Will I lose Social Security retirement benefits by lowering FICA deposits or self-employment taxes?by Tom Luker on 05/01/15
- We’ve done hypothetical calculations of a regular employee using $5,000 of Flex Plan Medical or Dependent Care tax-free benefits. Thus their FICA income is lowered which does lower future benefits.
- With a $5,000 lower income, a FICA/SS contribution of about $620 [12.4% EE/ER] is made. We then “invested” $620/year. From various age/marital groups we calculated that the difference in Social Security retirement income at age 65 was:
- Increased by eight time’s annual income for an EE age 25, single or married;
- Increased six times for age 35;
- Increased five times for age 45;
- Increased three times for age 55; and even;
- Increased annual income of two times if the EE began at age 60.
- Assumption: Using an ROI of 6% during the period accumulation and income withdrawal [not even considering that this might be a Simple IRA or Roth IRA, which increases the advantage] – And still having money left over at age 100.
- The problem is, “Will you save?” But that is always a problem.
- The change in benefits is very small, because benefit levels are based on an average 40 years of earning years and not just the last 5 years of earnings, like many people think.
- There was no consideration made to the slight changes in potential Survivors Benefits or potential Disability Benefits.
- Finally, an independent, personally-owned retirement fund will leave a remaining estate value for survivors, whereas the only lump-sum SS benefit is $255.
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