Break-even SS 62 vs 66 vs 70 calculators ?

[youbet]

It might also be another opportunity for means testing. You place your bets and take your chances.

Agree. With means testing, the folks facing SS reductions (or larger relative SS reductions) will be the minority who have the significant "means." Therefore means testing will be the "voter safe" way to proceed. The masses will vote to effectively tax the minority keeping the incumbent politicians in office. (It's always best for politicians when they piss off the minority instead of the majority or everyone!)

The system is already in place for Medicare where folks of more significant means pay higher (much higher) Part B and Part D premiums than folks of lesser means. So, no problem with implementation as the system is already there and debugged.

In any case, my hope is that whatever solution evolves, it doesn't disproportionately impact younger folks. We seniors can hitch up our trousers and pay our own way without relying on tomorrow's working families to help us buy our next BMW........

 

[Dtail]

If we truly think there will be a cut, would that change the thought process of when to take SS, or would the proportional cuts end up in the same financial place?

 

[USGrant1962]

Good point on where these taxes go. I wonder how much tax is actually collected from benefit recipients on their SS benefit? And how many years would that add to SS's remaining intact if directed back to the program instead of the general fund?

Taxation of SS benefits is returned to the Social Security Administration (the Trust Fund). It does not go to the general fund. It was $37.9B last year. See page 7 https://www.ssa.gov/OACT/TR/2018/tr2018.pdf

+1 Everything that I have read suggests cuts will be across-the-board so even then current recipients will get benefits cut.... I read something recently that suggested that across-the-board is mandated somehow but I have never been able to find a cite for it.

I think that grandfathering would be unfair and cause such political turmoil that there is no chance of it happening.... also, unless they announce it after the
fact, it would cause a huge amount of people who would be impacted to sign up that day.

If there is not a change in law, the Social Security Administration can only pay out 79% of benefits in 2034. They have no authority to do anything else, and cannot pay more than their revenues.

 

[Dtail]

Agree. With means testing, the folks facing SS reductions (or larger relative SS reductions) will be the minority who have the significant "means." Therefore means testing will be the "voter safe" way to proceed. The masses will vote to effectively tax the minority keeping the incumbent politicians in office. (It's always best for politicians when they piss off the minority instead of the majority or everyone!)

The system is already in place for Medicare where folks of more significant means pay higher (much higher) Part B and Part D premiums than folks of lesser means. So, no problem with implementation as the system is already there and debugged.

In any case, my hope is that whatever solution evolves, it doesn't disproportionately impact younger folks. We seniors can hitch up our trousers and pay our own way without relying on tomorrow's working families to help us buy our next BMW........

I assume you are referring to means tested for income vs. assets...if so it brings us back to the value of having non taxable income producing assets.

 

[eytonxav]

If we truly think there will be a cut, would that change the thought process of when to take SS, or would the proportional cuts end up in the same financial place?

I was going to wait until 70, but took mine earlier this year at 68.5 just to give me a "little" head start should SS cuts come, taxes increase or I meet my demise in the next several years.

 

[Dtail]

I was going to wait until 70, but took mine earlier this year at 68.5 just to give me a "little" head start should SS cuts come, taxes increase or I meet my demise in the next several years.

I have 4 years to 62 y.o. and the decision when to take SS is looming big in my thinking. Wish we knew more by then but probably not.

 

[youbet]

I assume you are referring to means tested for income vs. assets...if so it brings us back to the value of having non taxable income producing assets.

Yes, the existing system for charging those with significant means more for Medicare Parts B and D is based on MAGI.

I agree with your comments about the advantages of non taxable income producing assets but struggle to find ones that are legal, easy to manage and produce at similar rates. So, I pretty much live in a taxable income world.

 

[Nature Lover]

Taxation of SS benefits is returned to the Social Security Administration (the Trust Fund). It does not go to the general fund. It was $37.9B last year. See page 7 https://www.ssa.gov/OACT/TR/2018/tr2018.pdf

Thanks for clarifying and for the amount (and where to find it!).

 

[pb4uski]

.... If there is not a change in law, the Social Security Administration can only pay out 79% of benefits in 2034. They have no authority to do anything else, and cannot pay more than their revenues.

Agreed... but is there anything that says that rather than an across-the-board 21% haircut that they could pay existing recipients what they currently receive and haircut those who begin benefits after x date whatever they need to to match payouts with revenues?

