What will happen if Social Security benefits are cut in 2034

[donheff]

Why can't they just sell more Treasuries even after the reserves are exhausted?



Is selling more treasuries different than printing money?

We very well may will do just that. But if, as the last thread's OP pointed out, SSA are legally prohibited from making payments that are not covered by the Trust Fund, then Congress will have to pass a fix to allow that, or a fix increasing payroll tax, reducing benefits, or whatever.

 

[Senator]

We very well may will do just that. But if, as the last thread's OP pointed out, SSA are legally prohibited from making payments that are not covered by the Trust Fund, then Congress will have to pass a fix to allow that, or a fix increasing payroll tax, reducing benefits, or whatever.

Is the SSA prohibited from borrowing to pay the obligations, without additional law changes?

 

[pb4uski]

Yes, the SS trust fund is prohibited from borrowing by law. The cites for this were in another recent thread.

 

[pb4uski]

Medicare part B is already being means tested, so why not SS!

Because SS retirement benefits are a gorilla compared to Medicare Part B costs.

 

[UnrealizedPotential]

I used to worry about this, not so much anymore. The earliest I could get SS is 2031. Posters here have told me it will be there. I'm sure they know much more than me on the subject. I consider anything I get from SS as a bonus. I'll get something for sure, but I do not structure my future with having SS as something that will be make it or break it.

SS for me serves more as a bonus or a complimentary role later in life for my income. Isn't that what it was meant to do from inception?

 

[RunningBum]

I used to worry about this, not so much anymore. The earliest I could get SS is 2031. Posters here have told me it will be there. I'm sure they know much more than me on the subject. I consider anything I get from SS as a bonus. I'll get something for sure, but I do not structure my future with having SS as something that will be make it or break it.

SS for me serves more as a bonus or a complimentary role later in life for my income. Isn't that what it was meant to do from inception?

Supplemental/complimentary, yes; bonus, no, definitely not. Bonus implies something extra you may or may not get. Maybe it's evolved into that, but as far as I know that was not the original intent. If you aren't concerned about a benefit that probably will pay you 5 figures a year, good for you. It won't make or break me, but I am concerned enough to follow.

 

[USGrant1962]

Supplemental/complimentary, yes; bonus, no, definitely not. Bonus implies something extra you may or may not get. Maybe it's evolved into that, but as far as I know that was not the original intent. If you aren't concerned about a benefit that probably will pay you 5 figures a year, good for you. It won't make or break me, but I am concerned enough to follow.

And to complete that thought, a benefit that you and your employer probably paid six figures into.

 

[Senator]

Hopefully there would be enough of us left to vote them out.

That reminds me of several quotes by Alexander Fraser Tytler...

 

[UnrealizedPotential]

Supplemental/complimentary, yes; bonus, no, definitely not. Bonus implies something extra you may or may not get. Maybe it's evolved into that, but as far as I know that was not the original intent. If you aren't concerned about a benefit that probably will pay you 5 figures a year, good for you. It won't make or break me, but I am concerned enough to follow.

I'm concerned, I guess I just feel powerless as an individual to do anything about a change in benefits that may or may not come and may or may not affect me. But I have to admit bonus is a poor word to use.

 

[jollystomper]

The Social Security Administration (SSA) announced that the maximum amount of wages in 2017 subject to the 6.2% Social Security tax (old age, survivor, and disability insurance) will rise from $118,500 to $127,200, an increase of more than 7%. By comparison, the 2016 wage base was unchanged from 2015.

One option that might be considered is removing this ceiling on the 6.2% social security tax, and subject all earned wages to it.

 

[athena53]

SS for me serves more as a bonus or a complimentary role later in life for my income. Isn't that what it was meant to do from inception?

Yes- it was meant to be part of a "3-legged stool" of SS, pensions and private savings. Pensions are mostly gone from the private sector now, but judging from the comments I see on FB posts concerning seniors, a huge number of them are trying to exist on SS alone and it's tough going, especially after a spouse dies.

And I agree with RunningBum: you and your employer paid into it for decades. It's not a "bonus".

 

[Blueskies123]

One could look to see what happens to pension plans when their company's go bankrupt, for example Delta airlines 20 years ago or so. Or one could look to see what happens when counties go bankrupt like Brazil or Greece. What they have done in some of the cases could be perceived as a little more fair than a cut across the board. They have capped pension payments at a certain amount so that people that got the bigger checks got a hair cut while those that receive smaller payments kept 100% of the payments. This way poorer people were not impacted while (for example pilots) got a larger cut which they should be able to afford.
This is why I am taking SS at 66 rather than 70.

 

[gayl]

I never expected SS to be around, or that it would be cut back before I became eligible to collect "my earned" benefits, so I had already written it off. OK, I was wrong, again. My financial planning never counted on SS (still doesn't) so it won't bother me other than to give me the satisfaction that I was right about SS.

+1

In addition to that, we all knew when signing retirement papers that DBP could be cut.

