND investment margins worked out in your favor.

Like I said above, the break even on pre-paying the taxes is around 5 years, depending on how aggressive you are with your investment choices. If your window to retirement is shorter than that, then the Roth might not be a good choice.

It also depends on how much you have in your pre-tax accounts, since when you start pulling those funds, it will make the SS checks taxable. So, you have to do projections all different ways to see what keeps your tax liability the lowest.

MrMagic, I am not going argue with you on this topic. It is highly personal decision, with many variables that cannot be objectively quantified.
I dont need to defend every reason why I don't like Roth myself. Some are more important than others obviously. If you sleep better by paying the tax man early in life so you can reduce your taxes in your 70's, be my guest. Deferring my tax bill as long as possible allows me to sleep better at night. The similar strategy with income property depreciation. I get to keep more real money today, but in the future if I sell I must pay back in recapture. Time and flexibility are huge wildcards, time allows asset appreciation. With time, I can also have flexibility to create other plans to reduce future taxes, e.g. 1031 exchanges, TIC...
I do not trust the IRS/government to not find other ways to screw me through my future tax rates changes from future regime changes. We have plenty of examples from the past. Keeping more money today for me is bird in hand, Roth is 2 in bush.
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https://www.financialsamurai.com/disadvantages-of-the-roth-ira-not-all-is-what-it-seems/
" The (ROTH) math is the same whether you pay now or later. Whether you pay taxes now and let your investment grow tax free, or you let your pre-tax investments grow, and then tax it upon retirement results is more or less the same! Don’t believe me? Do a calculation yourself. Here’s an equation: Y = A B. Re-arrange to A = Y / B. Or Y = A B is equal to Y = B * A."

One "trick" to a Roth...
• While working, contribute to your company's 401k. You don't pay income taxes on the money that goes in, but you will when you withdraw.
• When you personal income decreases (either because you retired or because you took some time off from work), convert some or all of your 401k to a Roth; you'll pay taxes on that conversion as though it were income, but if you keep that amount low (coupled with not having regular income) you'll take advantage of the low portions of the progressive tax rates.
• After retiring, withdraw from the Roth.

This lets you pay the original income tax at a lower rate than directly funding a Roth while you are working. It converts you to a Roth so you don't have to make mandatory deductions. It gives you some tax-free income later so that your total income (from a 401k or pension or investments, for example) is reduced, taking advantage of the progressive tax rates once again.

If you're at your peak earnings in your career right now and contemplating 401k verses Roth, you really want to think about when your tax rates are likely to be higher: right now (at peak earnings) or 20 years from now when you are retired. We're all assuming tax rates will go up in the future, BUT those rates are progressive, so even if they do go up in the future you will probably be at the lower end of them. Another thought (application to Californians such as me): if I go 401k right now I shield myself from California; I'll then flee the state when I retire and move to somewhere (anywhere, actually) with lower state taxes for my withdraws. So, even if federal taxes go up, state taxes will be going down.

Fuck SS! Let it run dry. Arm every retiree and let nature take its course.