Net worth compared to Medicare earnings

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jaj2276
Posts: 509
Joined: Sat Apr 16, 2011 5:13 pm

Net worth compared to Medicare earnings

Post by jaj2276 »

Does anyone know of any research articles where they look at net worth as a function of Medicare earnings? I looked at my social security statement and I was surprised that my medicare earnings were so high (simply a function of time in the job market I suppose) and that my net worth was a small % of it. Even though I'm fully invested I still haven't been able to experience the magic of compounding.
Silk McCue
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Re: Net worth compared to Medicare earnings

Post by Silk McCue »

The term medicare earnings through me a bit in terms of the question. You are really wanting to understand net worth as a function of gross wages. That is if someone makes x over 35 years how do they stand up against their peers in terms of net worth. If your net worth is a small amount of that number it can be due to a number of factors. The first is spending too much and not investing enough and early enough. There is also jumping in and out of the market, having the the wrong asset allocation, picking "hot" stocks etc.

Take a look at this and see article to see if it helps.

https://www.financialsamurai.com/net-wo ... xperience/

Bottom line. You can't change the past. Put it behind you and focus on the next sane and sensible steps to achieve the goals the future you will thank the present you for.

Cheers
Topic Author
jaj2276
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Re: Net worth compared to Medicare earnings

Post by jaj2276 »

Well Medicare earnings is what the Soc Sec statement calls it but yes, gross wages is the equivalent.

My NW is high. My gross earnings are high(er). I guess I was surprised to see that my NW wasn't as high as my gross earnings would have suggested. Doesn't seem others are too interested in this so appreciate the link!
neilpilot
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Location: Memphis area

Re: Net worth compared to Medicare earnings

Post by neilpilot »

jaj2276 wrote: Thu Oct 25, 2018 7:33 am Well Medicare earnings is what the Soc Sec statement calls it but yes, gross wages is the equivalent.

My NW is high. My gross earnings are high(er). I guess I was surprised to see that my NW wasn't as high as my gross earnings would have suggested. Doesn't seem others are too interested in this so appreciate the link!
First off, SS wages are <= gross wages, since many of us have annual earnings in excess of that year's max wages subject to SS.

Secondly, how is your question actionable?
Topic Author
jaj2276
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Re: Net worth compared to Medicare earnings

Post by jaj2276 »

neilpilot wrote: Thu Oct 25, 2018 7:37 am
jaj2276 wrote: Thu Oct 25, 2018 7:33 am Well Medicare earnings is what the Soc Sec statement calls it but yes, gross wages is the equivalent.

My NW is high. My gross earnings are high(er). I guess I was surprised to see that my NW wasn't as high as my gross earnings would have suggested. Doesn't seem others are too interested in this so appreciate the link!
First off, SS wages are <= gross wages, since many of us have annual earnings in excess of that year's max wages subject to SS.

Secondly, how is your question actionable?
1) Who said anything about social security earnings? We're talking about Medicare earnings on your social security statement. Which ARE equal to gross wages.

2) Stop with the "how is your question actionable?" replies. I'll take some action if the responses here would suggest.
fourwheelcycle
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Re: Net worth compared to Medicare earnings

Post by fourwheelcycle »

SSA maintains records of SSA earnings, which stop at the annual FICA tax limit, and Medicare earnings, which should equal W2 earnings (I think). I keep track of the accuracy of our SSA records. For my wife and me, our SSA earnings have always been accurate, but SSA's record of my Medicare earnings was lower than my actual W2 earnings for about five years during my forties. I submitted a request to SSA to change my SSA record, documented with copies of my W2 statements, but they responded they do not use Medicare earnings for any of their calculations so they will not accept requests to change them.

I keep track of our total W2 earnings, and my pension since I retired. Our total savings exceeds our lifetime W2 earnings plus my pension. Of course, much of our savings is due to inflation and 1099 DIV income, since or lifetime earnings are in nominal dollars and our savings is in current dollars.
grokzilla
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Re: Net worth compared to Medicare earnings

Post by grokzilla »

It's pretty tough to effectively look at your gross earnings to net worth ratio and compare it to peers in any sort of truly helpful way simply because net worth can be acquired in so many varied ways that have absolutely nothing to do with gross earnings. Most people will have wildly different ratios that seem entirely incongruous to their earnings -- but overall the simple rule that the higher one's earnings - the higher one's net worth is likely to be, is sure to apply.

That said, I have seen a number of threads here that do take account of gross earnings and compare them to their savings rates, which provides a much more helpful measure of "how you're doing."

Of course, be prepared for some pretty incredible savings ratios...we are all bogleheads of course!
MathWizard
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Re: Net worth compared to Medicare earnings

Post by MathWizard »

First, the ratio will depend upon your age, since your investments would have more time to grow.

