Are you concerned that your nest egg will cause you to get means tested out of SS?

[frank]

if our current political leaders implement the policies needed to avoid means testing they would loose their jobs and that is the reason why nothing will happen until after the 2012 elections. If you pass an unpopular bill then the people will have 4 years to forget before you are accountable.

 

[chinaco]

Interesting comment on an article about AARP: AARP holds its fire on Social Security reform

AARP holds its fire on Social Security reform - The Hill's On The Money

I'm not at all surprised that the AARP is not making an all out effort to protect Social Security. For the past ten years, I have been researching and writing about Social Security, and I have published four books on the subject. During that entire period I have been trying to alert the public to the fact that all surplus Social Security revenue generated by the 1983 payroll tax hike was being diverted to the general fund and used for general government operations. The money was supposed to be saved and invested to build up a large reserve in the trust fund with which to pay benefits to the baby boomers.

The AARP is fully aware of the great Social Security scam, but they don't want the looting exposed. When my book, "The Looting of Social Security" was published in 2004, I sent a review copy to then AARP CEO William Novelli, along with a letter requesting that the AARP give me help and support in alerting the public to the looting of the trust fund. I received a reply from William Novelli, dated April 9, 2004 scolding me for exposing the looting.
Novelli wrote, "Saying that the trust funds have been looted could result in people losing confidence in Social Security, and that is counterproducti ve." Following that letter, the AARP cut off all communcations with me. I tried repeatedly to communicate with the organization, which I had been a member of for many years, but they would not respond to my letters, emails, or phone calls. I have had no further communications with them, but they have fought my efforts to expose the looting every step of the way. It wasn't that Novelli didn't believe the trust fund was being looted. His concern was keeping the public from finding out about the looting. In my opinion, the AARP is more concerned with maintaining good relations with corporate America and government officials than it is in representing the best interests of its 38 million members. Their refusal to join with the other organizations in fighting against benefit cuts reinforces that opinion.

Allen W. Smith, Ph.D.
Professor of Economics, Emeritus
Eastern Illinois University

Paying for SS going forward (i.e., today's FICA taxes even with an increase) is not the problem.... it is repaying the last 25 years of FICA collected and spent for other purposes. In effect.... they have to Double FICA to collect what they spent on other programs over the last 25 years (instead of collecting the taxes). Paying almost 25% FICA (12.4% from the worker and 12.4% from the company).

The Reagan and Bush tax cuts were little more than a ruse on the public... they cut and kept spending... the scam was covered up by using FICA collections.

Now the bill is due. Those taxes that Reagan and GWB cut (but not really)... will be reconciled by not paying people their SS.

 

[FIRE'd@51]

During that entire period I have been trying to alert the public to the fact that all surplus Social Security revenue generated by the 1983 payroll tax hike was being diverted to the general fund and used for general government operations. The money was supposed to be saved and invested to build up a large reserve in the trust fund with which to pay benefits to the baby boomers.

Well, in all fairness, the Trust Fund itself has been saved and invested, and a large reserve has indeed been built up. Of course, that reserve is in unmarketable US government securities, a large portion of which will soon be coming due. The fact that the return on this portfolio hasn't been high enough to provide for retiring "boomers" is a whole additional matter. IMO, the "scam" is that the borrowing from the Trust Fund was not included in the deficit, as it would have been if the Treasury had auctioned the dollar-equivalent of these "IOU's" to the public.

 

[chinaco]

Well, in all fairness, the Trust Fund itself has been saved and invested, and a large reserve has indeed been built up. Of course, that reserve is in unmarketable US government securities, a large portion of which will soon be coming due. The fact that the return on this portfolio hasn't been high enough to provide for retiring "boomers" is a whole additional matter....

Yes... Trust Fund is the ruse. And it is fair to call it out!

Thanks for the description ... Are you for real?? Are you really that naive?

