Social Security: The Tax That Pays

Uber's Guber

Well-Known Member
Wouldn't you rather keep your money now, and use it when it is actually needed? I rather keep my own money instead of pooling it into SS. Everyone should be free to contribute money to what they chose... not be forced to pay for someone else.
It’s true there are many inherent problems with Social Security. Say you’re single and die at age 50, all that money you paid in disappears, you can’t leave it to anyone.
I could discuss all day the problems plaguing the system but this is probably not the forum to do so; too many Uber drivers aren’t paying into the system anyway and wouldn’t have the required sense it takes to properly invest for their own future.
 

MasterAbsher

Well-Known Member
Interesting article but wrong on credits.

In 2019, you must earn $1,360 in covered earnings to get one Social Security or Medicare work credit and $5,440 to get the maximum four credits for the year. During your lifetime, you will probably earn more credits than the minimum number you need to be eligible for benefits.

You will need a total of at least 40 credits to earn Social Security.
 

Older Chauffeur

Well-Known Member
I preach this to my kids, as they turn 18 I help them start a Roth IRA and help them set up reoccurring regular deposits. I give them the initial $1000 deposit needed to start the Roth IRA as a 18th birthday gift.
Just curious, how do you get around the rule that says Roth IRA contributions have to come from earned income?
 

LADryver

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  • #24
Just curious, how do you get around the rule that says Roth IRA contributions have to come from earned income?
So long as there is qualifying earned income, the actual funds for a contribution can be from any source and be made up to the due date of the year's tax return. It does not have to be an accountable straight line from qualifying earnings to contribution. If there are no earnings, then there is no going around that.
 

Older Chauffeur

Well-Known Member
So long as there is qualifying earned income, the actual funds for a contribution can be from any source and be made up to the due date of the year's tax return. It does not have to be an accountable straight line from qualifying earnings to contribution. If there are no earnings, then there is no going around that.
In the example shown, he was giving $1000 to each child to open the account, so what I was wondering about would the child have to have earned at least an equivalent amount. As I understand it, contributed funds to a Roth IRA must be from taxable earnings, the idea being that once tax is paid on those funds, interest or investment returns on those funds when withdrawn are tax free, unlike traditional IRAs. Can the poster’s own earned income qualify in his starting Roth IRA’s for his children?
 

LADryver

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  • #26
Interesting article but wrong on credits.

In 2019, you must earn $1,360 in covered earnings to get one Social Security or Medicare work credit and $5,440 to get the maximum four credits for the year. During your lifetime, you will probably earn more credits than the minimum number you need to be eligible for benefits.

You will need a total of at least 40 credits to earn Social Security.
Good update. And currently there is yet another. For 2020 the amount per credit went up to $1410, and the four credit maximum is still applicable. One may ask, why different people get different amounts of Social Security? In order to get any benefit checks, the credits must be earned, the four across ten years, or 40 credits. All earners qualify equally but not all earners get equal benefits, because "During your lifetime, you will probably earn more credits than the minimum number you need to be eligible for benefits. These extra credits do not increase your benefit amount. The average of your earnings over your working years, not the number of credits you earn, determines how much your monthly payment will be." So, you can bet on your longevity and earn where it matters when it matters. Every year the earned income is reduced through clever "tax planning" the lower your Social Security average will be and lower the monthly check.

About IRA's and private pensions. IRA's are finite and can be exhausted. Pension plans are more and more vulnerable to economic winds and company and plan solvency and also is finite.

Social Security in its own Trust, goes on every month with schefuled cost of living increases, for as long as you live with no maximum age. The higher that yearly average, the better.
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In the example shown, he was giving $1000 to each child to open the account, so what I was wondering about would the child have to have earned at least an equivalent amount. As I understand it, contributed funds to a Roth IRA must be from taxable earnings, the idea being that once tax is paid on those funds, interest or investment returns on those funds when withdrawn are tax free, unlike traditional IRAs. Can the poster’s own earned income qualify in his starting Roth IRA’s for his children?
Many minors begin working in their childhoods, depending upon the state qualifying work age (NY 14; CA 16) or working for a parent or in an exempted work such as in entertainment, where work can be at any age exempt from most commonly known labor laws. So long as the minor being gifted has the qualifying earned income but the parent or other adult must open the account as a Custodial Roth IRA. "There are no age restrictions. Kids of any age can contribute to a Roth IRA, as long as they have earned income. A parent or other adult will need to open the custodial Roth IRA for the child. ... A Roth IRA is more flexible than other retirement accounts because contributions can be withdrawn at any time."
 
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MasterAbsher

Well-Known Member
Good update. And currently there is yet another. For 2020 the amount per credit went up to $1410, and the four credit maximum is still applicable. One may ask, why different people get different amounts of Social Security? In order to get any benefit checks, the credits must be earned, the four across ten years, or 40 credits. All earners qualify equally but not all earners get equal benefits, because "During your lifetime, you will probably earn more credits than the minimum number you need to be eligible for benefits. These extra credits do not increase your benefit amount. The average of your earnings over your working years, not the number of credits you earn, determines how much your monthly payment will be." So, you can bet on your longevity and earn where it matters when it matters. Every year the earned income is reduced through clever "tax planning" the lower your Social Security average will be and lower the monthly check.

