What will you do with your 2% windfall?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills

What will you do with 2% windfall?

Spend it
8
29%
Spend it
8
29%
Pay down debt
12
43%
 
Total votes: 28

Grt2bOutdoors
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What will you do with your 2% windfall?

Post by Grt2bOutdoors » Tue Jan 04, 2011 3:31 pm

For those of us working, what will you do with your 2% windfall?
I've opted to add the windfall to my 401K, what say you?

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Kenkat
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Post by Kenkat » Tue Jan 04, 2011 3:55 pm

Some portion of the 2% social security tax reduction will be offset by the loss of the "Making Work Pay" tax credit of $400 per person for 2011. So your 2% is more like 1.6% if you max out the social security wage base and 1.2% if you make $50K per year.

If you make less than $20K, you will actually pay more in taxes because of this change.

natureexplorer
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Post by natureexplorer » Tue Jan 04, 2011 3:57 pm

Stimulate the economy.

Rodc
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Post by Rodc » Tue Jan 04, 2011 3:59 pm

I hate to show my ignorance, but what 2%?
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Kenkat
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Post by Kenkat » Tue Jan 04, 2011 4:09 pm

Social Security withholding tax rate was reduced for 2011 from 6.2% to 4.2% for employees. One year only. It was part of the late year tax Bush cut extension legislation package.

Random Poster
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Post by Random Poster » Tue Jan 04, 2011 4:14 pm

kenschmidt wrote:Some portion of the 2% social security tax reduction will be offset by the loss of the "Making Work Pay" tax credit of $400 per person for 2011. So your 2% is more like 1.6% if you max out the social security wage base . . .
How do you figure, since if you maxed out the SS wage base, you probably weren't eligible for the making work pay tax credit (the IRS states "This tax credit will . . . phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly")?

ETA: And the credit is completely phased out for individuals making $95,000 or more, or $190,000 for joint filers.

johnubc
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What will you do with your 2% windfall?

Post by johnubc » Tue Jan 04, 2011 4:22 pm

kenschmidt wrote:Some portion of the 2% social security tax reduction will be offset by the loss of the "Making Work Pay" tax credit of $400 per person for 2011. So your 2% is more like 1.6% if you max out the social security wage base and 1.2% if you make $50K per year.

If you make less than $20K, you will actually pay more in taxes because of this change.
or 2% (up to 106K) if you were ineligible (income phase out) for "Making Work Pay"

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Kenkat
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Post by Kenkat » Tue Jan 04, 2011 4:23 pm

Random Poster wrote:
kenschmidt wrote:Some portion of the 2% social security tax reduction will be offset by the loss of the "Making Work Pay" tax credit of $400 per person for 2011. So your 2% is more like 1.6% if you max out the social security wage base . . .
How do you figure, since if you maxed out the SS wage base, you probably weren't eligible for the making work pay tax credit (the IRS states "This tax credit will . . . phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly")?

ETA: And the credit is completely phased out for individuals making $95,000 or more, or $190,000 for joint filers.
Well it all depends on who made what.

Married couples with a single wage earner making $100K (close to SS wage base max) would have qualified for $400 tax credit under Making Work Pay. This person gets $2000 credit but loses $400 - so $1600 net or 1.6%.

Married couples who both made $75K would have qualified for $800 tax credit under Making Work Pay. Instead they will get net of $2200 tax credit or 1.46%.

[Edited to add]

Single making $50K would have qualified fo $400 tax credit under Making Work Pay. Instead they get net of $600 (50K x 2% = 1000 - 400) or 1.2%

Only the highest wage earners will get the full 2% since they were never eligible for the Making Work Pay credit.

Random Poster
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Post by Random Poster » Tue Jan 04, 2011 4:40 pm

kenschmidt wrote:Only the highest wage earners will get the full 2% since they were never eligible for the Making Work Pay credit.
And for those individuals, the 2% is welcome news. 8)

The Wizard
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Post by The Wizard » Tue Jan 04, 2011 4:54 pm

I'm striving to pay off my home mortgage early, so the extra funds will easily go there...

