Social Security and Medicare cuts now on the table

[ziggy29]

I'd assume that their measure of 'income' does not include the SS payment? Bad assumption?

If they use AGI, anywhere from 0% to 85% of your SS income would be included under current tax law.

 

[Nords]

Have you seen this ? Officials: President Obama seeks $3 trillion to $4 trillion in cuts - CNN.com - please kindly refrain from making political comments... I am posting this to share with those of us who plan to FIRE - we may be well advised to plan for significant cuts in SS.

Two comments:
1. Fear mongering. Some "unnamed officials" say that some "unspecified cuts" to Social Security may be necessary. Seriously?

2. If Social Security is a single point of failure in an early-retirement plan, then the plan is not adequately capitalized.

Bonus comment: There's plenty of tinkering room to Social Security through means testing (taxation of benefits) and "improving" the COLA calculation. The real program to be concerned about is Medicare.

 

[MasterBlaster]

I'd assume that their measure of 'income' does not include the SS payment? Bad assumption?

IOW, does delaying SS to 70 YO increase your 'income' under this measure?

-ERD50

If you want to read details about the Bowles Simpson deficit reduction plan here is the link. It is much more than just SS cuts.

The discussion of Social Security starts on page 48

www.fiscalcommission.gov/sites/.../TheMomentofTruth12_1_2010.pdf

 

[Independent]

I think that one very likely "cut" is that the social security for many of us will be fully taxed as income. That is a way to have a means-tested cut, yet not have any official cut listed on the social security payout list. Still, it is a 15% cut for most and a larger cut for others, particularly those with large RMDs. Plan on at leat that.

I agree with your comment that this is one way to reduce benefits without sending smaller checks - a backdoor cut.

But, I do the math differently.
If 85% of my SS is currently included in my taxable income, and I'm in a 15% marginal FIT bracket, then making SS 100% taxable only increases my taxes 15% of 15% or 2.25% of my benefit.
If I'm in a 25% marginal bracket, it's 25% of 15% or 3.75% of the benefit.

 

[eytonxav]

Not sure where all the funds that were redirected from SS coffers went over the years, but that would be a good place to get back from. Also, would expect to see the FICA cutoff threshold increase much more than it normally does.

 

[MasterBlaster]

Not sure where all the funds that were redirected from SS coffers went over the years, but that would be a good place to get back from. Also, would expect to see the FICA cutoff threshold increase much more than it normally does.

The funds were directed into the general fund and were spent. You can thank Lyndyn Johnson for putting SS together with everything else under a "Unified Budget". It was indeed separate before that.

 

[chinaco]

I think most people were aware the SS and Medicare needed some work to keep it solvent over the next 40 years.


The ridiculous part is that a Lobbyist (Grover Norquist) put some fear into the GOP (mainly) using the tea party as a threat to throw them out if they voted for any tax increase. Consequently a number of them were politically pressured (yes by a lobbyist) to sign a no tax pledge.

The Taxpayer Protection Pledge

I, _____, pledge to the taxpayers of the (____ district of the) state of ______ and to the American people that I will:

ONE, oppose any and all efforts to increase the marginal income tax rate for individuals and business; and

TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.

Source: Americans for Tax Reform

http://s3.amazonaws.com/atrfiles/files/files/060711-federalpledgesigners.pdf

Is GOP Resolve On Taxes Showing Cracks? : NPR


Somehow the debate over the current budget has turned into an impasse over taxes because of this pledge.... and it appears that it will be now be used as a midnight session to chop SS.

If that tax pledge was to protect taxpayers.... I am not feeling very protected!

 

[donheff]

Not sure where all the funds that were redirected from SS coffers went over the years, but that would be a good place to get back from. Also, would expect to see the FICA cutoff threshold increase much more than it normally does.

In 2000 we had a huge surplus. Bush said "let's give a bunch of it back," and did. So, of course there is no surplus anymore. That's is why many of us believe the cuts were always intended to force a crisis that could lead to privatization or other means to cut social programs back. Add two unfunded wars and spending to address a collapse and we have a huge mess to dig out of.

 

[Independent]

Not sure where all the funds that were redirected from SS coffers went over the years, but that would be a good place to get back from.

I hope you realize that wherever it went, we're not going to get it back. It's either extra spending or extra tax cuts that wouldn't have happened otherwise. (I'm guessing donheff is right, but it doesn't matter anymore.) We can't unspend the money, the only way to uncut taxes is to, you know, raise them.

My personal planning includes a 0% probability of SS getting any of that money back.

 

[scrabbler1]

I think most people were aware the SS and Medicare needed some work to keep it solvent over the next 40 years.


The ridiculous part is that a Lobbyist (Grover Norquist) put some fear into the GOP (mainly) using the tea party as a threat to throw them out if they voted for any tax increase. Consequently a number of them were politically pressured (yes by a lobbyist) to sign a no tax pledge.

http://s3.amazonaws.com/atrfiles/files/files/060711-federalpledgesigners.pdf

Is GOP Resolve On Taxes Showing Cracks? : NPR


Somehow the debate over the current budget has turned into an impasse over taxes because of this pledge.... and it appears that it will be now be used as a midnight session to chop SS.

If that tax pledge was to protect taxpayers.... I am not feeling very protected!

Thank you for mentioning Norquist. I am incensed that he, a lobbyist, is basically dictating tax policy to the rest of the country via the intransigence of the Republicans he threatens with a primary if they raise taxes one dime.

 

[scrabbler1]

In 2000 we had a huge surplus. Bush said "let's give a bunch of it back," and did. So, of course there is no surplus anymore. That's is why many of us believe the cuts were always intended to force a crisis that could lead to privatization or other means to cut social programs back. Add two unfunded wars and spending to address a collapse and we have a huge mess to dig out of.

