Originally Posted by old woman
If you take money out of your ROTH is that income showing you don't need your SS?
Why don't they just say you don't need more than 40K to live so reduce it dollar for dollar until the savers are equal to the non savers.
I have always expected for the solution to be found in a wealth transfer between retirees with as minimal impact on current workers as possible. This process was begun with the 50%-85% taxable means testing back in the early 90s when the money wasn't needed to pay current benefits. This transferred current benefits back to the trust fund to be borrow for current operations of the general fund budget under the guise of deficit reduction. There aren't enough "very rich" retirees to supply/repay this money so it will rapidly become an upper middle class retiree transfer and gradually a middle class retiree transfer if that isn't enough. I expect the phase in to be sneaky. (Look at Medicare B.) Even the RMD has become a potential mechanism to accomplish more than tax collections.
As the Lenin Strategy (search CATO) points out, erosion of middle class benefits to provide a minimal income for poor retirees will destroy support for the entitlements entirely. If cash flow is diverted from the pay-go through private investment of part of it, the cash flow in Social Security becomes even worse and more and more will be required from savings and pension fund redistributions. The funny thing is that people who don't support wealth redistribution from the rich seem to support it when the middle class is the main class impacted. In that case, generational fairness becomes an argument. Funny thing is that the same fairness could be used for any budget, not just Social Security.
Brace yourself. You have been saving for your neighbor who earns more than yourself but has been smart enough to spend rather than save. He can probably sell that boat to his brother in law under the table and hidden from income records in relative safety of being caught.
The only thing I haven't figured out is how the transfer will be projected since 401k's and pensions aren't guaranteed and most pensions aren't inflation protected. I guess that is why mandated annuities are being discussed. But... what if the insurers go broke?
Exaggeration? Of course. But the major thing people with savings need is inflation protection. (Actually, that is true of all retirees especially as they get older.) Social Security has provided a little of that and is important to middle class retirees.
Since (almost) no politician would say outright - we aren't going to pay the boomers back for the fake pre-payments but we are going to pay Japan and China back so they can afford their aging problems, any mechanism that drags out repayment to SS will be used. Lowering the bend points is a perfect mechanism as well as reducing the COLA gradually. Unfortunate, according to the American Academy of Actuaries, the only "perfect" solution is tethering the retirement age to longevity. I, myself, don't see how that helps the cash flow problem since it just solves the long term actuarial balance problem. No, since this occurs in the short term, there will be one big pot and all retirement money from all sources will be thrown in and redistributed.
Who will support this? A greater number of people than you think. If you combine the numbers of retirees without pensions or savings with current workers you have a lot of people. The former gets their SS guaranteed and the later gets lower taxes.