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Old 05-21-2015, 02:06 PM   #261
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Anybody here modeling the scenario based on the 'rumors' that in 2033 SS benefits will be cut by 23%?
Social Security Trustees Report: Unfunded Liability and Projected Insolvency

And does that factor into your decision to take SS early?
My initial thought on this is that when cuts are made, they will only affect those under 62, and those already collecting or eligible to collect would not see changes. So once you hit 62, whether you start taking it or not, you benefit is set (other than COLA changes).

The more I see the issue getting kicked down the road, the more it seems that it may have to affect everyone. If it happens that some may start collecting full benefits at 62 and later down the line the benefits are slashed for all, it clearly pushes the breakeven line a lot further out.

They could also do it in less obvious ways, like making SS 100% taxable (perhaps only for those with enough other income, similar to how the 85% tax is now). If they make that effective for all, it makes it better for those who took SS early and paid less taxes on it for a few years.

I'm guessing some kind of cuts will be made before I hit 62. If it appears they took full measures to make it solvent I can do a new analysis then. If it looks like they took a half step, I can at least see if they favored early takers.
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Old 05-21-2015, 02:07 PM   #262
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Originally Posted by mathjak107 View Post
there is no sequence risk since you are not spending down the way he is figuring . you are taking ss instead so the comparison is really what you are getting , which is the ss checks and the 6% average return on a 50/50 mix .

kind of a one sided view i guess.
We can just disagree. I think sequence of returns applies to the accumulated funds from receiving and investing the SS.

And the author uses a 6% investment return and 3% inflation rate guesstimate. Those could very well be true........ or not. Depending on how things actually work out for any individual, the break even point could be exactly the 21 years...... or more..... or less....... I'm just pointing out it's a statistical estimate based on assumptions of the future and not a calculation based on historical numbers.


I'm not knocking the calculation. I'm must pointing out that the 21 year break even point he estimates is just that, an "estimate."
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Old 05-21-2015, 02:25 PM   #263
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some areas of SS simply scream for reform and change...
Yep. SS started out as a good thing but the people and situations covered have expanded faster than funding. We need to reform the payouts or increase the funding or both.

Perhaps our leaders will choose to have some parts of survivors benefits and spousal benefits moved from the SS retirement system to some sort of welfare system where "need" comes into play?

However it's done, lots of folks depend on their SS checks while for some others it's just "gravy" on an already well financed retirement. Thoughtful reform must be done.
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Old 05-21-2015, 02:32 PM   #264
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The people for whom SS is gravy is suppose to be a tiny percentage.
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Old 05-21-2015, 02:46 PM   #265
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The people for whom SS is gravy is suppose to be a tiny percentage.
why do you say that?

one of the principles of social insurance is that need is presumed - i.e. everyone gets it
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Old 05-21-2015, 02:54 PM   #266
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Originally Posted by BBQ-Nut View Post
Anybody here modeling the scenario based on the 'rumors' that in 2033 SS benefits will be cut by 23%?
Social Security Trustees Report: Unfunded Liability and Projected Insolvency

And does that factor into your decision to take SS early?
If that is a case then they will also cut all Health Care Programs so one would have to plan not getting sick after 2033

Naaa I think they will raise taxes to deal with this. USA will not move to become some developing country that does not provide benefits for its citizens With Obamacare we are more like moving towards what Europe does for a long time.
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Old 05-21-2015, 02:54 PM   #267
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why do you say that?

one of the principles of social insurance is that need is presumed - i.e. everyone gets it
There just are not that many wealthy retirees where SS is all extra income, and not a significant sources of retirement income -

Means Testing Social Security | Mother Jones
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Old 05-21-2015, 03:04 PM   #268
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I see taking SS early as a way to increase my estate value. I'm able to either;
A. Invest my early SS payments if I don't need the money. All of which is inheritable if I don't spend it.
B. Spend my early SS payments and leave my investments untouched to continue and grow. Again inheritable if I don't spend it.

Personally, I prefer to count my birds in my hand, not those in the bush. A promise by the government for a future SS benefit is susceptible to revisions as I haven't actually received a benefit yet, so logic dictates, I haven't actually lost anything yet. (Congressmen and Senators think just this way!) Whereas, a benefit I'm currently receiving is harder to take away.

I am willing to bank on the sure thing, taking the SS early, locking in my claim to the payment by actually receiving it and either spending it to shelter my own current investments or to invest along with my current investments if I don't need the money at the time.

Playing the 'waiting' game, banking on a gamble that SS will be around, let alone grow at a 8% annual rate by delaying is tantamount to banking on a gamble that the stock market is going to average 10% growth just because it has in past years. Only now the government has your money.

Speaking of which; The government does not consider your SS account your money. Oh no!! That's THEIR money that they decide how to distribute. If they decide to means-test, and I think there is a strong chance they will someday, then folks like us are screwed.
Agree 100%. You left out taxes.
In my state, my IRA W/Ds are taxed at full flat income tax of 5.1% SS...not at all.

