Are you counting on SS?

[joeea]

And despite all the stupidity and inaction in D.C. I just don't see SS taking a serious haircut because for too many people it is their only or major source of income. That would create a major social crisis.

And even if you don't need SS, I'd be willing to wager that most on this forum know or are related to someone who does need it. I sure do.

That seems to be the history of SS changes. The government waits until the last minute to make any changes since both sides prefer not to face any political backlash.

Depending on the definition of "serious haircut", I agree. I don't think the currently pending across-the-board haircut will take place. But I do think benefits will be reduced in some fashion.

I suspect one side will favor increased taxes and the other side will look for decreased benefits. A combination of the two will almost certainly become the compromise solution at the last minute. Some of the changes will affect every recipient, while other changes will be grandfathered in. Some will win, others will lose.

That's what happened in 1983. That's what almost certainly will happen again (around 2030?).

 

[marko]

DH and I are both collecting SS. I assume for planning that this will continue. I recognize the possibility that 100% of it could become taxable and/or the COLA could be lowered. It is possible that benefits could be lowered but I would expect that above to happen first. The main thing that I do remember to do periodically is run scenarios with only of us alive

Lots of comments over the years here about SS changing/going away/taxed differently/reduced.

Everyone's situation is different but this was one of the many reasons I decided to 'take the money and run' at 62. Bird in hand.

 

[joeea]

I was told something like that back in 1972.

Back in 1972, the FRA was 65. And none of the benefits were taxed at the Federal level. Social Security taxes were collected on the first $9,000 of earnings.

Now the FRA is gradually moving to 67 and up to 85% of the benefits are taxed. Social Security taxes are collected on the first $128,700 of earnings

If I had to guess, at some point in the next 15 years the FRA will be gradually increased again and 100% of the benefits will be taxed. Social Security taxes will be collected on the first $500,000 or so of earnings.

 

[Dtail]

Back in 1972, the FRA was 65. And none of the benefits were taxed at the Federal level. Social Security taxes were collected on the first $9,000 of earnings.

Now the FRA is gradually moving to 67 and up to 85% of the benefits are taxed. Social Security taxes are collected on the first $128,700 of earnings

If I had to guess, at some point in the next 15 years the FRA will be gradually increased again and 100% of the benefits will be taxed. Social Security taxes will be collected on the first $500,000 or so of earnings.

The bolded sounds reasonable. Do you think there will be a grandfathering for the FRA decision of those already at a certain age?

 

[ncbill]

Yes, but only "counting on it" to pay Medicare Part B & the cost of supplement plans.

 

[joeea]

The bolded sounds reasonable. Do you think there will be a grandfathering for the FRA decision of those already at a certain age?

Based on the last time this happened, I would say yes.

 

[Perryinva]

Agree. And at current age 60, with over 35 years of maxed out earnings, I am definitely counting on my $40k/yr at age 68.

 

[Another Reader]

I'm counting on the deposit on June 25, just as I have counted on the deposit every month for two years plus. I have my pitchfork honed and my torch fueled for the month it doesn't show up.

So far, it's paid off some rental mortgage debt. I earn just under 6 percent on the principal that is paid off for some number of years.

 

[Lawrencewendall]

I was told something like that back in 1972. Actually they told me that the program was nearing bankruptcy and wouldn't exist at all by now.

Heard it in the early 80's also.

 

[Focus]

The bolded sounds reasonable. Do you think there will be a grandfathering for the FRA decision of those already at a certain age?

My original guess was that Congress would aim to continue the current incremental increases in FRA up to 70; if they had done that, it would have affected those born in 1961 and later. But a good number of those folks are over 55 now, so I'm not sure they could get away with it.

 

[copyright1997reloaded]

The thought process that social security is "good till 203X" misses a very important point. The socials security "trust" fund is nothing buy IOU's from the federal government in the form of special issues treasuries. That money has already been spent by the government for general purposes, e.g. guns and butter.

Starting the 2018, social security is running a deficit, meaning that it isn't taking in as money money (to the treasury) as is going out (from the treasury). That means, for the first time since it was "fixed" in 1982, that social security is a net impact on government funding instead of a source of funds (to be used for whatever great government purposes as politicians decided).

As the net outflow into social security payments increases each year, the burden on the overall government spending picture will grow. We have a problem now, not in 2034 or whatever.

 

[imoldernu]

No plan, but a look back. Retired unexpectedly due to cancer scare @ age 53 in 1989. Took SS early @ age 62 in 1998, so for the past 20 years, we have received the equivalent of $25K/yr which forms the base for our ongoing income.

Social Security began in 1935 w/taxes assessed beginning in 1937. Thankfully the plan worked out for those of us in the Silent Generation. , (The Lucky Few).

 

[Bryan Barnfellow]

It's astounding, but nonetheless understandable, that so many here plan for future potential cuts to SS benefits. Here's a question. If you are due an SS benefit, but are not a US person (as defined by the IRS) and so don't file tax returns, how would the SSA ever reduce your payout according to some income threshold scheme? How would they ever get information on your income unless you voluntarily provide it?

Note: this doesn't apply in my case; I'm just wondering how an equitable system for income-based benefit reductions would be constructed.

-BB

 

[tb001]

We’re only 7 years out from taking early SS, so yes, we’re depending on it, at least in the early years. My hope is that we would be grandfathered in if any cuts or changes were made. If there are significant changes, we’ll need to change our plans. I too grew up hearing it would be gone by the time I retired.