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JupiterJones
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Post by JupiterJones » Tue Jan 04, 2011 4:58 pm

In my case, I wouldn't call that a windfall.

More like a gentlebreezefall.

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Post by travelnut11 » Tue Jan 04, 2011 5:05 pm

Mine will be partially off-setting my new HSA contributions. Probably not by much though.
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Rodc
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Post by Rodc » Tue Jan 04, 2011 5:19 pm

kenschmidt wrote:Social Security withholding tax rate was reduced for 2011 from 6.2% to 4.2% for employees. One year only. It was part of the late year tax Bush cut extension legislation package.
Cool. Missed that.

Thanks.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Kuckie
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Inverst the 2 percent windfall.

Post by Kuckie » Tue Jan 04, 2011 5:32 pm

Add it to my 401k. It is a golden opportunity to increase personal retirement savings without costing a thing. Normally those funds would have been paid to SS and redistributed according to the whims of politicians so very little would have been returned at retirement. But now we can keep the entire amount. One can even consider the windfall to be a form of privatized Social Security, which was presented and rejected about 5 years ago. Take advantage of the opportunity.

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Post by jh » Tue Jan 04, 2011 5:36 pm

Oh, I will definitely end up investing it. I already live way below my means. So increasing my income isn't going to have any impact on my spending choices. If I wanted to spend more money I would have been doing that already.

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Christine_NM
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Post by Christine_NM » Tue Jan 04, 2011 5:39 pm

I collect SS (thanks everybody) so I don't get the tax cut, but I did get a 50% reduction in my Medicare supplemental insurance cost this year. That adds up to 0.5% of annual income.

For that amount I bought a 40-inch TV on terrific sale at amazon.com after Christmas. The price has already risen from what I paid a week ago. I'm not sure this will stimulate the US economy since it's a Japanese TV assembled in Mexico. Can anyone rationalize this??

Anyway, it came today and I've set it up and it works great. Shuffled the little 27-inch one off to the bedroom, maybe to watch DVDs.
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masteraleph
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Post by masteraleph » Tue Jan 04, 2011 5:47 pm

kenschmidt wrote: Well it all depends on who made what.

Married couples with a single wage earner making $100K (close to SS wage base max) would have qualified for $400 tax credit under Making Work Pay. This person gets $2000 credit but loses $400 - so $1600 net or 1.6%.
kenschmidt- I'm pretty sure we ran through all the married couple issues last year. One earner vs. two earners didn't matter; a married couple making $100k (through whatever method) would have qualified for an $800 credit.

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Kenkat
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Post by Kenkat » Tue Jan 04, 2011 6:52 pm

masteraleph wrote:
kenschmidt wrote: Well it all depends on who made what.

Married couples with a single wage earner making $100K (close to SS wage base max) would have qualified for $400 tax credit under Making Work Pay. This person gets $2000 credit but loses $400 - so $1600 net or 1.6%.
kenschmidt- I'm pretty sure we ran through all the married couple issues last year. One earner vs. two earners didn't matter; a married couple making $100k (through whatever method) would have qualified for an $800 credit.
Yep - you are right. I couldn't figure out exactly how it worked by a quick Google (imagine that - a complicated tax code!) but have confirmed that you are correct.

Just another wrinkle in the tax code - Uncle Sam giveth and Uncle Sam taketh. No complaints with tax breaks but a lot of people will not see the full 2%.

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scubadiver
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Post by scubadiver » Tue Jan 04, 2011 8:28 pm

It's not a windfall, it's a loan. Uncle Sam is eventually going to want (need?) that money back. I'm saving it until he does. :wink:
Last edited by scubadiver on Wed Jan 05, 2011 9:26 pm, edited 1 time in total.

