You might be right, but I was not counting my pensions or mine and H’s SS. If they take some of my SS because I have a pension, they can’t take H’s because he doesn’t have one. My figure is based on the estimated value of our retirement accounts and homes.
How are you guys so lucky not to pay a big penalty to not withholding enough? That $2-3,000 we paid was the penalty alone not interest for underpayment. It was a long time ago. We just had a baby. I consider myself lucky for not messing up in a bigger way. Since then, I overpay a bit and apply the overpayments toward next year’s estimate tax. That way, I write three checks instead of four.
We are taking SS and it takes care of our basic needs to my pleasant surprise. Don’t discount it. It made me a great supporter of SS. We need to salvage it.
yes, if you have a pension, the “number” could be much lower.
Definitely not discounting SS. Will be planning on it, but later on. Gonna take that guaranteed 8% annual increase until 70.
But, the “number” on how much you need also depends on pension, and stock/bond mix. A tanking market like we had in '08/'09, could reduct the equity portion by 40% in a very short time period. Thus, need some cushion in that number.
I guess I’m quite lucky. We both worked for 50 years [ self employed] and be 70 in 4 years. At that point 1/2 of our 6 figure retirement income will come from SS. the rest from IRA distributions. I have stops on all our aggressive IRA stock investments so I know that $$ wont disappear in a meltdown. We have lots of cash sitting in bank accts as well.
we’ll be comfortable w/o having to sell our home or investment property.
I think the year I did the worst, we owed around $10K or so. It was the first year DW made enough in self-employment that the extra withholding I was doing from my paycheck wasn’t enough to cover it, and I never bothered making estimated payments. My tax program filled out form 2210 (Underpayment of Estimated Tax by Individuals, Estates, and Trusts) for me and it added a few hundred $ to the bill. You can have the IRS calculate the penalty for you if you want.
I’m probably getting sloppy with terminology as well. The “penalty” is calculated as if you were paying 4% interest on the underpayment amount, but it’s not really interest, just looks and smells like it.
Well, the rate was a lot higher many years ago. Like, 14-15%. So it wouldn’t take that huge of an underpayment to generate $2000 in penalties.
Or maybe the IRS was more aggressive back then with people who underpaid, and there were other penalties. AFAIK these days, if you pay what you owe by April 15, the only penalty is what gets calculated on form 2210.
Agree that I wouldn’t count on SS until age 70 to get the maximum benefit. And personally at my age, I’d probably figure it at 75% of whatever today’s charts show, as that’s the biggest cut you could expect if the system goes “bankrupt” without any fix.
H’s pension is from the fed govt for his 45 years of working there. That’s why there’s the govt offset or windfall provision that makes him ineligible to collect anything as a spouse of someone who could collect SS (me). His pension is much larger than my SS benefit will ever be anyway.
I’ve calculated my pension using SS’s calculator and am not expecting it to be very large, even if we wait another decade until I turn 70 before collecting. I will be happy if it does pay my and H’s Medicare premiums. If it also pays our medical insurance premiums, that would be icing on the cake.
H’s pension pays for all our living expenses. Even 55% of H’s pension will pay a lot of our living expenses and is more than my SS benefits.
Here’s a thread about a retirement estimate.
https://www.bogleheads.org/forum/viewtopic.php?p=3837016#p3837016
But note that fed employees hired after 1984 are on a different retirement plan and are paying for SS as well as a portion of their pension.
My niece-in-law is a teacher and the governor in her state is messing with cutting the pension plan. Teachers there don’t pay into SS, and it has people REALLY fired up. One of my sisters is an instructional asst in the same state, but on a different contract. She says they’ve been deducting SS, so she thinks she’ll get SS, but isn’t sure. (!!!)
Yes, those fed employees fired after 1984 or who chose to opt for the TSP retirement plan (instead of CSRS), yes, they will get SS as part of their retirement.
@bluebayou What do you mean by this? (concerning Social Security)
My wife (slightly older than me) just started receiving a very small pension, which is sure better than nothing (nothing being my pension! LOL) When I turn 66 she will file for her full SS benefit and I will collect a spousal. Then if I make it to 70 I will start my own benefit and she will probably switch to a spousal from mine (I think it will be a little more than her’s). Social security is a very important part of our retirement plan.
I think we can all intellectualize and understand the anxiety but experiencing it will be something else: Even with 1 or $2 million in retirement savings you will likely be spending down your nestegg. Even if you have done planning and calculations that tell you you have enough it will be very stressful to add up the total and have less every year as you grow older!
spousals can go both ways, NJRes, if both paid into SS.
Considering a restricted app as discussed in this Forbes article. (But haven’t researched it fully, since I still have a couple of years before FRA.)
So for those thinking about what age to start taking SS, do you have any thoughts about risk of SS in future? (ie earlier withdrawal being bird-in-hand)
^^not me. There has never been any proposal to reduce the benefits to the Boomers. (Heck, Congress can’t even have an open discussion on reducing benefits for those under 50 without getting pilloried…)
And if SS goes ‘broke’ we got much bigger issues.
The risk of living a long time looms much larger to me than the risk of me not getting SS because I waited until age 70 to collect. I will wait until age 70 unless something dramatic changes in my life. (My folks are 88 and 83 and in pretty good health. All my siblings are alive and slsobin great health.)
I will turn 70 this coming November. I’ve waited. I have every intention of living until I’m 95-ish. So far, so good – I exercise a lot.
I doubt they will reduce benefits in a general way, but I think it’s likely that they will means test SS in the future. Since we will get a pension, I’m expecting little, if anything in SS, at least at some point. Makes me think we should take it early.
Means testing is already done in a way. Medicare premiums are determined by your income and SS benefits are taxed depending on your income. If they have to expand means testing to salvage SS, I am all for it. I think many people heavily rely on SS benefits. If we lose everything, we will get by on SS. Not luxuriously but ok. I think that means a lot.
Indeed. It doesn’t take much of a pension or dividends to hit the tax threshold:
The means testing I expect will be that 100% of our benefits will be taxed…at the rate of 100%. 