Social Security and Medicare cuts now on the table

[MasterBlaster]

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Originally Posted by ERD50 Question for anyone: I can also envision limits on higher incomes. Does anyone have a reasoned opinion on how they might go about this? Specifically - would delaying SS to increase the payout make one more of a 'target' for 'adjustments'? -ERD50

The Bowles-Simpson plan cut SS by income level. The highest incomes (top 20 %) received around 30 percent less in payments than under present law. The lowest incomes saw a small increase. Other levels were cut but not as much as the top group.

If I recall correctly, they didn't change retirement ages for SS eligibility ?

[ziggy29]

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Originally Posted by MasterBlaster The Bowles-Simpson plan cut SS by income level. The highest incomes (top 20 %) received around 30 percent less in payments than under present law. The lowest incomes saw a small increase. Other levels were cut but not as much as the top group. If I recall correctly, they didn't change retirement ages for SS eligibility ?

Frankly I find a slight increase in means testing less objectionable to raising the retirement age. Raising the retirement age has this little problem of requiring that there be more jobs for the folks working longer...

[donheff]

Quote:

Originally Posted by ERD50 Question for anyone: I can also envision limits on higher incomes. Does anyone have a reasoned opinion on how they might go about this? Specifically - would delaying SS to increase the payout make one more of a 'target' for 'adjustments'? -ERD50

I take that about right back I don't think they will directly whack the current scale for higher income folks (other than via taxing the whole payment). I could see them raising the payroll tax cap while not commensurately raising the top payout rates - this would whack higher earners in the earning phase. Of course the GOP says no new taxes so...

[MasterBlaster]

I just looked up the (Bowles-Simpson) plan details. They do every thing with a gradual phase-in that ends in 2050.

Highlights...

1) they reduce benefits per income level as previously discussed
2) They increase early and full retirement age
3) They increase the maximum taxable income cap for SS taxes

[ERD50]

Quote:

Originally Posted by MasterBlaster I just looked up the (Bowles-Simpson) plan details. They do every thing with a gradual phase-in that ends in 2050. Highlights... 1) they reduce benefits per income level as previously discussed 2) They increase early and full retirement age 3) They increase the maximum taxable income cap for SS taxes

I'd assume that their measure of 'income' does not include the SS payment? Bad assumption?

IOW, does delaying SS to 70 YO increase your 'income' under this measure?

-ERD50

[ziggy29]

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Originally Posted by ERD50 I'd assume that their measure of 'income' does not include the SS payment? Bad assumption?

If they use AGI, anywhere from 0% to 85% of your SS income would be included under current tax law.

[Nords]

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Originally Posted by obgyn65 Have you seen this ? Officials: President Obama seeks $3 trillion to $4 trillion in cuts - CNN.com - please kindly refrain from making political comments... I am posting this to share with those of us who plan to FIRE - we may be well advised to plan for significant cuts in SS.

Two comments:
1. Fear mongering. Some "unnamed officials" say that some "unspecified cuts" to Social Security may be necessary. Seriously?

2. If Social Security is a single point of failure in an early-retirement plan, then the plan is not adequately capitalized.

Bonus comment: There's plenty of tinkering room to Social Security through means testing (taxation of benefits) and "improving" the COLA calculation. The real program to be concerned about is Medicare.

[MasterBlaster]

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I'd assume that their measure of 'income' does not include the SS payment? Bad assumption? IOW, does delaying SS to 70 YO increase your 'income' under this measure? -ERD50

If you want to read details about the Bowles Simpson deficit reduction plan here is the link. It is much more than just SS cuts.

The discussion of Social Security starts on page 48

www.fiscalcommission.gov/sites/.../TheMomentofTruth12_1_2010.pdf

[Independent]

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Originally Posted by lonnie I think that one very likely "cut" is that the social security for many of us will be fully taxed as income. That is a way to have a means-tested cut, yet not have any official cut listed on the social security payout list. Still, it is a 15% cut for most and a larger cut for others, particularly those with large RMDs. Plan on at leat that.

I agree with your comment that this is one way to reduce benefits without sending smaller checks - a backdoor cut.

But, I do the math differently.
If 85% of my SS is currently included in my taxable income, and I'm in a 15% marginal FIT bracket, then making SS 100% taxable only increases my taxes 15% of 15% or 2.25% of my benefit.
If I'm in a 25% marginal bracket, it's 25% of 15% or 3.75% of the benefit.

[eytonxav]

Not sure where all the funds that were redirected from SS coffers went over the years, but that would be a good place to get back from. Also, would expect to see the FICA cutoff threshold increase much more than it normally does.

[MasterBlaster]

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Originally Posted by DFW_M5 Not sure where all the funds that were redirected from SS coffers went over the years, but that would be a good place to get back from. Also, would expect to see the FICA cutoff threshold increase much more than it normally does.

The funds were directed into the general fund and were spent. You can thank Lyndyn Johnson for putting SS together with everything else under a "Unified Budget". It was indeed separate before that.

[chinaco]

I think most people were aware the SS and Medicare needed some work to keep it solvent over the next 40 years.