 

[joeea]

The thought process that social security is "good till 203X" misses a very important point. The socials security "trust" fund is nothing buy IOU's from the federal government in the form of special issues treasuries. That money has already been spent by the government for general purposes, e.g. guns and butter.

You are confused.

You seem to be imagining some special sort of money targeted toward repaying the bonds issued by the Social Security Administration. And you seem to be saying that this special source no longer exists because it was used for some other purpose. That is simply not the case.

Starting the 2018, social security is running a deficit, meaning that it isn't taking in as money money (to the treasury) as is going out (from the treasury).

That is correct. Starting this year, the benefits of social security exceed the income. So the $2.6 Trillion trust fund has begun to be depleted.

That means, for the first time since it was "fixed" in 1982, that social security is a net impact on government funding instead of a source of funds (to be used for whatever great government purposes as politicians decided).

As the net outflow into social security payments increases each year, the burden on the overall government spending picture will grow. We have a problem now, not in 2034 or whatever.

Again, you are confused.

There is no problem until the trust fund ($2.6 Trillion today!) is depleted. That is currently projected to occur in 2034. At that point, benefits must be reduced so that they match the income of social security. That is projected to result in a 21% across the board cut in benefits.

While it would be beneficial (and cheaper) for the government to tackle the funding issue now, this situation is not a "burden" on the overall government now, any more that any other bond obligation that the government meets every single day.

 

[joeea]

If you are due an SS benefit, but are not a US person (as defined by the IRS) and so don't file tax returns, how would the SSA ever reduce your payout according to some income threshold scheme? How would they ever get information on your income unless you voluntarily provide it?

There are all sorts of possibilities ranging from "they don't reduce your payout if you are not a 'US person'" to "they completely eliminate all benefits to folks who aren't a 'US person'". It's all speculation on top of guesses.

 

[Independent]

Starting the 2018, social security is running a deficit, meaning that it isn't taking in as money money (to the treasury) as is going out (from the treasury). That means, for the first time since it was "fixed" in 1982, that social security is a net impact on government funding instead of a source of funds (to be used for whatever great government purposes as politicians decided).

I'd think that the money SS takes "takes in (to the treasury)" is the tax revenue (mostly payroll taxes, some FIT from taxation of benefits, a little miscellaneous).

The money that "is going out (from the treasury)" is benefits, administrative expenses, and a little miscellaneous.

2010 was the first year that the "takes in" was less than the "going out".

Taxes+misc were $664 billion. Benefits+admin+misc were $713.

"takes in" has been less than "going out" every year since then.

The Trust Fund balance has gone up because the trust fund calculation includes an interest column. This money is a cost to the general fund and revenue to SS, and hence has no impact on the total amount of money the treasury takes in or pays out.

See Table VI.A.3 here: https://www.ssa.gov/oact/tr/2018/VI_A_cyoper_hist.html#207125

 

[Independent]

We have a problem now, not in 2034 or whatever.

There is no problem until the trust fund ($2.6 Trillion today!) is depleted.

Depends on your definition of "problem".

Legally, the Secretary is both authorized and required to make benefit payments as long as the Trust Fund worksheet shows a positive balance.
The best estimate is that balance will stay positive until about 2034.

Economically, a portion of those payments has been covered with new borrowing from the public since 2010.
That portion will continue to go up.

 

[daylatedollarshort]

We put a lot of buffer in our retirement plan so we could live without it, but I don't see any reason to plan on it going to zero. Old people tend to vote so I can't see them keeping people in office who let SS benefits go to zero. I do think it might be means tested, but if that impacts us too much, I'd start transferring assets to our kids sooner rather than later.

We get one SS check now and with our pension income it feels really good seeing those checks hit the checking account every month. I have been tweaking the budget so that eventually two SS checks, pensions, plus some odds and ends income like credit card churning and bank bonuses cover all our ongoing retirement expenses.

 

[flyingaway]

I do not count on social security, but it is one of my safety nets.

 

[ShokWaveRider]

I wonder what sort of statistics there are about people fraudulently collecting SS by not reporting the demise of a related recipient. Is there any way the authorities would find out? Do funeral homes or crematoriums have to report the SS numbers? Banks have joint members so that is one avenue closed.

 

[braumeister]

Do funeral homes or crematoriums have to report the SS numbers?

AFAIK, that is the main way that SS finds out.

 

[gayl]

I initially retired at 50, then from PT seasonal (taxes) last year. I did not include SSA in my calculations as I'm under WPO (won't get till 70) and 20 years was too long to plan for. I also omitted it last year thinking of it as a minimal boost to self insuring for LTC. That + RMD is sort of like a security blanket when I might need it in the future

 

[VanWinkle]

Yes I count on my SS, my company pension, and my 50/50 portfolio. That doesn't mean I couldn't live without one of the above, but I am counting on them being there. I could live on only my SS(once taken at 66) or only on my portfolio. The pension alone and I am eating cat food.

VW

 

[scrabbler1]

Independent, those were 2 good posts you made there (#92 and #93) plainly describing how SS's funding works and what the impact is of having FICA taxes not being enough to cover payouts since 2010. Thanks for posting the link to the SSA website, too.


The 3 choices as far as how to resolve SS's cash shortfall remain the same, whether it is today or in 203x: Raise taxes, cut benefits, or borrow. Today, SS borrows, albeit indirectly through trust fund expenditures putting claims on current GF tax dollars, increasing the deficit outside of SS. In 203x, the default position will be to cut benefits, although there is nothing stopping Congress and the president from issuing additional public debt or raising taxes (FICA or general) to reduce or eliminate the shortfall.