Social Security ....The monthly Check...yes or no

[ken_sylvania]

Not to stir the pot too much ,here , but it's noteworthy that admistrative law Courts (SS judges),have several times over the past decade ,ruled that if you are exempt ,from paying SS, you cannot then have IRA's or 401K's or any such retirement plan ......It plainly states on the form itself ,that you are opposed to any private or public retirement plan, whatsoever....So far ,they have only addressed this issue ,on a case by case basis, but it's well to remember they could swoop in and take that big IRA , since you're not allowed to have one, if you are exempt from SS......So that wouldn't be an issue for Amish, but perhaps for some on that list....

Can you point me to any of those rulings or provide any details that might enable me to find them?

The Form 4029 that our church uses does not include the statement that we are conscientiously opposed to retirement plans such as IRA's or 401K's.

[Ken]

Not to stir the pot too much ,here , but it's noteworthy that admistrative law Courts (SS judges),have several times over the past decade ,ruled that if you are exempt ,from paying SS, you cannot then have IRA's or 401K's or any such retirement plan ......It plainly states on the form itself ,that you are opposed to any private or public retirement plan, whatsoever....So far ,they have only addressed this issue ,on a case by case basis, but it's well to remember they could swoop in and take that big IRA , since you're not allowed to have one, if you are exempt from SS......So that wouldn't be an issue for Amish, but perhaps for some on that list....

Do you have a citation for this? I have never heard that before.

[Josh]

Not to stir the pot too much ,here , but it's noteworthy that admistrative law Courts (SS judges),have several times over the past decade ,ruled that if you are exempt ,from paying SS, you cannot then have IRA's or 401K's or any such retirement plan ......It plainly states on the form itself ,that you are opposed to any private or public retirement plan, whatsoever....So far ,they have only addressed this issue ,on a case by case basis, but it's well to remember they could swoop in and take that big IRA , since you're not allowed to have one, if you are exempt from SS......So that wouldn't be an issue for Amish, but perhaps for some on that list....

I think the average Amish person is far more concerned that his church and his bishop teach against having various insurances and retirement accounts, and are far less concerned with what an administrative law court would say.

Most churches conservative enough to avoid social security would also teach against having IRAs, stocks, retirement accounts, and so forth. (I would say "all", but someone might nitpick me and ask me to prove it.)

But in any case, a form 4029 says no such thing. It says objection to insurance, not savings accounts.

I am conscientiously opposed to accepting benefits of any private or public insurance that makes payments in the event of death, disability, old age, or retirement; or makes payments for the cost of medical care; or provides services for medical care. Public insurance includes any insurance system established by the Social Security Act.

I request that I be exempted from paying social security and Medicare taxes on my earnings from self-employment under Internal Revenue Code section 1401 and from the employer’s share of social security and Medicare taxes under Internal Revenue Code section 3111.

I further request exemption from the employee’s share of social security and Medicare taxes under Internal Revenue Code section 3101, for my services as an employee whenever I am employed by an employer who has an identical exemption from social security and Medicare taxes.

I waive all rights to any social security payment or benefit under Titles II and XVIII of the Social Security Act. I understand and agree that no benefits or other payments of any kind under Titles II and XVIII of the Social Security Act will be paid based on my wages and self-employment income to any other person. I certify that I have never received benefits or payments under the above titles, nor has anyone else received these benefits based on my earnings.

The conscientious objection is to insurance, including insurance that makes payments because someone is retired. The technical name for social security is "OId Age, Survivors, and Disability Insurance". There really isn't anything else that exist that "insures" against old age like Social Security does. Social Security also includes a "death benefit", which was the original reason Amish objected to it; conservative Anabaptists almost universally hold positions against life insurance, even the less-conservative groups.

The fourth paragraph means someone who claims such an exemption can't have already drawn Social Security benefits, such as themselves or a child having been on disability. (It does not say anything at all about drawing Medicare benefits, and I don't see anything even saying that someone is ineligible for Medicare benefits once they hit age 65, although most Amish avoid Medicare.)

[eccentric_rambler]

As Josh has said, Form 4029 does not prohibit 401(k) plans or IRA's. IRA's are not uncommon in ultra-conservative groups, as they are merely tax-advantaged savings accounts. I too would be very interested in a cite of a case that took issue with an exempt person possessing either. There is, however, a conflict in an exempt person having an annuity, since an annuity is an insurance product. Memory says there may have been some court cases dealing with exempt persons possessing an annuity but I don't have time to look it up atm. A member of the Old Order Amish Steering Committee has relayed that the IRS sees a conflict between exemption and annuities.

