What does SS&R do? It helps answer questions:
When can I retire? When should I start collecting Social Security? How much can I afford to spend when I'm no longer working?
Given the difficulty of comprehending the interactions between income, savings, taxes, and Social Security benefits in even the short term, and given that retirement decisions can have a financial impact two, three, or four decades down the road, help is needed to peer into the foggy future. SS&R combines the particulars of a person's or couple's situation, handles the interactions, and projects the consequences of retirement decisions into and through the retirement years .
SS&R inputs:
• Birthday(s)
• Marital status
• Income (monthly)
o Work (wage or self-employment)
o Pensions/annuities
• Expenses
o Mortgage
o Other expenses (excluding mortgage and federal taxes)
• Assets
o Non-retirement
o Retirement
- Tax-deferred (e.g., traditional IRA or 401K)
- Roth
o Social Security benefit amount
The user may also specify the values for Cost-Of-Living and Investment Growth Rate. SS&R, utilizing the key rules of both Social Security and the IRS, then does its work to create estimates of your financial future.
What elements of Social Security and the IRS does SS&R incorporate?
For Social Security:
o Worker, spouse, and widow(er) benefits
o Impact of work on benefits
o Impact of age at which benefits are begun
o File, suspend, and restart options
o Spousal Benefit Only option (for those born before 1954)
o Windfall Elimination Provision (WEP)
o Government Pension Offset (GPO)
For the IRS:
o Single/married
o Wage/self-employment income
o Taxable portion of Social Security benefits
o Required Minimum Distributions (RMD) from tax-deferred retirement accounts
o Capital gains
o Alternative Minimum Tax (AMT) calculations
o FICA (i.e., Social Security) and Medicare taxes
Relative to the IRS, calculations comprehend single or married status, but not head of household. Standard deductions are assumed, including, when appropriate, the additional deduction available to those over 65. For SS&R to make estimates out into future years, it is assumed the structure of federal taxes remains fixed, but tax brackets are indexed to the projected cost-of-living changes. Required Minimum Distributions from tax-deferred retirement accounts are calculated, in all cases, using the IRS's "Uniform Lifetime Table."
It should also be mentioned that capital gains on non-retirement assets are assumed to be realized each and every year. As required by the IRS, capital losses in excess of $3000 are carried over to the following year. SS&R, with default settings, assumes gains in non-retirement assets are split evenly between long-term capital gains and ordinary income items. The user, however, has the option to specify a different ratio if their non-retirement account investments are better represented by something other than a 50:50 split.
Because SS&R includes all the taxes typically encountered by Joe Taxpayer, but conservatively assumes standard deductions, tax estimates should tend to miss on the high side. Consequently, the calculation of total assets over time should tend to miss on the low side for those who benefit by itemizing deductions.
Disclaimer
SS&R, utilizing 2022 Social Security and US federal tax parameters, 2020 Social Security actuarial data (for life expectancy), inputs/assumptions concerning future market performance and cost-of-living changes, along with inputs that describe a person's or couple's current financial situation, strives to project that situation out into the future. The world, however, is not orderly. Paraphrasing a bumper sticker, 'Stuff happens.' Rules change, situations change, and it's even possible, truth-be-told, that coding errors exist that impact the outputs of SS&R. Thus, SS&R is, and should be viewed as, a well-intentioned assistant, not a source of "Gospel truth."
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