Hi,
I'm counting on receiving Social Security in retirement. The recent 2021 Social Security Trustees report now says the Old-Age and Survivors Insurance part of Social Security will only be able to pay 76% of benefits as of 2034. I assume one of the worst case scenarios, that politicians won't do anything about this and benefits will be reduced.
To account for this in my planning I use a calculation like this:
(Amount I expect to receive between now and 2033 +
76% of amount I expect to receive between 2034 and death) / years of retirement
I allocate the result of this calculation to the "income" side of my expenses calculation. I don't do anything about cost of living adjustments.
Are any of you accounting for a benefits reduction in your retirement planning? How are you doing it?
Thanks,
--
Dan
While it is good to be cautious, I think it is close to certain that there will NOT be a benefit reduction for anyone in or older than their mid 40's as of right now.
Why? The government will increase payroll taxes, increase the amount of income subject to the tax, reduce benefits for younger people or some mix of the above to prevent insolvency.
They won't do anything, of course, for at least a few more years. And every proposal floated always has a 10 year window for folks near retirement. These folks are ALWAYS grandfathered in. Thus, my thinking is this:
Current insolvency date-2033.
They will probably cut a year or two off of this as time goes forward.
So let's say congress finally acts to fix things around 2030, near the insolvency date.
They grandfather in anyone 57 or over (10 years from the full retirement date) in 2030.
Thus, they grandfather in anyone born before 1973.
But, lets be conservative, and say they make it 1975.
Thus, it seems unlikely to me that anyone currently over 46.
Of course, if you are a teenager, in your 20s, or in your 30s there very well might be a cut. But more likely, these age groups will just pay a lot more in taxes for a similar, or modestly reduced benefit.