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Old 11-07-2013, 01:03 PM   #21
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We could certainly discuss what may or may not happen or the ever popular what should or should not happen but that will not get us anywhere. The issue always comes down to different layers of risk and how to respond.
Since the OP mentioned 25% SS cut in her planning, I was simply offering my opinion on that. As I said, there is no telling what will happen, so I certainly agree that speculation may get us nowhere, but its always interesting (at least to me) as to what others think.
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Old 11-07-2013, 01:05 PM   #22
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I am 65, and plan to take SS when I am 70. So, we are both thinking of claiming SS in five years.

Actually, I will be fine without it but since my pension is tiny I like the idea of having additional, regular, annuity-type income coming in if I should live to a very old age.

If it gets a haircut between now and then I will feel extremely stupid, but it won't be the first time in my life that I have felt like that!
Did you ever look into taking spousal at 66 on your ex's record? I recall that was kicked around here at one time but I don't recall the outcome.

Maybe it would be affected by WPO?
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Old 11-07-2013, 01:28 PM   #23
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I think there's a chance to have SS taxed more (a "stealth benefit cut") at any age, but other than that I personally put the chances of *directly* cutting benefits for those already receiving benefits at precisely zero, and the chances of anyone currently over 55 getting benefits cut as less than 5%.

Folks under 50 are probably prudent to assume a (say) 20% reduction in benefits just in case -- and if that difference makes the difference, you may have to work an extra year or save a little more until then.
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Old 11-07-2013, 01:40 PM   #24
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Count me in the conservative planning camp. SS is under financial pressure & no one can predict what congress will do.

IMHO- They may not cut full SS 'payment' but prob will functionally increase tax rate on it. As late as 1983, SS was not subject to income tax. Now up to 85% is subject to US income tax, plus SS payment is reduced by 50% if you are below FRA & have outside income > only $15,120/yr.

How work affects Social Security retirement payments
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Old 11-07-2013, 01:45 PM   #25
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At this time, we are thinking I will file and suspend at FRA and then he would take spousal. I would then take mine at 70 as it is slightly larger than his.
He may not be allowed to take spousal until he is 67 if his SS would be more than half of yours before then. That is why it may be better for him to take his SS at 62, if you are taking yours at 70.
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Old 11-07-2013, 02:34 PM   #26
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I think if you are age 30 and above and not well off you can expect full SS. At age 45 you could have already been paying into SS for 27 years...
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Old 11-07-2013, 02:36 PM   #27
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I think there's a chance to have SS taxed more (a "stealth benefit cut") at any age, but other than that I personally put the chances of *directly* cutting benefits for those already receiving benefits at precisely zero, and the chances of anyone currently over 55 getting benefits cut as less than 5%.

Folks under 50 are probably prudent to assume a (say) 20% reduction in benefits just in case -- and if that difference makes the difference, you may have to work an extra year or save a little more until then.
+1
Obama has already floated the idea of chained CPI SS increases. Politicians (almost) never do anything directly when they can go in through the back door. Taxation of all SS benefits is one scenario I've heard. Personally counting on 70% benefits at 70. If it works out better, it means more cruises.
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Old 11-07-2013, 02:52 PM   #28
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I didn't even include SS in my plan until I hit my 50's. When I did, I overly reduced it because of WEP. I have subsequently had enough substantial earnings years that I use the amount the downloaded PIA software calculates. My only conservative aspect is that I plan for 100% of it being taxed. I'm fairly certain we can survive a 25% cut as we have a buffer in our retirement savings and my plan indicates we'll have 15+ years of income exceeding expenses, which I don't include the excess income as offsetting any future year's expenses.
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Old 11-07-2013, 04:28 PM   #29
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Well you should understand the facts before you start re-arranging your budget.

Fact 1 : Social Security has never contributed 1 Cent to the National Debt!

Fact 2 : There is Currently a $2.3 Trillion Dollar Surplus in what S.S. has Collected vs. Paid out Benefits.

So, if you look at the facts, a reasonable person would conclude that the 'talk' about Social Security is completely Political.

I'm 62 and not planning on S.S. changing for myself and I'm delaying to Age 70 to maximize benefits.

