I think that Social Security is a good thing. However, it's not really an insurance program and never has been. Those with low lifetime incomes get a much higher return on their FICA taxes than people with higher incomes. It's a vital security net for them.
I volunteered with the similar VITA program for 14 years and saw a lot of similar things. I was always careful to point out when a child's age would mean that they would not be able to claim them for the child tax credit or the earned income tax credit the next year. I recall one client who was a single mother and had been laid off from her job. She had several W2s from short-term jobs and was hoping to get a few hundred dollars refund. She had never heard of the earned income tax credit and had probably never been eligible for it before. She started crying when I told her that her refund would be several thousand dollars.
I don't have any objections to annuities, but I realized that my assets were such that it's very unlikely I'll spend them all in my lifetime. I consider "longevity insurance", where the annuity doesn't start until later (e.g. age 85, if ever) to be a good idea for many, but couldn't find one with reasonable fees.
First, I should mention that I would be a big beneficiary if the tax on Social Security were eliminated. My 2024 income taxes, totaling a little under $9,000, would have been less than $4,000 if SS benefits hadn't been taxed. It should also be noted that the limits in the complicated formula for the tax haven't been changed since the tax was first implemented in 1984 and inflation has totaled about 300% in the 40 years since then. However, I don't think that eliminating it would be a good tax policy because it would be highly regressive. Lower income people pay little or no tax on their SS so the lion's share of the benefit would go to those in higher income tax brackets.
A lot of people are planning on home health care, but I don't think that will be an option for most of us. That will require far more home health workers than there are now. Where will they come from? Home health care isn't a viable option for me regardless. I'm 75 and my only close relatives are my 78-year-old brother (who's already in assisted living) and my 65-year-old sister, who I wouldn't want to burden with my care. There are only a couple of CCRCs in my area, I don't want to move elsewhere. I can see the time in the not-too-distant future that I won't be able to drive anymore, I'm considering moving to an independent living facility before that occurs. My most likely choice is on the campus of a non-profit hospital, but independently managed. It also has associated assisted living and memory units. It doesn't have a skilled nursing care facility, but the hospital does. I have more savings than I am likely to need, even if I require a couple of years in a nursing home, which is considerably more than the mean nursing home stay.
I agree about not splitting the main entree. Restaurants frequently encourage guests to split appetizers and desserts, which are usually among their most profitable items. I personally rarely order either.
My income consists of Social Security, a modest amount of interest on savings accounts, and distributions from my traditional IRA (usually a little more than my RMD). I take the IRA distribution near the end of the year and have an amount withheld close to what I expect to pay in taxes. I typically have a small refund due, but I just have that applied to the next year's taxes.
Much of my charity giving goes to my local United Way, which is over 100 years old. They look at the big picture, a single charity can't possibly help relieve all of the problems of their clients, but the United Way can help coordinate the services of multiple charities so as little as possible is wasted due to overlap. Ae excellent op-ed piece in the Wall Street Journal several years ago tols why you should never ask a charity how they will use your donation, instead you ask how they are meeting their objectives. I never designate my donations for a specific purpose. Another of the charities I donate to is my local Humane Society (which is over 150 years old). I suspect that a lot of people donate kitty litter, but I doubt that anyone donates toilet paper for the staff and volunteer restrooms. If I didn't trust a charity to spend my money wisely, I wouldn't donate to them in the first place.
I'm taxed on the maximum of 85% of my SS benefits, but I don't consider it unfair. I do wish that the method of calculating the percentage weren't so convoluted, however. I've never seen a clear explanation of the calculation. I finally studied the IRS worksheet and figured it out, but I don't think that I could explain it to someone else. Also, the thresholds used to determine what portion is taxed haven't been changed since the tax began in 1984, so a much higher percentage of SS recipients are taxed now. Most people think of Social Security as insurance but, at its heart, it's a welfare program. People with low income during their working years receive a much higher percentage of their previous income in SS benefits that do higher-income recipients. How benefits are figured is another hard-to-understand facet of SS. Recently there've been a lot of outcries about the reduction in SS benefits for those who receive pensions for work that wasn't covered by SS taxes. There's a logical reason for the reduction, again tied to the way that SS benefits are calculated that few understand. I started my career in a Federal job which wasn't covered by SS at the time and would be hit by the reduction in SS if I had stayed in the job long enough to receive a pension. The SS trust fund is an accounting entry in the government books and has never really existed as a separate entity. The money is invested in government securities so it can be claimed that Congress borrowed the money in the fund and spent it on something else. However, it must be invested in something, and government securities are generally considered the safest choice.
Comments
I think that Social Security is a good thing. However, it's not really an insurance program and never has been. Those with low lifetime incomes get a much higher return on their FICA taxes than people with higher incomes. It's a vital security net for them.
Post: You versus Social Security – Quinn is betting against you.
Link to comment from May 4, 2025
New York prohibits tax software companies from charging to file a return electronically.
Post: It’s 2025. Do you send checks by mail?
