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rated:
I read that the SS payroll tax cap is going from 118500 to 127200 next year. Assuming I get a cost of living increase (I.e. 3%) next year, would it be prudent to cash out the vacation so I am not subjected to additional tax for earned vacation?

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they sure like to tax us.

cr3s (Oct. 21, 2016 @ 12:02a) |

Everybody arguing about whether this is "fair", "reasonable", accountable, or hurtful, completely ignores the fact that ... (more)

Claymore (Oct. 21, 2016 @ 6:42a) |

I find it hilarious the Social Security COLA was 0% for 2015 and 0.3% for 2016 and yet they raised the tax bracket by 7%... (more)

brettdoyle (Oct. 21, 2016 @ 8:12p) |

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If your pay is well below 118500 or above 12700 for both years, I don't see any gain by cashing your vacation out this year.

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Assumenothing said:   If your pay is well below 118500 or above 12700 for both years, I don't see any gain by cashing your vacation out this year.

Let's say 2016 pay is above 118500 but below 127200.

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wow what a huge jump.  :Qit was almost flat for a few years.  my pay was slightly higher and i was enjoying fatter payroll checks during the last month or two of the year.  
https://www.ssa.gov/oact/cola/cbb.html
 

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subieaggie said:   I read that the SS payroll tax cap is going from 118500 to 127200 next year. Assuming I get a cost of living increase (I.e. 3%) next year, would it be prudent to cash out the vacation so I am not subjected to additional tax for earned vacation?
This is wrong.
SS payroll tax cap does not move ib 2017. It will stay as 118,500

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Government screws you again and again.  Homeowner's tax exemption is always $7,000; capital losses deduction is always $3,000; never adjusted for Cost-of-Living Adjustment or inflation. But cap on the SS Payroll tax goes up 7% just like that

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fleetwoodmac said:   
subieaggie said:   I read that the SS payroll tax cap is going from 118500 to 127200 next year. Assuming I get a cost of living increase (I.e. 3%) next year, would it be prudent to cash out the vacation so I am not subjected to additional tax for earned vacation?
This is wrong.
SS payroll tax cap does not move ib 2017. It will stay as 118,500

You are not correct:

The agency also said the maximum amount of earnings subject to the Social Security tax would climb 7.3% to $127,200 in 2017 from $118,500 in 2015 and 2016, affecting an estimated 12 million workers. The worker’s share of Social Security payroll tax is 6.2% of eligible wages; someone making at least $127,200 in 2017 would pay an additional $539 over the course of next year.

http://www.wsj.com/articles/social-security-taxes-to-rise-for-hi... 
 

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The reason it will be such a big jump, is because there was no Social Security COLA for 2016. Thus, there was no change in the max wage base for 2016.

Seems like there shouldn't be any link between the two, but hey this is Congress.

So this really represents a change in the wage index over two years.

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Still the  7.3%  jump is too big as the Social Security COLA for 2017 is going to be 0.3 percent.
https://www.ssa.gov/news/cola/

 

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Yay, a $500 tax increase...

What's the formula for figuring out the cap? It seems odd to see a 7% jump in the cap when wages have been stagnant across the board for many years.

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Wages have been up 7% in two years. They aren't stagnant. You must be watching the wrong 'fair and balanced news' channel.

My question is, if an additional ten million people are paying an additional $500 or so in taxes, that adds up to $5 billion. If benefits are only increasing 0.3%, where is the extra money going? or does a 0.3% increase = $5 billion?

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borisr said:   Still the  7.3%  jump is too big as the Social Security COLA for 2017 is going to be 0.3 percent.
https://www.ssa.gov/news/cola/ 

 

Based on different indexes and delayed application.

The SS COLA is tied to the CPI-W inflation index. Since there was no increase last year, it is calculated on the average of the 2014 3rd quarter vs. the 2016 3rd quarter. This yields a 0.3% inflation increase.

The max wage base is adjusted by the national Average Wage Index (AWI). Since there was no increase last year because their was no COLA last year, the increase is for both years. The AWI was up 3.55% in 2014 and 3.48% in 2015. When applied to the previous $118,500 and rounded to the nearest multiple of $300 yields $127,200. The rounding this time caused it to be rounded up significantly aggravating the effect.

It is a good thing that the average wage growth was up ~3.5% over both of the last two years. That coupled with virtually non-existent inflation meant that the average worker saw real wage growth. Just because you personally didn't see that doesn't mean it didn't happen. Look at it this way, there are many people in this country who would be very happy to make enough to be able to pay the extra SS payroll tax.

P.S. Every year that there is wage growth higher than the inflation rate is only good for the health of the Social Security Trust Fund. It needs all the help it can get.

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btuttle said:   
borisr said:   Still the  7.3%  jump is too big as the Social Security COLA for 2017 is going to be 0.3 percent.
https://www.ssa.gov/news/cola/ 

 

Based on different indexes and delayed application.

The SS COLA is tied to the CPI-W inflation index. Since there was no increase last year, it is calculated on the average of the 2014 3rd quarter vs. the 2016 3rd quarter. This yields a 0.3% inflation increase.

The max wage base is adjusted by the national Average Wage Index (AWI). Since there was no increase last year because their was no COLA last year, the increase is for both years. The AWI was up 3.55% in 2014 and 3.48% in 2015. When applied to the previous $118,500 and rounded to the nearest multiple of $300 yields $127,200. The rounding this time caused it to be rounded up significantly aggravating the effect.