[Josh]

As Josh has said, Form 4029 does not prohibit 401(k) plans or IRA's. IRA's are not uncommon in ultra-conservative groups, as they are merely tax-advantaged savings accounts. I too would be very interested in a cite of a case that took issue with an exempt person possessing either. There is, however, a conflict in an exempt person having an annuity, since an annuity is an insurance product. Memory says there may have been some court cases dealing with exempt persons possessing an annuity but I don't have time to look it up atm. A member of the Old Order Amish Steering Committee has relayed that the IRS sees a conflict between exemption and annuities.

401(k)s and mutual funds, however, would be rare (but retirement accounts and owning stocks has exactly nothing at all do with insurance or religious objections to insurance). A Roth IRA from the local bank that gets simple interest is, I imagine, quite common. It's just a savings account. 401(k)s are rare because conservative Mennonite employers don't seem to like to give their employees very many benefits beyond cash compensation, for whatever reason.

Annuities usually have a life-insurance component associated with them and they certainly do bear an element of insurance. (They are also usually a very, very bad investment that is basically predatory to the person who buys one, but that's a different topic.)

In my own church, we teach against collecting simple interest and discourage things like owning stocks, although recently decisions have been made to allow limited involvement in retirement accounts if they are "ethically invested" (basically investing in Everence Praxis funds). So in my own circles, there wouldn't be much point to an IRA that collects simple interest, and annuities would be avoided.

I feel I should also address this:

So far ,they have only addressed this issue ,on a case by case basis, but it's well to remember they could swoop in and take that big IRA , since you're not allowed to have one

There is no statutory basis by which the government would "swoop in and take that big IRA". IRAs are heavily protected against being seized; they are one of the most protected assets there is in that category. They could assess penalties and interest on withdrawals I guess (for a Roth) or penalties against the original deposits (for a 401(k)).

[Ken]

As Josh has said, Form 4029 does not prohibit 401(k) plans or IRA's. IRA's are not uncommon in ultra-conservative groups, as they are merely tax-advantaged savings accounts. I too would be very interested in a cite of a case that took issue with an exempt person possessing either. There is, however, a conflict in an exempt person having an annuity, since an annuity is an insurance product. Memory says there may have been some court cases dealing with exempt persons possessing an annuity but I don't have time to look it up atm. A member of the Old Order Amish Steering Committee has relayed that the IRS sees a conflict between exemption and annuities.

An IRA is just a savings account dedicated towards retirement. They are tax advantaged over regular savings accounts so the only reason why an Amish group would disapprove of IRAs is because they want their members to pay more taxes than they are legally required to pay. And that doesn't sound very Amish to me. A traditional IRA is tax exempt when the money is saved but then you owe taxes when you withdraw. A Roth IRA is the opposite, you save taxable income in the Roth and then are exempt from taxes on the gains when you retire. I frankly can't imagine any religious group demanding that their members pay more taxes than necessary simply due to the name on the type of account.

Annuities take many forms. Variable annuities are a form of retirement savings account sold by insurance companies. You pay in monthly and they guarantee some sort of return in the end. They are usually a scam or, of not a scam, a very high fee way to save money and should generally be avoided. The disclosures that come with many of them are hundreds of pages long and written to the advantage of the insurance company. They are often sold to public employees through such as teachers as a way to supplement your existing retirement and in almost every instance you are better off just putting your extra money in a Roth or traditional IRA and avoiding variable annuities.

Fixed annuities are something different. They are just a way to convert a lump sum of money into annual payments for life. So if you have $100,000 saved and you are age 70 you can buy a fixed annuity that will pay X-dollars a month for the rest of your life. How much X-dollars is depends on your age, sex, and other factors determined by actuaries. Fixed annuities are a good way to ensure that you don't outlive your savings. And are insurance products. You can think of them as longevity insurance I suppose. You are buying insurance against living too long and running out of savings.

[Ken]

In my own church, we teach against collecting simple interest and discourage things like owning stocks, although recently decisions have been made to allow limited involvement in retirement accounts if they are "ethically invested" (basically investing in Everence Praxis funds). So in my own circles, there wouldn't be much point to an IRA that collects simple interest, and annuities would be avoided.

