Most Government Employees are Covered by Social Security

Government employees aren't necessarily covered in Social Security so they may or may not be taxed for it and eligible for benefits.  

The document titled Social Security: Mandatory Coverage of New State and Local Government Employees  has specifics on the percentage of government employees people who are in the program.    Turns out that the large majority of them are in SS.

Only 27.5% of state and local government employees are not in Social Security.

It varies state to state.   For each state the % of employees covered by SS is as follows.   Sorted on the left by state and then on the left by the % of employees:

AK	65.6%		OH	2.5%
AL	92.3%		MA	4.1%
AR	90.2%		NV	17.6%
AZ	95.3%		LA	27.9%
CA	43.6%		CO	29.1%
CO	29.1%		CA	43.6%
CT	71.8%		TX	47.9%
DE	94.0%		IL	54.6%
FL	88.4%		ME	54.7%
GA	72.3%		AK	65.6%
HI	69.4%		HI	69.4%
IA	89.2%		CT	71.8%
ID	93.4%		GA	72.3%
IL	54.6%		MO	72.7%
IN	90.1%		KY	73.8%
KS	92.1%		RI	83.3%
KY	73.8%		ND	87.1%
LA	27.9%		WA	87.7%
MA	4.1%		MI	87.9%
MD	90.5%		WI	88.0%
ME	54.7%		FL	88.4%
MI	87.9%		NH	88.7%
MN	92.4%		IA	89.2%
MO	72.7%		MT	89.5%
MS	92.1%		IN	90.1%
MT	89.5%		AR	90.2%
NC	91.7%		TN	90.4%
ND	87.1%		MD	90.5%
NE	94.2%		NM	90.5%
NH	88.7%		WY	90.5%
NJ	92.0%		UT	90.8%
NM	90.5%		OK	91.2%
NV	17.6%		NC	91.7%
NY	96.7%		WV	91.7%
OH	2.5%		OR	91.8%
OK	91.2%		NJ	92.0%
OR	91.8%		KS	92.1%
PA	92.6%		MS	92.1%
RI	83.3%		AL	92.3%
SC	92.8%		MN	92.4%
SD	92.8%		PA	92.6%
TN	90.4%		SC	92.8%
TX	47.9%		SD	92.8%
UT	90.8%		ID	93.4%
VI	94.2%		DE	94.0%
VT	97.9%		NE	94.2%
WA	87.7%		VI	94.2%
WI	88.0%		AZ	95.3%
WV	91.7%		NY	96.7%
WY	90.5%		VT	97.9%

Half of the states have over 90% of employees in SS.     Only 7 states have less than 50%.



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Your Tax Rate is Likely to Be Lower After You Retire

Most people have lower incomes when they're retired compared to when they're working.  With lower incomes comes lower tax rates.  So it ought to follow that your tax rate is likely to be lower when you're retired.   Thats often the case.  

A married couple has a combined income of $60,000 from wages of $40,000 and $20,000 currently.   Their expected social security checks will be $1200 and $800 monthly for total of $2000 or $24,000 a year.   They've done a good job saving 10% of their pay and have amassed a total retirement nestegg in IRAs and 401ks of $600,000.    They plan to withdraw 4% of that annually for $24,000 of income.   This gives them a combined retirement income of $48,000 a year between their SS checks and retirement accounts.   That replaces 80% of their pre-retirement income.    They paid their house off a few years ago so their basic living expenses aren't too high now.

While the couple is working they would have a taxable income of about $33,700.   Thats after taking out 10% they saved in IRA/401k's and then the standard deduction and exemptions.    That $33,700 income puts them in the 15% tax bracket with $4,148 due to the IRS.

After retirement they would have lower household income.   Half of their income is from SS and little of it will be taxed.   Given their total income of $48,000 then only $2,000 of their SS check counts towards taxable income.   They'd get a higher standard deduction of $14,600 due to being 65 years or older.   Their final taxable income is just $3,500 and they'd be in the 10% bracket.    They'd only owe the IRS $350.

Of course this is just one random example.   But in this relatively typical looking couple their tax bracket went down from 15% to 10%.   Most people will see better tax situation in retirement due to social security tax treatment and the higher standard deduction for people over age 65.  

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Best of Blogs for Week of September 26th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week

DoughRoller  discusses the question Should You Pay Off Your Mortgage or Invest for Retirement?

MyMoneyBlog gives us Charts: Average New Car Price vs. Average Student Loan Debt 1990-2014
and that comparison is a topic I touched on when I asked Is There Really a Student Loan Problem?

DQYDJ made another neato investment calculator/tool with an Automatic Graham Number Calculator for Any Stock!

Theres also a  Free App Bundle on Amazon today with several apps like OfficeSuite Professional and Sonic the Hedgehog among others.

-- This article may contain referral links which pay this site a commission for purchases made at the sites.

Cost of College Room and Board over Time - 1971 to 2013

I got the room and board costs off the College Boards site page for published prices at national level.  Specifically the Tuition and Fee and Room and Board Charges over time table 2.

I had to figure the room and board cost by taking the total cost for tuition, fees and room and board and subtracting the cost for just tuition and fees since they didn't have an individual figure for just room and board.

I'm showing the numbers for public four year universities here.   However I looked at private schools and the trend is pretty much the same but private school room and board costs a bit more.


Here's a chart showing the trend for room & board and tuition rates over the past 43 years :

From the chart it looks like the growth rate has been similar, but not really.   Tuition started at $428 a year in 1971 and housing was $977.   Now as of 2013 school year tuition hit $8893 and room and board was $9498.    Tuition is 20 times as much and room & board is not quite 10 times as much. 

Here's the compound annual growth rates for the entire period and the latest 20 years :

	Tuition	Room/board
1971-2013	7.50%	5.60%
1993-2013	6.50%	4.90%

Again that doesn't look hugely different but 7% growth adds up a lot more over the years than 5% does.

Room and board has gone up faster than inflation but not as fast as tuition.


A large portion of the cost of room and board is the real estate.    You might have noticed that housing has gone up in the past few decades and even with the crash a few years ago real estate has grown faster than inflation over the past 40-50 years.    We can look at housing costs two ways, comparing to the cost of rent or the cost of housing.   I got both from the Census for the 1970, 1980, 1990 and 2000 years.   Historical housing cost and rent cost.  Unfortunately the college room and board figures only go back to 1971 so I'm comparing hosing costs from 1970 to room and board from 1971.  Close enough for an idea but not exact.

	Room/board	Rent	House
1971/70	$977	$1,296	$17,000
1980	$1,747	$2,916	$47,200
1990	$3,166	$5,364	$79,100
2000	$4,931	$7,224	$119,600

With the following growth rates for the 30, 20 and 10 year periods :

	Room/board	Rent	House
70's to 2000	4.2%	4.4%	5.0%
80 to 2000	5.3%	4.6%	4.8%
90 to 2000	4.5%	3.0%	4.2%

Generally the cost of room and board has grown at a similar pace as rent and home values.    Over the longer period from 1970/1971 to 2000 the cost of room and board at 4.2% has not grown as fast as either rent at 4.4% or homes at 5%.    Of course a sizable % of the cost of room and board is in the food served to students.   However I don't know what % of the cost is typically housing and what % is food, so I can't break that apart.


 Bottom Line:    Room and board has certainly gone up over the decades and faster than inflation in general.  However it hasn't gone up as fast as tuition and the growth in room and board has been more on pace with the change in housing costs.


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