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Opponent Process
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Post by Opponent Process » Tue Jan 04, 2011 8:49 pm

I also look at it as an advance on my SS. as such, I feel it necessary to invest it although I hope everyone else uses it to buy stuff from the companies I invest in, creating distance between me and them. but not too much distance. sustainable distance. not revolution-provoking distance.
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tetractys
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Post by tetractys » Tue Jan 04, 2011 9:11 pm

I will try and invest whatever extra drops from the sky. But whatever extra that turns out to be will depend on the immediate effects of X-flation. I'll have a better answer next year.

Chances are though, since I'm not among the top 5% percent of earners, I won't even notice it. -- Tet
Last edited by tetractys on Tue Jan 04, 2011 9:16 pm, edited 1 time in total.
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NightOwl
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Post by NightOwl » Tue Jan 04, 2011 9:13 pm

I won't treat it any differently from any other money that comes to me in my monthly paycheck. I keep an amount equal to my budgeted spending in checking, and any additional money goes to Vanguard.

If you're looking for economic stimulus, don't look to me.

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House Blend
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Post by House Blend » Tue Jan 04, 2011 10:07 pm

kenschmidt wrote:
Random Poster wrote:
kenschmidt wrote:Some portion of the 2% social security tax reduction will be offset by the loss of the "Making Work Pay" tax credit of $400 per person for 2011. So your 2% is more like 1.6% if you max out the social security wage base . . .
How do you figure, since if you maxed out the SS wage base, you probably weren't eligible for the making work pay tax credit (the IRS states "This tax credit will . . . phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly")?

ETA: And the credit is completely phased out for individuals making $95,000 or more, or $190,000 for joint filers.
Well it all depends on who made what.

Married couples with a single wage earner making $100K (close to SS wage base max) would have qualified for $400 tax credit under Making Work Pay. This person gets $2000 credit but loses $400 - so $1600 net or 1.6%.

Married couples who both made $75K would have qualified for $800 tax credit under Making Work Pay. Instead they will get net of $2200 tax credit or 1.46%.

[Edited to add]

Single making $50K would have qualified fo $400 tax credit under Making Work Pay. Instead they get net of $600 (50K x 2% = 1000 - 400) or 1.2%

Only the highest wage earners will get the full 2% since they were never eligible for the Making Work Pay credit.
Beyond this, remember that SS tax is extracted before so-called "before tax" deductions are taken out. So there are singles that can get the max benefit from the 2% reduction in 2011 and (with the same income level) qualify for MWPC in 2010:

Code: Select all

Gross wages: $106.8K (max for SS).
Max out 401k   -$22K   (age > 50).
Cap losses      -$3K
AGI:          $81.8K
Puts you in the phase-out range for MWPC; I think you would get about $265.

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RJB
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Post by RJB » Tue Jan 04, 2011 11:07 pm

I already increased my 401K deductions by that amount. Hopefully it will help stimulate the economy along with earnings many years from now.

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White Coat Investor
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Post by White Coat Investor » Tue Jan 04, 2011 11:21 pm

I can't wait until it expires and the politicians accuse each other of balancing the budget on the backs of the poor.

I'm all for lower taxes, but this is just another stimulus now that the word stimulus has a bad rap.
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Post by Startled Cat » Wed Jan 05, 2011 12:38 am

I'm giving it to charity. Ideally a charity that's desperate for money to keep people employed, since I feel strongly that this borrowed money should have been used to combat unemployment rather than enriching people who are lucky enough to have jobs. I think a struggling school would be a good choice, but I'm open to suggestions.

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Post by epilnk » Wed Jan 05, 2011 12:57 am

Since this drains SS funding, I guess I better stash it away for retirement. I just wish I had tax deferred space to do so. But I'm not going to spend retirement money to stimulate the economy today.