An IRA is just the tax status or "wrapper" that goes around the account. But you can invest IRAs in practically anything including your own business if you are creative. You can invest in farmland, real estate, or pretty much any form of stock, bond, mutual fund, or simple interest-bearing savings or money market account.

For example: Investing in farmland with an IRA: https://www.irafinancialgroup.com/learn ... in-an-ira/

[eccentric_rambler]

An IRA is just a savings account dedicated towards retirement. They are tax advantaged ...I frankly can't imagine any religious group demanding that their members pay more taxes than necessary simply due to the name on the type of account.

Annuities take many forms.

An IRA is just the tax status or "wrapper" that goes around the account.

Exactly. Annuities are an insurance product, and thus are a conflict of conscience for those opposed to "insurance that makes payments in the event of death, disability, old age, or retirement"

IRA's are not an insurance product. Even for those opposed to collecting interest an IRA could be worthwhile for the tax credit or tax deferral opportunities.

I frankly can't imagine any religious group demanding that their members pay more taxes than necessary simply due to the name on the type of account.

Quite possible, with the intent of encouraging simpler lives, or keeping further from the world's system, or in support of nonaccumulation, etc.

[Josh]

Keep in mind the 401k and Roth IRA are relatively new (been around since the 80s?)

Now, a different question is if they are bad for society - I think they have, the old world of defined benefit pensions was a lot better. Now the little people have to suffer whenever the stock market is volatile. Wall Street always wins, of course. Stocks are a lousy investment now and the wealthy instead invest in private equity which is inaccessible to the average American. The largest asset class the wealthy invest in is real estate, yet the common people are told to invest in stocks. What has had the best returns since the 1980s? Hmm…

Ken’s suggestion to use a self directed IRA sounds interesting, except you have to be a “passive” investor. So you can invest in farmland but you can’t farm it. You have to lease it out to someone unrelated to you. The last thing this world needs is more absentee landlords.

[Ken]

Keep in mind the 401k and Roth IRA are relatively new (been around since the 80s?)

Now, a different question is if they are bad for society - I think they have, the old world of defined benefit pensions was a lot better. Now the little people have to suffer whenever the stock market is volatile. Wall Street always wins, of course. Stocks are a lousy investment now and the wealthy instead invest in private equity which is inaccessible to the average American. The largest asset class the wealthy invest in is real estate, yet the common people are told to invest in stocks. What has had the best returns since the 1980s? Hmm…

Ken’s suggestion to use a self directed IRA sounds interesting, except you have to be a “passive” investor. So you can invest in farmland but you can’t farm it. You have to lease it out to someone unrelated to you. The last thing this world needs is more absentee landlords.

People have been saving for the future since ancient times. The only thing new about IRAs and 401(k) plans is that the government is incentivizing people to open them by giving them a tax break. Which I frankly think is a good thing. We should encourage people to save more rather than spend it on endless consumer junk.

The biggest argument against IRAs is that they benefit the rich more than the poor. In contrast to Social Security, they are essentially a transfer of wealth from the poor to the affluent since affluent get bigger tax breaks than the poor. But since they do exist and aren't going away anytime soon, the only real question is whether or not to use them.

As for what you are calling the lousy stock market? It went up 24% in 2023 (the S&P 500) which is better than just about any other sort of broad-based investment. The average annual return of the S&P500 since the index was created in 1957 is 10.26% which is better than just about any other broad-based investment you could have made over those past 66 years.

As for investing in farmland with IRAs? There is absolutely no reason why the Menno community couldn't invest retirement funds into Anabaptist land banks which could then be made available to young farmers who lack the wealth or family legacy to inherit farms of their own. There are lots of creative things that could be done. Such land could be made available to young farms simply to lease, or they could do creative "rent to own" sorts of things so that they could build equity over time. It really depends on your objectives.

So, for example, a specific church could create a farmland trust and then use money invested by members to buy farmland for the community. The money invested could be from both the IRAs of church members as well as other non-IRA regular money that members choose to invest. And then the rent earnings from such farmland trusts would then support retirees as they spend down their IRAs. Such a fund could even leverage its resource to buy more farmland if it wanted to. Say put 25% down and finance the remainder. Depends what your objectives are.

From a purely financial perspective, it is probably better to just invest in the "lousy" stock market than try to do creative social programming with people's retirement savings. I'm just pointing out that there are lots of options besides simply investing in index funds with your IRA or 401(k).