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Pastimes : My House
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To: E who wrote (37)9/4/2002 7:10:08 PM
From: Original Mad Dog  Read Replies (2) of 7689
 
They took away income averaging the year before it would have saved me thousands on my taxes. :-(

The rationale for the self employment tax is that SS was sold to the public with the fiction that the employer "pays" half (really what happens is that the employer commits a certain amount to wages and instead of paying you that extra 7.65% he pays it on your behalf to the government). In order to preserve that system, it seemed fair that the self employed, as both employer and employee, should pay both "halves". But only the self employed recognize that really 15.3 percent of their money is being taken away. Others see on their pay stub that it is "only" 7.65 percent.

Of the 15.3 percent, 2.9 percent is for Medicare. The remaining 12.4 percent is for retirement and disability benefits under SS. If you took 25 percent of that 12.4 percent, you would have 3.1 percent of your pay going into a self-directed retirement account. For somebody making 50K a year, that's $1,550 a year. And the key is, there would be money going in even when the person is a teenager. Even modest amounts in a savings or investment vehicle at age 18 compounds enormously by the time you are in your late 60's.

I hope that events permit Bush to advance some steps toward enacting SS reform that includes self directed accounts.
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