Social Security and Medicare cuts now on the table

[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.

 

[Alan]

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.

I don't think it is new news. Who on this forum is not expecting SS cuts and planning for them?

Washington (CNN) -- President Barack Obama is seeking $3 trillion to $4 trillion in deficit cuts over the next decade, a move that would require putting Social Security, Medicare, defense spending and tax reform on the table as part of a balanced approach to cuts, Democratic officials familiar with the negotiations told CNN.
The officials, speaking on condition of anonymity, did not say what types of cuts would have to be considered under such a proposal. In the past, one Social Security adjustment debt negotiators have discussed is cost-of-living.

 

[WB52]

As a guess, I'm estimating SS to payout at 75% of the current rate by the time I start collecting in 10+ years. At least, that is what I am planning in my FIRE projections.
Comments?

 

[2B]

Ah yes, this is fraught with the risk of political diatribes. I've learned over the years the moderators have drastically different opinions as to what is political and what is actions taken by our government that has meaningful impact on retirement planning. The changes that are being considered to our so called "entitlements" are very meaningful to my financial planning.

I don't think there will be any direct cuts but I think it prudent to discount the future value. Both parties support changes that will ultimately reduce most of this forum's participants future income. What I expect we'll see is manipulated COLA increases, elimination of any tax free portion and lessening of the SS payout at the higher income levels (anything over $30K). Why do I suspect the same rules won't be applied to Federal pensions?

I know I have a problem with my cynacism; but with everything happening these days, I just can't keep up.

 

[donheff]

I don't think there will be any direct cuts but I think it prudent to discount the future value. Both parties support changes that will ultimately reduce most of this forum's participants future income. What I expect we'll see is manipulated COLA increases, elimination of any tax free portion and lessening of the SS payout at the higher income levels (anything over $30K). Why do I suspect the same rules won't be applied to Federal pensions?

I know I have a problem with my cynacism; but with everything happening these days, I just can't keep up.

I expect this is about right. As to Federal pensions I hope you are right But, the old system Fed pension COLAs (mine) are the same as SSA COLAs so it may be they would just change to match SSA absent specific exceptions. The newer FERS COLAs are already so called "diet COLAs" and the costs are fully funded so they may get left alone.

 

[rescueme]

Who on this forum is not expecting SS cuts and planning for them?

I/DW are not.

First of all, we start collecting in less than two years (I doubt if any "solution" will come before that time).

The second (and more importantly), SS was never looked as the foundation to our retirement income plan. If it's there, fine; if it's reduced (or worse), we will still be OK, according to our estimates.

The major impact to society will be if SS is drastically cut back in the future. I suspect that a substantial of current/future retiree's count on the program to supply the majority of their retirement income needs. That will cause a major shift not only in retiree income, but also to the economy due to the possible reduction in purchasing goods/services by the retiree population.

The velocity of money is eliminated if you don't have a starting value (e.g. SS payments) to flow through "the system". That in turn will affect the economy to a much greater extent than one person's SS income.

Just my $.02.

 

[chinaco]

What a bunch of complainers... its supposed to be a party!

Shut up and drink your tea!

 

[F-One]

The cuts I've seen mentioned are changes to COLA for SS. Per the article, it would be about 0.3% a year (compounded). For average SS of $1,100 per month. it would equal $18,634 over 25 years reduction.

Cut Social Security COLAs? | Bankrate.com

 

[convergent]

In addition to what's been mentioned, I am thinking they will likely raise the earliest age from 62 to something higher. I am planning to start drawing at the earliest age possible, but that won't be for 12 years, so at this point I'm planning for it to be there, but its really the gravy on the plan at this point, and not the majority of our retirement savings. I already have enough saved for retirement to surpass SS.

 

[jimnjana]

In addition to what's been mentioned, I am thinking they will likely raise the earliest age from 62 to something higher. I am planning to start drawing at the earliest age possible, but that won't be for 12 years, so at this point I'm planning for it to be there, but its really the gravy on the plan at this point, and not the majority of our retirement savings. I already have enough saved for retirement to surpass SS.

In 12 yrs it is age 63 for early soc sec...so you are correct.

 

[ziggy29]

I already took it once when my FRA went up from 65 to 67. Suspect I'll see myself getting creamed again, either with a rise to 68-70 and/or much lower benefits unless I can engineer a lower apparent income in retirement.

 

[73ss454]

I don't think anything will be cut. The government will just figure out ways to take a good portion of what we get back.

 

[Independent]

This is from the link, my bold:

To reach that number, they will need to include significant revenue increase and significant changes to entitlement programs.

The aide said the two parties are discussing reductions in Medicare, Medicaid and even Social Security, something Democrats like Harry Reid have long said is off the table. The cuts are in the range of $500 billion, the aide said

If they do "balanced" packages of tax increases and benefit cuts, I figure I'll get 85-90% of my scheduled SS (I'm 64). Medicare might cost us a couple thousand more per year.

That's in my plan.

 

[FANOFJESUS]

As a guess, I'm estimating SS to payout at 75% of the current rate by the time I start collecting in 10+ years. At least, that is what I am planning in my FIRE projections.
Comments?

Sounds smart

 

[MasterBlaster]

All of the projected growth in spending is in SS and Medicare/Medicaid.

If they aren't talking of SS/Medicare/Medicaid/Defense/taxes then they are only posturing.

You can bet that those programs will be cut. If they actually do it, Everyone will feel some pain.

 

[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.

 

[calmloki]

It's all about confidence and attitude. Maybe if the government stopped paying with checks and credit cards and went to cash payments. and used these instead of twenties:

 

[fisherman]

In 12 yrs it is age 63 for early soc sec...so you are correct.

I hope I am reading this right as I have never heard of a change to age 62 yet. Could you cite a source for reference.

Full Retirement Age = 67

 

[ERD50]

... What I expect we'll see is manipulated COLA increases, elimination of any tax free portion and lessening of the SS payout at the higher income levels (anything over $30K). ...

I expect this is about right.

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'?

On one hand, it makes no sense - actuarially the delayed and early payments are the 'same' amount. No reason to target the higher $ figure of a later payout.

OTOH, what does 'sense' have to do with it?

I don't think anything will be cut. The government will just figure out ways to take a good portion of what we get back.

Agreed. Some complex, obfuscated tax rules which limit what goes into your pocket is harder to turn into a media sound bite than "they cut my SS!".

-ERD50

 

[ziggy29]

You can bet that those programs will be cut. If they actually do it, Everyone will feel some pain.

You think they really will touch people already collecting it?

 

[MasterBlaster]

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]

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]

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]

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