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Old 06-25-2014, 01:40 PM   #41
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It also states it on the first page of your SS statement.

I went back and checked and it looks like they changed it to 77cents from 75 this year. Woohoo.
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Old 06-25-2014, 01:49 PM   #42
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Quote:
Originally Posted by Rustward View Post
EJ, would you mind telling us in which SS publication you saw the 25% haircut?
Here's a link: Retirement Estimator

I've seen the message on my SS statement for a few years and now see it on my on-line statement when I check it.
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Old 06-25-2014, 02:11 PM   #43
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Uh Oh! The above link points to the official SS site, and it says
Your estimated benefits are based on current law. The law governing benefit amounts may change because, by 2033, the payroll taxes collected will be enough to pay only about 77 cents for each dollar of scheduled benefits.
It sounds like they are preparing the populace so there will be no big surprises later. This is actually not bad, by the way, to set people's expectation.
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Old 06-25-2014, 02:45 PM   #44
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To me the question isn't so much of whether to wait until 70 or collect at 66 or earlier, but whether to retire so early with either plan. Many of the same factors that make retiring on SS alone at 70 risky also make it risky to retire at 66 (or was it 67) with some money and enough to cover expenses with SS. Market downturns will eat into that money. SS cutbacks will impact your plan no matter when you take them. I would probably put a bit more buffer in my plan. I also agree with the statement that you really don't have to answer the "when to take it" question yet.

To the OP, are you also certain about your expected SS benefits? Have you put in 0's for the years you won't be working? When you get your expected benefit statement from the SSA they calculate it based on the assumption that you'll work until you reach full retirement age.
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Old 06-25-2014, 03:08 PM   #45
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EDIT: My reluctance with this drawdown strategy to maximize SS benefits is similar to the aversion I have to buying an annuity. It isn't going to happen.
Wahoo - when you say 'an annuity' do you mean a SPIA?
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Old 06-25-2014, 03:33 PM   #46
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Wahoo - when you say 'an annuity' do you mean a SPIA?
Unless I'm unfortunate enough to someday suffer from some form of dementia, there is no way I would ever consider any type of of deferred annuity. The fees simply outweigh any real benefit.

The only annuity I would ever consider purchasing would be a SPIA. That said, the stars, sun, moon and interest rates would all have to align perfectly for me to seriously contemplate buying - and that isn't likely to happen.
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Old 06-25-2014, 03:48 PM   #47
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I'm not ejman, but you'll find it here:

http://www.socialsecurity.gov/OACT/TR/2013/tr2013.pdf

In the first five pages of the pdf you'll see the whole overview of the future situation.
Thanks, I'm familiar with those.

The statement says "Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 75 cents for each dollar of scheduled benefits."


This
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What if SS gives everybody a 25% haircut as SS publications been clearly stating for several years now it will do when the trust fund runs out?
makes it sound as though a decision has been made to reduce everybody's benefit by 25%. As far as I know, no decision on how to handle the shortfall has been made. I think that is my point.

I doubt that we will see a flat 25% reduction in everybody's benefit. It will likely be a combination of changes that will be phased in over time.
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Old 06-25-2014, 03:59 PM   #48
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Agree with Katsmeow. Run your plans three times:
1) You both live a long time (your expectation)
2) Spouse A dies before claiming SS - what widower SS benefits will Spouse B have?
3) Spouse B dies before claiming SS - " for Spouse A

Our plan has lower earning spouse claiming at FRA (66). Higher earning spouse will wait until 70 to claim. Counterintuitively, this was a better claiming strategy than both of us waiting until 70.

My model shows our portfolio down to ~$500k (~$700k including house equity) by the time higher earning spouse turns 70, at which point combined SS + RMDs cover expenses. And the portfolio being even that low makes me nervous!

(You may want to model and then test same basic inputs using cFIREsim. My model ends up being right at the median end-portfolio value, total withdrawals, etc. So while reality will likely be higher or lower, at least it's a zero historical failure plan. Which, while it's no guarantee, is better than Ambien for my quality of sleep!)
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Old 06-25-2014, 07:21 PM   #49
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Thanks, I'm familiar with those.

The statement says "Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 75 cents for each dollar of scheduled benefits."


This makes it sound as though a decision has been made to reduce everybody's benefit by 25%. As far as I know, no decision on how to handle the shortfall has been made. I think that is my point.

I doubt that we will see a flat 25% reduction in everybody's benefit. It will likely be a combination of changes that will be phased in over time.
I was simply trying to point out to the OP that a plan that contemplates entirely using up ones resources and then relying SOLELY on SS payments may not be as entirely risk free as one could wish.

Of course no decision has been made yet as to how the shortfall will be dealt with. One could certainly hope that logical and cool minds will come up with the best solution and implement it in a logical and even handed fashion over a reasonable period of time.

I guess one's set of beliefs comes into play here. Personally, I'm not encouraged by how our political organisms have responded to such challenges over the last decade or two so I assume that such behavior will continue. Clearly you assume the opposite. I hope you are right.
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Old 06-25-2014, 07:42 PM   #50
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Thanks, I'm familiar with those.

The statement says "Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 75 cents for each dollar of scheduled benefits."


This makes it sound as though a decision has been made to reduce everybody's benefit by 25%. As far as I know, no decision on how to handle the shortfall has been made. I think that is my point.

I doubt that we will see a flat 25% reduction in everybody's benefit. It will likely be a combination of changes that will be phased in over time.
I am assuming the 25% reduction is the default for planning purposes since that is what is currently funded. Anything better will be great, but I am not counting on it.
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Old 06-26-2014, 09:05 AM   #51
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I am assuming the 25% reduction is the default for planning purposes since that is what is currently funded. Anything better will be great, but I am not counting on it.
+1

If we receive more than 75%, it's gravy.
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Old 06-26-2014, 10:12 AM   #52
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I never thought to model a 75% reduction before, so thanks for the nudge to do that. (The combination of RMDs + 75% of scheduled benefits still meets our annual core expenses.)

Having said that, coping with the Social Security shortfall is a relatively easy combination of fixes. (Analysis: Social Security is fixable but changes are politically tough - The Denver Post)

I do worry about Medicare, which will be very difficult to patch up.
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Old 06-26-2014, 07:30 PM   #53
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This is an interesting (and timely) conversation. My mega-corp provides Financial Engines with our 401(k), and last night I discovered their Income Planner > Cash Flow Income & Expense Details report. I ran it the first time with our projected SS payments beginning at 70. It lists yearly tax detail, expenses (adjusted for inflation), Minimum Required Distributions, withdrawals needed yearly to meet your expenses, and projected shortfall for each year. According to this report, if we begin SS at 70, we'll be leaving our kids about $1.8M, each. If we begin at 62, they'll each get $1.3M.

Now I need to go back and see how they'll fare if we only get 75% of our SS. Great insights in this thread!

If you have access to Financial Engines, this is a pretty cool report to generate.
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Old 06-27-2014, 07:11 AM   #54
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SS is not going to get cut 25% for everyone.

What they will eventually do is:

1) Eliminate the income cap on SS tax

2) Increase the FRA by a year

3) Increase the amount of SS that is taxed (perhaps 100% of benefits will be taxed for people with incomes above $44,000)
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