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Old 02-27-2010, 08:17 AM   #1
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calculating SS benefits?

I'm hoping someone here might be able to answer this or point me in the right disrection to find a definitive answer. I have searched, both here and elsewhere. The government websites are like microsofts, ever expanding circles of questions, with not an answer to be found.

How are SS benefits calculated, and what is the maximum for a married couple, and how does both having worked figure into it?
(my mother, who never worked much or made much, gets SS {$734/mo} based on my fathers income, she divorsced him 40 years ago!)

Here's the deal.
We're small business owners. As such, we control our income as well as how it is distributed to us. We also have to pay both the employees AND the employers halves of SS and medicare taxes on W2 wages!

So, for the past 20 some years, we've made our W2 wages the minimum our accountants have said we could get away with, mid 70k's combined for both. (not each)
The bulk of our income is propery rental income and corporate dividends.
We can juggle these 3 sources any way we want to, it's all coming from the same pot.

I'm 52, my wife is 46 or so.

How will the govt. calculate our SS benefits?
Will we see an increase if one of us has W2 income near the max?
Both?
How many years back do they use to figure this?
At nearly 20% payroll tax rates for SS and medicare combined, is there a payback, or is it a losing proposition regardless?

Serious questions looking for serious answers. Before anyone starts ranting, what we've put into the system over our working lives adds up to 2 grand a month if we rcv benefits for 20 years. If my government had permitted me to keep my money and privately invest it, it would be $7000 a month or more! So lets keep political discussions out please.
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Old 02-27-2010, 08:39 AM   #2
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You need professional advice - posting on this type of forum is not going to answer your questions. Although many people are well intentioned. the answers you get would be questionable. I owned a small business and always used my accountant for professional advice. Choosing to use answers/advice from a forum on something as technical and critical as this...well, I just would not do it.
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Old 02-27-2010, 09:27 AM   #3
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The SSA website has several benefit calculators, maybe one will fit your situation? Here's a link to them: SSA Benefit Calculators
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Old 02-27-2010, 11:41 AM   #4
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Hi JimM,
mook1244 makes a good point. Find a financial adviser who is skilled in the questions you have. When balancing ones finances there is no free lunch. Priorities need to be established. There will be + and - to any decision and path taken. These are difficult decisions.
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Old 02-27-2010, 05:43 PM   #5
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I should type shorter.

All I really want to know is how SS benefits get calculated. I don't need to pay an accountant $100/hr to google that.

I'll check the calculators, thanks.
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Old 02-27-2010, 06:09 PM   #6
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interesting. according to the calculator, right now my benefit at 62 is 1438 if I stop working at 58.

If I double my W2 wages, I'll pay an additional 39600 in taxes over the next six years, my benefit will go to 1500, and if I collect it for 20 years, that adds up to 14,880 in add'l benefits.

I don't think I'll calculate any further. I can do better than a 66% loss in mutual funds. Heck, I can do better (this year!) in real estate!

I sure do wish we could opt out of SS....
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Old 02-27-2010, 07:06 PM   #7
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Actually you do need financial advice,,not to calculate a SS future benefit, but to redo your methods of paying yourself income. With a bit of advice, you should be able to totally avoid SS payments entirely, and completely legal as well. My guess if you never paid another dime into SS, your benefit wouldnt change all that much compared to continuing to pay month after month until you retire.
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Old 02-27-2010, 07:08 PM   #8
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Quote:
sure do wish we could opt out of SS....
Not after you've paid in all those $$$ ! I know some folks who did opt out of SS ...ordained clergy have the option. Not knowing everything involved was a disaster for one guy. If you can opt out of SS, and you do, you DO NEED to buy disability insurance. In addition to the "old age pension," disability coverage for the covered individual and to support their spouse & children is a significan benifit for those who need it. From my viewpoint now that I have retired, the DW & I will have some extra pocket change ---enough to make a house payment if necessary ---when we start drawing our SS.
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Old 02-27-2010, 07:24 PM   #9
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I had the same ? about SS a few months back. I'm a normal working stiff working for a employer. SS benefits are calculated with the 35 highest years of earnings. I have worked so far 32 years. When I receive my yearly SS estimate letter, in order for them to give me my SS amounts for early SS (age 62) normal SS (age 67) or (age 70) they will take what I made in 08' and add that yearly amount of earnings to get to my 35 years. Their assuming I'll make at least that amount in future years. So once I have worked over my 35th year, the lower earning years will start to drop off. So back in 78' 79' 80' I didn't make very much, so those low earning years will be replaced with what I make in the near future, unless I lose my present job and don't work. I have been fairly lucking working in the food distribution industry since the late 70's.

