Budget and SS cuts
- Thread starter bizlady
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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.
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.
Cut-Throat
Thinks s/he gets paid by the post
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
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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Fermion
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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)
gauss
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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.
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.
-gauss
Cut-Throat
Thinks s/he gets paid by the post
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.
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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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.
ziggy29
Moderator Emeritus
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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Midpack
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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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Fermion
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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).
daylatedollarshort
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+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.
gauss
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Stay the course! Well I certainly am not planning to go back to work any time soon. ;-)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.
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.
-gauss
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?
Katsmeow
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See:
Retirement Planner: Benefits For Your Spouse
Note the statement.
So as I understand this (and I am no expert on this so double check), if a spouse is under FRA and applies for spousal benefits that spouse is first deemed to be applying for his/her own benefits and is paid that amount. If that amount is less than the person would be entitled to as a spouse then the spousal benefit is paid to make up the difference. So, basically, applying for spousal benefits before full retirement will permanently reduce the benefits that person is entitled to on his/her own record.
However, at FRA, this doesn't happen. The spouse can apply for spousal benefits and take them while not taking his/her own benefit which continues to grow until age 70.
Edit: Everyone does it. There is SS using the term "they" to refer to a single person where the gender is unknown. Sigh.
I too plan on taking SS at 70 while attempting to minimize SS/total taxes from RMD's. Early next year, I plan on playing around with BigFoot48's spreadsheet over at Bogleheads combined with ESPlanner. Hopefully, I'll be able to figure something out regarding optimal Roth conversions before SS @ 70 vs. taking SS earlier.
HappyOutsourced
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The way I see it is it's good to be careful but you can only make plans on what you know now. There are a lot of possible things that can go wrong.
I think social security will be paid at 100% for at least for the middle class for the next 30 years. But the country is changing demographically and politically so who knows what the future will be like?
I agree with Chuckanut enjoy your time before you get too old. Unless you really love your job.
I think social security will be paid at 100% for at least for the middle class for the next 30 years. But the country is changing demographically and politically so who knows what the future will be like?
I agree with Chuckanut enjoy your time before you get too old. Unless you really love your job.
Midpack
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Me too. I looked at it, but it's going to take more study for me to fully understand the results...
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
Must respectfully disagree with the cited article, and notion that "talk" about SS is just political. The SS Trust Fund is essentially IOU's from the Fed Gov't, and payouts are exceeding collections by $55-75 Billion annually and rising. According to 'Summary of the 2013 Annual Reports' of the Social Security and Medicare Trustees-
"Social Security’s total expenditures have exceeded non-interest income of its combined trust funds since 2010, and the Trustees estimate that Social Security cost will exceed non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to cost was about $49 billion in 2010, $45 billion in 2011, and $55 billion in 2012. The Trustees project that this cash-flow deficit will average about $75 billion between 2013 and 2018 before rising steeply as income growth slows to the sustainable trend rate after the economic recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. "
Trustees Report Summary
While SS is clearly in much better financial shape than Medicare, vast majority of "reasonable" legislators & analysts from both parties agree that SS is not sustainable in the intermediate/long term without some significant changes.
Why do you say 67? Because that's what you think their FRA is (vs. current 66 & 66 + 4 mo for those born in 1956)? Thanks.
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RetiringAt55
Recycles dryer sheets
Yes, I should have said FRA.
Marc
Recycles dryer sheets
My initial plan had been to take SS at 62 (with wife taking spousal benefit at same time). As I will have maxed out contributions, I think this would be around 30K a year. Lately, I have been considering postponing SS benefits with file and suspend at FRA and then taking my full benefits at 70 and pairing this with increasing SWR from 4% to 5% from an expected $3M portfolio for these eight years. I think growth in SS benefits will be larger than the loss in portfolio if I make it past my late 70s.
Marc
Marc
youbet
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+1
As several of the states are figuring out, the way to cut the future expense of public pensions and SS is to reduce the COLA. It's a technique that also comes with desirable political benefits.......... The real impact of COLA cuts won't be felt until years down the road by which time the current politicians will have had time to CYA or, hopefully, die.
Look for SS benefits to be reduced by making the COLA less generous. This will impact everyone, including current recipients.
DevonMiles19
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For once I'm not being too conservative
I'm 38.
Been planning for a 10% cut in SS benefits, and SS benefits being fully taxable. I also plan on all the retirement age brackets being bumped 2-3 years.
I see many here figuring on 20%
I also use a 10% cut when figuring out Survivor's Benefits for Family should I croak early.
I'm 38.
Been planning for a 10% cut in SS benefits, and SS benefits being fully taxable. I also plan on all the retirement age brackets being bumped 2-3 years.
I see many here figuring on 20%
I also use a 10% cut when figuring out Survivor's Benefits for Family should I croak early.