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Post by Valuethinker » Wed Jan 05, 2011 7:21 am

Christine_NM wrote:I collect SS (thanks everybody) so I don't get the tax cut, but I did get a 50% reduction in my Medicare supplemental insurance cost this year. That adds up to 0.5% of annual income.

For that amount I bought a 40-inch TV on terrific sale at amazon.com after Christmas. The price has already risen from what I paid a week ago. I'm not sure this will stimulate the US economy since it's a Japanese TV assembled in Mexico. Can anyone rationalize this??

Anyway, it came today and I've set it up and it works great. Shuffled the little 27-inch one off to the bedroom, maybe to watch DVDs.
Roughly speaking, gross margins on brown goods (washers and fridges are 'white goods' stereos and tvs are 'brown goods') range 20-30%.

So the retailer picked up say 25% of the sale price. Maybe in America only 20% (on white goods, the margins are twice as high).

Then there was sales tax if your state has that. Another 7%?

And of course the distibutor/ wholesaler picked up something, say 5-10%. Amazon is its own wholesaler so delivery charges.

So say 25%- 1/3rd of your purchase price went directly into the US economy.

Then of course there are exports. US largest trade partners are China, Canada, Mexico I believe. Mexicans make more money and often buy things (soap, hair shampoo) made or branded in America, or shop at American owned chains (WalMart, Home Depot).

a lot of the components Mexicans use are imported from America (less so in a TV).

China buys just about everything from America. Wood, coal, airplanes, software, legal and financial services-- you name it.

To the extent China continues to hold dollars, that lowers US domestic interest rates-- feeds back to homeowners, companies investing etc.

The raw materials to make that tv set of course came from Australia, Canada and the like. Canadians buy just about everything from America and go on holiday in America. We are your largest trading partner (or second) both for exports and imports.

And then there's insurance if you bought the extended product warranty. That will be held most probably by a Bermuda subsidiary of the retailer. Again a US company.

Just on your old TV, watch the 'instant on'. Post a law signed by President Bush, I believe US electronics are moving to the '1 watt initiative' ie only drawing 1 watt (1000 hrs = 1 kw hour, about 12 cents at average US electricity rates, there are 8760 hours in a year and hours x watts divided by 1000 = kwhr).

But your 'instant on' could be drawing 30 watts (or 100) on an old electronic device.

At 30 watts, that's roughly 250 (EDIT had 25] kwhr pa so say $30. And of course your air conditioning has to offset that, too, so add another 1/6th (1/3rd additional watts at a heat pump Coefficient of Performance of 3.0 x half the year).

It's estimated as much as 10% of home electricity consumption is 'silent hogs' like instant on features on electronic devices.
Last edited by Valuethinker on Wed Jan 05, 2011 8:59 am, edited 1 time in total.

likegarden
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Post by likegarden » Wed Jan 05, 2011 8:17 am

Wow, I did not know about the 2%, this must be the new math which I did not get to learn in the 1950/60s.
So you are paying less SS tax to let SS survive longer? Why did they not reduce Medicare and health insurance contributions too to help us out in the future? Then we have tax cuts, but then the US still has to pay what is due?
As a retiree I did not get that 2% saving, had no increase in SS benefit for 2 years, perhaps I should stop paying taxes too this year because that new math seems to be so good?
Bernd

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Post by Valuethinker » Wed Jan 05, 2011 8:59 am

epilnk wrote:Since this drains SS funding, I guess I better stash it away for retirement. I just wish I had tax deferred space to do so. But I'm not going to spend retirement money to stimulate the economy today.
http://en.wikipedia.org/wiki/Paradox_of_thrift

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midareff
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Use it to build cash......

Post by midareff » Wed Jan 05, 2011 9:01 am

14 or so months away from saying cya around to the office and am in cash builder mode.

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Re: Inverst the 2 percent windfall.

