Reply #14: SS Tax Code

[YNGW]

As a side issue, there's all sorts of ways to circumvent having to pay SS Taxes if you'd rather plan your own retirement without paying maximum into SS. Of course, it's good to keep the option of SS open, and you can do that with a minimum of income.

The scale of "payments to benefits" is a skewed bellcurve that diminishes as you pay more in. Currently, if you were to claim $8,000 annual income, and paid 15.3% tax on that amount ($1,224), you would recieve $400/mo from SS ($4,800 annually), or approx. $4 for every $1 you contributed.

Now, if you were to claim $80,000 annual income, paying 15.3% would be $12,240, and you would only receive $2,100/mo from SS ($25,200), or approx. $2 for every $1 you contributed. Not as good.

I own and operate my own business, so what I do is claim the minimum as income and the rest as Sub-S dividends which are taxed at a much lower rate than income and are not subject to SS taxes. In essance, I avoid paying $11,000 into SS that I can use to invest elsewhere (that gives a larger return) for a program that, given my income level, really doesn't benefit me much to begin with.

I'm sure there's are accountants here who can verify these numbers more accurately and others here who own businesses that do similar things. I say all this to say the SS system as it currently stands can be made useful for each individual's needs if they properly use the tax codes.