Social Security, Taxes, Then & Now

I have been reflecting on the lifetime of taxes as I contemplate SS and send off a check to the IRS.

The early years when I paid no taxes, not because I was wealthy but because I made and paid so little, I got it all back at the end of the year with the standard deductions for family. Recalling this, it brought the question to mind, “Would that figure into any SS calculations if I start to draw it? Guess I should start opening the mail for the SS office when it comes. lol

It's based on how much a year you get. They are doing more stuff on their web site now instead of sending snail mail. I suggest making an account on their web site. I started collecting at 62, I'll be 67 in about a month. I owed the feds for the first time ever this year. I got to increase my W-4 amount to fix that. I'm not an expert at this stuff so I have to do more research. No agency makes things easy for us seniors that's for sure.

The amount you've paid in in your lifetime reflects how much you will get when you start drawing. Some elderly women who were stay at home Moms get minimum while those who made good money and paid in generously will draw more. I think.

If you got a w-2 the employer paid half of your FiCA tax that you never see. The self employment tax is you paying all of it.

That wasn’t much. lol

I got SS credits when I was in college tutoring Spanish..I got maybe 3 hrs work in that lol

Not that many years ago they would send you a printed salary/tax history for review. I haven’t seen one in a long time. But you can setup an online account to review the same info. I did have to get help from their office resetting my password due to inactivity. Probably best to occasionally scan info to make sure recent earnings are accurate as they tend to be higher years that are likely to impact what you receive

You get inflation adjusted credit for those early years. But as you get older (and presumably making more money) at some point a better year kicks out a poor one for purpose of calculating your benefits. I think they use your best 35 years.

I know little about it not having paid attention being younger and it so far away. On top of not believing it will be there for me or will be drastically changed. BUT when I was having serious issues with ballance my legs working properly and a struggle to walk with likely MS being the cause and a 4 an later 3 month issue before it wained again for who know how long. I became interested enough to do a 5 min Google search and see how disability worked. if Google is correct they run your best 10 years through a formula to figure out what you would get. You can make an on line account and check but I never bothered going that far keeping my fingers crosses it would not be necessary and not wanting to admit to myself there may come a day I'm reduced to that. Not looking farther keep it from being as real. And for the most part it slacked up and I'm Good, but I get small reminder some times when my legs are heavy or off balance or possiblely can't remember thinkd I should.


I Expect it's similar for when you retire. How much you paid in for x # of years - what the politicians stole = what you receive.

That's true. Your monthly amount when you start to draw will depend on the amount you've paid in and your age when you start to draw. I started drawing at age 67 which would be the best financial advantage for my particular situation.

^^^^^this

You are required to have a certain amount of "periods", or "credits", before qualifying, as well. A stay at home mom, a person working for cash, or any other "gig" that doesnn't accrue enough credits that pay into social security, (which are actually fiscal quarters of earned income), will not get social security at any age.

I am sure there are others but I can remember when you could also deduct SS from you taxes owed

"The minimum Social Security retirement benefit is approximately $52 a month if you have a minimum of 11 years of work history. On the other hand, the maximum Social Security benefit is pretty significant. It is $5,108 per month in 2025."

Keith

I received SSDisability for about six years before retirement. I planned to wait until age 70 to begin drawing on my earnings history, but the disability pay switched to retirement pay automatically at age 65. Wife waited until 70. Her check is larger than mine now.

Disability pay was tax free but the retirement pay is taxable. When I started my disability pay, my teen aged daughter received funds as well until she reached 18.

Because of a capital gain on an LLC sale, my Medicare premium and the wife’s premium each jumped to $591 per month. ouch! Got another year until it resets.

Social Security benefits are calculated based on your lifetime earnings, indexed to reflect changes in average wages, and the age you choose to start receiving benefits, with a formula that considers your highest 35 years of earnings. What worked best for me, I'm never going to stop earing wages or self-employment income, was to start collecting at age 66. That age allowed me to earn unlimited wages without effecting my SS benefit. This age changes based on the year you were born. The longer you wait the bigger the check. But, consider this: if you can collect $35,000 a year when you start you will not have the $35,000 if you wait. In short if I would have waited until age 70 I would have missed $140,000. Yes, my benefit would be bigger at age 70, but it would take many years to make up the $140,000 I missed. Open an account @ https://www.ssa.gov/admin/error500.htm You can get all of the correct information, including the amount you earned and paid in every year you paid into SS. If you were born in the month of October you can get an extra month's benefit if you sign up a month early. Yes, that is correct October born can get the first benefit a month earlier then everyone else.

