Early planning for retirement can help producers properly evaluate the range of Social Security taxes and payback periods, The Farm CPA Paul Neiffer says.
"Farmers, I think they have a genetic chip implanted at birth that they don’t want to pay income taxes. And that’s good," Neiffer said during the 2014 Top Producer Seminar. "But when they start reaching retirement age, and they’re coming into me and they say, ‘Hey Paul, we need to pay in more money so that we’ll boost up our Social Security benefits when we retire,’ well, we have to be careful."
(Click here to view a PDF copy of Paul Neiffer’s presentation titled "What Farmers Should Do To Maximize Social Security Benefits".)
That’s because a system of three tiers determines the payback period for Social Security.
"What we call the Lower Tier, or Tier 1, there’s value to paying in extra Social Security taxes for that because your payback’s maybe a three- to five-year period, so that’s a pretty good value," Neiffer explains. "If you are in Tier 2, which means your income is a little bit higher and you paid in some Social Security taxes over your career, paying into Tier 2 may not get you much of a benefit because your payback period is 10 to 15 years. If you paid in a lot of Social Security taxes and you’re in what we call Tier 3, the payback on that is like 30 years."
Click the play button below for Neiffer’s complete analysis of Social Security options from the 2014 Top Producer Seminar:
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