The Surplus is even Bigger than I thought.
Source :Social Security Has “A Large and Growing Surplus” | Accuracy.Org
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Old 11-07-2013, 04:44 PM   #30
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I agree with Cut-Throat. SS is well funded. Not including it in your budget is the same as not including your public pension (which is probably poorly funded compared to SS)
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Old 11-07-2013, 05:00 PM   #31
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+1
Obama has already floated the idea of chained CPI SS increases. Politicians (almost) never do anything directly when they can go in through the back door. Taxation of all SS benefits is one scenario I've heard. Personally counting on 70% benefits at 70. If it works out better, it means more cruises.
Chained-CPI is a very real threat currently to the value of Social Security benefits. With the President having bought into it, and the Republicans wanting to restructure the system for years. Make no mistake about it, Chained CPI is a cut in benefits. Not only to young folks but to current receipients.

I think in my case I calculated it to be about 8% for the two of us. With nearly 1M/each NPV of SS benefits accrued, an 8% hit would be over $150,000 in 2013 dollars! Hardly the "technical tweek to increase accuracy" that it is being marketed as.

It is amazing to me how many people do not understand the financial value of their accrued SS benefits. My 1M value listed above is based on 22 years of work (salaried, member of technical staff type of job), deferring to age 70 and then taking for 30 years at ~ $2,500/month (ie $30,000/year). All inflation adjusted.

Social Security is a very progressive system in the sense that the majority of the lifetime benefits are earned fairly early in the career of a mid-income worker. Think of it as the opposite shape of the income tax bracket curve that applies to a careers worth of earnings - not just a single year.

I have posted in the past about how to use the benefit estimator at the ss.gov site to determine what SS benefit you have already accrued. PM me for details if you need the post link. Hint: the trick is to enter 0 for last years wages so that it will assume 0 earnings for all future years.

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Old 11-07-2013, 05:27 PM   #32
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Chained-CPI is a very real threat currently to the value of Social Security benefits. With the President having bought into it, and the Republicans wanting to restructure the system for years. Make no mistake about it, Chained CPI is a cut in benefits. Not only to young folks but to current receipients.
Yes, and you have to understand that I was on this forum 10 years ago, when everyone was saying "Bush Says : that if you are younger than 55 your S.S. will be privatized" The last state he tried to sell this to was Alabama. There were plenty of people on this forum that are still here, that were betting me that S.S. would change drastically by 2006. We all know how this turned out.

You have to recognize that these are Political Poker Chips and the Cards that are actually held are far different than the Table talk and Bets. Don't hold your breath or change your retirement plan. Stay the course.
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Old 11-07-2013, 05:31 PM   #33
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That is great! I always urge people to look at this case because most people don't want to plan for it. One SS strategy I would recommend you look at is the "One early, one late" strategy. One of you would take SS at age 62. The other takes the spousal benefit at full retirement age (1/2 of their spouses full retirement age SS) and then switches to their own SS at age 70 to get the delayed credits. This will preserve the larger SS payment for the one who is widowed. Have you looked at doing Roth conversions before one of you starts SS?
This s us for the same reasons. Planned to age 94 with the possibility of a 25 percent public pension reduction for each os along with SS. It is means testing that has me wondering. Will be 66 and starting spousal in a few months. The Big Crunch is RMD's along with SS both hitting at 70. Working on minimizing that now.
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Old 11-07-2013, 05:33 PM   #34
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I'll be taking SS at 70, and I have always felt it best to take the trustees at their word and assume a 25% cut in benefits beginning in 2035. All my projections use that as if it were cast in stone. If our beloved congresscritters figure out a way to fix that problem it will be gravy, but I won't count on it until then.
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Old 11-07-2013, 05:41 PM   #35
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I agree with Cut-Throat. SS is well funded. Not including it in your budget is the same as not including your public pension (which is probably poorly funded compared to SS)
In theory. The problem is that the "deficit" and the "debt" as usually reported has been sugarcoated by offsetting the *real* debt and deficit by the surplus in the SS trust fund.

That balanced budget we had in the late 1990s? For sure, even apart from the SS trust fund it was the lowest deficit we've had in 20 years.... but without that shady accounting, we still had a +/- $200B deficit instead of a small surplus.

