The Hidden Social Security Math Nobody Shows Retirees

[62Dodge_]

Howdy I hope all are well Everyone's situation is different. I stopped working for the "man" at 62 and started collecting SS, my wife stopped working for the man at 62 and started collecting SS. I'm now 63 and a half and she is 68 and a half. I'm leaving my investments alone as they are currently doing very well. The reason we pulled the plug at 62 is that we figured that we would be healthier from 62 to 70 than 70 to 78. That said we also practiced retiring at 50 and 55 by taking half of our take home pay and putting it in a lock box, yes it was a challenge at first but after three months we discovered that we could survive quite happily. Now we did have a bump in the road recently, well and septic, costing around 6k to remedy and a blue box/outhouse in our driveway. My thought is no car/house payments equals pull the plug at 62. Just my opinion, everyone's situation is different. Thank you Bob

 

[Hey-O]

If you live in Virginia they tax you just for the privilege of owning you vehicle based on the assessment of the value of your vehicle. I just got my bill for my 2021 4-Runner for this year. $1100. I paid taxes on it when I bought it too. If it sells the buyer has to pay taxes on the sale and then assume property taxes on it. It’s not just cars. It’s any recreational vehicle. Boats, dirt bikes, ATV’s, campers, jet skis, etc. that’s on top of property taxes I pay for the pleasure of owning my own home. It’s out of control.

Same here and why I only need two cars now, screw them. It's screwed up.

 

[68BabyBlue]

Same here and why I only need two cars now, screw them. It's screwed up.

PA doesn't have the property tax on vehicles, and registrations are cheap, but they get you on the sales tax. This is why I've tried to keep the purchase price of my daily drivers as close to $10,000 as possible, and I run them forever. Passing the current one on to my granddaughter after 14 years, just spent $11,000 on the replacement, hope it takes me to the finish line. I've spent a lifetime trying to maximize legal tax avoidance. Favorable tax treatment influenced my decision to max out social security.

 

[sam dupont]

President Trump campaigned on tax free Social Security and Tips. He has promised it again and again since elected. That will save us a lot of money

 

[Davefinan]

I took mine at 62. I calculated that to be best for me.
I will say this , every brochure from the social security administration I saw before I filed and after , promoted waiting for the higher monthly payment. That should tell you something. They likely have it figured out that enough people will die without collecting any money.

 

[padam]

It’s depressing as hell to hear people with millions say they might not have enough to retire.

 

[68BabyBlue]

It’s depressing as hell to hear people with millions say they might not have enough to retire.

Well, it depends on your lifestyle. During my tour of the elder law seminars I mentioned in my earlier post, doctors came up as a frequent topic. There are exceptions, but they tend to not be in a good position to maintain their lifestyle without working. They start out in the back of the pack after voluntarily impoverishing themselves paying for their education. Then they make substantial salaries, with high exposure to income taxation. Big house and expensive vehicles often enter the equation.

Say you are used to living on a $300,000 a year income. Takes $7.5 million lump sum to cover that nut securely for a 30 year retirement., With say $2 million, that unfortunate guy would have to live like me. Wife and I have gotten to know a local anesthesiologist who built a palatial estate on an old apple orchard, and started a side business offering premium hard cider to the public. He is strapped for capital because he still has a mortgage and a car payment, no spare funds. I doubt he has $7 million stashed.

 

[Dennis H]

Income Streams work better than a big pile. Measure success without having to nick the pile in that case.

 

[68BabyBlue]

Income Streams work better than a big pile. Measure success without having to nick the pile in that case.

When I was on the corporate tour, my employer ran an open shop. We had several union terminals, covered by the Teamsters' Central States Pension plan. Wages were the same in our non union locations, and they had better medical insurance. This was by design, to reduce the incentive to unionize, by providing better cash flow to the non-union drivers up front.

The Central States Plan got into trouble a few years back, and got bailed out. So the 30 year guys got to retire at the level of final earnings, a nice deal. When I was pitching our 401(k) and profit sharing program to the rank and file I always emphasized the lump sum accumulation that could be built, versus the income stream of a pension that couldn't be passed to heirs, and the likely insolvency of the pension plan.