Post by Valuethinker » Wed Jan 05, 2011 9:04 am

Kuckie wrote:Add it to my 401k. It is a golden opportunity to increase personal retirement savings without costing a thing. Normally those funds would have been paid to SS and redistributed according to the whims of politicians so very little would have been returned at retirement. But now we can keep the entire amount. One can even consider the windfall to be a form of privatized Social Security, which was presented and rejected about 5 years ago. Take advantage of the opportunity.
Just to be clear 'SS redistributed according to the whims of politicians'

is not really true *unless* you mean this change in SS taxes ie this change?

Unless we say 'the whims of Franklin Roosevelt, his advisers, and the ?1940? Congress'?

SS benefits are fixed by formula? Ronald Reagan and Tip O'Neill made some significant changes of which I ma aware (and we'll not get into the 'Trust Fund debate' which is way off Forum rules)?

But SS is one of the longest lasting and most stable of US government programmes.
Last edited by Valuethinker on Wed Jan 05, 2011 9:20 am, edited 1 time in total.

fishndoc
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Post by fishndoc » Wed Jan 05, 2011 9:09 am

But SS is one of the longest lasting and most stable of US government programmes. It's an inter-generational bargain that has proven to be remarkably stable.
Like my old washing machine that died this weekend: Everything works fine, until it doesn't...
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Valuethinker
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Post by Valuethinker » Wed Jan 05, 2011 9:22 am

fishndoc wrote:
But SS is one of the longest lasting and most stable of US government programmes. It's an inter-generational bargain that has proven to be remarkably stable.
Like my old washing machine that died this weekend: Everything works fine, until it doesn't...
That's reasoning by false analogy.

The actuaries do not forecast the financial health of your mum's washing machine until 2050, as a matter of law.

What I say about US SS is, AFAIK, factually true. I am not forecasting its future, I am noting how it has functioned until now and how it operates-- to the best of my understanding.

I commend to you Alicia Munnell's work at Boston College on SS economics and retirement planning. All very readable and succinct, all very thoughtful.

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Post by carolc » Wed Jan 05, 2011 9:26 am

It will help me offset the increase in my healthcare premium.

carolc

Harold
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Post by Harold » Wed Jan 05, 2011 9:54 am

Valuethinker wrote:
fishndoc wrote:
But SS is one of the longest lasting and most stable of US government programmes. It's an inter-generational bargain that has proven to be remarkably stable.
Like my old washing machine that died this weekend: Everything works fine, until it doesn't...
That's reasoning by false analogy.

The actuaries do not forecast the financial health of your mum's washing machine until 2050, as a matter of law.

What I say about US SS is, AFAIK, factually true. I am not forecasting its future, I am noting how it has functioned until now and how it operates-- to the best of my understanding.

I commend to you Alicia Munnell's work at Boston College on SS economics and retirement planning. All very readable and succinct, all very thoughtful.
Glad to know there's a law against actuaries forecasting the financial health of fishndoc's mum's washing machine!

Seriously though, Valuethinker's right. You can see it in the trust fund annual reports (http://www.ssa.gov/oact/tr/2010/tr2010.pdf for 2010). If you don't want to read hundreds of pages, just the overview section would be insightful.

I'm just waiting for the furor at the end of the year over the heartless and unconscionable 2% tax increase!

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Post by pkh01l » Wed Jan 05, 2011 10:39 am

The Wizard wrote:I'm striving to pay off my home mortgage early, so the extra funds will easily go there...
+1

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Post by pkh01l » Wed Jan 05, 2011 10:42 am

EmergDoc wrote:I can't wait until it expires and the politicians accuse each other of balancing the budget on the backs of the poor.

