Wait to Age 70 to Collect SS?

[SteveR]

Nothing is underfunded. The funds for these programs are from taxes; SS tax or Medicare tax. All they have to do is raise them.

Once the politicians convince us of the need; taxes will be increased while they tell us it will only be for a "little while."

Part D of Medicare will cost us a lot more than what was originally believed (as always :). Those still working will have the joy of seeing this tax increase in the coming years. Also, eventually, SS will be taxed on all income without an upper income limit as it has today. That is an easy one because it affects only the "wealthy" and is an easy sell.

 

[MasterBlaster]

SteveR:

The tax-only solution to medicare and SS is not likely to be implemented.

I think you need to do a little more research as the amounts are so staggering.

The intro to Ben Steins Book gives some good insight into how large the problem is.

Here is a link to it from Amazon:

http://www.amazon.com/gp/reader/1401903185/ref=sib_dp_pt/002-8751724-3064051#reader-page


remember that the SS "trust fund" has been spent. It really isn't available to pay anybody. So any analysis you see where the "trust fund" is used to show the problem isn't so bad are disingenuous.

 

[thefed]

A qoute I found:

Social Security faces an $11 trillion shortfall if nothing is done to fix the current system. But they fail to mention that this is over the course of the “infinite future." Over the next 75 years -- still practically a lifetime -- the shortfall is projected to be $3.7 trillion.

 

[MasterBlaster]

Here's another quote (from Ben Steins' book):

"Add in Medicare expenditures (to SS), and far from having a surplus, you're already devoting 3.6 percent of personal and corporate tax revenues to meet the shortfall from social security and Medicare taxes today. By 2030 this shortfall will require 52.7 percent of general tax revenues, and by 2070 they'll need 100 percent, according to the National Center for Policy Analysis."

Stein Pegs the present value of the SS shortfall at 10.4 $trillion and 62 $trillion for the Medicare shortfall.

Clearly our current system is not sustainable and changes in benefits are inevitable.

 

[thefed]

Here's another quote (from Ben Steins' book):

"Add in Medicare expenditures (to SS), and far from having a surplus, you're already devoting 3.6 percent of personal and corporate tax revenues to meet the shortfall from social security and Medicare taxes today. By 2030 this shortfall will require 52.7 percent of general tax revenues, and by 2070 they'll need 100 percent, according to the National Center for Policy Analysis."

Stein Pegs the present value of the SS shortfall at 10.4 $trillion and 62 $trillion for the Medicare shortfall.

Clearly our current system is not sustainable and changes in benefits are inevitable.

that's disheartening!

Does anyone think the USA will ever ABOLISH SS, due to a lack of funds? imagine the ramifications if it's done away with....

 

[MasterBlaster]

Oh SS and Medicare will be around. They just won't be nearly as generous as they have been.

 

[ProfHaroldHill]

that's disheartening!

Does anyone think the USA will ever ABOLISH SS, due to a lack of funds? imagine the ramifications if it's done away with....

No -- SS is not the problem. Medicare is the problem. Medicaid is the problem. Pharmaceuticals are the problem. Healthcare in general is the problem. SS is not the problem!

HH

 

[SteveR]

Here's another quote (from Ben Steins' book):

"Add in Medicare expenditures (to SS), and far from having a surplus, you're already devoting 3.6 percent of personal and corporate tax revenues to meet the shortfall from social security and Medicare taxes today. By 2030 this shortfall will require 52.7 percent of general tax revenues, and by 2070 they'll need 100 percent, according to the National Center for Policy Analysis."

Stein Pegs the present value of the SS shortfall at 10.4 $trillion and 62 $trillion for the Medicare shortfall.

Clearly our current system is not sustainable and changes in benefits are inevitable.

I guess I just have a hard time with this assessment.  It appears to be yet another example of "creative accounting" by a couple of guys that want to sell a book.  I would have to see the basis for his calcuations before I buy into them.  

Raising taxes was one of the ways even Ben says will help to resolve the issue.  I also believe that there will be some reduction or elimination of benefits at certain income thresholds and perhaps even a tax on non-wage income someday.  Which is already there with certain non-wage income like stock options.  

Far smarter people than I will figure this all out someday.  I don't pretend to know the answer...I only stated that the government will never truly run out of money as long as they can levy taxes.  

I choose to take his doom and gloom assessment with several grains of salt.

 

[ProfHaroldHill]

Also  . . . the projections that show SS to be underfunded are disingenuous spin -- they are based on an assumed growth rate for the US economy that is way below the historical average.  If GDP grows at its historical rate, SS is solvent literally (well . . . figuratively) forever, without any changes.

HH

 

[MasterBlaster]

the projections that show SS to be underfunded are disingenuous spin

These type analysis usually include the SS trust fund. Take that out and - "Houston weve got a problem"

Still maybe I am overly concerned.

- Party on Garth

 

[ProfHaroldHill]

These type analysis usually include the SS trust fund. Take that out and - "Houston weve got a problem"

Still maybe I am overly concerned.

- Party on Garth

There is so much spin from our "leaders" on this. You can hear it -- "just promises on pieces of paper in a file cabinet." Stinking shysters! What, then, is any bond, except a promise on a piece of paper? Worry not. As other posters have pointed out, these promises are backed by the power to tax.

HH

 

[MasterBlaster]

Well I'd really like to believe that I can count on SS.

Trust funds, bonds, and taxation aside, just think about 4 workers now for every retiree. That changes to 2 workers to every retiree in the not-so-distant future.

What I fear is that taxes will have to go so high that the economy crumbles and the Government take comes out even less or less than they need.

 

[eric1821]

nobody can really tell how long can he lives. My Fidelity agent likes to tell me I can live up to 92, I don't even think I want to live that long. So I will get my SS when I am 62 which is only 1 years and 5 months to go.