One more thing, if you continue to work after paying in for 35 years. You will probably be earning more than you were earning 35 years ago. They use your highest 35 years of earning to calculate your benefit.

I believe you need to have 40 credits to qualify for a work related stipened. Also there are bend points that are used to calculate your stipened. They have probably changed now with inflation and the raising of the taxable income that is used to calculate SSI earnings. You get more credit for the lower income levels up to the bend point and then somewhat less for the 2nd income level and some what less for the 3rd level. This is a way of helping out those with lower incomes have higher retirement or disability stipends. My wife had minimal credits to qualify and we took her minimum stipened when she reached 62. I worked and waited ulntil I was 66 years old and then she got a bump up as well being married to a SSI recipient..

Bryce

I thought I read something about spouse benefits where thay can get half of what you get when you retire ? But again it's not I have looked into and probably should.

Lots of things good to know like I can contribute to my wife's Roth even though she has no earned income. I just assumed she would have had to have earned income. Found that out last year and started hammering on it.

I should definitely get educated on ss but it's likely to change before I get there.

My wife did not work enough quarters (for others) to qualify for benefits but she does get half of what I would have received at my full retirement age even though i waited some. If I croak before she does she will no longer get half, she will get my whole SS monthly benefit.

Also, if my ex wife would have been a big wage earner (and we were together at least 10 years) I could have opted to take half her SS benefit instead of my own if it was more.

There's got to be a better way to protect old people, who can no longer work, who don't have family, who will help them.

Keith

With all the warnings 40 years ago I find it hard to believe folks approaching retirement don’t have a plan B.

all their press releases now on X

Old people going to figure that one out in no time!

https://thehill.com/homenews/admini...ministration-social-platform-x-releases/

pensions...but those are ancient history now. SS is a safety net and we need to support it. need to eliminate the max income range that it's withheld on -- $176K in 2025 and $168k in 2024.

High earners need to pay their share....

High earners pay much more than their share to subsidize all the losers. Equal under the law should mean no one should have to pay more taxes than anyone else.

I don't believe anyone should starve or be denied basic medical care, but everyone should have to contribute. Those that won't contribute should not be living in comfort.

Keith

How high would SS payments be and how low taxes be if it wasn't being used by our representatives as a slush fund?

I'm doing my part not to be too comfortable in my old age.

Or maybe get rid of payroll taxes and let companies or the employees drop that savings into a tax free,truly tax free not just deferred ,retirement account.

If you make 50k gross a year, that's putting 650o or so dollars into a retirement account. If that's ilvested into almost anything that gets any kind of positive return, you'll get way more money to live on than you would of off SS.

Anybody else wonder why its so complicated?

6.2 percent is 6.2 percent whether you make 176,000 or 70,000. After 176,000 you don't pay any.

That is true but the return on investment isn't the same. Social security is a scam to high earners.

If I make $50,000 a year and Danny Clifton makes $100,000 a year, he's not going to draw twice as much as I will.

Or if you have averaged something less the $160,000 for the best 35 years you worked, you could collect as much as $5,108 per month. average a million a year and you could get the same $5,108 per month.

In short:

The average Social Security benefit was just $1,979 per month for retired workers in January 2025.

But Social Security's wealthiest beneficiaries get the max monthly benefit in 2025 of $5,108 per month.

I don't think the goal was to be fair to every taxpayer. If I made a 100,000 a year I may be OK with some of my FICA contribution going to a disabled vet that mostly just sold stuff at flea markets during the productive years of his life.

A disabled vet is one thing, but people that are Hi, they're too lazy to work muchor . Want to live a simple lifestyle. . It isn't hard to make $100,000 in this day and age and relatively easy to make 50 or 60,000

Many of us forget that SS is more than a pension plan. It also protects the disabled, widowed, and orphans.

I got to ask Carl, have you ever made $100,000?

If not, you should try it sometime. It's really fun seeing the amount of money they take out of your check.

You have got too much "ability" Steve. I'm sure all the people with" need" personally thank you every day.

