This article could potentially make me a target of the Government … but at this point I don’t care!
DO NOT believe a word that these people tell you. Most of them have no idea how the system really works.
When I was 65 I called the administration to find out what would happen if I took my retirement at at 66 and continued to work and earn a living. That was in 2017. Of course based on the year of my birth age 66 is when I could take full retirement from Social Security. I was told that as long as I was of full retirement age I would not have any reductions of Social Security Income even if I earned as much as $1 million dollars per year or more. The only requirement is that I wait until FULL RETIREMENT AGE to file for benefits. I first filed for benefits in 2017 and retired fully in June 2018 after selling my business.
Prior to the law extending retirement out as far as age 67 for some … if you earned any amount above about $17,000 or so per year (the income threshold) your benefits would be reduced by $1 for every $3 of earnings over the threshold (and this threshold did change from year to year based on inflation). At age 70, however, you could earn any amount and not have a reduction of Social Security benefits (if you waited to age 70 to take benefits). Again, this all supposedly changed when the government extended full retirement age from 65 to 66 or 67 (depending on year of birth).
In 2018 (the year I retired with full benefits) this limit was increased to $17,040 – but again I would not have to worry about this, so I was told, because I was going to be of full retirement age.
Here is the ruling:
Now for 2020 this has really been pumped up …
Wow … now that appears to be quite a jump in the Threshold amount … from $17,640 to $46,920. This change probably took place sometime mid-year this year thanks to the Republican Administration … but be careful … it is not all it seems to be. Just another way of Uncle Sam giving you something with one hand and taking back more with another. Let me explain using my own situation.
What you will see below is the deposits into my checking account for my wife and I this year (2019). I hold nothing back from you!
As you can see, up until recently, my wife and I was collecting $2,277 and $840 per month from Social Security. So, for 10 months we received $3,117 per month. Then in October we were informed that since I had income in 2018 that I paid more FICA (Social Security Tax) on we would get a little raise. I got another $279 and my wife got another $144 which you can see deposited on 10/11/2019. Thus, the November deposits were $2,308 for me and $856 for my wife for a total of $3,164. We naturally thought that this $3,164 would be our on-going income for 2020.
Now that is not too bad … an income of $37,921 income for 2019. We assumed that there would be a slight adjustment upward for 2020 with the Cost of Living increase that social security normally provides (and takes back in the form of increased insurance costs).
In fact we just received letters this past week indicating that my income would go to $2,482.70 per month and my wife would go to $1,006.70 for a total gross income (before insurance cost) of $3,489.40 per month or potentially $41,872.80 per year due to a 1.6% rise in the cost of living.
Not So Fast … take a look at these letters in full:
As you can see in the above letters … I will pay an additional $318.10 for Part B Medicare and $70 for Part D medicare while my wife will pay an additional $318.10 for Part B Medicare. I guess she does not have Part D.
So rather than my ending up with a monthly income of $2,482.70 – $144.60 (normal Medicare Premium) of $2,338.10 … I will end up with a Net of $1,950. My wife will end up with a net of $544.00 going to the checking account each month. Together we are only going to get $2,494.00 rather than the $3,200.20 that we should normally get (this is $706.20 less than what we should get in 2020) … and $670 less per month than what we are getting based on the latest adjustment for earned income in the first 1/2 of 2018.
Thus rather than the increase of 1.6% that the letter tells us … we end up with a net decrease of 18.35% ($706.20 divided by $3,489.40).
I ask you … where is the fairness in that?
Also, what is the deal when your told you can earn as much as you want to and there will be no decrease in benefits?
This is all happening this year because of MAGI and IRMMA. What are these? Take a look at this table … then I will explain:
MAGI stands for Modified Adjusted Gross Income. As you can see … with a MAGI of $326,001.01 to $749,999.99 a person is responsible for $318.10 per month additional dollars of Medicare Part B Medicare and $70 per month additional dollars for Part D Medicare.