I'm all for lower taxes, but this is just another stimulus now that the word stimulus has a bad rap.
Totally correct. There will be headlines stating politican "X" raised your social security taxes by 47%!!! (2.0/4.2)

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Post by Opponent Process » Wed Jan 05, 2011 11:09 am

pkh01l wrote:
EmergDoc wrote:I can't wait until it expires and the politicians accuse each other of balancing the budget on the backs of the poor. .
There will be headlines stating politican "X" raised your social security taxes by 47%!!! (2.0/4.2)
no, the theme at that point will be: "now that the economy is rebounding, we wouldn't want to raise taxes and curtail the recovery. better to extend this another year."
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Post by Dagwood » Wed Jan 05, 2011 11:29 am

Harold wrote:
Valuethinker wrote:
fishndoc wrote:
But SS is one of the longest lasting and most stable of US government programmes. It's an inter-generational bargain that has proven to be remarkably stable.
Like my old washing machine that died this weekend: Everything works fine, until it doesn't...
That's reasoning by false analogy.

The actuaries do not forecast the financial health of your mum's washing machine until 2050, as a matter of law.

What I say about US SS is, AFAIK, factually true. I am not forecasting its future, I am noting how it has functioned until now and how it operates-- to the best of my understanding.

I commend to you Alicia Munnell's work at Boston College on SS economics and retirement planning. All very readable and succinct, all very thoughtful.
Glad to know there's a law against actuaries forecasting the financial health of fishndoc's mum's washing machine!

Seriously though, Valuethinker's right. You can see it in the trust fund annual reports (http://www.ssa.gov/oact/tr/2010/tr2010.pdf for 2010). If you don't want to read hundreds of pages, just the overview section would be insightful.
It's funny, I do read the reports for Social Security and Medicare. Both are less positive than portrayed. But as long as we want to talk reports, let's talk reports. Here's the conclusion to the SS report introduction. My guess is that fishndoc is familiar with it.

Under the long-range intermediate assumptions, annual cost for the OASDI program is projected to exceed tax income in 2010 and 2011, to be less than tax income in 2012 through 2014, then to exceed tax income in 2015 and remain higher throughout the remainder of the long-range period. The combined OASI and DI Trust Funds are projected to increase in dollar level through 2024, and then to decline and become exhausted and thus unable to pay scheduled benefits in full on a timely basis in 2037. However, the DI Trust Fund is projected to become exhausted in 2018, so some action will be needed in the next few years. At a minimum, a reallocation of the payroll tax rate between OASI and DI would be necessary, as was done in 1994.

For the combined OASDI Trust Funds to remain solvent throughout the 75-year projection period, the combined payroll tax rate could be increased during the period in a manner equivalent to an immediate and permanent increase of 1.84 percentage points,1 scheduled benefits could be reduced during the period in a manner equivalent to an immediate and permanent reduction of 12.0 percent, general revenue transfers equivalent to $5.4 trillion in present value could be made during the period, or some combination of approaches could be adopted. Significantly larger changes would be required to maintain solvency beyond 75 years.

The projected trust fund shortfalls should be addressed in a timely way so that necessary changes can be phased in gradually and workers can be given time to plan for them. Implementing changes sooner will allow the needed revenue increases or benefit reductions to be spread over more generations. Social Security plays a critical role in the lives of 54 million beneficiaries and 155 million covered workers and their families in 2010. With informed discussion, creative thinking, and timely legislative action, present and future Congresses and Presidents can ensure that Social Security continues to protect future generations.

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Post by Harold » Wed Jan 05, 2011 11:34 am

I can't tell what your point is. It's as if you're commenting on something different than I was. Social Security is pretty well understood -- it's not like a washing machine that will just all of a sudden break.

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Post by Dagwood » Wed Jan 05, 2011 11:38 am

My point is that the finances are less secure than you portray. Will the sky fall tomorrow? No, of course not. But to state that essentially there is no reason for some concern or skepticism about the financial condition of the program (fishndoc's point, as I understood it), or to dismiss it as reasoning by false analogy when in reality it is simply a short-hand way of expressing a view, strikes me as overly dismissive. I'll leave it there.