My gross income is generally over 100K but never had a net anywhere near that. I get it...not fun to see how much money is taken away.

Not fun?

It's criminal

And then to top it off one hopes he can get some of it back with almost zero ROI

My understanding on "Survivor Benefits" is the surviving spouse will receive 70% of the benefits the deceased received before death. A pretty significant hit.

I just did a quick check to make sure I'm right, but the survivor gets 100% of the deceased spouses benefits if they wait until they're at full retirement age.

Federal - 1982 Married Filing Jointly Tax Brackets
Tax Bracket Tax Rate
$0.00+ 0%
$3,400.00+ 12%
$5,500.00+ 14%
$7,600.00+ 16%
$11,900.00+ 19%
$16,000.00+ 22%
$20,200.00+ 25%
$24,600.00+ 29%
$29,900.00+ 33%
$35,200.00+ 39%
$45,800.00+ 44%
$60,000.00+ 49%
$85,600.00+ 50%

Current( I believe )
Tax Bracket Tax Rate
$0.00+ 10%
$23,850.00+ 12%
$96,950.00+ 22%
$206,700.00+ 24%
$394,600.00+ 32%
$501,050.00+ 35%
$751,600.00+ 37%

$100,000 using CPI would be $30,000 in 1982.

Good thing you were not working in the good ole days in the 70's and 80's.

I don't have a spouse, if I die it's all gone. Neat.


So you are saying two wrongs make a right?

It’s all gone the moment you pay it - like term insurance. SS is not a savings plan. It is insurance. Many people do not understand this or take the time to learn about our SS.

Go tell all the people saying "but its my money!"

What I'm saying is; things ain't nearly as bad as they were in the good ole days. Taxes are not wrong. They are a necessary evil, if you have a government.

Dang Steven, best I don't mention that to my wife or she'll have you set up with one of her Colombiana friends.

Last year over 2

Seems like taxes are under control and reasonable. Let's not add in the 10k in property, sales, user taxes like gas, permits and fees.

I wish taxes were not payroll deducted and individuals had to sign and send quarterly checks. I would expect folks would be much more happy about DOGE if that were the case. It would make it real to the general population seeing the money go out vs never getting it in the first place.

Add all the taxes I pay now and it's more than I made a year when bought my first house and got married..

PF, there would be millions of tax payers that would be willing to change places with you. At 6.2 % divided into 8772 you had 141,000K earned with SS taxes and with smart tax planning you paid only 13,400 of federal income tax or an effective rate of about 9.4%

Bryce

But hey, us retirees need you for this ponzi scheme. Thanks!

If everybody gets to keep their SS, then can I get back the match that I paid when in business for 28 years. Half of what you show was paid by you're employer which was mandated by the Gov.

Let's just get rid of it. Keep old age benefits for current recipients. Provide benefits to eligible folks with a birthday before X date. It will give the younger workers time to prepare.

Eliminate benefits immediately for all but the worst disability cases. And end that program going forward.

Problem solved.

That might work, Therefore, it will never be pursued.

Social Security was quite a help to me in College. I was still in High School when my dad retired so I got benefits up until age 22 while attending Ag school. $130/month freshman year and had increased to $180 by age 22. Just enough to cover board and room. Trapping and farming paid the rest.

Carl, one ex-wife is enough lol.

Just takes another executive order these days.

Smart man!

Thanks bp. I need to check that out. I think what I read on My SS. site was taking it upon the passing of the recipiant. And spouse had to be at least 60 y.o., and got 70% if taken before full retirement age.

It was late when I read this last night and I misunderstood what you typed I think? Still not sure but I think You used the ss tax that and worked backwards to figure yearly I come then used that to figured the tax % I paid.

If so something was a little off my income was higher from work. The farm generated income as well So I paid a lower % yet. Then after deductions and business expenses I got a good refund. So paid a much lower %. Everyone needs to have a business or corporation and make investments. Use the tax code to your advantage.

In other words, learn from Trump!

That brings up something else. If I die all that money that was taken is gone.

I've said it more than once, if I had that 13 percent that has been paid into the program in my name and put it into an IRA there would be more than one million dollars in there that I could bequeath to my children.

That brings up something else. If I die all that money that was taken is gone.

I've said it more than once, if I had that 13 percent that has been paid into the program in my name and put it into an IRA there would be more than one million dollars in there that I could bequeath to my children.



