$15/hr

LPNMary · Mar 5, 2014

Hey Ned, curious about something- other than the shock of any RN making $15/hour- what effect on SS contributions annual income look back? Do stipends factor into what these travellers receive as income, for purposes of SS?

NedRN · Mar 5, 2014

Yes, a large part of the bankable cash increase from stipends comes from knocking out the 15.3% total FICA hit on pay on top of reduced income taxes. That is huge. And yes, if you make a career out of traveling, there will be a real impact on SS retirement pay.

That said, SS is basically a zero sum game - on average, the average beneficiary is only returned what they pay. With little to no investment gain. So if you are disciplined and invest, even conservatively, what was not paid to FICA, you will be literally millions ahead at retirement age with any decent time frame. Spend a half hour with some calculators and the numbers will really surprise you.

That is the Bush and other Republican's argument for reducing or eliminating SS taxes that citizens will come out ahead managing their own money. They seem to time these arguments at unfortunate times, just as the economy sinks (arguably because of Republican initiated reduced regulations), but technically they are correct as far as it goes. Of course, what that fails to take into account is human nature. Most people have a tough time with deferred gratification and discipline and so a large part of the population is completely or largely dependent on SS for retirement income. Thus SS is a real social safety net that should not be done away with no matter how inefficient it is.

I recommend eliminating as much personal taxation as possible and legal and so does any tax expert. Do not squander the extra money you can put in the bank from the tax advantages currently available for travelers and you will be ahead. However, it is not worth much thought or worry if you are only going to travel for a few years as perhaps most travelers do - the impact on SS retirement income will be completely negligible.

Zjinn · Mar 6, 2014

That's good information from Ned and I'll expound on it a little. My wife and I started traveling a few years ago. Our kids are grown, so we didn't really need a home to go back to. We sold our home because we planned on traveling from contract to contract, while taking short vacations in between.

Even though we tell every company that we don't own a home and don't pay rent anywhere, every company we have worked for has tried to talk us into claiming a tax home. Fortunately, we started out with a very good accountant who advised us to just take straight taxable hourly pay. It makes a lot of the companies upset to do that and some have even refused, but it's a make or break deal for us. If we ever get audited, I know we're in the clear. We have met travelers at every single contract we've take, who don't have a qualifying tax home, but still claim one. I try to educate them, but recruiters can be very persuasive.

A secondary effect to taking a lower hourly wage with a stipend, is your purchasing power. The next time you decide to buy a car or a house. Do you want your wages to show $15-$20 an hour or $40-60 an hour? Your stipend does not count towards your purchasing power. We just bought a house in California. We're from Oklahoma, so we already had sticker shock at California housing costs. I would not have wanted to go to a mortgage company and only been able to show them that we had been making $15 an hour for the last few years.

NedRN · Mar 6, 2014

Often is it possible to show lenders your contract, paycheck, and your savings rate and many will bump up your credit worthiness. I've heard of lenders going both ways, but total paycheck is pretty convincing.

Since you moved to California, your ability to make good wages as a nurse certainly would not have been questioned. I had to jump through some hoops recently to just to get a credit card I wanted (for no foreign transaction fees, I didn't need credit), and sending them a bank balance did the trick.