The lump sum pitch always won out, but the Central States guys ended up way better off.

 

[XS22J8R]

I am 63, so watch retirement planning and issues subjects constantly. The old saying “your results may vary” certainly is true when people talk about retirement due to all the variables involved; how much one has saved for retirement, legacy planning, in other words how much if any one wants to leave to family and charities, health, pensions, and more.
I watch financial planner videos on YouTube, but like everything on social media, one has to take what you see with a grain of salt. Is the person making the video trying to drum up their own CFP business, trying to “get clicks” to make income from their videos, or just giving advice out of the goodness of their own hearts to help people?
I’m always suspicious of people’s motives, but I’m pretty cynical!
I’m still working but financially could retire, I just haven’t got off the fence to actually pull the plug on my work.
My main fears about retirement are Boredom/loneliness, health, and taxes, not necessarily in that order. Yours are likely not identical to mine.
In my case, I think that my social security, a small pension (my huge 4 figure yearly pension I call it) and dividends and interest from my outside investments will pay the majority of my bills, at least until that time I need to go to assisted living or a nursing home if that happens.
Therefore my 401K and rollover IRAs mostly look to me to be tax headaches when I get old enough to be required to take RMDs. So I’m leaning toward living off those for awhile my withdrawals taxed at lower tax brackets, to pare them down, as opposed to taking my SS asap.
But that’s my particular situation, as I said before your results may (and almost certainly do) vary.
I have to admit as I focus on retirement and senior living, I’m starting to feel guilty. I remember my 20s and 30s, seems like yesterday, money was always tight, always watching my budget, I rented a room out in my house for 10+ years to help pay mortgage and other bills.
And in my 40s, work got unstable and I spent a couple years in total unemployed, in 2006 and all of 2009 into 2010.
Now I am in my 60s, I’ve got plenty of retirement savings, but money will get transferred from younger often financially stretched younger people to me through social security, tax breaks and senior discounts. Just the other day I was at Culver’s and the kid at the register gave me a senior discount, I’d never even thought about asking if they had one. Lots of places do, I get them regularly without asking. Looking around the other customers at that Culver’s I was probably better off financially than anyone else there.
Here in Illinois retirement income isn’t state taxed, seems sort of unfair when I’ve converted some IRA to Roth in the last couple years, I didn’t owe any state tax, not that I was complaining! Or someone getting 6 figures in retirement income goes Scott free state tax wise here, while someone working and struggling to pay the bills in this financially messed up state does have to pay taxes on their hard earned pay.
So do I need to scheme to try to get every last penny I can out of social security? It is a Ponzi game transferring wealth from young to old whether the retiree needs it or not. Many do and it’s a lifeline for them for sure, but the system is going to be in the red in 2033 or 2034. Not trying to start an argument here, just pointing out that if you’re in decent financial shape because you saved diligently and managed your money well to ensure a comfortable retirement, do you need to try to maximize getting the most $$ out of social security you possibly can or not? Again, not trying to argue about it, just saying it’s something I think about now that I’m about to retire and find myself financially secure, despite many decades of younger years I wasn’t. In many ways I wish I’d had the money when I was young and could have enjoyed it more!!

 

[Richard Cranium]

It’s depressing as hell to hear people with millions say they might not have enough to retire.

You won't hear me saying that!

 

[Dennis H]

The amount of $$$ I paid in SS and other taxes over the years would add up to a HUGE amount. I floated many lazy bastards over the years and feel zero guilt about perks or senior breaks. Lived relatively poor as a young man like many others. Paid my bills and DID NOT USE MY HOME AS A BANK. I pulled my weight for about 50+ years. Enough. Retired 5 years, no nick to the pile. That could change, and there are no guarantees. CalPERS is investing in Solar, Wind Mills, and other bullshit I can’t control. Not reflective of my portfolio. (Big Oil, Boeing, etc. Example, Applebees. Split a meal and get the Golden Apple discount. Do what you can. It adds up. Time and health still trumps money.

 

[dadsbee]

I've said it before. Married at 20 years old with $13.84 in the bank and a bun in the oven I apologize to no one, that for all intensive purposes I stopped getting a pay cheque at 43 years old.