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Post by Jack » Wed Jan 05, 2011 11:59 am

EmergDoc wrote:I'm all for lower taxes, but this is just another stimulus now that the word stimulus has a bad rap.
This poll is very interesting, showing that most here are saving or investing the tax cut instead of spending it. It illustrates exactly what most economists claim, that tax cuts are the most inefficient form of economic stimulus. It just runs up the debt with very little positive stimulative value. That's what happens when real stimulus gets a bad rap. You get bad policy.

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Post by Jack » Wed Jan 05, 2011 12:05 pm

epilnk wrote:Since this drains SS funding, I guess I better stash it away for retirement.
The SS tax cut will be made up by general revenue funds so that contributions to the SS trust fund will be unchanged. The result is no change to the actuarial projections for Social Security.

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burnsh
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Post by burnsh » Wed Jan 05, 2011 12:48 pm

I just raised my TSP contributions by 2% starting pay period 1.
Burnsh | ______________________________________ | VFIAX 17%, VVIAX 17%, VEXAX 16%, VTIAX 21%, VGSIX 9%, VIPSX 10%, VBMFX 10%

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Just sayin...
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Post by Just sayin... » Wed Jan 05, 2011 1:11 pm

Accumulate and save my $2,136.00 windfall until Jan 2, 2012, then use it to partially fund my 401k contribution for that year (2011 is already done). I look at it as taking from one spectacularly inefficient retirement account, and depositing it into another, more efficient account (over which I have more control).

Easy Rhino
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Post by Easy Rhino » Wed Jan 05, 2011 6:32 pm

I won't even notice it.

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White Coat Investor
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Post by White Coat Investor » Wed Jan 05, 2011 6:54 pm

Jack wrote:
EmergDoc wrote:I'm all for lower taxes, but this is just another stimulus now that the word stimulus has a bad rap.
This poll is very interesting, showing that most here are saving or investing the tax cut instead of spending it. It illustrates exactly what most economists claim, that tax cuts are the most inefficient form of economic stimulus. It just runs up the debt with very little positive stimulative value. That's what happens when real stimulus gets a bad rap. You get bad policy.
Are you suggesting Bogleheads are representative of Joe Public?

Bogleheads save everything and spend nothing. Stimulus-save it. Tax cut-save it. Paycheck-save it.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Post by Atilla » Wed Jan 05, 2011 6:59 pm

Random Poster wrote:
kenschmidt wrote:Only the highest wage earners will get the full 2% since they were never eligible for the Making Work Pay credit.
And for those individuals, the 2% is welcome news. 8)
Yes it is welcome news. I'll save the couple grand - it will do me a lot better than paying the taxes and hoping for a meager return in 25 years. Sweet.

I hope the political fallout a year from now is enough that they don't let the new SS tax rate expire. :lol:

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Post by Jack » Wed Jan 05, 2011 7:25 pm

EmergDoc wrote:
Jack wrote:
EmergDoc wrote:I'm all for lower taxes, but this is just another stimulus now that the word stimulus has a bad rap.
This poll is very interesting, showing that most here are saving or investing the tax cut instead of spending it. It illustrates exactly what most economists claim, that tax cuts are the most inefficient form of economic stimulus. It just runs up the debt with very little positive stimulative value. That's what happens when real stimulus gets a bad rap. You get bad policy.
Are you suggesting Bogleheads are representative of Joe Public?

Bogleheads save everything and spend nothing. Stimulus-save it. Tax cut-save it. Paycheck-save it.
I think Bogleheads are probably more representative of high income earners. People with high incomes are more likely to save the money than spend it. Someone making $100,000 per year has more disposable income to save than someone making $25,000 per year.

But that's not all. The tax cut is indexed to income. Someone making $100,000 a year gets four times as much as someone making $25,000 per year. So the tax cut ends up giving the most money to the people least likely to spend it. This is the worst way to design a stimulus package. A lot of national debt and relatively little stimulus.

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