Social security means testing?

[I earned it]

I keep hearing social security is running out of money, I'm 53 & retired, the bride is 47 , she is a homemaker, I imagine like most folks in here as an early retiree , if means testing happens , everyone of us would get a reduced social security benefit (if any). I don't want your feeling about if it is fair or not, I'd like to know if you counted on it when your figured out if you had enough to retire. I thought I was being generous in my calculations when took my projected amount and reduced it by 30% , because I read by the time I was about 68 it would only have enough for a reduced amount. Thank you

 

[Midpack]

Most of my calculations were based on 50-70% of published Soc Sec benefits during my accumulation years.

But as I got close to actually pulling the trigger and facing the real financial finality of retiring, my calculations were based on ZERO Soc Sec benefits. So my calculations were ultimately based on no Soc Sec benefit whatsoever. I expect to be retired for 30-40 years, and who knows how/when/if Soc Sec will change, so I assumed worst case - that's what I needed to sleep well. YMMV

 

[I earned it]

Thank you I did the 70% thing too, and ran a zero soc sec as well

 

[eta2020]

Most of my calculations were based on 70% of published Soc Sec benefits during my accumulation years.

But as I got close to actually pulling the trigger and facing the finality of retiring, my calculations were based on ZERO Soc Sec benefits. So I guess you can say my calculations were ultimately based on no Soc Sec benefit whatsoever. I expect to be retired for 30-40 years, and who knows how/when/if Soc Sec will change, so I assumed worst case. YMMV

I am same way.... but if any means testing was implemented we would spend everything by 70 and then get full SS at 70.

 

[I earned it]

I am same way.... but if any means testing was implemented we would spend everything by 70 and then get full SS at 70.

Hahaha, too funny ,

 

[youbet]

Thank you I did the 70% thing too, and ran a zero soc sec as well

There are an infinite number of ways to pad your numbers so that anything going "wrong" financially during your retirement years will not tank your plans. Assuming SS will be zero or some fraction of what you expect is just one way and no more effective than any of the others.

On the income side, for example, you might:

assume your SS will be zero or a fraction of what's expected.
assume any pension will be zero or a fraction of what's expected.
assume market returns on your FIRE portfolio are historically low.
Assume any other sources of income such as rentals, part time work, etc. evaporate.

On the expense side, for example, you might:

assume a prolonged high level of overall inflation.
assume a number of unexpected large expenses.
assume catastrophes such as drought, commodity shortages and meteor strikes cause huge spikes in the costs of life's essentials.

Many of the folks on this discussion board are "belt and suspender" types. No amount of padding will ever be enough. It's just too much fun to plan, plan and plan some more! Personally, my anticipation is for SS over my lifetime (I'm 68 and FIRE'd for a decade) to continue pretty much as is. For my son (41), my advise is to plan the future prudently knowing that any expected source of income can fail, be diversified and be flexible. It's almost certain his FIRE world will be very different than we're picturing today.

 

[Cobra9777]

Throughout most of the accumulation phase, I assumed zero SS. As I got closer to decision time and started fine-tuning the numbers, I included it but with a significant haircut. Current spreadsheet assumes 50% of promised benefits. That figure was recently reduced from 70% after the F&S change soured my outlook.

 

[Whisper66]

I ran my retirement analysis using (a) full SS based on the rules at the time as well as (b) no social security. The analysis also considered other "what if's" that had nothing to do with SS. Bottom line was that when I looked at any reasonable combination of contingencies that I felt we should plan for, I was comfortable that we could address any shortfall through cutting expenses as needed.

 

[I earned it]

I don't know what the f&s, is but I'm getting depressed , sounds like bad news for me and the savers in here

 

[Midpack]

I don't know what the f&s, is but I'm getting depressed , sounds like bad news for me and the savers in here

File & suspend.

Though I used ZERO in my calculation to be ultra safe (for the reasons youbet noted), I don't believe there's any chance it will actually be zero. I am expecting 50-70% when all is said and done. Most people seem to think 70% is the Soc Sec benefit floor, but tax code changes could also further reduce that benefit...

No one can know for sure.

I may be whistling pass the graveyard, but I suspect this group is way too pessimistic. Zero, 50% haircuts... I doubt it.

What we calculate based on and what we expect are not the same for many peeps...

 

[LARS]

I may be whistling pass the graveyard, but I suspect this group is way too pessimistic. Zero, 50% haircuts... I doubt it.