That bugged me in 1998, it's bugged me regardless of the political makeup of Washington, and it bugs me today. The size of the deficit is being understated by the amount of the surplus the SS fund developed over decades. I don't want this to get political, but if I'm mistaken in reality, I'd like to be enlightened.

As for being well-funded? Sure, if you're 85 years old. Pretty much all objective, non-partisan projections I've seen are suggesting that as the Boomers retire we are going to burn through the accumulated SS trust fund "surplus" and exhaust it by the late 2020s (and oh joy, I turn 62 in 2027). At that point you can't use the trust fund to "make whole" the promises combined with expected current tax revenues. And even then, it's not like SS will be unable to pay anything; even under the most pessimistic current estimates they could still pay between 75-80% of the benefits currently "promised" (with promise in quotes for a good reason).

Having said all that -- of all the demographic/economic time bombs we face in the next 20-30 years, SS may be least of them. It's still close enough to balance that it won't take a lot of massive tweaks to bring into balance. The bigger problem is how to do it (if we do it at all) depending on perspective. In terms of old-age entitlements, Medicare and public pensions (local, state and federal) are much a bigger problem (and even there, federal public pensions are becoming a lesser problem as CSRS recipients give way to FERS participants).
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Old 11-07-2013, 05:46 PM   #36
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We were planning (and still may) to take SS at age 70 as it would maximize our before tax SS benefits if we assume longer than average lifespans (like our parents/families). However, if we don't do Roth conversions (taxable now), RMD at 70-1/2 plus SS will increase our tax bite substantially. So we're still trying to optimize income/minimize lifetime taxes factoring in withdrawals and passive income from taxable assets (CG/dividend income), tax deferred (about 90% non-deductible) and SS while making assumptions regarding future changes in SS and tax rates - it ain't easy! It may turn out taking SS earlier may be beneficial...
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Old 11-07-2013, 05:49 PM   #37
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Eliminating the income cap for SS would probably be the only fix needed. That should be a pretty easy sell...not sure why they don't put it on the table (and yes my wife makes over $240K by herself, so we would be hit by it....for a couple of years anyway until we ER).
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Old 11-07-2013, 05:57 PM   #38
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I'll be taking SS at 70, and I have always felt it best to take the trustees at their word and assume a 25% cut in benefits beginning in 2035.
+1. I agree on at planning for the at least the possibility of a 25% cut. We are thinking of taking benefits earlier, though, for that reason.

I want a budget going into retirement where our fixed expenses are reasonably low. If we do get the extra 25% SS money above plan, finding ways to spend it won't be a huge problem.
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Old 11-07-2013, 06:06 PM   #39
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Yes, and you have to understand that I was on this forum 10 years ago, when everyone was saying "Bush Says : that if you are younger than 55 your S.S. will be privatized" The last state he tried to sell this to was Alabama. There were plenty of people on this forum that are still here, that were betting me that S.S. would change drastically by 2006. We all know how this turned out.

You have to recognize that these are Political Poker Chips and the Cards that are actually held are far different than the Table talk and Bets. Don't hold your breath or change your retirement plan. Stay the course.
Stay the course! Well I certainly am not planning to go back to work any time soon. ;-)

I hope you are right. My comment was in response to several posts that had suggested that reforms to Social Security would be mostly born by the younger folks. This is not the case with Chained-CPI which is the most likely the first reform to be implemented because it is abstract.

I have budgeted a write-off of 33% of our accrued Social Security benefits over the long haul. I just don't want to see that whole chunk that I have allocated evaporate before I turn 50 next year!

I know how quickly my pension was terminated after the first year they started tweaking the benefit accrual formula. I think it took about 6 years to end it outright.

I get so frustrated when my contemporaries won't get educated on this and when I spell it out for them, they say 'oh well I will just save more'. Of course they look at me, ERed and all, and are curious/intrigued about how I am playing out my life cards.

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Old 11-07-2013, 06:06 PM   #40
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He may not be allowed to take spousal until he is 67 if his SS would be more than half of yours before then. That is why it may be better for him to take his SS at 62, if you are taking yours at 70.

This is one I have not heard of before. May I ask if there is a reference someplace to this that I can explore more?
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