Link to comment from May 4, 2025
I volunteered with the similar VITA program for 14 years and saw a lot of similar things. I was always careful to point out when a child's age would mean that they would not be able to claim them for the child tax credit or the earned income tax credit the next year. I recall one client who was a single mother and had been laid off from her job. She had several W2s from short-term jobs and was hoping to get a few hundred dollars refund. She had never heard of the earned income tax credit and had probably never been eligible for it before. She started crying when I told her that her refund would be several thousand dollars.
Post: Taxing Situations
Link to comment from April 26, 2025
I don't have any objections to annuities, but I realized that my assets were such that it's very unlikely I'll spend them all in my lifetime. I consider "longevity insurance", where the annuity doesn't start until later (e.g. age 85, if ever) to be a good idea for many, but couldn't find one with reasonable fees.
Post: RDQ Sorry folks, I still see annuities, including deferred annuities, as a viable option for creating steady retirement income.
Link to comment from April 26, 2025
First, I should mention that I would be a big beneficiary if the tax on Social Security were eliminated. My 2024 income taxes, totaling a little under $9,000, would have been less than $4,000 if SS benefits hadn't been taxed. It should also be noted that the limits in the complicated formula for the tax haven't been changed since the tax was first implemented in 1984 and inflation has totaled about 300% in the 40 years since then. However, I don't think that eliminating it would be a good tax policy because it would be highly regressive. Lower income people pay little or no tax on their SS so the lion's share of the benefit would go to those in higher income tax brackets.
Post: Like it or not, we all need to pay taxes. Seniors are no exception. Everyone in the pool.
Link to comment from March 22, 2025
A lot of people are planning on home health care, but I don't think that will be an option for most of us. That will require far more home health workers than there are now. Where will they come from? Home health care isn't a viable option for me regardless. I'm 75 and my only close relatives are my 78-year-old brother (who's already in assisted living) and my 65-year-old sister, who I wouldn't want to burden with my care. There are only a couple of CCRCs in my area, I don't want to move elsewhere. I can see the time in the not-too-distant future that I won't be able to drive anymore, I'm considering moving to an independent living facility before that occurs. My most likely choice is on the campus of a non-profit hospital, but independently managed. It also has associated assisted living and memory units. It doesn't have a skilled nursing care facility, but the hospital does. I have more savings than I am likely to need, even if I require a couple of years in a nursing home, which is considerably more than the mean nursing home stay.
Post: Senior Care Crisis – Are we prepared?
Link to comment from March 8, 2025
I agree about not splitting the main entree. Restaurants frequently encourage guests to split appetizers and desserts, which are usually among their most profitable items. I personally rarely order either.
Post: A matter of significant financial concern – want fries with that?
Link to comment from February 22, 2025
My income consists of Social Security, a modest amount of interest on savings accounts, and distributions from my traditional IRA (usually a little more than my RMD). I take the IRA distribution near the end of the year and have an amount withheld close to what I expect to pay in taxes. I typically have a small refund due, but I just have that applied to the next year's taxes.
Post: Easy Does It
Link to comment from February 22, 2025
Much of my charity giving goes to my local United Way, which is over 100 years old. They look at the big picture, a single charity can't possibly help relieve all of the problems of their clients, but the United Way can help coordinate the services of multiple charities so as little as possible is wasted due to overlap. Ae excellent op-ed piece in the Wall Street Journal several years ago tols why you should never ask a charity how they will use your donation, instead you ask how they are meeting their objectives. I never designate my donations for a specific purpose. Another of the charities I donate to is my local Humane Society (which is over 150 years old). I suspect that a lot of people donate kitty litter, but I doubt that anyone donates toilet paper for the staff and volunteer restrooms. If I didn't trust a charity to spend my money wisely, I wouldn't donate to them in the first place.
Post: Does Charitable Giving Make Things Better?
Link to comment from February 1, 2025
I'm taxed on the maximum of 85% of my SS benefits, but I don't consider it unfair. I do wish that the method of calculating the percentage weren't so convoluted, however. I've never seen a clear explanation of the calculation. I finally studied the IRS worksheet and figured it out, but I don't think that I could explain it to someone else. Also, the thresholds used to determine what portion is taxed haven't been changed since the tax began in 1984, so a much higher percentage of SS recipients are taxed now. Most people think of Social Security as insurance but, at its heart, it's a welfare program. People with low income during their working years receive a much higher percentage of their previous income in SS benefits that do higher-income recipients. How benefits are figured is another hard-to-understand facet of SS. Recently there've been a lot of outcries about the reduction in SS benefits for those who receive pensions for work that wasn't covered by SS taxes. There's a logical reason for the reduction, again tied to the way that SS benefits are calculated that few understand. I started my career in a Federal job which wasn't covered by SS at the time and would be hit by the reduction in SS if I had stayed in the job long enough to receive a pension. The SS trust fund is an accounting entry in the government books and has never really existed as a separate entity. The money is invested in government securities so it can be claimed that Congress borrowed the money in the fund and spent it on something else. However, it must be invested in something, and government securities are generally considered the safest choice.
Post: Should Social Security benefits be income tax free?
Link to comment from February 1, 2025