It is a good thing that the average wage growth was up ~3.5% over both of the last two years. That coupled with virtually non-existent inflation meant that the average worker saw real wage growth. Just because you personally didn't see that doesn't mean it didn't happen. Look at it this way, there are many people in this country who would be very happy to make enough to be able to pay the extra SS payroll tax.

P.S. Every year that there is wage growth higher than the inflation rate is only good for the health of the Social Security Trust Fund. It needs all the help it can get.

  is that what happens to the extra money? it is applied to the empty trust fund so that it runs out later?

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Remember too that the extra money you pay in is not just going down a black hole. It means that you are eligible for a larger payout when you retire.
Whether you will get ALL of your money back depends, of course, on how long you live, how many years you pay into the fund, how high your earnings were over those years, etc (people who have high salaries for their whole life get bigger checks, but they certainly see diminishing returns for their contributions) 

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canoeguy1 said:   Remember too that the extra money you pay in is not just going down a black hole. It means that you are eligible for a larger payout when you retire.
Whether you will get ALL of your money back depends, of course, on how long you live, how many years you pay into the fund, how high your earnings were over those years, etc (people who have high salaries for their whole life get bigger checks, but they certainly see diminishing returns for their contributions) 

  The earnings level is already established because the payroll cap is being discussed.

rated:
To the OP question.

How much vacation? Would you save the vacation to use later as time off? Or is your plan to cash it out at some point no matter? Can you save an unlimited amount of vacation or are you capped? Is it a government and or pension job?

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subieaggie said:   
Assumenothing said:   If your pay is well below 118500 or above 12700 for both years, I don't see any gain by cashing your vacation out this year.

Let's say 2016 pay is above 118500 but below 127200.

  Are you talking about your gross pay? If so, be sure to take into account all contributions that are not subject to the Social Security tax, such as your FSA contributions, employer withheld healthcare contributions under café 125 plans, etc...

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borisr said:   Still the  7.3%  jump is too big as the Social Security COLA for 2017 is going to be 0.3 percent.
https://www.ssa.gov/news/cola/ 

 

  This increase has nothing to do with COLA, but more with the fact that SS will be facing a shortfall in the next 20 years.  These some some of these steps that will keep the program sustainable.

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Damn, another $539 I won't have next year.

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aleck said:   This increase has nothing to do with COLA, but more with the fact that SS will be facing a shortfall in the next 20 years.  These some some of these steps that will keep the program sustainable.Just to clarify, as people have correctly mentioned above, the increase in the Social Security wage base is formulaic and is based on the National Average Wage Index. The increase is not part of any efforts to save Social Security.

Having said all that, for two people with earnings at or above the Social Security wage base, the increase will cost an extra $1,078, which is substantially higher than it has been in the past.
  

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Yes, our benefits will increase for those of us without 35 years of maximum earnings. That's probably most of us, at this point. If you end up exceeding 35 years of max earnings then you have already maxed out your benefits, and every additional dollar you pay in SS tax is wasted so to speak, but that's true whether it's your first dollar per year or last 539 dollars.

The problem is the benefit increase is relatively small. If you have maximum earnings for about 17 years, you will have exceeded the second bend point in PIA calculations, therefore you only receive about a 15% 'return' on your contribution to the system. Those before the first bend point see a 90% return, those between the two bend points see a 30% return. So there's little solace to be taken in a 'higher benefit' for those with consistently higher earnings. I bet most of us would like to contribute only to the first or second bend point in the first place, then invest the rest of our money outside the SS system. Alas, it is largely the contributions of those beyond the first and second bend points which keep SS solvent, so that will never happen.

Furthermore, it is the reason that talk of raising the SSWB even further is anathema to most high earners. It converts SS even more from a self-funded retirement security program to a welfare program. The program's popularity depends on widespread support including among those who see a relatively lower return on their investments. Jeopardize their support and you jeopardize support for the entire program.

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you think thats a big increase,,,just hold on for whats coming !!!

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geo123 said:   
aleck said:   This increase has nothing to do with COLA, but more with the fact that SS will be facing a shortfall in the next 20 years.  These some some of these steps that will keep the program sustainable.
Just to clarify, as people have correctly mentioned above, the increase in the Social Security wage base is formulaic and is based on the National Average Wage Index. The increase is not part of any efforts to save Social Security.

Having said all that, for two people with earnings at or above the Social Security wage base, the increase will cost an extra $1,078, which is substantially higher than it has been in the past.
  

  I agree with geo123.  Also worth noting that employers are required to contribute to social security at the exact same rate and income level that applies to the employee.  The added salary expense is something an employer needs to consider when planning to increase an existing employee's wages, paying bonuses or hiring additional employees.  The 2015 Social Security Tax rate of 6.2% for wages (assuming a salary of $118,500) costs $7,347 for the employer and $7,347 for the employee.  Additionally both the employer and employee each pay 1.45% medicare tax (there is no salary limit on the medicare tax.    For wages in excess of $200,000, the employee also incurs an additional 0.9% medicare tax

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they sure like to tax us.

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Everybody arguing about whether this is "fair", "reasonable", accountable, or hurtful, completely ignores the fact that the people we should be upset with is ourselves and the rat-basteard politicians who sold us out over the past 50 years.  You voted them in folks.  Think about it.  The money is already gone,.  

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I find it hilarious the Social Security COLA was 0% for 2015 and 0.3% for 2016 and yet they raised the tax bracket by 7%.

This is way to fix social security without being honest about it with a tax increase or benefit cut. If you wipe out the real value of the benefits with inflation and get rid of the cap it will help prolong the ponzi scheme.

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