This is the endgame of the stupid "Starve the Beast" rallying cry I first heard from my misguided Republican brother back in the 1990s. "Cut taxes now, preferably for the wealthy (and scream "class warfare" at anyone who disapproves), then after the resulting deficits cut spending on things the Left likes."

 

[2B]

In 2000 we had a huge surplus. Bush said "let's give a bunch of it back," and did. So, of course there is no surplus anymore. That's is why many of us believe the cuts were always intended to force a crisis that could lead to privatization or other means to cut social programs back. Add two unfunded wars and spending to address a collapse and we have a huge mess to dig out of.

Now were off the financial reservation and into politics.

Where are our moderators?

Now, back to the finacial only discussion.

 

[ziggy29]

I would please ask the community to focus discussion more on where we are headed with SS and Medicare reform and its practical impacts on retirement as opposed to revisiting the past through politicized eyes. Thank you.

 

[rescueme]

In addition to what's been mentioned, I am thinking they will likely raise the earliest age from 62 to something higher.

I don't think they will. Certain people in certain occupations don't have much left in them after they hit their 60's (I was one of them).

What they might do is what was done before; that is drop the percentage of the FRA payment at age 62, and at the same time increase the FRA age.

Prior to 1983, if you retired at age 62 you would receive a payment that was 80% of the then FRA age of 65. However the benefits were changed in 1983, during the last major change to SS.

With the latest change, they not only increased the FRA age (in my/DW's case, to age 66), they also reduced the age 62 payment to 75% of the FRA age amount.

As it is, 73% of folks eligible for SS take it early, at age 62 (latest stats a/o 2007, at:

OASDI Monthly Statistics, November 2007 - Table 3 )

I believe there would be more of an uproar over changing the age rather than changing the FRA percentage reduction at age 62.

Of course, that's only my opinion...

 

[2B]

I would please ask the community to focus discussion more on where we are headed with SS and Medicare reform and its practical impacts on retirement as opposed to revisiting the past through politicized eyes. Thank you.

About time.... This forum would be in sad shape if it depended on the likes of me.

 

[eytonxav]

I hope you realize that wherever it went, we're not going to get it back. It's either extra spending or extra tax cuts that wouldn't have happened otherwise. .

Do you think I'm delusional or just popped out from under a cabbage leaf

Heck, we can't even get the wallstreet crooks to return the $$ they absconded with, but wouldn't it be nice.

 

[youbet]

In 2000 we had a huge surplus. Bush said "let's give a bunch of it back," and did. So, of course there is no surplus anymore. That's is why many of us believe the cuts were always intended to force a crisis that could lead to privatization or other means to cut social programs back. Add two unfunded wars and spending to address a collapse and we have a huge mess to dig out of.

Dems would have created the same situation. No, they wouldn't have cut taxes across the board as the Republicans did. They would have left taxes alone and increased spending to create the same crisis. Same goals, different means.

 

[2B]

Do you think I'm delusional or just popped out from under a cabbage leaf.

Is this a multiple choice question?

Heck, we can't even get the wallstreet crooks to return the $$ they absconded with, but wouldn't it be nice.

Hell, it doesn't even look like we can get them to pay taxes on it.

 

[Midpack]

I don't think it is new news. Who on this forum is not expecting SS cuts and planning for them?

No one who has a pulse. I plan on no more than 50% and am prepared for less. If I'm wrong, I'll do some travel I wouldn't have otherwise.

I expect Medicare is going to be even worse unless we adopt a universal health care system like every other developed country (not simply institutionalizing our current mess of a costly system), but I'll believe that when I see it. Politicians won't propose real changes because 'we the people' won't let them when all is said and done - we get what we deserve.

 

[donheff]

Sorry for taking this in a political direction I saw the subject and assumed it was in the political forum. So, I agree, lets forget the whys and focus on the what nexts -- at least in this forum

 

[haha]

I plan on no more than 50% and am prepared for less. If I'm wrong, I'll do some travel I wouldn't have otherwise.

Don't worry, if your avatar is your photo, you probably can travel for free.

Ha

 

[Mulligan]

Maybe someone who is smarter than me please help me with this question, as I can't get my arms wrapped around the whole budget. We are overspending currently approx. 30% of our yearly government revenues. However, none of this overspending is caused CURRENTLY by Medicare or SS. I know long term there is a problem, but shouldn't it be first things first, and cut the current overspending problems before, the other 2 programs are pared down?

 

[rescueme]

I know long term there is a problem, but shouldn't it be first things first, and cut the current overspending problems before, the other 2 programs are pared down?

You're not looking at it properly ...

Slight of hand in any government (regardless of party) is normal SOP.

Never, never look behind the curtain (e.g. Wizard of Oz). Concentrate on what is in front of you, and make sure the folks only see the "smoke and mirrors" of the problem that you want them to concentrate on.

Get it now ... ?

(OOPS - political rant ...)

 

[W2R]

Each time I read one of these stories threatening SS cuts, I am tempted to run right out and claim my SS before it vanishes or decreases drastically. After all, I'm 63. I could do that.

In my individual case it would normally seem preferable to wait a bit longer for SS. Still, these stories are pretty alarming when you are already retired and eligible, but just haven't made that claim quite yet.

I am still hanging on. Hopefully anything that is done will not affect someone who is already 63.

 

[Alan]

I am still hanging on. Hopefully anything that is done will not affect someone who is already 63.

DW is thinking about seeing a plastic surgeon to ask he/she can make her look older