<p>“we are in Maine … Cost of living is astronomical”</p>
<p>Yes, but the snow is so pretty!</p>
<p>“we are in Maine … Cost of living is astronomical”</p>
<p>Yes, but the snow is so pretty!</p>
<p>Oregon’s property tax (and housing) is pretty high too. I grew up there and everytime my folks visit the Sw (AZ/NV) they want to buy!buy!buy!</p>
<p>@Iron Maiden: All 4 states (NJ, OR, NC, and ME) have pretty high income taxes. OR is of interest because sister lives there, ME because we like it there and would save a bundle on lobster :-). I just can’t imagine being one more retired couple from NJ living in Florida, but maybe I should just get over myself.</p>
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<p>We live in Huntersville, just north of, and very convenient to, Charlotte. It has been a great move for us. Housing cost (and property tax) is much lower than northern New Jersey, but everything else is somewhat similar costwise. The only thing approaching a regret has been recent and would lead me into a taboo discussion of politics.</p>
<p>"busdriver- you would not pay any tax in my proposal until you collect all your contributions back. Over the last 40-45 years the max ss paid by an individual was no where near $300,000. The max now is about $7k. I would say someone that paid the max for 40-45 years would have paid closer to $200k (most people did not pay the max their entire career) or less.</p>
<p>You would get $2533 or about $30,300 so you would get all your money back in about 7 years. I have read that most get everything back in 5 years or less."</p>
<p>Unfortunately, your proposal isn’t law now. As it stands, you get taxed on every single cent of social security, often by your state, also, if you get any substantial payout from other sources of income. People may not have paid 300K over the last 40-45 years, but those of us in the middle of that surely will. Social security is paid over increasing income, every year. It will never go down.</p>
<p>"It also assumes a 0% rate of return, which if you were running a real retirement plan with these kinds of returns, you would have been fired after the first year or two.</p>
<p>That does not include the employer contribution, which roughly that amount. Now we are out to 18 years, which exceeds the average life expectancy of a 67 year old person."</p>
<p>That’s for sure. There is just no way you can consider that people who have paid (and will have paid) the max into SS for most of their lives are really going to get it all returned within 5 years. This is not an investment, and if it was, it was be a terrible investment. This is purely for one generation to pay for the next, and the next, and the next…which I have no issue with, but this is not a good investment deal for those who have paid the max into, some of whom will die before they even get to collect it. But the point is moot anyways, it is to provide people with a source of income no matter what, and I don’t want that to disappear.</p>
<p>I am amazed, though, from reading these posts, how complex it is. I had thought the only consideration was the payout based upon the age you take it, so why bother to run a calculator? But it sounds like there are a ton of variables for everyone’s individual situation.</p>
<p>@busdriver: not only are there a “ton of variables,” but frequently the people who need to know about those variables are precisely the ones who don’t hear about them until it’s too late. </p>
<p>Being frank and not PC, if I got it wrong and didn’t get my children’s benefits paid out, it would be an optimization fail but would not overwhelmingly affect my family’s life. I know someone in town whose daughter is young, who is older than me, and who had not heard of this option until I (luckily) bumped into him; for him, the difference mattered quite a bit. I have the luxury of time to read Bogleheads, purchase software, etc.; he has to rely on the SSA office which sometimes is on the ball, but other times is not. All’s well that ends well, but it was just random that I happened to know his situation and brought up the topic.</p>
<p>That is awesome that you were able to help him! Amazing how a casual conversation can affect someone’s life.</p>
<p>People who are curious and who look things up instead of going by the “I heard” repository of information always know more than others, even if the others might be educated and relatively competent. Today’s technology facilitates looking things up way more than before. </p>
<p>I had the same experience of telling someone about the checks for kid under 18 if you are full retirement age. There aren’t too many of those around. He was unaware of it, but thanked me the next time I saw him several months later. He also wondered how it was possible that this “benefit” existed. </p>
<p>BTW, since the employers contribute the same amount as employees, that should be taken into account when figuring “returns” on social security contributions.</p>
<p>Re: states and taxes and cost of living I noticed Pennsylvania got knocked off the Kiplinger top 10 list. Wonder what happened there?
