Double Income and Social Security Tax

havaneselover said:

What you say is true, but you can also argue that if my employer weren't paying their portion of social security taxes on my income, I'd probably be paid more as the employer is looking at the total cost of employing me (salary, benefits, FICA, FUTA). Put another way, if I were responsible for all payroll taxes, my salary would likely be higher. My ex-husband worked in IT staffing and when he figured what he could pay someone and what his margin would be, a 1099 obviously could make much more / hour than a salaried employee but then they had to pay their own payroll taxes.

Click to expand...

A fair point- also, self-employed individuals can incorporate as an S-Corp and limit their self-employment taxes to some degree. Always a thrilling topic to discuss

nalajms said:

My mother had the same conversation a couple of years ago with SSA. She was laid-off and went to a lower income the last 2 years before full collection of her SS benefits. Her benefits DID drop because of the lower income in the last 2 years. She had more than 10 years of work. So in her case, she should have just taken her benefits early because the drop in her salary caused the full benefits to decline and was only a bit more than the early benefits.

Click to expand...

This is wrong. That is not how social security works.

Her "projected" benefits dropped because she had a lower income. Social Security projections assume you will work until your full retirement age making the same amount you are today with raises equal to inflation. So your mother's projection was wrong because in real life she didn't make the same amount until she retired.

Had she not worked those two years her actual benefits would have been even lower than they were with her working for a lower salary because rather than making some money she would have gotten a 0. And $1 in income would give you a higher benefit than $0 income that year.

Social Security is calculated using your 35 highest earning years. All earnings are adjusted for inflation. Then a formula is used. I just looked it up and here's how it works:

First 9,912 of earnings X .90 +
9,913 - 59,760 X .32 +
59,761X .15

So your first 10k or so is weighted 3 times higher than your earnings from 10k - 60k and 6 times higher than your earnings above 60k.

So your mom may have had a decreased salary, but unless she went from 10k to 5k she wouldn't have seen that much of a SS benefit drop because the weightings for earnings above 10k are so low, relative to the weightings for earnings below 10k. If she took at 10k pay cut from 100,000 to 90,000 she would have lost:

10,000 X .15 X 1/35, which is like $45 per year.

How old does a person have to be to collect Social Security? I have only paid about 4 quarters into social security so I won't ever collect it. I retire next month and collect my pension right away but have to wait until 60 to collect our version of social security. We do pay more into our fund but we also collect more than double what you would on social security and at a younger age it seems.

aprilgail said:

How old does a person have to be to collect Social Security? I have only paid about 4 quarters into social security so I won't ever collect it. I retire next month and collect my pension right away but have to wait until 60 to collect our version of social security. We do pay more into our fund but we also collect more than double what you would on social security and at a younger age it seems.

Click to expand...

It depends. My full retirement age is 67. I can start taking it earlier, but then I won't get as much. Or I can wait until I'm older than 67 and I will get more than what I would get if I started taking it at full retirement age.

Hun, not that you haven't been given some good advice but I would definitely recommend you talk with an accountant. When we were faced with the same questions between paying in and taking out we learned that there are many, many different situations and not all of the options are best.

btk2333 said:

A fair point- also, self-employed individuals can incorporate as an S-Corp and limit their self-employment taxes to some degree. Always a thrilling topic to discuss

Click to expand...

It's not like those of us under 50 are going to really see anything anyway. They will have to either steal way more money from the younger workers or continue to raise the age into the 80s to even hope to keep the SSI ponzi scheme aflot.

I really wish young people could opt out. It's a huge scam.

Sadie22 said:

Go to Social Security dot gov and get the real scoop.

Click to expand...

That's what I said in my first post and even provided a link to the website Everyone's situation is different and that's the only place to get real information.

benefit is based on highest 40 quarters of income- based on a % of credits based on each years maximin payment. doesn't matter when th 40 quarters were

partigus said:

benefit is based on highest 40 quarters of income- based on a % of credits based on each years maximin payment. doesn't matter when th 40 quarters were

Click to expand...

As I said earlier, that is incorrect. It's based on the 35 highest earning years. I even provided the calculation.

Source: I went to ssa.gov and read about it.

sorry- you are correct- the 40 quarters is for eligibility- bit the 35 years is also the "top" 35 years, so if you worked 40 years, maxed out the number of credits each year the first 35, then reduced your work load and worked a couple of more years- that will NOT hurt your benefit.