Client wants to know if he can make voluntary payments into his social security account and I have no idea. I know it's a very questionable idea and that he'd be much better off fully funding his retirement account, buying disability insurance or just buying treasuries or other investments. But I'd like to know if anyone knows if the idea is possible for anyone silly enough to do it.
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I doubt it
I would think he would either need to be self-employed or have W2 earnings to pay into social securrity since social security is earnings based. I see no other way.Originally posted by erchess View Post
Peachie -
Does he have earned income that SS should be coming out of? If not I also don't think he can pay into it but if he really wants to know why doesn't he call SS?Believe nothing you have not personally researched and verified.Comment
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Is he self-employed with losses and maybe not enough quarters? He can elect the optional method to calculate the SE tax and by doing so he is making voluntary payments to SS.Jiggers, EAComment
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I would suppose that delayed retirement, to age 70, is the equivalent of voluntary payments. Also, I understand that there is a way, although it seems messy to me, to pay back all benefits previously received and thus in essence to start over.Originally posted by erchess View Post
Maybe what is really on his mind is whether folks can choose not to contribute at all to Social Security from their wages or SE income. I don't know about much of anybody other than some clergy who get that option.Comment
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Otis makes a great point regarding delayed retirement. If a person has funds they would like to contribute to Social Security in order to increase their benefit, they would be much better served to live off those funds and delay drawing Social Security benefits. The real return for delaying is about 8% per year until age 70.
People often begin receiving benefits at age 62 based on the theory that they can invest the money better than the government. There's some validity to the argument, but there are other considerations. I'm sure that some people who began drawing benefits early and investing them have taken quite a beating in the past 3 years. Many aare now in the position that they would gladly settle for an 8% return, which they could have achieve by simply doing nothing.
If your client is wondering if he can pay a couple of thousand into Social Security and increase his benefit by a few hundred dollars per month, the answer is "NO". But if he has enough money that he is trying to choose between buying an annuity and putting the money into Social Security, the answer is probably still "NO" to both propositions.
He can run some very good projections on the SSA web site. Their retirement calculator is very good, IMO.
"The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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to OP
One reason to want to "pay into" SS would be to get to the minimum number of quarters to satisfy SS requirement for later benefits.....(I do NOT know of any way to "pay into" SS without actually "earning" income....)Comment
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TY For All Responses
He has a Sch C Business that he started last year and that was profitable last year. He worked regular jobs full time much of last year and those provided a greater part of his income but this year he worked one part time job and got most of the income that supports his family from his business. His "life partner" bore him a child in I think May of this year and I don't know how much if at all she worked outside the home after the baby came. She had a decent job last year as a masseuse but was thinking of hanging out her own shingle and she may have done that.Comment
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Wall St. Journal has recently been suggesting that those planning to retire might often do well to live off of those taxable assets which generate little taxable income, or live off of traditional IRAs, until the year that they reach age 70-1/2 where RMD's must begin. Only 50% of increased Social Security benefits find their way into the Soc. Sec. taxability worksheet, and the RMD's are smaller thus reducing what goes into the worksheet. One tool is to convert traditional IRA's into Roth during the years prior to age 70-1/2, running the taxable income up to the top of the 15% tax rate bracket. Taxes in the long run come out considerably less, depending upon all of the numbers which go into the computation.Originally posted by JohnH View PostComment
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Personally I think that's a great strategy for anyone who can afford it, especially for anyone who hasn't used up all their 15 bracket. I urge people in that position to run income a little above the 15% bracket, since the tax deduction for state taxes brings the tax on those first few marginal dollars back down closer to 18-20%.
I have or have had several clients in their 80's, and one or two in their 90's. Virtually all of them will attest to the fact that the risk in retirement isn't that you die early and thus leave a few Social Security dollars on the table. The greater risk is that you will outlive your assets and the value of the Social Security benefit becomes more and more significant. Locking the benefit in at a low base insures that future earnings will be much lower overall if you are blessed enough (or cursed enough in the eyes of some), to live into your late 80's or 90's.
This strategy may have been a little less attractive in the last couple of decades when investments were flying high. But a return in the 8% range, backed by the full faith and credit of the US Government, isn't bad right now. And if the government guarantee ever fails, every other financial instrument known to man will have already gone under anyhow. At that point even precious metals won't mean much - the only metal with any value will be lead.Last edited by JohnH; 12-22-2011, 11:05 PM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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