According to the IRS, this is how you calculate a MAGI:
IRMAA is an acronym for Medicare’s Income-Related Monthly Adjustment Amount (IRMAA). This is a higher premium charged by Medicare Part B and Medicare Part D to individuals with higher incomes.
Did I actually earn an additional $326,001.01 to $749,999.99 during 2018. No! but I wish I had. My adjusted gross income after business expenses was far less. However, the social security administration could care less about Adjusted Gross Income – that number you pay FICA (Social Security Tax) on when you retire. They are hung up on Modified Adjusted Gross Income (MAGI).
Let’s see, this is my 1040 form from 2018:
While the income looks high … a total of $152,000 of the $381,006 of other income came from the capital gains on the sale of my business so that I could retire. While this was subject to income tax … it was not subject to FICA or Social Security Tax. Furthermore, I don’t believe it should be a part of MAGI for social security tax or cost purposes. However, the Social Security Administration believes it should be.
Am I going to fight this … you darn right … even though it will likely do no good. If we could lower the $381,006 by $152,000 of capital gains and add back in 1/2 of self employment tax ($26,146 X 50% = $13,073) it should bring my MAGI to $242,073 which is less than the amount being shown in the letter from the SSA. While this would not reduce insurance cost totally, it would lower it to $144.60 and $31.50 for me and to $144.60 for my wife. That’s a total of $320.70 per month vs. the $706.20 that we are now being charged.
Again, can I get the SSA to listen to reason … doubtful. “To get a man to change his mind he must first admit he is wrong.” You may get him to “make a new decision based on new information,” but we are not talking about a man here … we are talking about the Federal Government who will never admit they are wrong or make a new decision based on one person’s opinion.
It’s like the $73,797 I paid in Income Tax and Self-employment (Social Security) tax was not enough … now I am paying a tax on top of taxes. That’s all these insurance premiums are … another tax dressed up as something else. When will it all stop?
Let’s face the facts
It is not going to stop.
The Social Security Act was signed into law by President Roosevelt on August 14, 1935. In addition to several provisions for general welfare, the new Act created a social insurance program designed to pay retired workers age 65 or older a continuing income after retirement. It’s original intent was not to cover widows, dependents, or healthcare needs … but to provide a supplement to retirement.
Huey Long was Governor of Louisiana from 1928 to 1932 and was elected to the U.S. Senate in 1930. A nominal Democrat, Huey Long was a radical populist. He wanted the government to confiscate the wealth of the nation’s rich and privileged. He called his program Share Our Wealth. It called upon the federal government to guarantee every family in the nation an annual income of $5,000, so they could have the necessities of life, including a home, a job, a radio and an automobile. He also proposed limiting private fortunes to $50 million, legacies to $5 million, and annual incomes to $1 million. Everyone over age 60 would receive an old-age pension. His slogan was “Every Man A King.”
The Share Our Wealth program immediately became a movement. Clubs were formed in every state in the nation. By 1935 the movement claimed 27,000 local clubs with 7.7 million members. This was probably the beginning of the socialist movement we see in America today. So, you see folks … nothing is really new.
This was also one of the early starts to the Social Security System as we know it today. You can read more about the HISTORY of SOCIAL SECURITY from the SSA.Gov website by clicking on this link. It is really a very interesting read and I encourage you to read it.
How bad is it getting with social security … and why do they need more of mine and your money?
I found this graphic from the 2015 Social Security Trustees Report …
And here’s some of the same information from the Social Security Administration’s website …
So, as you can see … what started with 159 workers to every 1 beneficiary is now down to about 2.8 workers per beneficiary and still going lower. It is anticipated by some that by 2035 it will be 2.1 workers for every 1 beneficiary … but I would not be surprised if it is less than 2:1.
Yet the Federal Government continues to Use Our Money for their benefit without even asking for our permission. I say the use of our money for their benefit when I see congress people like Nancy Pelosi flying all over the world using American Tax Payer dollars (like she represents us all) rather than California Tax Payer dollars.
The scoundrels have been ripping us off for years and attempting to cover it up. It is time for every person to come down hard on their federal legislators.