The ridiculous part is that a Lobbyist (Grover Norquist) put some fear into the GOP (mainly) using the tea party as a threat to throw them out if they voted for any tax increase. Consequently a number of them were politically pressured (yes by a lobbyist) to sign a no tax pledge.

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The Taxpayer Protection Pledge I, _____, pledge to the taxpayers of the (____ district of the) state of ______ and to the American people that I will: ONE, oppose any and all efforts to increase the marginal income tax rate for individuals and business; and TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates. Source: Americans for Tax Reform

http://s3.amazonaws.com/atrfiles/fil...dgesigners.pdf

Is GOP Resolve On Taxes Showing Cracks? : NPR


Somehow the debate over the current budget has turned into an impasse over taxes because of this pledge.... and it appears that it will be now be used as a midnight session to chop SS.

If that tax pledge was to protect taxpayers.... I am not feeling very protected!

[donheff]

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Originally Posted by DFW_M5 Not sure where all the funds that were redirected from SS coffers went over the years, but that would be a good place to get back from. Also, would expect to see the FICA cutoff threshold increase much more than it normally does.

In 2000 we had a huge surplus. Bush said "let's give a bunch of it back," and did. So, of course there is no surplus anymore. That's is why many of us believe the cuts were always intended to force a crisis that could lead to privatization or other means to cut social programs back. Add two unfunded wars and spending to address a collapse and we have a huge mess to dig out of.

[Independent]

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Originally Posted by DFW_M5 Not sure where all the funds that were redirected from SS coffers went over the years, but that would be a good place to get back from.

I hope you realize that wherever it went, we're not going to get it back. It's either extra spending or extra tax cuts that wouldn't have happened otherwise. (I'm guessing donheff is right, but it doesn't matter anymore.) We can't unspend the money, the only way to uncut taxes is to, you know, raise them.

My personal planning includes a 0% probability of SS getting any of that money back.

[scrabbler1]

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Originally Posted by chinaco I think most people were aware the SS and Medicare needed some work to keep it solvent over the next 40 years. The ridiculous part is that a Lobbyist (Grover Norquist) put some fear into the GOP (mainly) using the tea party as a threat to throw them out if they voted for any tax increase. Consequently a number of them were politically pressured (yes by a lobbyist) to sign a no tax pledge. http://s3.amazonaws.com/atrfiles/fil...dgesigners.pdf Is GOP Resolve On Taxes Showing Cracks? : NPR Somehow the debate over the current budget has turned into an impasse over taxes because of this pledge.... and it appears that it will be now be used as a midnight session to chop SS. If that tax pledge was to protect taxpayers.... I am not feeling very protected!

Thank you for mentioning Norquist. I am incensed that he, a lobbyist, is basically dictating tax policy to the rest of the country via the intransigence of the Republicans he threatens with a primary if they raise taxes one dime.

[scrabbler1]

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Originally Posted by donheff In 2000 we had a huge surplus. Bush said "let's give a bunch of it back," and did. So, of course there is no surplus anymore. That's is why many of us believe the cuts were always intended to force a crisis that could lead to privatization or other means to cut social programs back. Add two unfunded wars and spending to address a collapse and we have a huge mess to dig out of.

This is the endgame of the stupid "Starve the Beast" rallying cry I first heard from my misguided Republican brother back in the 1990s. "Cut taxes now, preferably for the wealthy (and scream "class warfare" at anyone who disapproves), then after the resulting deficits cut spending on things the Left likes."

[2B]

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Originally Posted by donheff In 2000 we had a huge surplus. Bush said "let's give a bunch of it back," and did. So, of course there is no surplus anymore. That's is why many of us believe the cuts were always intended to force a crisis that could lead to privatization or other means to cut social programs back. Add two unfunded wars and spending to address a collapse and we have a huge mess to dig out of.

Now were off the financial reservation and into politics.

Where are our moderators?

Now, back to the finacial only discussion.

[ziggy29]

I would please ask the community to focus discussion more on where we are headed with SS and Medicare reform and its practical impacts on retirement as opposed to revisiting the past through politicized eyes. Thank you.

[rescueme]

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Originally Posted by convergent In addition to what's been mentioned, I am thinking they will likely raise the earliest age from 62 to something higher.

I don't think they will. Certain people in certain occupations don't have much left in them after they hit their 60's (I was one of them).

What they might do is what was done before; that is drop the percentage of the FRA payment at age 62, and at the same time increase the FRA age.

Prior to 1983, if you retired at age 62 you would receive a payment that was 80% of the then FRA age of 65. However the benefits were changed in 1983, during the last major change to SS.

With the latest change, they not only increased the FRA age (in my/DW's case, to age 66), they also reduced the age 62 payment to 75% of the FRA age amount.

As it is, 73% of folks eligible for SS take it early, at age 62 (latest stats a/o 2007, at:

OASDI Monthly Statistics, November 2007 - Table 3 )

I believe there would be more of an uproar over changing the age rather than changing the FRA percentage reduction at age 62.

Of course, that's only my opinion...

[2B]

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Originally Posted by ziggy29 I would please ask the community to focus discussion more on where we are headed with SS and Medicare reform and its practical impacts on retirement as opposed to revisiting the past through politicized eyes. Thank you.

About time.... This forum would be in sad shape if it depended on the likes of me.