 

[Aeowyn]

I try to not let the gyrations of the government prevent me from doing smart things.

I'm not saying SS is government aide, but I've know people who rely on government aide rather than work and save for a living. They do not thrive. For example - have you ever heard of someone receiving unemployment benefits not getting a job yet because their benefits haven't run out? They may be "milking" the system for money - but it's not a technique that's going to cause them to thrive.

Not that I won't try to max out on the "financial" games the government plays - I take taxes into consideration in everything I do. But I refuse to count on the government for anything.

My game plan for minimizing future taxes has been to put as much as I can into Roth accounts. If this causes me to be means tested out of SS, I may not like it, but I'm not going to stop accumulating wealth so that I can get SS.

 

[chinaco]

I try to not let the gyrations of the government prevent me from doing smart things.

I'm not saying SS is government aide, but I've know people who rely on government aide rather than work and save for a living. They do not thrive. For example - have you ever heard of someone receiving unemployment benefits not getting a job yet because their benefits haven't run out? They may be "milking" the system for money - but it's not a technique that's going to cause them to thrive.

Not that I won't try to max out on the "financial" games the government plays - I take taxes into consideration in everything I do. But I refuse to count on the government for anything.

My game plan for minimizing future taxes has been to put as much as I can into Roth accounts. If this causes me to be means tested out of SS, I may not like it, but I'm not going to stop accumulating wealth so that I can get SS.

The first half of your statement sure sounds like you think SS is welfare.

Many of us paid into a govt pension program (known as SS). It is legally due to the participants in the system. It is not milking the govt. Of course, they might change the rules because they have not been good stewards of our money... yes our money!


While it will not work exactly like this... here is the notion.

If I continue to work and earn $ only to give those earned $ (via a double tax... income tax and FICA only to relinquish SS in the future... a tax) to the govt to support someone else... why would I continue to work? Why not FIRE (early) and spend my money and engineer my bottom line income later in life (assuming an acceptable bottom line can be attained).


In other words, if the govt changes the rules, people's behavior will change... but in this case it will only happen to those that can afford to do it!


People will do that which is in their best interest... and with a vengeance if they are getting the shaft!

 

[FIRE'd@51]

Yes... Trust Fund is the ruse. And it is fair to call it out!

Thanks for the description ... Are you for real?? Are you really that naive?

Nice bit of name-calling, chinaco - but I guess that's your style.

If by naive do you mean that I think the Government will not default on its obligation to the Trust Fund. No, I don't think it will. Do you think it will?

 

[Aeowyn]

I do think that SS is an entitlement program and should be given to the people that invested in it. But I don't have any control over it - so I'm not going to count on it.

It is a forced investment into a government system. A system that the government seems to be free to change at anytime. And as such, I'm not going to count on them to keep their word. If I had the choice, I would opt out of SS. But I don't have a choice.

I'm in the 25% federal tax bracket. I'm not going to set out to earn less money so that I can avoid paying less tax. I may play with putting money in sheltered accounts in order to pay less tax, but I'm not going to forgo making money to avoid taxes - I still get to keep 75% of it (OK maybe 65% minus the other taxes).

I feel much better having my own assets to get me through retirement. If having those assets causes me to lose my SS - I guess I'll live. I may feel "cheated", but I really do think I'll be be better off not including this program in my financial planning.

 

[chinaco]

Nice bit of name-calling, chinaco - but I guess that's your style.

If by naive do you mean that I think the Government will not default on its obligation to the Trust Fund. No, I don't think it will. Do you think it will?

No name was called...

Did I ridicule your statement? Absolutely! I don't buy it! It is a bunch of hogwash.

I have read published descriptions of the so call Trust Fund and how it works. It was and is BS!


We are getting scr3wed.

 

[WhoDaresWins]

It is beyond my control, so I am not worrying about it. I plan to get SS survivor's benefits in 3.5 years at age 60. It will supplement my pension nicely (don't know the SS amount as I have never looked into it), but if it is not available, I will just have to dig into savings as I plan to hold off as long as I can tapping tax-advantaged accounts.