Most likely SS gets cured through upping maximum salary cap, pushing out FRA and taxing 100% of SSI for high earning retirees (up from 85%).

That having been said when I retired 20 odd years ago I never considered SS. As I am approaching it being a reality I am expecting it to be there with a worse case scenario that the politicians do nothing and as SSA has said then a cut of 25% as the system moves back full swing into pay as you go.

 

[gauss]

I discounted SS benefit by 1/3 in that there will be enough funds from future generations, if the law is not changed, to perpetually pay at the low-mid 70% level.

This assumes that funds borrowed from the SS trust fund will be repaid.

-gauss

 

[NW-Bound]

I am same way.... but if any means testing was implemented we would spend everything by 70 and then get full SS at 70.

Or draw down your IRA+401K even if you do not spend it all, and hide it under the mattress. No more investment. Stock market will crash, and the economy will suffer, but who cares?

If only the poor get SS, then everybody will find a way to be poor, maybe even involuntarily.

I think some form of reduction will be enacted, but not outright cut-off.

 

[Andre1969]

I didn't run a 70% calculation, but did run two sets of numbers with one assuming full SS and one assuming nothing at all. In most cases, no SS meant I'd have to keep working another 2-3 years. For instance, if I had a 95% chance of success retiring at age 50, living off of $60K per year with full SS kicking in at 62, then I'd have to work until around 52-53 if I wanted a 95% chance with no SS at all.

 

[I earned it]

Thank you Andre this is what my original question was

 

[NW-Bound]

For a long time, I never bothered to find out how much SS we will have. So, I run FIRECalc with just what we have, and what we get to spend is not bad. I can live comfortably with that, though it is not a luxurious life.

Then, one day I sat down and figured out this SS stuff once for all. It was more than I expected. In fact, the total is now more than my frugal self want to spend. Knock on wood.

So, if the future unfolds to somewhere in between, I am of course OK. But darn, no more long foreign travel, gift and charity donations.

It's nice to have some headroom in case the market turns bad, so I am still trying to restrict my spending.

 

[razztazz]

When I quit I did not even consider SS down the line as I was very young. Now that I am 58 I have started incorporating it into my projections. My SS will be pretty much the minimum a person can collect so I doubt they will cut mine at all but a token shaving somewhere down the line is possible.

I do run some FireCalc scenarios with a reduced SS, or as a non-inflation adjusted pension income. I doubt it will just go away and any significant trimming will be from retired rich people getting the max.

 

[W2R]

I ran FIRECalc two ways also, with and without SS. My goal was to be able to have a bare bones retirement, with at least enough money to barely sustain life, without it. Then SS would be for everything else, if/when I got SS.

I didn't take into account the increase in medical bills in retirement, though; I based my bare bones retirement expenses on what I was spending at the time. I should have assumed somewhat greater expenses than I did. Oh well. Now I am retired, and I am getting that monthly SS deposit which is wonderful to have.

 

[Options]

I read a brilliant book years ago which I recently reviewed entitled "20/20 Foresight", by Hugh Courtney. In it, he deals with levels of uncertainty in situations such as the future of SS, which at this point is unknown and unknowable (due to the extensive number of factors and combinations thereof impacting its solvency--I'm referring here to the many proposals for shoring up the program and their impact on various groups).

Although the ultimate future of SS changes are unknown and unknowable at this time, he proposes a powerful model for dealing with with this level of current uncertainty. In this case, what would you have to believe regarding the future of SS for any given scenario to take place? And in order to look at the future it's a good idea to look at the past.

See this from a BH Forum thread regarding the history of changes to SS:

Something as contentious as social security often has a long lead time, debate, and news cycle. In addition, they usually have longer implementation times to telegraph those changes, due to the large number of people that it impacts. For example, the Social Security Reform Act of (was it 1984?) which raised the retirement age was done in stages, and still isn't complete. Full Retirement Age (FRA) was raised from 65, now 66, and will be 67 when I retire.

What this means is that those who wait have greater flexibility. If it looks like Congress is going to pass a law dropping Social Security for the wealthiest recipients, it will probably be phased in, and not take away benefits from people already claiming. Someone who is eligible to claim already but is waiting, could simply claim before the implementation date. If you claim at 62 in anticipation of events that may or may not happen, you're giving up benefits for a lifetime. You can't unclaim once you claim (okay, you can, but only for a year). And you better actually be retired when you claim, because you'll be giving some of those benefits back if you keep working and are below FRA....but the changes have NEVER happened to the Age 62-70 age group which is the discussion here. Whether to delay or not. Changes always happen to the young or mostly to the unborn...