If you do that, the Ponzi scheme does not work!

It works for the other investors. More money for them.

Tax Bracket Tax Rate
$0.00+ 10%
$23,850.00+ 12%
$96,950.00+ 22%
$206,700.00+ 24%
$394,600.00+ 32%
$501,050.00+ 35%
$751,600.00+ 37%

If you're in the 12% bracket, can you put more into retirement by a few thousand more a year or buy an IRA to stay under that. Am I right on that? I probably need to talk to my tax guy. He made the comment you're still in the 12% bracket for now. Guess that's what he was hinting at.

Yep. Not schooled up on any limits to IRA, Roth, or 401K though. That is the whole idea behind tax deferred/ free programs.

A person making $20/hour and investing $5741 (SS taxes) for 50 years at 8% would have $3.5 million at 68 years of age.

Never ever even come close to drawing that much out from SS.

20 bucks an hour isn't much these days. I don't really know any place around here that pays that little.

First thing. The 12% is only for the money earned between $23,850 & $96,950. All earnings between $0.00 & $ $23,850 are taxed @ 10%. Every wage earned pays 10% of the first $23,850 they earn. If you are not covered by a pension plan you can contribute to an IRA. For the 2024 tax year, the maximum IRA contribution is $7,000 if you are under age 50, or $8,000 if you are age 50 or older. In 2024, the maximum spousal IRA contribution limit is $7,000 per individual, or $8,000 if the spouse is age 50 or older. This means that a married couple filing jointly can contribute a total of $14,000 ($16,000 if both are 50 or older). The spousal IRA allows a working spouse to contribute to an IRA for a non-working spouse.


Roth IRA or standard IRA is a total as shown above. You can put some or all of the contribution in either, but the total contribution cannot be more than 7000/8000. 401k's are employer plans that you can contribute too. In 2024, the maximum traditional 401(k) contribution limit is $23,000 for employees under age 50, with an additional $7,500 catch-up contribution allowed for those age 50 and over.

Before you consider a ROTH (a government trick to make you pay more taxes) do the math. Long term you might be better off not paying the tax up front.

For me long term it is best to put as much as I can into a tax deferred plan. Most of us are in a higher tax bracket when we are working. The government wants you to ROTH (pay taxes now at a high rate). After you stop earning you will be in a lower tax bracket. For me it makes sense to pay the taxes then. Do the math. Government didn't create ROTH to save you taxes. They created ROTH to get you to pay more taxes NOW. Then they can use your money to buy vote to keep them in office.

Worth repeating, the government didn't create ROTH to save you money

One other note . Tax bracket is not your income. This is the number after adjustments and standard deduction or itemized deductions.

Just using that as an example that people on the lower wage scale would be millionaires if they had a private account.

The problem with a private account is that 99.99% of the people would cash out their account every time they want an extra dollar or two.

If you really believe that when there is enough money put tax prepaid into Roth IRAs that the feds with keep their promise in the future and not to tax it more you better ask any Native American how well they keep their word. There is already a Net Investment Tax(NIT)(3%) added in addition to income tax to collect more from those that made an effort to invest in their own retirement and not be dependent on SS. Medicare also now has an IRMA surcharge attached to it that is income based so that many have to pay much more for to be on medicare as other recipients. This having to pay more for anything just because you worked and saved harder than others will kneecap this countries productivity faster than anything else. Why work a hundred hours a week on the farm, the factory or office for the same purchasing power as those that barely do. Taking advantage of laws, loop holes, assistance programs or whatever you can IS NOT what has made America Great no matter what color your politics.

How many have ever been subject to the Federal alternative minimum tax(AMT). Swallow that one. There are tens of thousands of pages of current tax code not designed to even start to make taxes fair, if even progressive, for all taxpayers. I'd be thrilled if it was only the higher %= tax that we had to pay for each bracket of wealth we have worked and scraped to achieve. While those that just speculate, manipulate, gain illegally dishonestly pay very little. Have read the constitution many times and never seen it say "All men are created equal to take advantage of each other and whatever they can".

Ebsurveyor, thanks we're both over 50 so we can go either way on the contributions. 401K or IRA. I just have to figure out which one.

Dirt, I did understand that. We're close so an adjustment needs to be made.