About IRA's and private pensions. IRA's are finite and can be exhausted. Pension plans are more and more vulnerable to economic winds and company and plan solvency and also is finite.

Social Security in its own Trust, goes on every month with schefuled cost of living increases, for as long as you live with no maximum age. The higher that yearly average, the better.
True. For the novice reading this, the 40 credits don't have to be in a 10 year period. Maybe one year sucked and you only earned 1 credit. 1o years is the fastest you can earn all 40 credits.
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Another area many Husbands dont think about when it comes to Social Security us their wives. This happens where a husband is self employed and wife is the homemaker. I'm not talking about death benefits. In my case, wife has been a housewife for decades. I added her name to our business. Since I'm at full social security age and shes not, I'm now putting the bulk of the earnings in her name.
 

LADryver

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  • #28
True. For the novice reading this, the 40 credits don't have to be in a 10 year period. Maybe one year sucked and you only earned 1 credit. 1o years is the fastest you can earn all 40 credits.
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Another area many Husbands dont think about when it comes to Social Security us their wives. This happens where a husband is self employed and wife is the homemaker. I'm not talking about death benefits. In my case, wife has been a housewife for decades. I added her name to our business. Since I'm at full social security age and shes not, I'm now putting the bulk of the earnings in her name.
Social Security includes benefits for non-working spouses. Make sure you do not inadvertently disqualify your wife. What you are doing is stunting your own benegi do I do not know how it works legally in general if the corporation employee is actually not working. My uncle had his daughters on the payroll for years but I think something may have been passed to curtail such payroll additions. I am not educated on this in particular but you might want to check.
 
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LADryver

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  • #30
Shes not vcd an employee. We are not a corporation. We do have an awesome CPA.
You have to learn this yourself. Your CPA is not going to be paying consequences of a misunderstanding.
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Shes not vcd an employee. We are not a corporation. We do have an awesome CPA.
Social Security comes from earned income. When you said you put her name in the business, then if not employee then partnership or proprietership. If you file joint returns it goes in the same tax pot but you make the assumption she will outlive you. You make other assumptions too. CPA's are hired because they possess knowledge you do not. CPA's make everything they say sound brilliant. The vulnerable spot is about the stakes. If he makes it sound like he knows absolutely and it makes sense to you, he could still be mistaken. To become a CPA a person must possess this quality. You need to go to google and ssa and find out for yourself. It is your retirement. CPA's dont get to see their long range errors.
 
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LADryver

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  • #31
True. For the novice reading this, the 40 credits don't have to be in a 10 year period. Maybe one year sucked and you only earned 1 credit. 1o years is the fastest you can earn all 40 credits.
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Another area many Husbands dont think about when it comes to Social Security us their wives. This happens where a husband is self employed and wife is the homemaker. I'm not talking about death benefits. In my case, wife has been a housewife for decades. I added her name to our business. Since I'm at full social security age and shes not, I'm now putting the bulk of the earnings in her name.
Revisiting this because I have just done some reading and also the internet connection flaked out on my original response significantly. My own point of view is that of someone who lost nearly 20 years of earned income and has no spouse. I am eligible to claim ss early but am not doing so. I know from reading that although I have my qualifying 40 credits, I do not have the desired 35 year average of higher earnings years by which to maximize my own personal benefits. Math is that from the highest 70 year point for claiming, the age of 35 as the start point of successful work is necessary. Work began at 17 on minimum wage, and in variations from 20. But my jobs early on had none of the power of scale that we expect these days. In the range of 35 years, the legal average base, I know that I must maximize the number of years in which that average can be raised.

Two conditions apply to benefits. 40 credits to get them at all, in a minimum of 10 years, plus to get more than the minimum benefits, gain a good average of earnings up to the yearly maximum, in a 35 year average of highest earning years. This 35 year average continues to compute if there is a lower earning year replaced by a higher earning year even after full retirement age.

Investopedia has the info I knew: "Working past full retirement age may increase Social Security benefits in the future because Social Security contributions continue to be paid in."

If there was a non-working spouse, they could apply on my account once they reach the age, and get 50 percent more, meaning our combined social security would be 150% of my own. As a survivor they could get all of mine.

Your CPA may have info I dont, such as you may have income of above 128000 each year or more. I hope he really is awesome otherwise you might want to amend some tax returns.
 

LADryver

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  • #33
Thanks for the input. I do have a unique situation
FWIW good info is found "As a spouse, you can claim a Social Security benefit based on your own earnings record, or collect a spousal benefit in the amount of 50% of your spouse's Social Security benefit, but not both. You are automatically entitled to receive whichever benefit provides you the higher monthly amount."