Emphasis added

For those very close to the age of 62 and above, in order for you to believe that your SS would be impacted in any way, you would have to believe Congress would do something it has never done before. Edit: Black Swan? Yes. Possible? Yes. Probable? Highly unlikely.

Moreover, the recent changes to F&S had, in my view, very large implications for future SS changes. First, some over 62 were originally impacted (although minor), then as a result of public outcry, that was rescinded. Second, and most importantly, no one over the age of 62, whether claiming or delaying, was ultimately impacted, signaling no break from past practice. Third, the changes did not occur immediately, but had a lead time.

Something to think about.

 

[RunningBum]

There are an infinite number of ways to pad your numbers so that anything going "wrong" financially during your retirement years will not tank your plans. Assuming SS will be zero or some fraction of what you expect is just one way and no more effective than any of the others.

On the income side, for example, you might:

assume your SS will be zero or a fraction of what's expected.
assume any pension will be zero or a fraction of what's expected.
assume market returns on your FIRE portfolio are historically low.
Assume any other sources of income such as rentals, part time work, etc. evaporate.

On the expense side, for example, you might:

assume a prolonged high level of overall inflation.
assume a number of unexpected large expenses.
assume catastrophes such as drought, commodity shortages and meteor strikes cause huge spikes in the costs of life's essentials.

Many of the folks on this discussion board are "belt and suspender" types. No amount of padding will ever be enough. It's just too much fun to plan, plan and plan some more! Personally, my anticipation is for SS over my lifetime (I'm 68 and FIRE'd for a decade) to continue pretty much as is. For my son (41), my advise is to plan the future prudently knowing that any expected source of income can fail, be diversified and be flexible. It's almost certain his FIRE world will be very different than we're picturing today.

Why wouldn't I apply the risk factor to the variable that I actually think is at risk? I should be getting much more in SS than my pension, and I personally think SS is more at risk than the pension, so why would I adjust my pension assumption rather than SS? That makes no sense. I have an overall safety net in case something unexpected to me happens, but I am expecting that SS benefits will be cut sometime in the next 8-16 years before I start collecting, so I'm adjusting that income.

Yes, I could just build a bigger overall buffer to account for it. My reasoning is that if I think there is a likely chance, say 25% or more (though I haven't actually quantified it) of it happening, I am going to specifically account for it. Less than that, and I will account for it by lumping it in with other risks.

Specific to the question, I reduced my SS income expectations by 25%, on the basis that I've read that once the govt's buffer is gone, incoming SS collections will be about 75% of outflow. I don't remember the source for that.

 

[tmm99]

Like some posters have said here, I don't think the change will happen to people who are already taking SS. If the SS is reduced for the current recipients, many become homeless and starve, which I don't think the government will let happen, although I could anticipate more taxes taken out of SS very slowly...

This is not about US, but my mom in Japan tells me her SS stayed the same during the deflation years there (while their tax deduction increased gradually but at a slow pace) and although they are now experiencing inflation, the government is not raising the SS since they didn't lower it when the deflation was happening. Just tidbits.

 

[Chuckanut]

SS is already means tested if one considers that above a certain level it is taxed more and more. And, IIRC, that level is not indexed for inflation, thus increasing the tax level almost every year.

 

[I earned it]

Yes , I don't remember where I read it but that 70-75% rings a bell that's why I used it. As far as reducing my pension numbers I didn't do that at all, I factored it in at 100%. Don't depress me with what if my pension gets cut, you might as well tell me did I factor in that my investments will be nationalized.

 

[Car-Guy]

I started seriously thinking about SS and retirement when I was in my 40's. Even back then I figured the gov would figure out a way to steal what I was forced to contribute. So I never considered SS in my retirement calculations. To my surprise, I've been collecting it for a couple of years now and just consider it extra cash. However I realize that they could cut it off or reduce it at any time. To me it's not if they will cut it off or reduce it, it's when and by how much and by what conditions. It will be legalized thievery anyway you slice it.

 

[Big_Hitter]

Yes , I don't remember where I read it but that 70-75% rings a bell that's why I used it.

I believe 70% comes from the SS trustees' report.