Means Testing and Cash

[wodehouse]

Or what if someone blew all their assets on sex and drugs and San Cabo, while other poor shmoes worked their tail off?

[zibazinski]

Just another way to punish people who tried to save for retirement and rewarding those that didn't.

[haapai]

The assets in question probably won't appreciate and you'll have to get a gun and a dog. It's a pretty costly solution.

[haapai]

Do you live with anyone that you care for? Home invasions are nasty experiences.

[resolution]

Because you just told us. *looks for her safe*

[Savoir Faire-Demogague in NJ]

The IRS already knows about your assets. You report income on them, and contributions to your 401K, IRA, Roth, etc., are all tracked by the govt.

[Deleted]

Any system is going to have people trying to game the system.

[Deleted]

Interesting thought. I also suspect SS will be taxed away if you have other traceable income. But let's continue this thought experiment. You'd have to keep some $$ in a checking account or you'd be going all over town with a wallet full of bills. That alone could make you a target as word got around- you might get mugged on the street or someone might break into your house looking for more. That could be a bad experience even if they never find the safe. How would you buy a car or a computer or anything over the Web?

You'd also have no protection against inflation. If you keep some of your assets in the market, you have a better chance of making a positive real return.

You're probably better off going to a country that doesn't snitch to the US and taking your money with you- ah, but then there's FX risk.

[Savoir Faire-Demogague in NJ]

Someone can correct me but if you withdraw all your assets and convert to cash, you'd be looking at nearly $1 million... okay, maybe not that much for some of you, so let's go with $500,000.
This is a cash transaction, I do believe that big transactions must be reported to the IRS.
I could not imagine having $500,000 to $1,500,000 in cash sitting around.

[formerexpat]

SS is already means tested. There is a formula in Pub 915 that determines the amount of SS benefits that are to be taxed.

More or less, if 1/2 of your SS + all other income [including interest from tax free munis] is greater than $44k if MFJ, then 85% of your benefits will be taxed.

www.irs.gov/pub/irs-pdf/p915.pdf

Maybe they just do away with this formula and tax all benefits if your total income is above $44k but means testing already does exist.

[Savoir Faire-Demogague in NJ]

No, you could withdraw it over a couple of years. Who is to say then where it goes? And, say you put $500K in a safe or something, why not? And, as for checking, you could keep a small checking account.

Yes you could do that. You'd draw Social Security and what ever other benefits available. You would want to pull out the cash in small bills, like say 25,000 $20 bills.
The risk would be inflation, if you lived 20-25 years into retirement.
If one managed their financial affairs prudently, it seems doable on the surface.
What you are really talking about is an underground economy, or going off the grid.

[Savoir Faire-Demogague in NJ]

SS is already means tested. There is a formula in Pub 915 that determines the amount of SS benefits that are to be taxed.

More or less, if 1/2 of your SS + all other income [including interest from tax free munis] is greater than $44k if MFJ, then 85% of your benefits will be taxed.

When we refer to SS means testing we really mean severely reducing or eliminating monthly benefits for people who have prudently saved in their 401Ks/IRAs during their working years. So if one lived within their means and accumulated a fairly respectable retirement account they would not be eligible to draw SS, versus someone who deliberately spent everything they have, were constantly in debt and saved nothing.

The govt can also means test social security by a back door method. They have already kicked around the issue of levying a wealth tax on retirement assets.

[973beachbum]

The means testing I have heard has been talking about billionaires and such not people with a 401K. Most of them even like the idea. The people they are targeting are so wealthy they actually find the money SS would pay them too insignificant to even care about.

I have known people who stashed cash in a safety deposit box. They were on permanent disability for a medical condition and had Medicaid. Without the Medicaid they would probably have died so they had to keep their savings very little or lose it.

They kept a few thousand in cash in the box. they used it for emergencies that likely would have made them homeless or without heat in the winter or something. It is a shame these are the things that people have to go to.

[zibazinski]

DF keeps 40k in the safe at home. It creeps me out but I am sure he got that from grandpa when the banks failed thing.

[olderburgher]

Yeah lets find a way to gouge the system and screw those who don't. Lovely attitude. Makes you a credit to this community.

[Deleted]

Feb 12, 2011 9:16:25 GMT -5 formerexpat said:

SS is already means tested. <snip>
More or less, if 1/2 of your SS + all other income [including interest from tax free munis] is greater than $44k if MFJ, then 85% of your benefits will be taxed.

Yeah, 85% of DH's is taxed and not because of his income at all. It's because of mine since we file jointly. Living in sin would have been a far better deal tax-wise.

And I predict that the confiscation of SS benefits through taxation will get worse.

[mtshastawriter]

In order for us to have Medicaid coverage for my husband we are not allowed to have any savings from one month to another... We own a house (doublewide MH actually) that is about 30 years old and two very old vehicles.

The "no savings" rule makes us either lie about savings held in cash or not being prepared for an emergency with our house or cars. (Not to mention having two teenagers who sometimes need things for school, etc...)

What are people to do in this situation? It's not like if our heater breaks (which it did in Jan) or our car has a repair need ($500+ in Jan also) we can call up someone and have it paid for... We have to pay for it, but how do we do that if we can't have savings of any sort month to month?

IMHO the rules mean that people are forced to either live on the edge or lie. Both options suck...

[phil5185]

The means testing I have heard has been talking about billionaires and such not people with a 401K. Most of them even like the idea.

But that wouldn't result in much money for the govt. (Taking $100,000/yr away from every billionaire in the US would barely be a rounding error, remember, the US spends over $2 billion per HOUR.

The real money comes from taking $1000 from each of the 300,000,000 people - that would be $300 billion.

The tricky thing with a safe is getting it delivered and installed w/o everyone knowing it. Especially if you have a 1000 pound safe set in concrete or hidden in a wall - at least 20 salesmen & workers are involved - and they tell everyone at Happy Hour what a great experience they had that day.

And then the bad guys wait for you to be not home - then steal a 4WD truck, literally drive inside the house, drop a winch onto the safe, and drag it out. Then take your safe & abandon the truck. One group stole a motor grader. Others used a Bobcat.

[cronewitch]

It depends what they count in means testing. They may not count home equity so paying off the house would be a first move. They probably won't count collectibles or household goods. Buying things like antiques that might increase in value or collectible cars but then you have to take care of them. Gold hoarders think gold will be worth more in the future so could stock the home safe with gold bars. The danger of valuables in the home isn't as much from the safe installers as the family and friends. Your teen might tell a date who tells her brother who tells his friends about the valuables. They might all be good kids you can trust but later one might be on drugs and need to steal and remember.

[zibazinski]

I'm sorry but it's just wrong. The gov't didn't have any qualms about taking social security from your checks up to the max is it of 100k? But the max you can ever get from them is $2400 per month. That is nowhere near a 100k mark. Maybe like a 70-80k mark. If you are going to cap what you pay out then you should cap what you take in. NO WAY should ANY other income be counted against recieving social security. Just because SOME people saved and others spent is no reason to rob them to pay for those who couldn't be bothered to save.