[10</a> Most Tax-Friendly States for Retirees-Kiplinger](<a href=“http://www.kiplinger.com/slideshow/retirement/T006-S001-10-most-tax-friendly-states-for-retirees/]10”>http://www.kiplinger.com/slideshow/retirement/T006-S001-10-most-tax-friendly-states-for-retirees/)</p>
<p>O.M.G. I never knew SS was so complicated.</p>
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<p>Esp for those of us who are self employed and have been paying both sides forever.</p>
<p>So could one adopt one’s grandchildren and collect SS on them? Don’t have any so a theoretical question.</p>
<p>My proposal about how ss should be taxed is the same exact model that used to be applied to government pensions. The law changed so employee contributions now lower taxable income in the year they are made but the entire pension is subject to federal tax.</p>
<p>I get a kick out of the fact that when people criticize government pensions I never hear- 40 years of inflation but what about the employer match each year etc etc that I see on this thread. It is similar to the $200,000 of income is barely middle class when discussing tax cuts but paying a teacher $61,000 is excessive when discussing teacher salaries.</p>
<p>What is the saying depends on whose ox is being gored?</p>
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In theory, I believe the answer is yes. But it is not a trivial thing to adopt ones grandchildren. If the parents are living they have to relinquish their parental rights (or those rights must be terminated by the court) and the whole process of adopting is not simple. I can see how if the children are born or adopted after benefits start they could miss out (I wonder if benefits can be paid retroactively), but when you apply for Social Security benefits at age 62 or 66 or 70 don’t they ask you if you have any children under the age of 18?</p>
<p>You do not have to adopt a grandchild. According to SSA: “A dependent grandchild may also qualify.”</p>
<p>So, I guess if the grandparent is supplying more than 50% of support, and the other conditions are met, the grandchild may qualify.</p>
<p>Wasn’t there someone who tried to adopt his girlfriend?</p>
<p>For those who claim SS benefits doen’t pay you enough to recover for what you paid up. I just did a little digging. I compared the present value of monthly SS benefit for lifetime and the value of our 401K. As far as I remember, we always contributed max to 401K and invested in index funds. They are not too different. I think In our case, we certainly get back what we paid up for SS if not more.</p>
<p>^^it sounds like your 401K didn’t do do well then, if you really think its worth the same as social security. And at least you can pass your 401K down to your kids. I hope to be able to pass it all down to them untouched, giving them a very large pot of money. They don’t know that though, and I don’t know if we can do it, but if you’re comparing the two, you certainly have to take that under consideration.</p>
<p>^^busdriver, don’t forget though how valuable SS is relative to a 401K because of its COLA feature. If you don’t think that’s a huge deal, figure out how much a SPIA (single premium immediate annuity) would cost to match your current social security payment. Then, price one that would adjust your current payout to adjust based on CPI increases. There is a recency effect when we’ve had low inflation for a few years; I’m old enough to remember the double-digit inflation of the 70’s.</p>
<p>^^^Oh, I see, it’s that I am inept in investing not that SS may have value :)</p>
<p>^Exactly, it also has spousal benefit, lifetime payment. Put them into Annuity calculator and you will see how much it costs to buy.</p>
<p>COLA adjustments for the last 30 years have averaged 2.75%:</p>
<p>[Cost-Of-Living</a> Adjustments](<a href=“http://www.ssa.gov/oact/cola/colaseries.html]Cost-Of-Living”>Cost-Of-Living Adjustments)</p>
<p>I hope we never have high inflation like in the 70’s/early 80’s again, for 30 years inflation has been kept under control.</p>
<p>I don’t have yearly contribution numbers at hand, but my IRA/401(k) balance far exceeds what I’ve paid into SS, even though I didn’t get those until sometime in the 90’s, and my contribution rate was similar or less than the 12.4% going into SS. I’ve only hit the maximum 401(k) contribution a few times. </p>
<p>The difference is the investment returns, which don’t exist for SS.</p>
<p>^You don’t get the investment returns when you buy annuity. You just pay a lump sum to get paid every month until you die. What annuity can you buy with your 401K? You also pay taxes on annuity income at a higher rate than on SS. There’s an insurance factor with SS, too.</p>
<p>"^^Oh, I see, it’s that I am inept in investing not that SS may have value"</p>
<p>I don’t know if you’re inept. I’d gather most of us feel pretty inept in investing at many times in our lives, I don’t know if that ever stops. But I still don’t know how you can compare maxing out your 401K for 40-45 years, with social security benefits, tiny COLA raises and all.</p>
<p>If you put in 10K/year in your 401K (by the way, don’t forget the tax break you’ve had for that for all those years), in 45 years at only 5% rate of return…16 million. That keeps increasing over time, always able to be passed on to your heirs. Say it was only 5K/year for those 45 years (and you wouldn’t have been maxing it at all), that would be almost a million.</p>
<p>How do you compare that to a payout of about $2800 at age 66 (not sure if that’s what it is), that the second you die…it’s gone. You could die before collecting a cent, and that’s it. Great investment, and as good as a maxed out 401K? Not even close. I think annuities are a bad deal also.</p>
<p>Social security is very useful to ensure our elderly are not broke. I really have little desire to stop it or change it. I think you can consider it a good investment in our senior citizens. But I think it’s not practical to look at it as some sort of retirement investment for yourself. You will always be dependent upon whatever the politicians decide for the moment will get them the most votes.</p>