 

[Hey-O]

The system was never designed to carry you to the finish line in a Cadillac. It's a supplement, not meant as a stand alone source of income. I can say this because I came from s**tting in an outhouse to where I'm at today, by myself. I've talked about the round table I shared as a hobby with friends, my take on making money, but the real problem is saving and when to start. Saving money is a pain in the *** for one big reason, you don't reap the rewards for all the sacrifice till the end. Most look at that money and say, what a waste, I could use it now. I have a stand alone investment that I used as an example for the kids and their friends. I was 23 when I put our tax return and a few bucks into an investment and walked away from it, 2,500 dollars. That money today, with 10 dollar added to it every year, is worth around 70 thousand dollars. If I had a 100 dollars, I put away 10 bucks of it. We had some hards times at first and just lived accordly, yes I was doing without at first and my friends always laughed at me for not doing this or that. It's easy to say, well, you only live once, screw it, we'll worry about it tomorrow. I just worked harder, longer and found other ways to make more. Still, the one constant was putting away 10 percent. It became a game, yes a hobby. The earlier, the better, money doubles every 5 to 10 years. A steady income stream or a pile of money, makes no difference if you can't see past today and manage it for tomorrow. How much I have or don't have is not the point to my story, it's the trip to the finish line and how you handle it that measures success. I've had a lot of stuff in my life, so I've lived a very good life. I still live a reasonably simple life and can buy whatever I want, whenever I want. The problem is life has no reverse like a car, do overs don't happen in our world. You get one shot to get it right. Being poor wasn't a deterrent, is was an incentive or challenge. My father always told me to save your pennies and the dollars will take care of themselves. He also told me the definition of wealthy is being able to live off the money your money makes. Not a problem.

 

[68BabyBlue]

I've mentioned Julie Clark on this site in many different threads. She put me on the path that @Hey-O describes above. She owned the Plymouth dealership in my home town, and set up the test drive in my GTX 55 years ago. Julie was one of eight kids born to an Italian immigrant family who came to this country without a dime. Her father started a shoe repair shop, didn't have capital to sell shoes, like one of the better off Italian families up the street. Julie went to Penn State on scholarship, where she met her husband, a recently returned WWII war hero from a wealthy family, who owned a Packard dealership.

She became the de facto boss almost immediately, shifted the franchise from Packards and high end imports to Chrysler/Plymouth, then Jeep. She sold the property that housed the original dealership in downtown State College to the Borough for the site of the town's first parking garage, and set the family up for life with the deal. She shrewdly kept the land under the new site in a family trust separate from the dealership, which saved her heirs from total disaster after a general manager embezzled the business into oblivion, a decade after she passed.

Julie taught me my first lessons in living on less than what you make, not worrying about appearances to impress others, making wise use of your money. Seems like just yesterday that she was telling me this stuff as I handed the keys to the GTX back to her. She told me if I followed her advice, I'd own a car like that at the finish line. She didn't know how right she was.

 

[Hey-O]

I've mentioned Julie Clark on this site in many different threads. She set me on the path that @Hey-O describes above. She owned the Plymouth dealership in my home town, and set up the test drive in my GTX 55 years ago. Julie was one of eight kids born to an Italian immigrant family who came to this country without a dime. Her father started a shoe repair shop, didn't have capital to sell shoes, like one of the better off Italian families up the street. Julie went to Penn State on scholarship, where she met her husband, a recently returned WWII war hero from a wealthy family, who owned a Packard dealership.

She became the de facto boss almost immediately, shifted the franchise from Packards and high end imports to Chrysler/Plymouth, then Jeep. She sold the property that housed the original dealership in downtown State College to the Borough for the site of the town's first parking garage, and set the family up for life with the deal. She shrewdly kept the land under the new site in a family trust separate from the dealership, which saved her heirs from total disaster after a general manager embezzled the business into oblivion, a decade after she passed.

Julie taught me my first lessons in living on less than what you make, don't worry about appearances to impress others, make wise use of your money. Seems like just yesterday that she told me this stuff as I handed the keys to the GTX back to her, and she told me if I followed her advice, I'd own a car like that at the finish line. She didn't know how right she was.

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Great story and a lesson learned. You made it to the big show!