reconsider when to take SS?

[dtbach]

There was an article in the paper today (Associated Press) about SS needing some changes and fast. They showed a graph that by 2034 the program will probably have run through the surplus and that payouts could be reduced by a significant amount.

I was going to wait until 70 but now I'm thinking FRA to take it. Just another thing to throw a wrench into the plan. . . .

 

[Ready]

A lot can happen between now and 2034.


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[pb4uski]

+1 or in my case, even now and 62 (2+ years), FRA (6+ years) or 70 (10+ years).

But.... I hope/wish that the bozos in DC get the political courage to make the needed changes sooner rather than later.

 

[RunningBum]

This is also not new news.

 

[dtbach]

This is also not new news.

I know its been a known situation for many years but the last time I read on it, they had thought that it would be fully funded until 2042. Now it seems to be 2034 which is why I am now a bit concerned about it.

 

[eytonxav]

I am a little past FRA and have been contemplating that as well. If I wait, I wonder if I will be negatively impacted if SS changes come sooner rather than later.

 

[misanman]

I understand that one issue is that the disability trust fund is running out of cash very soon. I believe the administration has proposed moving $$$ from the Social Security Trust fund over to the disability program in order to shore it up. That will likely exacerbate the known problems with traditional social security.

 

[Tadpole]

So why the concern. Is there any discussion of making changes retroactive? I think I can switch from spousal to my own benefits before the critters could get a 3rd rail bill through. Is there some reason to think otherwise. (e.g. a freeze on changes before passage)?

 

[GrayHare]

Who can know what patch will be applied? Perhaps those who start taking SS sooner will see their benefits cut by more. I think whatever is most politcally-expedient will happen, which probably involves printing $.

 

[DEC-1982]

My question is: which party or which politician has the courage to make changes to negatively affect those 55 years or older? especially since retired folks are the most consistent voting group. I think many or most of this community should be safe.

 

[dtbach]

So why the concern. Is there any discussion of making changes retroactive? I think I can switch from spousal to my own benefits before the critters could get a 3rd rail bill through. Is there some reason to think otherwise. (e.g. a freeze on changes before passage)?

The article just noted that at around 2034 there will be no more surplus and if there is no reduction in payouts the first year there will be a $500 million deficit. And then it gets worse every year after, so yeah, I think it will be a cut to everyone who is currently taking SS. Or higher taxes on SS, or means tested, or other not so good things. Or the US does something like Greece and just keeps paying recipients and kicks the can down the road until it collapses.

 

[unno2002]

[FONT=&quot]2014 SS Trustees Report
Trustees Report Summary[/FONT]
[FONT=&quot]Regardless of what reports show, in truth there is no money in the “trust fund”. Every cent of SS tax that was taken in beyond operating expense, was spent, and replaced with an “IOU”. To cash in that IOU, someone else must be taxed, AGAIN, to make any trust fund payout.[/FONT]

 

[samclem]

[FONT=&quot]2014 SS Trustees Report
Trustees Report Summary[/FONT]
[FONT=&quot]Regardless of what reports show, in truth there is no money in the “trust fund”. Every cent of SS tax that was taken in beyond operating expense, was spent, and replaced with an “IOU”. To cash in that IOU, someone else must be taxed, AGAIN, to make any trust fund payout.[/FONT]

Right, and this, IMO, is why there's nothing especially noteworthy about 2034 or whatever year the IOUs run out. The general fund is transferring money right now every year to SS, it will continue to do it in the future. When the "special SS bonds" run out, it causes no new shock to the general fund, because the previous budgets were already built with this transfer built in.

 

[bingybear]

When to take SS and if anything is there are two important questions. Will they means test it?
Even if it is not means tested and it still is flush, there are still things to work out that is quite dependent on individual circumstances. How long will you live? How will it be taxed? And what investment returns do you assume? (note-- if you take it and invest it or take it and spend it so other funds are left invested...effectively these can be assumed invested and your other funds lived on).

And how do you invest? In TIRA/401k stocks or bonds? RIRA/R401k stocks or bonds...same for after tax accounts. And how much roth conversion to do before RMD time?
Some people may have an easy optimum in these trade studies. There area a lot of moving parts for my case. So I'm not sure what is really best and the sensitivity to the assumptions will be. I agree with the need to take another look at this. FRA is 13 years away for me

 

[Rothman]

We did hear Chris Christie say the other night he favored means testing SS and his example was other retirement savings not just income, so that would penalize this group but I doubt the political reality to do such measures. I do expect continued nibbling like taxing benefits increasing wage exposed to tax, etc. but with the concept you paid in hard to explain why you get nothing.
Regarding the "surplus" running out, we all know there is no money sitting there with your name on it as the government has treated SS as a pocket transfer. It all come down to political will to keep or break the promise. I am using the payments in my plan.