If you are over 65 today … there may be enough left to provide a little for your lifetime … but continue to expect surprises on those benefits like I have just received. If you are under 65 … you’d better come up with a better alternative for yourselves. With the average income in America being about $59,000 per year today … the government could be getting a total of $9,027 from the worker and the employer (15.3%) for social securities coffers. Even if they did not touch any of that, it is not going to be enough to sustain the current payout amounts into the next generation of retiring people (Generation X, Millennials and Generation Z). Remember of the 7.65% of your income that goes to Social Security (and the 7.65% of your income that is paid by your employer as well) a total of 6.2% will go for retirement and only 1.45% will go for Medicare.
Yet we have a class of people running for President in 2020 that is preaching “Medicare for All.”
It is also important to understand this:
On October 11, 2018, the Social Security Administration (SSA) announced that the 2019 Social Security wage base will be $132,900, which is an increase of $4,500 from $128,400 in 2018.
There is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax. As in 2018, wages paid in excess of $200,000 in 2019 will be subject to an extra 0.9% Medicare tax withholding that will only be withheld from employees’ wages as employers do not pay the extra tax. This means if you are an individual earning over $200,000 you could be paying a total of 2.35% for Medicare on the excess over $200,000.
The Federal Insurance Contributions Act (FICA) tax rate, which is the combined Social Security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2019 up to the Social Security wage base. The maximum Social Security tax employees and employers will each pay in 2019 is $8,239.80. This is an increase of $279.00 from $7,960.80 in 2018.
The Social Security wage base for self-employed individuals in 2019 will also be $132,900. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined Social Security tax rate of 12.4% and Medicare tax rate of 2.9%) up to the Social Security wage base. In 2019, the maximum Social Security tax for a self-employed individual will be $16,479.60.
Now the government will tax you on 50% to 85% of your social security because (according to them) you never paid tax on your employer’s portion. This all got its start way back in 1983 – again without the approval of the American People.
According to the IRS, the quick way to see if you will pay taxes on your Social Social Security income is to take one half of your Social Security benefits and add that amount to all your other income, including tax-exempt interest. This number is known as your combined income (combined income = adjusted gross income + nontaxable interest + half of your Social Security benefits).
If your combined income is above a certain limit (the IRS calls this limit the base amount), you will need to pay at least some tax.
The limit is $25,000 if you are a single filer, head of household or qualifying widow or widower with a dependent child. The limit for joint filers is $32,000. If you are married filing separately, you will likely have to pay taxes on your Social Security income.
For the 2019 and 2020 tax years, single filers with a combined income of $25,000 to $34,000 must pay income taxes on up to 50% of their Social Security benefits. If your combined income was more than $34,000, you will pay taxes on up to 85% of your Social Security benefits.
For married couples filing jointly, you will pay taxes on up to 50% of your Social Security income if you have a combined income of $32,000 to $44,000. If you have a combined income of more than $44,000, you can expect to pay taxes on up to 85% of your Social Security benefits. Don’t sink your money into a lot of Tax Free Bonds hoping to get out of this social security special tax. As you have already seen … all tax free interest is drawn back in to calculate that Combined Income.
You know, I would not even be against this tax if there was a way I would know for sure that the amount of taxes being collected is going back into the social security trust for future generations … but there is no guarantee when you have a country run by crooks. Or should I say, “a country RUINED by crooks.”
Yet the average person in this country does not feel like we need a tax revolt. Why, I do not understand? I’m not talking about a violent revolt, but rather a peaceful one. This can be done simply by having enough of the American Voters contact their federal legislators.
If you would like to join me in contacting your U. S. Elected officials, simple go to this website and you will have all the information you need to contact them:
If you agree with any part of this article, please contact your Congressman and Senators and let them know. If enough people would do this … then we may be heard. Whether they take action or not is unknown … but if they don’t we can always vote them out of office to be replaced by some who may listen.
Thanks and have a great week,
Jerry Nix | FreeWaveMaker, LLC
P. S. Here’s a draft that you may want to use when writing your elected officials: