Social Security reform and ER

[explanade]

So anything like means testing and raising the eligible age will likely be phased in but how long would the phase-in period be?

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

But what about people in their 40s and early 50s wanting to retire early and counting on drawing SS at 62?

Probably the ER and wanna-RE isn't a big constituency or one that the population at large would be sympathetic to.

Should people who want to RE but is under the age of 52 not count on getting SS at 62 under the rules we have today?

 

[Rustic23]

In 1983 the law change making the new retirement age 67 for those born in 1959. So they raised the age 2 years for 24 year old's. For those born in 1938, i.e. 45 years old, it went up 1 month. If the politicians follow the same course, then I don't think those older than 40 will be effected that much.

 

[Andre1969]

In 1983 the law change making the new retirement age 67 for those born in 1959. So they raised the age 2 years for 24 year old's. For those born in 1938, i.e. 45 years old, it went up 1 month. If the politicians follow the same course, then I don't think those older than 40 will be effected that much.

And, that law only changed the "full retirement" age, right? Hasn't the early retirement age always been 62?

 

[Rustic23]

I believe you are correct.

 

[Koolau]

Defining "rich" as someone with an income of 250k (never got close to that figure, myself) makes me think that means testing may well include those of us who saved a million or two over a lifetime of frugality. It won't be hard to sell that idea to those who spent every dime (a couple of times over in some cases). Imagine the class envy. Since the unprepared out number the prepared, it's not difficult to imagine means testing affecting those of us already retired (or very near) with a half decent sized nest egg. They can out vote us.

Regarding the raising of retirement ages, I doubt they will do that to folks beyond mid 40s, but I have no crystal ball. I just recall that when they "saved" SS back in 83 by doing this, they all slapped each other on the back, slapped the dust off their hands and said "Well, guess we fixed that!". Then they pi$$ed away all the extra money they took in and defined it as "off budget". Anyone think next time will be different? Suggestion to Young Dreamers: Read up on this saga.

 

[travelover]

Defining "rich" as someone with an income of 250k (never got close to that figure, myself) makes me think that means testing may well include those of us who saved a million or two over a lifetime of frugality. It won't be hard to sell that idea to those who spent every dime (a couple of times over in some cases). Imagine the class envy. Since the unprepared out number the prepared, it's not difficult to imagine means testing affecting those of us already retired (or very near) with a half decent sized nest egg. They can out vote us.............

Exactly my thinking and why I'm leaning toward taking SS at 62 - a bird in the hand........

 

[W2R]

I think that SS benefits are up in the air and although we can speculate, we just don't know what will happen. So for those who are still planning, I would suggest a "Plan B". You can always use your SS for toys, travel, or fun, but I wouldn't expect to rely on SS for the necessities of life.

Exactly my thinking and why I'm leaning toward taking SS at 62 - a bird in the hand........

It's tempting. I am 62.5 right now, and tentatively plan to wait until age 66... or 65.... or.... Guess I will play it by ear and decide year by year.

 

[rescueme]

And, that law only changed the "full retirement" age, right? Hasn't the early retirement age always been 62?

Yes, but the reduction in benefits for early SS was increased from a 20% to a 25% reduction in benefits (for those who's FRA is age 66, when the FRA age was increased one year). For those who were born later (for instance, after 1960), the reduction will be 30%.

 

[rescueme]

It's tempting. I am 62.5 right now, and tentatively plan to wait until age 66... or 65.... or.... Guess I will play it by ear and decide year by year.

In your case (being single, or for a person who has health problems), I would agree that consideration should be given to taking it earlier - if needed.

However, in a married situation the options for "combo benefits" are much more flexible and along with other sources of retirement income (outside of SS), those options should be considered.

Here's a good summary on options (for everybody), IMHO:

http://crr.bc.edu/images/stories/claiming_guide/social_security_claiming_guide_e-book.pdf

 

[W2R]

In your case (being single, or for a person who has health problems), I would agree that consideration should be given to taking it earlier - if needed.

I don't really need it, and have always had a "Plan B" in mind. Almost all material on the subject says that healthy single women should wait to take SS if they can afford to wait, since women as a group have a longer life expectancy than men as a group.

 

[chinaco]

Look at the proposals.

 

[W2R]

Look at the proposals.

You mean for social security reform? I think we all have.

I think that SS benefits are up in the air and although we can speculate, we just don't know what will happen.

 

[explanade]

I don't really need it, and have always had a "Plan B" in mind. Almost all material on the subject says that healthy single women should wait to take SS if they can afford to wait, since women as a group have a longer life expectancy than men as a group.

If you don't really need it, because your retirement savings an reliably be expected to last the rest of your life, couldn't it be argued to take SS now?

You could spend more or you can reduce your withdraws to increase the chances of your savings being preserved?

One could say that if you need x amount from SS and you can't get that until the age of yy, then you have no choice but to wait.

Of course, if you don't need it but by waiting you will get a higher payout, then you're deferring more income/discretionary income by however many years you wait.

 

[W2R]

If you don't really need it, because your retirement savings an reliably be expected to last the rest of your life, couldn't it be argued to take SS now?

You could spend more or you can reduce your withdraws to increase the chances of your savings being preserved?

One could say that if you need x amount from SS and you can't get that until the age of yy, then you have no choice but to wait.

Of course, if you don't need it but by waiting you will get a higher payout, then you're deferring more income/discretionary income by however many years you wait.

(I'm not really deferring any discretionary income; I am already spending all I want to spend. Madison Avenue has failed again.)