In my case, I'm automatically putting an extra a grand in my pocket by taking SS vs my IRA.
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Old 05-21-2015, 03:58 PM   #269
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Your family is definitely an extreme example, but shows why some areas of SS simply scream for reform and change...I don't how any reasonable person could think this was appropriate. That said, if it's there for you, no reason you shouldn't take it.
It is so extreme that it really does not need to be addressed.... the amount saved would be very tiny compared to the amount being paid out.... do you know any couple with a 20+ age difference I have only met one in my life...

The big problem is just the sheer number of people getting benefits compared to the number paying in.... in addition, how much longer people are living...
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Old 05-21-2015, 04:04 PM   #270
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There just are not that many wealthy retirees where SS is all extra income, and not a significant sources of retirement income -

Means Testing Social Security | Mother Jones
I didn't see any numbers or percentages anywhere
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Old 05-21-2015, 04:19 PM   #271
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Our FA convinced us to Waite until we I was 70 to take SS. I believe a big portion of that decision is your current status and how long you believe you will live?


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Old 05-21-2015, 04:19 PM   #272
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.... do you know any couple with a 20+ age difference I have only met one in my life......
+1 I know of one couple with a 20 year age difference... that's the most I can think of for people that I know.

To pay benefits to kids under 18 of those receiving survivor or disability benefits is understandable but I don't get why the system pays benefit to kids of people receiving retirement benefits... seems very odd to me because retirement is more "voluntary".

That said, I have a friend who is turning 62 and plans to draw SS and is starting early in part because his daughter will get benefits about $42k between now and when she is 18.
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Old 05-21-2015, 04:25 PM   #273
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Agree 100%. You left out taxes.
In my state, my IRA W/Ds are taxed at full flat income tax of 5.1% SS...not at all.

In my case, I'm automatically putting an extra a grand in my pocket by taking SS vs my IRA.
+1. After 15 yrs. of retirement my entire portfolio is in IRA's and is pretty much fully taxable. I also live in a State that has an income tax but does not tax SS for moderate incomes. Add to that the maximum taxable SS at 85% (I'm much lower) vs 100% of IRA w/d at the federal level and there are significant tax savings.

A modest 3% return on my portfolio not used to replace SS also mounts as the years go by.
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Old 05-21-2015, 04:26 PM   #274
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I didn't see any numbers or percentages anywhere
The article had many specifics on bend points and taxes. If you want an income based article here is one from AARP with both sides presented:

The against side states that only 2% of benefits go to retirees with $100K in other income, meaning any significant savings would have to cut into the middle class benefits.

http://www.aarp.org/content/dam/aarp...i-econ-sec.pdf

If they cut benefits for the upper middle class I'd probably just donate a good chunk of our savings away to liberal charities and political pacts in favor of expanding, not cutting SS benefits. No point in being penalized for being good savers all our lives and a LBYM lifestyle.
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Old 05-21-2015, 04:40 PM   #275
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The article had many specifics on bend points and taxes. If you want an income based article here is one from AARP with both sides presented:

The against side states that only 2% of benefits go to retirees with $100K in other income, meaning any significant savings would have to cut into the middle class benefits.
yes SS is very heavily front-loaded

the 2% seems reasonable, thx!
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Old 05-21-2015, 04:41 PM   #276
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Our FA convinced us to Waite until we I was 70 to take SS. I believe a big portion of that decision is your current status and how long you believe you will live?
I think FAs are hard-wired to automatically spit out the number 70 in any SS conversation
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Old 05-21-2015, 04:44 PM   #277
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It is so extreme that it really does not need to be addressed.... the amount saved would be very tiny compared to the amount being paid out.... do you know any couple with a 20+ age difference I have only met one in my life...

The big problem is just the sheer number of people getting benefits compared to the number paying in.... in addition, how much longer people are living...
That's a true statement, but I would be interested in knowing the amount overall that goes to the minor children of retired parents.Look at your average 60 year male movie star for more examples of 20 year age differences.
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Old 05-21-2015, 04:53 PM   #278
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not to go too far off topic on the subject of long-tailed pension payments, but the last civil war pension beneficiary just passed away a few years ago - she married young to an old veteran around the turn of the century
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Old 05-21-2015, 04:57 PM   #279
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I think FAs are hard-wired to automatically spit out the number 70 in any SS conversation
+1. I sense a work until you drop theme in many financial articles as, present company excluded, most retirees simply do not have the resources to both retire at 62 and delay SS. Investment companies make money off of us - the more we save and the less we take out of savings the more they make. As Fred Brock put it in Retire on Less Than You Think, the investment brokerages and mutual fund companies want our money, so they scare us as much as possible.

While there are many good reasons to take SS at 70, articles that do not mention pros and cons, and certainly the very real potential cut in SS future benefits as a factor to consider, seem more like advertorials to me rather than the true pros and cons discussions like we have here.
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Old 05-21-2015, 05:01 PM   #280
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if you can start before 2030, once you plug in that 25% (or whatever) haircut into the cash flows it becomes a no brainer
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