Steven 49er I'm not sure where you're at in MN but honestly there aren't many places paying over 20 an hour here unless you're a nurse, skilled trade (but not all) etc. There's only a couple of factories here paying over that. The ads around here are for $12 to $16 an hour for the most part.

When old enough that you have to take the required minimum distribution from your IRA so the feds can tax it, is it best to remove it all and reinvest or take the minimum.

If you take the minimum and have a good amount left in it when you croak, do your heirs pay tax on it?

Just for clarification, you can only do a 401k if your employer offers it.

Thanks

If you have upon death beneficiaries, IRAs can be transferred to beneficiaries as there own IRAs and then they will be taxed when they draw from them. Not sure what happens if they go to probate? Probably can pull the same maneuver.

They do.

Under the new tax laws, yes heirs pay the tax on the IRAs and that is at whatever tax rates they are in and also, heirs have to take out all the monies within 10 years. We are moving a certain amount of our deferred funds into ROTHs each year. We have done this since the tax rates were lowered.

Bryce

Roths are not taxed when transferred to heirs...however, it must be withdrawn from the IRA within 10 years of receiving it. They are hoping for you to spend it or reinvest it into funds that will be taxed in the future.

If you are not covered by a pension plan you can contribute to an IRA.

Not sure what you mean here, Ebsurveyor..? I dont believe the above statement to be true...can you clarify?

I kind of misspoke. Here are the current rules. In my case i couldn't do an IRA because of the income limits.

Specific rules apply to Traditional and Roth IRAs.
For Traditional IRAs, the ability to deduct contributions may be limited if your income exceeds certain thresholds, especially if you or your spouse is covered by a retirement plan at work. For Roth IRAs, there are income limits for both single and joint filers to contribute the full amount, according to the IRS.

While there's no income limit to contribute to a traditional IRA, your ability to deduct contributions from your income for tax purposes is phased out at certain income levels, especially if you or your spouse are covered by an employer-sponsored retirement plan.

Yes, IRA contributions and deductions are phased out at certain income levels, primarily affecting Roth IRA contributions and traditional IRA deductions for those covered by workplace retirement plans. For Roth IRAs, income limits exist to make them more accessible to middle and low-income earners, while traditional IRA deductions are restricted for higher-income individuals covered by employer-sponsored plans.
Roth IRA Contributions:
Single Filers:
To make a full contribution of $7,000 (or $8,000 if 50 or older), your modified adjusted gross income (MAGI) must be less than $150,000.
Married Filing Jointly:
The full contribution limit applies if your MAGI is less than $236,000.
Phase-out Range:
Single filers with MAGI between $150,000 and $165,000 and married couples filing jointly with MAGI between $236,000 and $246,000 can contribute a reduced amount.
No Contribution:
Single filers with MAGI of $165,000 or more and married couples filing jointly with MAGI of $246,000 or more cannot contribute to a Roth IRA.
Traditional IRA Deductions:
Covered by a Workplace Retirement Plan:
If you are covered by a retirement plan at work, your ability to deduct traditional IRA contributions is limited based on your income.
Single Filers:
For those covered by a workplace plan, deductions are phased out if your MAGI is between $79,000 and $89,000.
Married Filing Jointly:
If you are covered by a workplace plan and your spouse is not, deductions are phased out if your MAGI is between $126,000 and $146,000. If you are not covered by a workplace plan but your spouse is, the deduction is phased out if your MAGI is between $236,000 and $246,000.

https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000

The information you need is on that web site. But, I need a Philadelphia Lawer to understand it.

A few things you said I hear a lot and are ofter found to be wrong for many. Myself included used to say the same things you are then I ran the #s. Mainly a lot of people that save and invest well end up having more income when they retire than they made when working. They end up having their ss taxed and paying thousand more for the old people health insurance because of their income level. They don't get better coverage just have to pay more for the same coverage. Not true for everyone but happens more than you would think.



That's a big advantage of Roths for those that save and invest in assets. They don't count as income for taxes and won't effect your tax rate when making withdrawal and there are a lot of little things like this often over looked that cost people when they retire and it to late to change it.

living better in retirement and having more than people made working is very possible and happens more than I would have thought.


Do you think tax rates will stay the same or are likely to increase in the future with increased debt.. Tax rates are historically very low now. they may and are likely to be raised in the future and that is often over looked.