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[bingybear]

We did hear Chris Christie say the other night he favored means testing SS and his example was other retirement savings not just income, so that would penalize this group but I doubt the political reality to do such measures. I do expect continued nibbling like taxing benefits increasing wage exposed to tax, etc. but with the concept you paid in hard to explain why you get nothing.
Regarding the "surplus" running out, we all know there is no money sitting there with your name on it as the government has treated SS as a pocket transfer. It all come down to political will to keep or break the promise. I am using the payments in my plan.


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yes Christie picked up that approach. I really have an issue with that knowing the many federal, state, and local employees didn't have to pay into SS. To make it fair... how would they deal with those people.

In addressing assets... which is what would create many of our income (RMD for one), would there be the game that many played with the FAFSA (?spelling?) for college aid? They would buy a very expensive house so much of their assets would not be considered and would increase aid for college.
I did not do this, but know some that did.
The moving political parts are another factor

 

[dtbach]

The article states that in 2035 payroll taxes will only collect only enough taxes to pay 79% of benefits and the trust fund will have no reserves left to make up the difference, triggering an automatic 21% cut.

I've never heard that there would be an "automatic" cut but that is what the article states.

 

[Senator]

One the minimum wage is raised to $15+ per hour, the extra SS taxes will likely be enough.

Once everyone is making $30K+ per year, as long as inflation doesn't rise, SS will have plenty of money.

The article states that in 2035 payroll taxes will only collect only enough taxes to pay 79% of benefits and the trust fund will have no reserves left to make up the difference, triggering an automatic 21% cut.

I've never heard that there would be an "automatic" cut but that is what the article states.

Congress had a fit with the sequester, and that was only a 2% cut. And I actually believe it wasn't a cut, but a 2% smaller raise than budgeted.

I would worry more about healthcare services being denied after you get to be 70. Things like prostate cancer treatments after 70, or colon cancer prevention. Most those things take years to kill you and it will likely get you past the average life expectancy.

 

[Ready]

They could raise the cap from $118,500 to a much higher amount, like $150K. That would probably be the least painful way to plan for the eventual deficit.

Means testing, as Christie alluded to in the debate, would mean that LBYM folks like those on the board would get less while my neighbor who buys a new car every three months would get the full load. I don't see that happening.

 

[pb4uski]

...... I really have an issue with that knowing the many federal, state, and local employees didn't have to pay into SS. To make it fair... how would they deal with those people.....

No need to "deal with" those people... they didn't pay in so they don't get benefits.

They could raise the cap from $118,500 to a much higher amount, like $150K. That would probably be the least painful way to plan for the eventual deficit.

Means testing, as Christie alluded to in the debate, would mean that LBYM folks like those on the board would get less while my neighbor who buys a new car every three months would get the full load. I don't see that happening.

Agreed in both cases. Raising or eliminating the cap would go a long ways to solve the problem.... depending on whether you then count the higher contributions in computing those taxpayers future benefits... or not.

I don't see means testing as politically palatable... I know that I would be if savers are penalized at the expense of spenders.

 

[samclem]

Agreed in both cases. Raising or eliminating the cap would go a long ways to solve the problem.... depending on whether you then count the higher contributions in computing those taxpayers future benefits... or not.

For a lot of practical reasons the increased contributions would have to increase the expected payout to some degree. With the present "bend points", the "payback" is already pretty meager, so raising the cap still improves the financial position of SS. And, there's no reason legislation couldn't be passed to reduce the payback rate even further at higher levels of pay. To maintain the appearance of it being "insurance" rather than "welfare", the increased taxes would need to provide at least some meager increase in benefits.

 

[bingybear]

No need to "deal with" those people... they didn't pay in so they don't get benefits.

I don't see means testing as politically palatable... I know that I would be if savers are penalized at the expense of spenders.

My comment on the people who did not have to pay in... is based on my assumption that I'll be means tested out of SS for both myself and DW. By taking some people out of the system is just another means of screwing up system... not that it is likely a real large part of the problem.

I expect all solutions will not be palatable to many... just what they actually implement and when.

 

[pb4uski]

I guess I would suggest that any assumption that you'll be means tested out of SS is not likely and that was the basis for my response, but I understand your point.

 

[Looking4Ward]

My thought has always been that these doomsday projections are all based on a very large percentage of the population collecting SS benefits, which also means there would be a very large percentage of the population that is not likely to quietly accept any negative changes to those benefits.

 

[eytonxav]

One the minimum wage is raised to $15+ per hour, the extra SS taxes will likely be enough.

Once everyone is making $30K+ per year, as long as inflation doesn't rise, SS will have plenty of money.

That would be interesting, but I am more concerned about all the small businesses that will go out of business by virtue of a $15 minimum wage.