Originally created 04/02/02

Retiree finds 'before tax savings' is an IRS ripoff

For all the people who think Medicare is free, just remember that premiums last year were $50 per month, and this year are $54 per person, deducted from your Social Security check.

The increase in Social Security payments was barely enough to pay for this increase. Also, you have to pay the first $100 on health care each year per person, before Medicare pays anything.

Also, remember that when you were told to put money into a before-tax savings account while you were working to save on taxes then, that when you try to get some of that money out, every dollar you take out becomes income, subject to tax and the Internal Revenue Service is gracious enough to suck in about 80 percent of your Social Security payments for each dollar you take out of savings.

All this increases your maximum income and decreases any itemized deductions you have.

As a result, last year, we paid 32 percent on the little dab of money we took out of savings, even though the total tax rate was only about 16 percent. There's no way to get it out without paying through the nose.

The only way to beat the system is to cash in all your delayed-tax savings before you start on Social Security and pay the freight. As high as it will be, it will probably be less than if you wait.

The best thing to do is not to put any money into "before-tax savings."

Curtis D. Choplin, North Augusta, Ga.


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