Social Security reform and ER

[rescueme]

Concerning RMDs, unless you care about leaving an estate when you die, RMDs are irrelevant. I'm willing to be convinced otherwise.

I would agree (in our situation, only).

The vast majority of our TIRA's (as forecasted) will be going to charity after we pass. the little excess RMD's (e.g. required withdrawls, in excess of our projected retirement expenses) will be added to our disabled son's SNT (special needs trust).

As to the remainder? It's going to charity, with no tax due (under current laws). If the laws change? No problem; we won't be around to worry about it ...

 

[youbet]

+1 It's not the baby boomers that are the problem here. It's the [-]greedy[/-] dumb-ass, self-centered, thieving, criminal, low life, butt hole and always-on-the-take politicians IMO.

There, I changed your statement a tad to reflect what it's like for us living with our politicians in Illinois. If ours were only greedy, we'd have it made!

 

[W2R]

It's the constant kick-the-can approach to governance that I'm really getting tired of. Let's all ignore a minor problem that can be resolved with minor sacrifices until it's a crisis, and then start to consider draconian "fixes" which pit different groups of people against each other (in this case, young against old).

Nice divide and conquer tactic, really. Helps deflect some of the blame away from the people who deserve it most.

Exactly!

 

[W2R]

There, I changed your statement a tad to reflect what it's like for us living with our politicians in Illinois.

Thank you! I think your corrections are well justified everywhere, particularly in Illinois from what I have heard (but Louisiana is not far behind).

 

[Rustic23]

I think means testing could happen. It is more of the class warfare that is going on now. At first it will be people with say over a hundred million in net worth. Surly those people do not need their SS. Then as time goes on, either through the failure to index, or congressional changes to the value, this value will be lowered. How much lower. If the income tax is any guide it will be lowered until only about 50% of the people are receiving it.

 

[73ss454]

Ziggy, so we should give up part of our SS now to let the government redistribute it to our kids. JMHO but you're in dream land.

This is not a fight between young and old. It's a fight to keep and get what we were promised from our wonderful government. Anything I give back or don't take won't be going to my kids and grandkids. Maybe to some Indian or Black farmers but we don't fit the bill.

 

[FUEGO]

I'm not sure means testing of "the rich" would go a long way in making significantly larger benefits available to the masses. Depending on where you draw the line on "rich", you may get to deny SS to the wealthiest 2, 10, or 20% of retirees. Even taking away 1/5 of the SS payments and splitting them among the remaining 4/5 would provide only a 25% boost versus what you would get absent means testing (ignoring the fact that higher wealth is positively correlated with larger lifetime earnings and hence larger average SS payments). And in the meantime, you have royally pissed off most of the 1/5 you took the SS from.

Take SS from the very richest (top 1-2% wealthiest), and you are left with an even smaller slice of the pie to split up among a larger population of those still eligible to collect SS.

I personally think they will "fix" SS by increasing the retirement age, increasing the early retirement age beyond 62, and/or increasing the SS payroll tax. People in their 20's and maybe 30's will be affected by longer retirement ages. Those in their 40's and 50's are less likely to be affected. That's my take.

 

[kombat]

This is not a fight between young and old. It's a fight to keep and get what we were promised from our wonderful government.

Even if it turns out those promises were irresponsible and unrealistic?

ISTM that this is exactly the same kind of mentality that has thrown Greece into the economic abyss. All kinds of rich entitlements were promised, without sufficient funding (or, at the very least, based on economic assumptions that turned out to be overly optimistic), and now they have to either renege on those promises, or rob their own children to pay for them.

It sounds like you're of the opinion that the promises MUST be kept, regardless of how badly doing so impoverishes the next generation.

If Roosevelt promised every retiree a Ferrari, to commence in 2010, and now it turns out that that promise was unaffordable, would you be arguing "I WANT MY FERRARI" irrespective of how fiscally untenable that promise turned out to be?

 

[RunningBum]

One side of me says to start grabbing me as early as possible before it goes away...

I wouldn't worry too much about that, but let's try to stay focused on SS.

Oops! Well, that's kept Ernest Borgnine healthy all these years, hasn't it?

 

[JustCurious]

I think means testing could happen. It is more of the class warfare that is going on now. At first it will be people with say over a hundred million in net worth.

And how would the government know your net worth?

 

[Rustic23]

Well, being paranoid, I'll bet it is easier to come close than either one of us thinks.

 

[73ss454]

Even if it turns out those promises were irresponsible and unrealistic?

ISTM that this is exactly the same kind of mentality that has thrown Greece into the economic abyss. All kinds of rich entitlements were promised, without sufficient funding (or, at the very least, based on economic assumptions that turned out to be overly optimistic), and now they have to either renege on those promises, or rob their own children to pay for them.

It sounds like you're of the opinion that the promises MUST be kept, regardless of how badly doing so impoverishes the next generation.

If Roosevelt promised every retiree a Ferrari, to commence in 2010, and now it turns out that that promise was unaffordable, would you be arguing "I WANT MY FERRARI" irrespective of how fiscally untenable that promise turned out to be?

The only people getting robbed is us. The government can't keep their hands off our money in the general fund. If the SS money we and our employers paid in was left alone there would be plenty of money for everyone.

Since the government now wants to reneg on their promise what makes you thiink that they will do what they say and give it to our kids and grand kids? I'd rather get my money and leave it for my kids and grand kids myself. At least I know they will have a chance of seeing it.

 

[jdw_fire]

Concerning RMDs, unless you care about leaving an estate when you die, RMDs are irrelevant. I'm willing to be convinced otherwise.

i think the point being made about RMDs and when to take SS is that if you put off taking SS till 70 and use your IRA to fund your retirement between 62 and 70 the ballance of your IRA (and your RMD) would be smaller at age 70 then if you started SS at 62 and took less out of your IRA from 62 to 70. the smaller RMD might make less of your SS taxable at age 70 thus you would pay less in taxes.