Agree that a 3 (or 4) legged retirement plan is vital. Mine's:

1. Pension
2. SSA
3. Investments
4. Paid off house in a state where property taxes can only increase 2% a year (paying 3100 on a 950,000 house)

 

[scrabbler1]

I have been living only on my personal savings for the last 9 years after I ERed in 2008 at age 45. I have often described my additional money sources as "reinforcements" waiting for me when I turn ~59.5 in 5 years from now. One of them is SS, the others are unfettered access to my IRA and my frozen company pension. If my SS benefit, also pretty much frozen because I have not changed my SS earnings history in the last 9 years, takes a 25% cut, all it means is that this specific reinforcement will be a little smaller.

 

[audreyh1]

We're just hoping for our SS to cover our Medicare premiums after the taxes owed on SS. Looking at today's numbers projected to 2030 it will just barely cover.

 

[Teacher Terry]

Because of WEP our SS will be so small that it does not matter. I really don't see them cutting SS for people at the bottom of the income level as it would be a catastrophe.

 

[LRDave]

We're just hoping for our SS to cover our Medicare premiums after the taxes owed on SS. Looking at today's numbers projected to 2030 it will just barely cover.

A sobering thought....

 

[harley]

Sure. It's hearsay from one of the guys who "wrote the book" on Social Security.

From a guy who wrote a book on SS. I'm sure he's an expert and probably correct, I was just looking for the text of the law.

I haven't seen anything either, but I think the point is that the existing law is that they can't take money from elsewhere. So unless something is done by congress before 2034, SSA simply won't have the funds to distribute 100%. What would they do? I doubt they even have the ability to do any means testing or raise SS taxes. Do they even have the ability to limit when the give out knowing the lake is running dry? My guess is that once they have drained the reserves, they will only give out as much as they are taking in, which I believe is what's estimated to be 75%. I don't know how they could do anything but make cuts across the board. They are check writers, not policy makers. At that point, Congress might take other actions to either raise revenues or make uneven cuts.

Thanks, that's a helpful explanation.

Yes, the SS trust fund is prohibited from borrowing by law. The cites for this were in another recent thread.

Also thanks, I'll see if I can find them.

 

[pb4uski]

Think I found it.

http://www.early-retirement.org/for...decision-here-is-why-88951-3.html#post1962662

See post #271.

 

[Tom52]

I wonder what will happen to the quality of care for all the old folks in nursing homes that turn over their monthly Social Security to Medicaid in order to stay there. Will Medicaid be able to continue to pay enough to nursing homes to continue providing reasonable care for nearly broke residents with a 25% reduction to their SS benefits?

 

[Walt34]

IMO...Since SS is the only source of income for so many Americans, a 25% haircut would have such a negative impact on so many citizens that I believe there is no way Congress would allow a haircut to happen to people currently receiving SS. If they did, there better be plenty of funds available for food stamps and other similar public services.

That's my take on it too. And I doubt they'll means test SS although I suppose that could happen but my crystal ball is out of order again. As for us, a 25% SS cut would be an irritant but hardly catastrophic.

 

[daylatedollarshort]

I try to leave enough of a buffer in our plan that if we get the cut it will only impact our kids' inheritances, so I see it as more of their problem. But I suspect the odds of a SS cut and maybe even a few other events of that magnitude are possible, if not probable, for us over a 40 year time span and plan accordingly.

 

[Jerry1]

Money can be printed.

And that is what I really worry about. Between the need to pay off debt (or even just the interest on the massive debt) and the cost of other entitlements (not including SS), the easiest thing for congress to do is print money - i.e. raise inflation. They won't have to vote to cut payments, they just pay them with less valuable dollars. Of course the effect on the recipient will be the same - less purchasing power, but they're more likely to get reelected (their primary objective).

I told a buddy of mine 25+ years ago when we started putting money into our 401K, that of course I was going to do it, but had no belief that the Government would stick to their pledge and not tax or somehow take some of that money. It's too big a target not to tap. Then my understanding of inflation kicked in and I believe that is how they settle the accounts - by printing money.

 

[athena53]

I wonder what will happen to the quality of care for all the old folks in nursing homes that turn over their monthly Social Security to Medicaid in order to stay there. Will Medicaid be able to continue to pay enough to nursing homes to continue providing reasonable care for nearly broke residents with a 25% reduction to their SS benefits?

First, as noted earlier, any cuts are more likely to affect recipients with higher-than-average benefits and other substantial sources of income, not those poor enough to qualify for Medicaid.

The long-term viability of Medicare as a long-term care "plan" for so much of the population does concern me, though. My guess is that state budgets will be stressed, the amounts they're willing to pay to the nursing homes will go down and the places that take Medicaid patients only are going to look more and more like warehouses. Depressing.

 

[Chuckanut]

My take on this is that they will not 'means test' SS directly. That would be a really HOT potato. So everybody gets their full check.

Then.... they adjust how they tax SS so the more affluent pay more of their SS back to the Treasury.

No reduction in SS benefits. But, the more affluent you are the less you end up with after taxes. What else is new?