[/quote]


A few things you said I hear a lot and are ofter found to be wrong for many. Myself included used to say the same things you are then I ran the #s. Mainly a lot of people that save and invest well end up having more income when they retire than they made when working. They end up having their ss taxed and paying thousand more for the old people health insurance because of their income level. They don't get better coverage just have to pay more for the same coverage. Not true for everyone but happens more than you would think.



That's a big advantage of Roths for those that save and invest in assets. They don't count as income for taxes and won't effect your tax rate when making withdrawal and there are a lot of little things like this often over looked that cost people when they retire and it to late to change it.

living better in retirement and having more than people made working is very possible and happens more than I would have thought.


Do you think tax rates will stay the same or are likely to increase in the future with increased debt.. Tax rates are historically very low now. they may and are likely to be raised in the future and that is often over looked.





[/quote]

something that I'll never believe "the government created ROTH's to save the tax payer money". We can only estimate future taxes & returns. For me legally paying the least amount of taxes is my goal. I have a W2 job and my wife does consulting work. She started a SEP IRA this year and saved $20,000 in IRS taxes. We hope that that 20,000 invested will more than pay it's way if it is ever pulled out of the IRA.

I don't need my investments to pay for anything I want. I have paid income tax on SS for the past 14 years. Everytime they give a COL increase they raise my medicare payment and my SS check has been getting smaller for the past five or six years. For my RMD's I just pay the taxes & roll the money into a different brokerage account. Barring an unforeseen illness I'll probably never pull money out of my IRA's. Well, I did pull some out last year to buy a lake side cabin in northern Maine.

News Flash from 1997

"Bill Clinton signs ROTH IRA's into law to save the taxpayers money"

BTW, I had a ROTH and once I understood it i stopped contributing to it. At some point I cashed it out when I wanted a new truck or something.

Everyones situation is different. And I stand by my statement often people find they are earning more retired than they were working and don't go down in tax brackets like they thought they would.

With your wife's consulting business she should be able to get some nice tax breaks.

In my case I want to save more than allowed in my retirement accounts. In my Roth 401 I put in the same 23k last year . But I put it in Roth 401 and paid the taxes before so that 23k and all it's growth stays mine. Had I don't that pre tax the taxes would be taken out of the 23k and the future growth. In this case I'm saving more in that account. Sure I could have just not paid the taxes now and put the savings into a Taxable brokerage account or into a Roth. But I had already maxed out roths for the wife and I in addition to putting the max after tax into the 401 that doesn't count against the 23k limit (23,500) in 2025 for under 50.

I also I get enough deductions form the business and kids that running the #s I will.be ahead with a Roth. Or maybe I just like to know for sure what I'm going to have and don't like the unknown of what future tax rates will go up to.

Sounds like you have a great plan that works well for you.

"Federal - 1997 Married Filing Jointly Tax Brackets
Tax Bracket Tax Rate
$0.00+ 15%
$42,350.00+ 28%
$102,300.00+ 31%
$155,950.00+ 36%
$278,450.00+ 40%"

In the 90's it would have been not too difficult to end up in the 28% bracket. I think I would have gambled on paying deferred taxes.

P.S. I don't even want to think how this would work out with the time value of money.

If you think the tax bracket you will be in when you are retired will be the same as the one you are in now or higher buying ROTHs makes sense.
In current times tax rates and brackets are much lower then even a few decades ago but incomes are significantly higher for millions of tax payers.

Bryce

I don't disagree that tax rates might go up and I might be in a higher tax bracket when I pull the money out. BUT:

My point is this: If you are in the 24% tax bracket to Roth $10,000 you need to earn $12,400

to IRA or 401k the same $10,000 is tax deferred therefor only costing you $7,600

So to ROTH you need to spend an extra $4,800 to Roth $10,000

You will never recover that lost $4,800

To be fair with understanding this, take that lost $4,900 and invest it. Now you have $14,800 working for you compared to the ROTH of $10,000

Lets go out 20 years @ 8% per year (S&P long term average)

ROTH would be worth $46,609.57 no taxes owed.

IRA or 401k would be worth $68,982.17 taxable when pulled from the account.

The IRA or 401k is worth 48% more that the ROTH.