My wife on the other hand has not worked (housewife) the last 16 years. And then she did made very little. So her SS amount is only about $300 a month at 62.
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Old 02-27-2010, 07:30 PM   #10
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You should be getting an annual (or bi-annual) statement from the SSA telling you exactly what your benefits would be and all the information about previous years deposits. With this information and some good advice from AN ACCOUNTANT (if you are a small business person then you already have one) you should be able to get some very good advice about what to do between now and then.
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Old 02-27-2010, 08:14 PM   #11
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Quote:
Originally Posted by Bill Adams View Post
You should be getting an annual (or bi-annual) statement from the SSA telling you exactly what your benefits would be and all the information about previous years deposits. With this information and some good advice from AN ACCOUNTANT (if you are a small business person then you already have one) you should be able to get some very good advice about what to do between now and then.
Yes, I have one, but she is loath to give financial advice at all, and when pushed, she spouts chapter and verse from the irs.

ALL of my accountants, in over 20 years of running my own small bunsiness have cautioned me against too much distributions and not enough W2 wages, saying this would red flag an audit. I've always pushed it hard enough to make them bring it up, but not hard enough to be told to change. Same with company cars and other tax benefits of being self employed. And no, I'm certainly no expert at much of anything, just stumpling along like most of us.

I'd like to know about a legal way to avoid SS tazes
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Old 02-28-2010, 11:46 AM   #12
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I recieve a statement every year that tells me most of my information about my SS payments and benefits. You should be recieving one also.

I just calculated the payments made by myself and my employers for the total time that I have been in the workforce(1966 thru 2004) and came up with these figures; it will take me 10 years and 7 months to draw out what has been paid by me and my employer including SS and medicare taxes (I paid maximum in SS For 32 of those years) That doesn't include my Medicare benefits or the amount that my Wife will draw from my SS. I am starting my SS @ age 62 (approxamently 20% less than @ 66).

Your SS and Medicare payments aren't just for your "retirement" benefits. They also include protection for your Wife and Family in case something should happed to you such as disability or maybe even death, and medical benefits after age 65. To pay for such benefits as is offered to you by SS, I don't think you want to even think about the insurance cost for these benefits.

You can call SS @1-800-772-1213 to get information about your SS benefits. They might be able to answer your questions.

Good Luck, Indiana Journey
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Old 02-28-2010, 12:04 PM   #13
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If you do not work in your company and it is a Sub Chapter S Corporation, you can pay the profits to yourself without paying SS Tax. You receive a K1 for the income and pay only ordinary Income Tax on the profit. That is about the only way to avoid the SS Tax. If you work in the company, you are required to pay yourself a comparable income similar to what you would have to pay someone for a similar position to do what you do and pay the SS Tax.

In addition, if you own the company and the company pays for your health insurance, you must pay income tax on the amout paid for you by the company. If you have a company auto and you use it for personal business, you must pay tax on the portion that is used for personal business. Also, if you drive a nicer auto than someone else of similar position within your company, the IRS can decide that that is also a perk and make it subject to income tax.

Don't you love the Gov!
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Old 02-28-2010, 12:54 PM   #14
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I just heard this a few days ago. If you take your SS at age 62, but pay back all the money you received from SS at age 70, you can now get the age 70 amount. So if at age 62 I'm getting 1300 a month, but at age 70 it would be 2300. If I paid back 96 months X $1,300 ($124,000) at age 70 I could start collecting $2,300. Don't know how true this is or if it makes any sense??? I don't know if this also works for my age 67 SS amount either. Any truth to this?
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