In our case 85% is taxed. Not far from 100%. If we need to go 100% to fix it, I’d say go.
Because the threshold amounts for taxability of Social Security benefits are not indexed to inflation, and have not been increased since 1984, an increasing percentage of benefits that are taxable is built into the system. By 2050, almost 11% of all benefits paid out will be clawed back as income tax, up from around 7% today. The number of people getting taxed on their benefit has risen from less than 10% in 1984 when taxability of benefits was instituted (thank you Mr. Reagan) to over 50% today, and will climb to near 60% by 2030.
Excited to be able to be in 401k with 3% matching now that I have a year under the belt at work (sunset career). H and I retire 3 years from Oct when we both are 65 (his birthday is in June). The plan is with Fidelity, and I found two funds that are within the plan for me to choose, TRLGX (large cap growth, inception 2001) and PXSGX (small cap growth, inception 2006). Both 5 Star Morningstar rating.
I work with a lot of people that don’t participate with 401k, even though eligible. I don’t think they realize how the 3% pre-tax won’t affect their take home pay, and the enrollment takes a few steps on the computer. However once you log in, they want to throw you into an ‘automatic’ selection choice that in most cases is not the best for the individual enrollee…
Yes, I have a great uncle who died at or beyond 107. H has an aunt who died at 103. There is a chance I and H could live many, many, many more years. One of my parents is 93 and still in fairly good health.
I think the 85% number was considered since a portion of your SS is an actual ‘return’ of the 6.xx% that you were paying over the last 40 years…
@himom I ‘plan’ to outlive my H, lol. Since surviving aggressive stage III cancer and being cancer free, I might have a shot.
H’s grandfather lived to 96; grandfather had 3 sisters that died at ages 105, 106, and 107. H’s GGGM died in 1917 at age of 83…which was ANCIENT then. GGM died in 1950 at age 85 - grandfather, GGM, and other kids all survived small pox epidemic in mud lined wood cabin in the Dakotas before moving back to WI. H’s mother’s family also have pretty good longevilty - H’s maternal grandmother died at age 83 in 1974, and grandfather died in 1961 at age 74. H has 4 aunts that lived to ages 92, 93, 94, and 96.
It’s really tough for me or my docs to predict my longevity. On the one hand I have a chronic condition that initially I was told would kill me “soon.” That was said over 17 years ago. I have exceeded expectations but still have the chronic condition so am planning to live into my 90s and beyond. The docs now agree I could end up eventually succumbing to “old age,” rather than complications of my chronic condition.
My paternal grandma died at 90 in 1990. I may well outlive H since he’s more than a decade older than me. On the other hand, he doesn’t have my chronic health condition.
I believe faith and optimism go a long way @HImom - we can grow old ‘together’ on CC. One thing I think we can both be pretty sure we won’t outlive our nest egg - which is very comforting.
DH and I are expecting a grandbaby (first and hopefully only one for a while as ‘the kids’ need both incomes) in May, and nephew and his W are expecting a baby in Nov. I give small annual amounts to nieces/nephews with children because our family is small enough to be able to help a bit with the college funds - and it helps with the time value of money growing for them. Every bit helps, and they are appreciative.
Interesting study:
https://www.seattletimes.com/business/midlife-financial-loss-may-lead-to-death-study-suggests/
Just to be clear: Right now 85% of Social Security benefits taxable means that most of your social security check will be subject to ordinary income tax rates, which in 2018 will be 22% (for married filing jointly with income between $77,400 and $165,000). If your taxable income is over $165k (but less than $315k) the tax rate will still only be 24%, not 85%, and certainly not 100%. I have no problem with social security benefits being subject to federal income tax. I have a major problem if the tax rate is unusually high, or benefits are suspended if your income (or assets) are above a certain amount… unless of course those thresholds are far above my personal income/assets…LOL! Isn’t that the way it always is? Tax somebody else, not me! I still can’t get over the amount of qualified dividends and long term capital gains that can be tax free while a low income wage earner pays taxes on an identical income.
@BunsenBurner , thanks for adding a little worse to our week of tanking assets…
Do you have a problem with Roth accounts not being taxed?
They conceptually the same thing.
A retired firefighter told me his pension is 100% tax free ! Why??
I know his pension is more than 100% of his income since he claims disability, overtime etc figured into his pension. This is why Californians are so highly taxed. We have a local sales tax increase on the ballot to fund pensions.
It may be taxfree if he became disabled at work. A small part of my dad’s military pension is taxfree because of service-related disability.
@CountingDown - I believe you are correct. We had dinner with some friends last week and his brother is a fire fighter in California and will retire next year at 55. He was told if he goes out for a disability before he retires he will get his pension tax free.
The workers for Metro North Railroad had a disability rate that was off the charts (97%). After some investigative journalism (#realnews), fraud indictments began.
Ditto for Palo Alto firefighters.
https://www.mercurynews.com/2013/06/28/palo-alto-has-highest-rate-of-disability-retirements-in-santa-clara-county/
The retired firefighter I was talking to had bladder cancer. Can’t prove nor disprove whether it was work-related.
Take note. Sleep is important… Quality sleep is even more important.
https://www.aarp.org/health/brain-health/info-2018/daytime-sleepiness-alzheimers-fd.html
On the sleep front, I am in a good shape!
Does anyone know how to pay taxes if you inherit a trust? If the trust is in FL and you live in another state with inheritance tax, do you have to pay inheritance tax on the trust when you inherit it?
Something I’ve started incorporating into our retirement thinking is finding a place where either of us would be OK living if the other weren’t around. It will likely not be THE deciding factor for where we wind up, but it will influence the decision.
I have been thinking about retirement destinations for quite some time, but it sounds like my husband is going to work 4 more years, so I need to find another “hobby.” I haven’t decided how long it will be for me, but it won’t be longer than 6 years, and may be only 2.