 

[Midpack]

I'm not going to set out to earn less money so that I can avoid paying less tax.

I can only speak for myself, but that's not how I mean it. I want to earn as much as I can while I am working, always have.

Where the question comes in is do I want to work longer and accumulate a bigger nest egg to generate more income only to have more of it taxed/means-tested away? Once one reaches "enough" plus your personal safety factor - IMHO it's a legitimate question.

To put arbitrary numbers on it just to illustrate. Is it worth continuing to work to reach $3M at age 65 if you honestly believe you have enough with $2M at age 60? Or put another way, if you're at 3% WR at age 60, is it worth continuing to get to a 2% WR at age 65 IF you believe you're going to lose a substantial amount of the additional nest egg to taxes in some form? To me, that's the question...

Reminder - the numbers are just to illustrate.

 

[frank]

I think that when you have enough in investments that you can draw the earnings from them and live on them, not just survive, and not use the principal, you are financially independent. no matter what age that happens to be. I would not figure in ss because they will either cut benefits, raise the age, or tax more of it. when you are tired of the work that you do and want to quit it is time to retire, if like some people your job is your fun. then stay working. that matter is all personal.

 

[NW-Bound]

I think I have enough, but I have this nagging suspicion that when I have too much time on hand, I may morph from a frugal type to a spendthrift with new toys and leisure activities.

Has that happened to anybody who wants to 'fess up?

 

[W2R]

I think I have enough, but I have this nagging suspicion that when I have too much time on hand, I may morph from a frugal type to a spendthrift with new toys and leisure activities.

Has that happened to anybody who wants to 'fess up?

It's been the opposite for me. Now that I am happy and have what I want (free time, no job, etc), there is less need to spend a lot of money in attempts to find happiness.

 

[youbet]

I think that when you have enough in investments that you can draw the earnings from them and live on them, not just survive, and not use the principal, you are financially independent. no matter what age that happens to be.

Don't forget to allow for inflation. Folks who think that as long as they're "not touching the principal" often get nailed years down the road when their earnings no longer come close to supporting the inflated prices for the items in their budget. I think today this is going to be especially true in the areas of energy and food.

 

[Tadpole]

Well, I agree with many of the earlier posts. The latter ones got sidetracked.

Here is how I have viewed this for a long time. Remember these "won't affect people over 55" proposals have been out there for a long, long time even if they never made it to the floor of the Congress.

I was under 55 by a few years when I first started watching this. Year to year I approached 55 and one day I was in the 55 and over group. It's 2011 and people born in 1956 or thereabouts are approaching the "over 55". Boomers = 1946-1964. This differs depending on where you get it. But it looks like almost 10 years of boomers are already in the sweet "over 55" spot.

One Congress critter in the privatization group introduced the same legislation several years in a row and then watched as people passed 55. The last year I looked at his proposal he had tied the exemption to birth year as a constant so his exemption that year went from 55 the previous year to 56.

So one factor is the number of people over 55 which will only grow over time. Also, if we are near the 10 year mark, we are probably near the peak of the boomer years. That puts a lot of people in the age 50-55 group.
Does Tadpole have a point? Yes, if "above 55" were real, this is beginning to be about people in younger generations who probably think it is about the boomers.

Also, I imagine that promises made to people 55 and above are worth the same as the trust fund "IOUs". In short, worth only what the people are willing to fight for.

Additionally, and based on the above, I have never wavered from the conclusion that, to the maximum extent possible, retiree money will be placed in a single pot and redistributed to cover as much of the retiree needs as possible. So, yes, if your neighbor earned twice the income in his working life but didn't save or invest, you will be contributing to his poverty income after retirement.

Finally, if the COLA formula is changed to a lesser amount, expect the amount of your share to increase more each year to keep the lower end out of the poverty statistics.