As one moves into old age from ages in the 70's to/through the 90's, it makes more and more sense to shift to less volatile income. If SS cr*ps out on me before I reach age 66 (or maybe 70), I'll probably buy an SPIA (ugh!) to make up for it. I don't expect that to happen, though.

 

[chinaco]

You mean for social security reform? I think we all have.

The OP stated means test.

I have not seen any proposal that describes means testing... in the sense of qualifying or not based on wealth.


The legitimate proposals I have seen (from any legitimate source) describe solutions around trimming the benefits (various ways), raising the payroll tax (various ways), or some combination of the two.

I would not surprise me to see the income tax against SS to raise to 100% if total income is above some low level.

But I have not seen legitimate proposal (except perhaps a few really extreme right wingers) propose killing the program or taking it away and turning it into a welfare program only available to people at the poverty level.

This is similar to the information I hear from younger people (30's) making the off cuff comment... I am not planning on it at all.... it won't be there.

The SS program will survive. Pensions will survive (but they may be DC).

The wake up call:

• Retirement Income - costs more than people thought. More saving and higher contributions.
• Health care - cost more than people thought. More spending and higher contributions throughout life!

The cost of retirement preparation is a larger fraction of everyone's present income.

 

[clifp]

I hope for US sake that these proposals are phased in gradually. I fear if we don't start getting serious that the IMF, will make us institute the cuts in more dramatic and quicker time table.

However, if you look at the pension plan for the Greeks, it appears that pension were cut by 10% almost immediately. Average retirement was raised from 61.4 to 63.5 by 2015. Increasing the amount of taxes owe on high income pension immediately.
Changing pension benefits from being calculated at final pay to being based on lifetime average pay. (Something I've been advocating for pension for a while).

Ireland meanwhile is talking about cutting/taxing pensions between 3-10% starting next year. Along with many other fees and taxes.

 

[leyland]

I suspect the sorts of things proposed by the debt commission will eventually be implemented. Removing the income cap (this never made sense to me and is regressive) and raising the full retirement age are things that make sense to me. I just don't see "means testing" ever being implemented - I cant imagine any politician would want his name associated with any such proposal.

So anything like means testing and raising the eligible age will likely be phased in but how long would the phase-in period be?

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

But what about people in their 40s and early 50s wanting to retire early and counting on drawing SS at 62?

Probably the ER and wanna-RE isn't a big constituency or one that the population at large would be sympathetic to.

Should people who want to RE but is under the age of 52 not count on getting SS at 62 under the rules we have today?

 

[teejayevans]

Exactly my thinking and why I'm leaning toward taking SS at 62 - a bird in the hand........

Actually you want to do the opposite:
Wait till 70 to take SS, spend down your assets so when you hit 70:
Your RMD is lower, so your income will be lower.
Your assets are less, making you look poorer.
TJ

 

[travelover]

Actually you want to do the opposite:
Wait till 70 to take SS, spend down your assets so when you hit 70:
Your RMD is lower, so your income will be lower.
Your assets are less, making you look poorer.
TJ

In theory, this might work, but I kind of see it as doubling down on a bet.

 

[rescueme]

Actually you want to do the opposite:
Wait till 70 to take SS, spend down your assets so when you hit 70:
Your RMD is lower, so your income will be lower.
Your assets are less, making you look poorer.
TJ

That's only one of the reasons why DW/me are waiting for SS (even though we are both eligible, today)...

IMHO, there is no "standard" answer related to when to take SS, especially if it is part of your total retirement income/tax plan, and tied in to your other retirement income/assets.

BTW, for those who plan to take it at age 62 (due to wanting to "get back" what their contributions were), remember that SS, when planned properly (depending on your financial, health, and married status) can pay you much more by waiting. DW/me want to rely less on our investments and more on "auto income" as we age. As an exercise, look at your last annual SS statement and find out how much you actually contributed over the years (not your employer, since you did not have access to that money). Now look at your benefit at age 62/66/70 (depending on your birth date), and see how little time it takes to actually get "your" money back. I beleive you will be surprised.

Now that the payback option has been eliminated, it even makes more sense to sit down and plan out carefully, your retirement income stream - and where that income will be coming from.

As for us? We chose to maximize our possible income (and we can afford to delay). If either/both pass before collecting a dollar? That's the way it goes. Money is for the living, not the dead. I would rather maximize my income, assuming I live long enough.

Anyway, just my POV ...

 

[RunningBum]

One side of me says to start grabbing me as early as possible before it goes away and there's none left.

The other side says that one of my biggest dangers of running out of money is living to 110. In that case I'd want to wait as late as possible to get the biggest payout for all of those years. If I die at 72 I won't really care that I could've received more money starting at 62 because I won't have come near going through my own money.

I've still got 13 years before I face this decision, assuming I'll still have an option at 62 then, so I'm not losing much sleep over the decision. But as I think about long term strategies I'm leaning towards waiting longer.

 

[explanade]

What is RMD?

So withdraw at a higher rate and then take SS at 70 (and reduce the withdraw rate) to spend more while you're younger?

 

[REWahoo]

What is RMD?

Required Minimum Distribution (RMD) Definition

 

[Arnie]

When I was young, I assumed SS would either die or not be a significant part of my retirement income. The older I get, the more I hold out hope that I was wrong.

For me, 70 seems right - longevity insurance.

 

[Rustic23]

We set our retirement plans as if SS would not be there. It is, we take it, and the cruise line loves it.