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  #991  
Old 07-02-2018, 11:47 AM
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Yes, of course. But BENEFITS would be unaffected under present law. They are based on covered earnings, not taxes paid.

Bruce
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  #992  
Old 07-02-2018, 12:14 PM
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Yes, of course. But BENEFITS would be unaffected under present law. They are based on covered earnings, not taxes paid.

Bruce
Oh, I see. Of course that's true. I mis-read your statement.
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  #993  
Old 07-02-2018, 02:12 PM
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Originally Posted by bdschobel View Post
The game is inaccurate. We know that eliminating the cap increases taxes by approximately 20 percent (relatively). The math is easy from there.

Bruce
Does that take into account changes in behavior? One of the political stories I remember from a while back is that, back when John Edwards was a 0.001% trial lawyer, he received his settlement share as dividends from an S corporation. They were still subject to normal income taxes, but since they weren't payroll earnings, he got out of paying his "fair share" to Medicare. I'm not sure to what extent that is still possible under current tax law, but I would definitely expect the nation's top earners to find ways to be compensated that weren't income, if they could save themselves from paying both Medicare and Social Security taxes.
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  #994  
Old 07-02-2018, 02:32 PM
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Does that take into account changes in behavior? One of the political stories I remember from a while back is that, back when John Edwards was a 0.001% trial lawyer, he received his settlement share as dividends from an S corporation. They were still subject to normal income taxes, but since they weren't payroll earnings, he got out of paying his "fair share" to Medicare. I'm not sure to what extent that is still possible under current tax law, but I would definitely expect the nation's top earners to find ways to be compensated that weren't income, if they could save themselves from paying both Medicare and Social Security taxes.
Rich people's ability to change their compensation from wages to dividends varies. A professional athlete is still an employee of an employer so there's not much they can do. But anyone in business for themselves is probably already gaming the system to avoid the Medicare tax. While the shift in the FICA tax from 1.45% to 7.65% for earnings over $X might incent some people who aren't too far over $X to bother with something that wasn't worth bothering with before, I doubt it moves the needle all that much since the incentive to call your income dividends rather than wages already existed.
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  #995  
Old 07-02-2018, 04:45 PM
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And if an S corporation fails to pay reasonable salaries to its owners, then the IRS has the power to recharacterize dividends as wages. It doesn't happen very often, but it does happen.

Bruce
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  #996  
Old 07-02-2018, 04:54 PM
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And if an S corporation fails to pay reasonable salaries to its owners, then the IRS has the power to recharacterize dividends as wages. It doesn't happen very often, but it does happen.

Bruce
Yeah, my ex is an S-corp and doesn't pay himself *any* salary at all. He's even been audited and they've not questioned this.

I don't think they even remotely look at this unless they're investigating at least a dozen other issues on the same return(s) *and* they are really looking to stick it to you.

Technically this is the rule, sure, but it's not really enforced AT ALL.

Even so, John Edwards could pay himself $100,000 and call all the rest dividends. $100,000 isn't insane for a staff attorney at a corporation. It's about what the lawyers at the insurance companies where I've worked get paid. And a drop in the bucket compared to Edwards' overall income.
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  #997  
Old 07-02-2018, 05:28 PM
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Supposedly, Edwards made something like $30 million annually in his prime, so $100,000 would be a drop in the bucket. On the other hand, it would be close to the Social Security max, so the government would be chasing Medicare tax only, at 2.9%. Maybe not enough incentive to go after it.

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  #998  
Old 07-11-2018, 01:33 PM
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https://www.heritage.org/budget-and-...worth-its-cost

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Is Social Security Worth Its Cost?

SUMMARY
Americans would be better off keeping their payroll tax contributions and saving them in private retirement accounts than having to contribute to the government’s broken Social Security system. Social Security’s design has, over the decades, presumed that many Americans are too incompetent to make informed decisions for themselves, but few Americans believe that the government knows better than they do what is best for them and their families. Moreover, Social Security’s financial structure effectively guarantees that workers will receive extremely low—or even negative returns—on their payroll taxes.

KEY TAKEAWAYS

This report compares what Social Security can provide and what workers could receive if they had ownership of their Social Security payroll taxes.

This information can help individuals of all ages understand what they can expect to receive from Social Security or from private savings.

Virtually all Americans would be better off keeping their payroll taxes and saving them in private retirement accounts.
30-page report here: https://www.heritage.org/sites/defau...7/BG3324_0.pdf
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  #999  
Old 07-11-2018, 03:20 PM
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https://www.plansponsor.com/many-mil...cial-security/

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Many Millennials, Gen Xers Don’t Expect to Receive Social Security
Yet, a significant number are not saving for retirement at all.
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While more than half of pre-retirees expect to continue working in retirement, a mere 6% of retirees actually hold down a job, PGIM Investments, the investment business of Prudential Financial, found in a survey.

Fifty-two percent of pre-retiree Baby Boomers, 58% of pre-retiree Gen Xers, and 43% of pre-retiree Millennials expect to work part-time or full-time during retirement. PGIM says the high expectations for work may be due to fears of Social Security benefits being reduced—or not continued at all. Only 51% of Millennials expect to receive Social Security.

“While changes in retirement expectations are often driven by pure economics, these study results also suggest a mind shift in how people are thinking about retirement,” says Stuart Parker, president and CEO of PGIM Investments. “To help them bridge this gap, the asset management industry will need to rethink the way it does business and bring products and services in line with changing customer needs.”

The survey also found that pre-retirees are relying more on how much money they have saved than reaching a certain age to decide when to retire, with this being the case for 50% of Gen Xers and 62% of Millennials. In contrast, the majority of current retirees decided when to retire based on their age and eligibility for Social Security and other benefits.

Twenty percent of Millennials and 9% of Gen Xers want to start a business in retirement. Additionally, 39% of pre-retirees would like to volunteer in retirement.

Fifty-one percent of retirees say they are “living the dream.” On average, this group started saving six years earlier (age 40) than those not as enchanted with retirement (age 46). They are also likely to have pensions and other sources of income, to work with a financial adviser, to be more willing to take risks and to be more knowledgeable about investments.

The top lessons retirees would like to pass on to pre-retirees are save more, start saving earlier, and plan on retiring later.

Social Security will be the most critical source of income for 61% of pre-retirees. However, only 70% of Gen Xers and 51% of Millennials expect Social Security benefits when they retire.

While Millennials are the least likely to rely on Social Security for retirement income, nearly one in three are not saving anything for retirement. More than one-third say they do not see any point in saving for retirement because anything can happen between now and then. Additionally, nearly one in five Gen Xers are not saving anything for retirement.

This lax approach to retirement saving is surprising, given the fact that Gen Xers think they will need $2.5 million to retire, and Millennials, $1.1 million. Fifty-three percent of pre-retirees are unsure how much they will need to retire, and they give themselves a grade of “C” in terms of their retirement preparedness.

Fifty-one percent of retirees said they retired earlier than they had planned, with 50% of this group saying it was more than five years before their target date. In many cases, the reasons were involuntary, including health problems (29%), layoffs or restructurings (14%), the need to care for a loved one (13%) and the inability to find a new job (10%).

Prudential’s 2018 Retirement Preparedness Survey can be downloaded here.
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  #1000  
Old 07-11-2018, 05:01 PM
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"Virtually all Americans would be better off keeping their payroll taxes and saving them in private retirement accounts. "

Well, duh. It started out paying benefits in excess of contributions and has never dug itself out of that hole. But how else could it have started? It really never was designed for individual equity.
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