 

[youbet]

I think I have enough, but I have this nagging suspicion that when I have too much time on hand, I may morph from a frugal type to a spendthrift with new toys and leisure activities.

Has that happened to anybody who wants to 'fess up?

DW and I are pretty frugal (our son thinks we are very, very frugal ), but we have found ourselves with some new toys we hadn't necessarily planned on when we started retirement a few years ago. We like outdoor activities and as we get into our 60's, we can tell that our bodies aren't going to be comfortable doing some of the things we like to do much longer. So, here come the toys now while we can still use them. And, of course, using them involves spending money too. It's not just a one time expenditure.

I'm not worried, we're doing OK. But this concept that as geezers we'd just want to set in front of our B and W TV watching free OTA programs and drinking ice water because it's free isn't true. We definitely don't feel deprived, but there's no doubt we'd spend more on travel and leisure if we felt comfortable doing so.

 

[youbet]

I have never wavered from the conclusion that, to the maximum extent possible, retiree money will be placed in a single pot and redistributed to cover as much of the retiree needs as possible. So, yes, if your neighbor earned twice the income in his working life but didn't save or invest, you will be contributing to his poverty income after retirement.

Finally, if the COLA formula is changed to a lesser amount, expect the amount of your share to increase more each year to keep the lower end out of the poverty statistics.

Sadly, I concur with your conclusion.

 

[NW-Bound]

OK, let me get back on track with this thread.

I understand that if we need to keep SS solvent, and some of the problem is due to higher longevity, demographic changes and all that, some reduction may be necessary. And let's face it, SS is always a form of assistance to low-wage earners, who did not make that much to have a chance to save for retirement while working. So, the reduction may need to be for people at the higher range.

However, the reduction in the form of means testing penalizes the savers and that makes me upset. Again, if you think of two persons making identical incomes in their working life and contributing the same amount to the SS fund, why should their benefit be different now, because one saved and the other one did not? Any policy that has the side effect of promoting the wrong behavior should be avoided.

 

[Tadpole]

NW-Bound, It's about getting the money for entitlements without losing campaign contributions or votes not about rewards and punishments for behavior. It is also about completing the transition of employer benefits to "you are on your own".

Let's just assume the panic news is true. "The boomers have not saved for retirement." and "The boomers and current retirees hold most of the 'wealth'". This paints a picture of haves and have-nots irrespective of each individual sacrifice.

If "most boomers" don't have savings and they believe "a few" are unfairly "rich", then the majority of retirees will support anything that assures their income, fair or unfair.

 

[NW-Bound]

Call me one of the hopelessly romantic who like to believe our elected officials want to do the right things for the nation, but are just sometimes misguided. Sigh...

 

[Spanky]

Call me one of the hopelessly romantic who like to believe our elected officials want to do the right things for the nation, but are just sometimes misguided. Sigh...

Yes, we can only hope.

 

[thefinancebuff]

Of course it would incentivize people to save even less.

Consider two persons who make exactly the same salary. Both contributed identical amounts to SS. One spends all the rest. The other saves some money in his 401k, or IRA, or in an after-tax account. When the time comes for retirement, one has "too much" while the other is "empty handed". The gummint says that one now deserves more, and the other deserves less.

In order not to discourage savings, a means tested benefit has to be low enough no one wants to rely solely on it. SS benefits are too high for this purpose.

 

[swampwiz]

I think I have enough, but I have this nagging suspicion that when I have too much time on hand, I may morph from a frugal type to a spendthrift with new toys and leisure activities.

Has that happened to anybody who wants to 'fess up?

Yes, since I semi-FIREd at age 31, I have been doing a lot more traveling, for skiing and regular travel. Of course, I have been very frugal about it.

 

[Gone4Good]

Of course, they might change the rules because they have not been good stewards of our money... yes our money!

Of course, in a democracy, "They" is "Us".