 

[ProfHaroldHill]

Trust funds, bonds, and taxation aside, just think about 4 workers now for every retiree. That changes to 2 workers to every retiree in the not-so-distant future.

Productivity gains -- we're not a manual-labor economy any longer. Four workers with N machines become two workers with M machines -- the net of the relationship is determined by the values of M and N, not by the two and the four.

HH (who thinks that M >> N)

 

[Michael]

They may just inflate the deficit away, and alter the CPI calculation so that SS benefits don't actually buy much, even though the numbers are getting bigger. Of course, anyone who has money in bonds or a savings account will get inflated away also. This has been the US government's traditional method of dealing with debt. They pretend to pay what they promised, but don't really do so.

 

[TargaDave]

So what I have learned from all these posts is not whether to collect at 62 or 70 but to make sure I can survive without it. I run my retirement calc's with zero and with 50% of expected benefit as the best (gravy) case. I've got 15 years until 62.

 

[astromeria]

My current thinking is that I'll start collecting SS at 62 and DH will hold off as long as possible (he's a few months older than me). At 62, my SS income will be ~60% of his. By waiting long enough to collect his, I presume that the ratio changes and taking 50% of his may be better than taking my own. We'll have to see what the actual numbers are when we get there--6 years from now.

At the moment we're looking at SS providing 35-40% of our retirement income. Since we've saved over $1m (and will receive a teeny tiny pension and probably no employer-paid retirement health benefits), I think that shows just how important SS is even to middle class folks who've been decent savers.

 

[TromboneAl]

Remember also that it's not an all or none thing. That is, you don't have to choose between 62 and 70. You can start at any age after 61.

 

[Nords]

My current thinking is that I'll start collecting SS at 62 and DH will hold off as long as possible (he's a few months older than me). At 62, my SS income will be ~60% of his. By waiting long enough to collect his, I presume that the ratio changes and taking 50% of his may be better than taking my own. We'll have to see what the actual numbers are when we get there--6 years from now.

That's an interesting question. We'll have to start crunching the numbers when we hit our 60s and see which offers the best deal...

 

[MasterBlaster]

Astromeria:

I am not an expert on SS distributions, However what you have proposed is not quite correct.

If you retire at 62, you take a reduced benefit over what you'd get at full retirement age. I think they call this the early retirement reduction

If you then switch over and take 50 percent of your DH's benefit when he retires, your benefit then will also be reduced by the same percentage cut as above (the early retirement reduction).

You'll just have to work the numbers to see what works out best for you.

 

[astromeria]

Thanks, MasterBlaster. Perhpas I misunderstood something I read. Still, it would be kind of annoying that I worked for 20 years and paid the max in SS taxes for several of them, but someone who never worked at all may collect more SS from her higher-paid spouse. Well, time, as they say, will tell--who knows what the rules will be 6 or 10 years from now. Perhaps we'll be means-tested out of SS as "millionaires" anyway!

 

[Martha]

This is from www.socialsecurity.gov:

Can my spouse collect benefits at age 62 from her work and earnings and then receive a combined total up to 50 per cent from my account when I start receiving benefits at age 65?

The answer depends on the situation. The following information explains two provisions when an individual is entitled to his or her own retirement benefit and is entitled to additional benefits as a spouse.

1. An individual is filing for both his or her own retirement benefit and benefits on his or her spouse's record at the same time.

One of the provisions of the Social Security Act provides that whenever an individual files for reduced retirement or spouse's benefits, that individual is "deemed" to have filed for the other benefit as well. Essentially, this means that if an individual is eligible for both retirement and spouse's benefits in the initial month of entitlement, then he/she must be awarded both benefits. An individual cannot restrict the application to only one benefit when the deemed filing provision of the law applies.

2. An individual is filing for his or her own retirement benefit but is not eligible to file for spouse's benefits on his or her husband/wife's record until the husband/wife becomes entitled.

An individual can elect to receive his or her own retirement benefit as early as age 62, but his or her benefit will be permanently reduced for each month before full retirement age. If the individual is due additional benefits as a spouse, as soon as the husband/wife on whose record he or she is eligible starts receiving Social Security benefits, then the spouse's benefit is payable. If payment of spouse benefits occurs before full retirement age, the benefit is reduced each month between the entitlement date to spouse's benefits and full retirement age.

 

[Sheryl]

So, if SO and I never get married we can both collect full benefits?  Hm..

On another note, I read on the SS website recently that your benefit is based on your highest 35 years of earnings.  This means that some of us who are retiring particularly early or started working for full earnings later in life (extended college years with only part time work in my case) are going to see much smaller benefits than the predicted value on the yearly statement, right?


Sheryl<------running back to FIRECalc

 

[MasterBlaster]

The topic of retiring early and SS payouts has been discussed quite a bit on the forum.

Under current rules (which may change due to SS funding issues) the payout penalty for early retirees is very small. I worked my numbers for retiring at 50 versus 62. The difference in the SS benefit was a reduction of around 12 percent or so at 50 versus 62.

Therefore Social Security will not be the driver in my FIRE decision.

I suspect though, that SS may tighten up the rules as the boomers start to retire and those big deficits start to pile up. So in the future, it may cost you more in your SS payout to retire early.

 

[Martha]

Under current rules (which may change due to SS funding issues) the payout penalty for early retirees is very small. I worked my numbers for retiring at 50 versus 62. The difference in the SS benefit was a reduction of around 12 percent or so at 50 versus 62.

I got my SS earnings statement yesterday and for the first time plugged the numbers into the calculator on the www.socialsecurity.gov website, assuming no more earnings after the age of 50 and starting to collect SS at 62. I had similar results. I was surprised the reduction wasn't bigger. I also agree that odds are things will change over the years, but who knows how.