On another view of course, if the amount of the higher earning spouse is reduced by design, then that spousal half would be less. Currently the maximum monthly full benefit is $3770. Spouse half simultaneously received is $1885 for combined couple income from Social Security of $5655. The maximum full benefit is realized if for 35 years the contribution ceiling for FICA was reached (or Self Employment Tax) each year. The 35 years average computation is performed automatically regardless of age if work is continued past full retirement age.

I believe you could find the official info that says that a surviving spouse can trade their lower check for a deceased higher check instead of their own lower check. I think the SSecurity is designed so that spouses need not take measures for their spouse.

You can check your own status on your statement maintained by Social Security. Years, reported earnings, and benefit projections. https://www.ssa.gov/myaccount/
 

FLKeys

Well-Known Member
Just curious, how do you get around the rule that says Roth IRA contributions have to come from earned income?
Kids all had jobs and had enough earnings to more than cover the initial deposit. The $1000 is just the boost they need to open the account. Even if they saved the money their self I'm still kicking in money to help them get started. It;s like a welcome to adulthood gift.
 

LADryver

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  • #36
Wouldn't you rather keep your money now, and use it when it is actually needed? and secondly? you trust someone else to do good by your money?...especially the government?! Haven't history thought you anything? I rather keep my own money instead of pooling it into SS. SS was designed to spread the wealth, not benefit you as an individual. So you're way better of with keeping the money you would otherwise need to pay to the government so it can pay out everyone and give you scraps when your turn comes. No thanks.
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Paying increasing amount of taxes is precisely what is wrong. Everyone should be free to contribute money to what they chose... not be forced to pay for someone else.
I would love to keep my money now, but as it happens, now is when I begin eligibility to claim for my benefits. If I wait seven years I can double my monthly benefit, and all I have to do is keep working and make the same amount. Not only that, there is a little-known formula by which monthly checks can increase further by continuing to work even after the full retirement age. When you do reach this point, there are two realizations people often may have including you. The reality of the benefits become tangible to you and you cant change it significantly if it is lower than you want. You can go forwards but not backwards. You can look at your own account at ssa.gov/myaccount so that you can see where your Social Security buildup stands. I used to tell my own tax consulting clients years ago that they should not be basing every decision on taxes because there is a wider economic picture. "Dont be afraid to make money."
 

SOLA-RAH

Well-Known Member
It’s true there are many inherent problems with Social Security. Say you’re single and die at age 50, all that money you paid in disappears, you can’t leave it to anyone.
I could discuss all day the problems plaguing the system but this is probably not the forum to do so; too many Uber drivers aren’t paying into the system anyway and wouldn’t have the required sense it takes to properly invest for their own future.
Social Security is insurance that you pay for, not a tax or entitlement. It’s literally in the official name: Old Age, Survivors, & Disability Insurance (OASDI). And as with all insurances...you pay your money, take your chances, and get what you get. With insurance sometimes you win, sometimes you lose, while the worst case (but rare) scenarios are covered.
 

MasterAbsher

Well-Known Member
Disability question. I've been given different answers. Let's say you are taking regular social security. You become disabled. Can you then apply for disability? In my case, I would get more money. Someone told me the deadline to apply is 65 years of age. I'm passed that. Thank you.
 

LADryver

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  • #39
Social Security is insurance that you pay for, not a tax or entitlement. It’s literally in the official name: Old Age, Survivors, & Disability Insurance (OASDI). And as with all insurances...you pay your money, take your chances, and get what you get. With insurance sometimes you win, sometimes you lose, while the worst case (but rare) scenarios are covered.
You are much too literal. You are also cynical about the guarantees built into the formation and structure of Social Security. Best you recognize your cynicism and not pass it out as fact.
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Disability question. I've been given different answers. Let's say you are taking regular social security. You become disabled. Can you then apply for disability? In my case, I would get more money. Someone told me the deadline to apply is 65 years of age. I'm passed that. Thank you.
Based on your birth year, your "Full Retirement Age" may be a tad later than 65. However it is easily searchable from reputable and non-wavering sources that, even though you have filed your early claim, you can apply for Social Security Disability up to your full retirement age. For whomever may qualify it would be changed.
 
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Stevie The magic Unicorn

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Wouldn't you rather keep your money now, and use it when it is actually needed? and secondly? you trust someone else to do good by your money?...especially the government?! Haven't history thought you anything? I rather keep my own money instead of pooling it into SS. SS was designed to spread the wealth, not benefit you as an individual. So you're way better of with keeping the money you would otherwise need to pay to the government so it can pay out everyone and give you scraps when your turn comes. No thanks.
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Paying increasing amount of taxes is precisely what is wrong. Everyone should be free to contribute money to what they chose... not be forced to pay for someone else.
Americans are too stupid for that. Many ‘Mericans if you had them $100 they will take that $100 go to the mall and spend it right away. Then they will go home with $300 worth or crap and $200 in credit card debt.
 
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