 

[M Paquette]

And how would the government know your net worth?

Form TD D 90-22.1 (Domestic) Revised 2011...

There's already a form for foreign accounts, which includes the maximum value of each account reported, along with account numbers and where the account is held.

 

[GregLee]

It sounds like you're of the opinion that the promises MUST be kept, regardless of how badly doing so impoverishes the next generation.

What other opinion makes sense? A promise is a promise.

 

[Rustic23]

I tend to agree with that, but hey, I also think a contract is a contract and should be abided by unless amended by both parties.

 

[chemist]

My guess is they will grandfather in everybody past a certain age. As others have pointed out, the magic age was 46 last time they fixed SS in 1983. This time maybe the same, maybe 50. I am 55 and DW is 52 so we hope to be grandfathered.

I wouldn't rule out a net worth test (when I lived in the Netherlands 1995 to 1996 we had a tax on your net worth), but I think it is unlikely. Too many small businesspersons in this country, too many intangibles to value. Plus all the politicians confuse "rich" with high income, not high net worth. Long, long precedent of using AGI for phaseouts (Roth contributions, college tax credits, etc etc).

 

[79protons]

My guess is they will grandfather in everybody past a certain age. As others have pointed out, the magic age was 46 last time they fixed SS in 1983. This time maybe the same, maybe 50. I am 55 and DW is 52 so we hope to be grandfathered.

I wouldn't rule out a net worth test (when I lived in the Netherlands 1995 to 1996 we had a tax on your net worth), but I think it is unlikely. Too many small businesspersons in this country, too many intangibles to value. Plus all the politicians confuse "rich" with high income, not high net worth. Long, long precedent of using AGI for phaseouts (Roth contributions, college tax credits, etc etc).

I can't see a net worth test working out very well. Would this mean that a person who has $100,000 in the bank and a paid off $700,000 house in sunny CA would get SS, but the person renting a 1bd apt in ID with $800,000 in the bank would not? How would that possibly be fair? And if you value the house as part of the net worth, then would we force people to sell their home before they could get on SS? What about the expensive wedding ring or the diamond bracelet they were given for their 50th aniversary? Do we make them sell all of their things before they get SS, or do we just deny SS to the person who forgoes all of that stuff and lives frugaly to amass the nice bank account?

 

[Alan]

Even the UK doesn't means test on the basic State Pension ( ie SS).

I can see the US making the whole of the SS taxable. High income folks would then be paying a large % of it in taxes. (In the UK, the 2010 tax rate for incomes over $250k is 50%, and the rate is 40% for incomes over $60k).

Means testing SS based on net worth would so messy, complicated and unpopular I just don't see it happening.

 

[W2R]

I am not sure, but I believe that to qualify for Public Assistance you have to provide proof of your assets (value of your home, bank accounts, etc) to establish your net worth. If so, then it seems to me that it is not beyond the realm of reason that the same thing could be done to qualify for SS. But I could be completely wrong! It wouldn't be the first time...

 

[Alan]

I am not sure, but I believe that to qualify for Public Assistance you have to provide proof of your assets (value of your home, bank accounts, etc) to establish your net worth. If so, then it seems to me that it is not beyond the realm of reason that the same thing could be done to qualify for SS. But I could be completely wrong! It wouldn't be the first time...

Public assistance is getting something for which you never paid anything into, and those applying for it have a lot fewer assets than "Rich" folks. (I expect).

I don't dispute it is possible, but I think it is a political hurdle too high to get over. It will be much easier to make SS taxable.

 

[ronocnikral]

Obviously they won't yank the rug out from under people in their mid to late 50s.

Why is this so obvious? I say screw 'em. To me, "fair" is equally sharing the burden, regardless of age, race, religion (amish excluded). The gummit promises nothing but a tax bill.

And as I've said before about any number of aspects of future gummint policy regarding taxes and entitlements, I hope those of us who are planning to "engineer" a high net worth/relatively low income retirement fly under the radar because we're few enough in number to go after -- and that "means testing" continues to look only at income and not assets or net worth.

Steps to mean testing SS a gummit guide.
1. Pickup FAFSA form
2. Scratch out "FAFSA"
3. Write "Social Security Application"
4. Hand to applicant.
5. Plug applicant's info into the computer
6. Allow computer to crank an esoteric and complex algorithm
7. hand results back to applicant.

I'm with you zig...but there is such an obvious model right under their noses. And this model looks well beyond income.

crawling back under my rock...carry on.

 

[hankster]

I can't see a net worth test working out very well. Would this mean that a person who has $100,000 in the bank and a paid off $700,000 house in sunny CA would get SS, but the person renting a 1bd apt in ID with $800,000 in the bank would not? How would that possibly be fair? And if you value the house as part of the net worth, then would we force people to sell their home before they could get on SS? What about the expensive wedding ring or the diamond bracelet they were given for their 50th aniversary? Do we make them sell all of their things before they get SS, or do we just deny SS to the person who forgoes all of that stuff and lives frugaly to amass the nice bank account?

This is what I was thinking about. We have considered renting as cheaply as possible to keep more liquid funds from which to take withdrawals. In theory, means testing that only involved one's liquid assets would mean it would make more sense to pay cash for a home to reduce the amount in the nest egg on which means testing was based.

 

[explanade]

It's not a screwing or not screwing them.

Especially with the Boomers, the people retiring or reaching SS age within 10 years are a large cohort. If they are forced to spend less, that hurts the economy and everyone else.

Some large number of people would be under the poverty line without SS. So then they become burden to other agencies besides SS.