Second, if you saved/invested say 15% of your gross salary every year, and you earned 0%, then your invested
total vs total earnings would be 15% .

If you get inflationary raises and you have a 0% real return,

To be much greater, you need to be looking at a long period of time, or a large real return.

Over 15 years, with 3% inflation and 4% real return, the ratio would be 20%.
for 35 years I get just under 29%.

Now stock returns are not a steady real return, but you get the idea.
TBillT
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Re: Net worth compared to Medicare earnings

Post by TBillT »

For us 65+ it looks like 1991 was the first year that Medicare Earnings were > Social Security Earnings, in other words they changed the tax base. Social security seems a little unfair to me that it is only people <$125k (or whatever it is now) that pay the burden.
letsgobobby
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Re: Net worth compared to Medicare earnings

Post by letsgobobby »

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Silk McCue
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Re: Net worth compared to Medicare earnings

Post by Silk McCue »

TBillT wrote: Thu Oct 25, 2018 12:24 pm For us 65+ it looks like 1991 was the first year that Medicare Earnings were > Social Security Earnings, in other words they changed the tax base. Social security seems a little unfair to me that it is only people <$125k (or whatever it is now) that pay the burden.
You are mistaken. The Tax Max as it is called has been around since the inception of Social Security. Quite honestly those that qualify at the very lowest level receive a greater benefit than those that earn more on a return basis. It is a degrading sliding scale and if anything "not fair' to those that pay more and get less based upon contributions.

https://www.ssa.gov/policy/docs/policyb ... 011-02.pdf

Cheers
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teen persuasion
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Re: Net worth compared to Medicare earnings

Post by teen persuasion »

Gross wages does not equal Medicare wages. HSA contributions thru payroll, and contributions for health insurance are not included in Medicare wages. I think DH's Medicare wages were roughly 75% of his gross wages last year.
MathWizard
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Re: Net worth compared to Medicare earnings

Post by MathWizard »

Redoing my calculation above, I see that over 35 years with
25% savings/investment and 6.2 % real return and 2% inflation (i.e. 8.2% nominal)
the ratio would be just over 75% as some are answering.

That is a pretty high savings rate over 35 years.

Going longer, 44 years, with 8.2% nominal return; 2% inflations, a savings rate of only 18% is required.
So time in the market is very important for this ratio.
neilpilot
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Re: Net worth compared to Medicare earnings

Post by neilpilot »

jaj2276 wrote: Thu Oct 25, 2018 8:57 am
neilpilot wrote: Thu Oct 25, 2018 7:37 am
jaj2276 wrote: Thu Oct 25, 2018 7:33 am Well Medicare earnings is what the Soc Sec statement calls it but yes, gross wages is the equivalent.

My NW is high. My gross earnings are high(er). I guess I was surprised to see that my NW wasn't as high as my gross earnings would have suggested. Doesn't seem others are too interested in this so appreciate the link!
First off, SS wages are <= gross wages, since many of us have annual earnings in excess of that year's max wages subject to SS.

Secondly, how is your question actionable?
1) Who said anything about social security earnings? We're talking about Medicare earnings on your social security statement. Which ARE equal to gross wages.

2) Stop with the "how is your question actionable?" replies. I'll take some action if the responses here would suggest.
I'm sure you maybe correct, but then how would you explain that my gross earnings are frequently greater than my Medicare earnings. For example, my Medicare earning for TY2013 were under-reported by over $8k. I do understand why, but I'll leave it to your imagination. That should be actionable.
sc9182
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Re: Net worth compared to Medicare earnings

Post by sc9182 »

Many of PreTax cafeteria Section 125 deductions are Pre-Tax, exempt from SS taxes, including employer-provided education assistance upto certain $ amount. Some are exempt from Medicare wages as well.
https://finance.zacks.com/pretax-deduct ... -3522.html
Wakefield1
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Re: Net worth compared to Medicare earnings

Post by Wakefield1 »

Using cumulative Medicare earnings as an approximation of total Lifetime earnings?
It comes to mind that if one has been retired for a while and drawing a pension,the pension would add a considerable amount to the "Lifetime Earnings" figure if included
Is Pension Receipts part of "Lifetime Earnings"?
michaeljc70
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Re: Net worth compared to Medicare earnings

Post by michaeljc70 »

I haven't read all the comments. I can say, I have 62% in NW of all my Medicare Earnings. I am 48 yo. Your age, family size (actually, more of pay/person) , how much you spend, if you are already retired, etc. obviously all play into this. Compounding obviously favors those that saved more when they were younger and those that worked longer.

I probably wouldn't put much credence in this metric unless your NW is very low compared to Medicare earnings (and even then, if your income was low, it might not mean much).
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