Social security means testing?

[meierlde]

However, the file and suspend change happened very quickly, and unless you are already 62, a married couple can no longer take advantage. So we have rethought our position.

Actually the File and suspend change was proposed in the 2014 budget of the president as well as the 2015. So it was discussed for 1.5 years what happened here was the exception to regular order that congress likes now days no passage thru committees etc. BTW it should be noted that once the full retirement age begins to rise (starting in 2020 by 2 months a year for the next 6 years) the benefit increase will be limited to 24% from todays 32%. (you loose 1 year of increase).
Actually if the full retirement age then remains the same for 10 years and increases again following the model that implies that folks turning 65 in 2035 would start the 2 months a year moving to 68 for folks turning 65 in 2041 etc.

 

[Mulligan]

Agreed.... What the article clearly tapped danced around is the fact this was set up clearly as a "pay as you go system". No illusion there as it has been that way from the beginning. The current working generation pays for the retired. Yes there are some problems that need to be addressed. But to label it as "welfare" in the sense the common man interprets that word is just plain wrong. And this is coming from a WEP victim , who begrudgingly supports the WEP.


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[nun]

Brits I have worked with told me that the UK does not apply a COLA to the state pension program for those who reside in retirement outside the UK.

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That is true for some countries, mostly Commonwealth countries like Canada and Australia because of historical reasons and no reciprocal SS agreements. The UK pays full COLA on its SS payments when made to residents of other European countries and the USA.

 

[Senator]

... to label it as "welfare" in the sense the common man interprets that word is just plain wrong.

Agreed. If every government program that was a pay as you go was considered welfare, federal and private pensions, military retirement, even interest on treasury bonds would be considered welfare. And the ACA and medicare would be a no-brainer. Even driving on public streets.

If SS was privatized, and the accounts was invested in government bonds, it would be no different. I suppose the MyIRA would be welfare welfare too.

SS will always be around in one for or another. They may means test it for high earners, increase the age to collect, increase the withholding, adjust the bend points, reduce the CPI or any number of other tricks to extend or fund it, but it will be around.

If I had a $100K retirement income, outside of SS, I would not be worried about being means tested in the next 20+ years.

 

[MichaelB]

Agreed.... What the article clearly tapped danced around is the fact this was set up clearly as a "pay as you go system". No illusion there as it has been that way from the beginning. The current working generation pays for the retired. Yes there are some problems that need to be addressed. But to label it as "welfare" in the sense the common man interprets that word is just plain wrong. And this is coming from a WEP victim , who begrudgingly supports the WEP.


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Yes, not only wrong but also off topic and likely to bring a premature end to a lively and interesting thread.

 

[marko]

They already have and High income non LBYMs pay for it.

Because if you earn max taxable SS income from 25 to 55 or from 25 to 67 you will get about same SS benefit.

So non LBYMs work extra 12 years and pay into SS, but he/she will not get anything extra in terms of benefits.

55 is nice age to say so long to work IMO to squeeze most out of SS benefit and pump least into it. (For high earners)

Nice observation! Sort of a "Freakonomics" analysis!

I am very disappointed with AARP on their position. .

Disappointed, but not surprised.

 

[NW-Bound]

A true retirement saving system would result in a retiree with 40 years of work getting twice as much as a retiree who worked only 20 years. SS does not do that.

I have seen systems in other countries where they separate out the welfare and the retirement parts. For the welfare part, everybody has to contribute, and as there's no cap on that the well-paid worker pays more without getting a direct benefit, just like other taxes. But in return, his own retirement portion is really his, and the longer he works the more he has. He will never complain about getting cut or has to "share". It is also tied directly to the investment markets, so that when the economy is down nobody gets a guaranteed benefit. That system also avoids the silly clauses like our SS has, that one needs an optimizer program to figure out how to file for benefits. File and suspend, spousal, survivor benefits. Arghh!

At this point, I do not see how our SS can be changed. We are stuck.

 

[marko]

At this point, I do not see how our SS can be changed. We are stuck.

We might be 'stuck' as you put it, but in this case, I don't see how anyone on this forum would be better off if anything changed.

"Change is not good" in this instance.

 

[NW-Bound]

That's why our SS system is stuck. We cannot go back and undo the silly things that were passed into laws in the past. In fact, we keep passing more laws to make it ever more complicated.

So, we are forever running optimizer programs this and that, shifting money around to get ACA subsidy, and playing the shell game with the IRS by moving money around different IRA/401k/Roth/After-tax accounts.

I am sure that if we sit down and explain all the nuances in our financial planning to people in other countries, they will be astounded: "What the hell?".

 

[athena53]

And while I think it is highly unlikely I also think the worst that will happen for us is a 25% cut. That would be noticed, but it would hardly put us on a cat food budget or anything close to it.

Actually, that's what's happening now. As much as 85% of your SS can be taxed if your AGI plus non-taxable interest plus 1/2 your SS benefit exceeds $34K for an individual, $44K if filing jointly. It gets worse since many states base your state income tax on your Federal Adjusted Gross, which already includes SS. Some states allow you to back that out of state taxable income, but some, such as KS, happily tax you on SS, too. (KS will let low-income people exclude SS but that didn't apply to us.)

To answer the OP's question, I took the cynical view that SS would be zero. Then, 18 months ago, the political BS at work became intolerable. I took a look at the numbers again and decided to factor in SS; I was 61 and, while I was aware of the taxation issue (DH is 15 years older), I figured zero was unreasonably pessimistic. I included 100% (planning to wait till age 70) but will be able to manage regardless of what they tax away, between a couple of small pensions (<$20K total, no COLA) and investment income.

 

[jkern]

For planning purposes, I use the full amount expected in 4 years at 62. However, I'm very conservative and I can still sustain my standard of living without SS. If things got tight I have some flexibility to reduce spending.

 

[DEC-1982]

I plan on taking SS at age 70, expect no reductions for myself, and it's part of my planning. If Congress actually passes a law making changes to SS and it is signed by the president, the time during that law changing process would be the time for thinking about alternatives, because that's when it will be clearer as to who is affected and what is the extent of the change.

I haven't heard of any bills for SS changes on the floor of the House or Senate. Let me know if I am wrong. and nothing on SS is going to happen in 2016, an election year.

 

[HFWR]

The means testing you mention is not about making a dent in the situation; it is about feeling good about making those who saved, did without and LYBM end up like everyone else who didn't. In fairness, of course, y'know.

Won't argue that point, but some, for instance Frank Langone of Home Depot fame, has suggested that he doesn't need the money, and donates it to charity. Doubtful he retired by LBYM...