Current tax rate is 24% if you earn less than $383,900

So .....

After 20 years with a ROTH I would have $46,609.57 to spend

After 20 years with an IRA or 401k I would need to pay $16,555.72 in taxes leaving me $52,426.45

Roth or IRA/401k it is your call but i would sooner have the extra $5,816.88 to spend. Yes, I paid $16,555.72 in taxes & you Rothers only paid $2,400 in taxes. BUT I have an extra $5,800 in my pocket. That is the effect of compound interest & that is why the government wants your money NOW.

Remember the government is trying to lower you tax burden. NOT

your math is flawed. You fail to account that we have marginal tax rates and are figuring your % across the board.

The younger you are the more advantage of doing ROTHs are. More likely lower tax bracket so less costly to use ROTH and a very long growth time period.

Bryce

My math is not flawed. I am in the 35% tax bracket now and probably will make less than $383,900 (24% bracket) when I start pulling money out.

Actually, my numbers are flawed:

I do $31,000 into a 401k & save $10,850 in taxes. If I would put that same $31,000 into a roth it would cost me $41,850. I'm actually saving $21,700 each year by not Rothing. That $21,700 invested will more than pay the income tax when money is pulled out. I will definitely be in a lower tax bracket when/if I start pulling money. I know, RMD. I do have to pay tax on that every year.

Also have up to 10 years of tax free growth on the account after you die when you leave it to your kids/grand kids if they choose to leave it in the account and that will effectively double the amount with tax free growth during that time.

IMO, incorrect.

Consider this: Individual Retirement Accounts (IRAs) were first introduced in 1974. From that point on the government lost tax revenue. In 1998 (24 years later) they created ROTH's to recover some of the tax revenue they were losing. Run real numbers and you will prove that ROTH's are not the best.

My fear of a Roth is they can change the law any time. Don't think they won't consider taxing them if necessary

Good point. I'm sure it gets talked about. I wouldn't put anything by those that want to tax unrealized capital gains.

They were trying to implement an unrealized gains tax...imagine what that would do to the stock market

After getting everybody worked up over the “losses”, they’ll slide that right in their brains and folks will be all for it.

Or the grand scheme to replace income taxes with tariffs. So much for income tax free or deferred. You get taxed with the new tax.

Can we just call the tariffs the new national sales tax?

At least it's a consumption tax vs you made money I'm taking some of it tax. And hopefully brings more manufacturing back into this country and we are no longer as dependent on our potential enemies. And the added jobs should be a nice bonus.

A national sales tax on imports. Don't buy imports, won't pay the tax. That sounds easier than it would be.

Think id rather just have a national sales ta and get rid of tariffs and income taxes.Thst would encourage savers as inflation doesn't go crazy

we have already turned into mostly service economy. Keep going won't be any one to spend money at the coffee shops. If your not producing your dieing.

China keeps dumping things like steel below cost to produce and it's not long before they are the only country that can make steel when all the mills close. Not only do we loos more good paying jobs and more of the middle class but . It's in our national security interest to have steel mills up and running. That's just a single example of many.

Hey I think we agree on something.

My solution to the tax problem = no income tax. All we need is a national sales tax and EVERYONE will pay their FAIR SHARE.

generally I would guess out of 100 things it would be over 95 we agreed on if broken down or at least close enough to conceded both sided have valid points and we'll as other factors over looked by both.

Careful what you wish for. That sales tax will be at least around 20% depending on how it is applied. This is going nowhere too.

Maybe a sales tax for Medicare.

I agree it will never go anywhere. I'll gladly pay 20% on the things I buy. Sure, beats the 28% I paid last year on all of my taxable income. Current system is very fair. I pay tax on what I save. I then pay tax on anything the investment earns. Then when I tip my estate pay tax on whatever I have accumulated. Then they send my money to Ukraine.

In 2023 the federal govenment collected 2.2 trillion in income tax. If you want a 20% national sales tax and include all purchases the amount could well be double the 2.2 trillion, plus all the states that use sales tax. Would be a faster way to reduce deficit spending and start working on national debt but how realistic is it for us to anticipate this becoming a reality.

Bryce

There is currently an income based “surcharge” tax on Medicare - IRMA.

And another over looked benefit of a Roth. When it's withdrawn it is not counted as income and won't increase your amount that may put youth in the charging amount.