So an existing recipient might get 100% of that they expected and a future recipient might get 50% of what they are expecting.... I can't see this happening for obvious political reasons but it is not clear if it woudl be prohibited or not.

 

[W2R]

I have never seen anyone on these forums describing what a thrill it is to get the higher SS that one gets if one has waited until age 70. I turned 70 on June 8th, and in about a week and a half, that higher deposit will hit the bank for the first time. Yes, I have been getting divorced spousal SS for the past 4 years, but let's face it, now my deposit will be bumped up by $555 month!!! That is no small potatoes, at least not for me.

I earned this money through the sweat of my brow, a.k.a. through my hard earned required contributions that were not one bit voluntary. Honestly I never expected to see a dime. Now I plan to "blow that dough" by frittering it away on stupid stuff on Amazon and elsewhere, doing absolutely nothing admirable with it and enjoying the h*** out of it, so everyone here can eat their heart out. Start planning landfill expansion because when I croak (hopefully many years from now) that's probably where it will all go.

If my SS gets a haircut to 79% in 2034, well, that's tough for some but I will be age 86 or dead by that time. Besides, even after such a cut I will still be getting 16% more than I have been getting on divorced spousal.

Party on!

 

[Chuckanut]

I doubt people will be grandfathered in to bigger benefits while millions of others take a haircut. The political cost of doing that will be huge, perhaps not initially, but as more and more people signup for SS benefits and experience the inequity of it, well...

I would imagine that those who take SS at 62 might even see a small reduction in their yearly increase as a way of equalizing them, over time, with those who waited until the later years collect their benefits. After all, supposedly there is supposed to be no actuarial difference for the whole group.

There will be no free lunch for anybody.

 

[eytonxav]

Its funny, I have several well off friends that took SS at 62, and when I told them I was holding off taking mine till after FRA, they called me crazy. Everyone's financial circumstance is different, but regardless of how well off one is, it seemed to me to be a no brainer to delay especially if your heath is reasonably good, however, I must say all the noise that comes out each year about SS/medicare running out of money at earlier dates made me adjust my thinking a little.

 

[mpeirce]

Agree. With means testing, the folks facing SS reductions (or larger relative SS reductions) will be the minority who have the significant "means." Therefore means testing will be the "voter safe" way to proceed.

If this turns out to be true, it's another argument for ROTH conversions.

 

[samclem]

If this turns out to be true, it's another argument for ROTH conversions.

I could see Roth withdrawal being counted when determining the tax rate. Don't directly tax the Roth money itself, but the withdrawal is included when determining the tax rate (so more of SS is taxed, all other income is taxed at a higher rate, etc).

 

[braumeister]

I could see Roth withdrawal being counted when determining the tax rate. Don't directly tax the Roth money itself, but the withdrawal is included when determining the tax rate (so more of SS is taxed, all other income is taxed at a higher rate, etc).

I'll thank you people to stop giving them ideas.

 

[Dtail]

I could see Roth withdrawal being counted when determining the tax rate. Don't directly tax the Roth money itself, but the withdrawal is included when determining the tax rate (so more of SS is taxed, all other income is taxed at a higher rate, etc).

Kind of like adding back muni interest for MAGI purposes.

 

[mpeirce]

I could see Roth withdrawal being counted when determining the tax rate. Don't directly tax the Roth money itself, but the withdrawal is included when determining the tax rate (so more of SS is taxed, all other income is taxed at a higher rate, etc).

While I understand congress can make up any rules they like...

Still. Since money placed into a ROTH has already generated taxes and pushed the taxpayer into a higher bracket once, I'd hope they don't do this.

And that's different from MUNI interest.

 

[beowulf]

If we truly think there will be a cut, would that change the thought process of when to take SS, or would the proportional cuts end up in the same financial place?

I think it would depend on when means testing is announced and how badly someone would be hurt by it. Knowing that this could affect when people claim, I doubt there would be any real advance notice of implementation other than would be absolutely necessary to propose and pass a bill. FWIW, I disagree with means testing for either Medicare or SS. We all pay in the same percentage of our income, so why should we be penalized because we saved more or were more successful? And penalizing already retired workers who collect SS is even worse. It's not as if they could change anything or save more by that point.

 

[Independent]

I have never seen anyone on these forums describing what a thrill it is to get the higher SS that one gets if one has waited until age 70.

I turned 70 last year. Yes, it is really satisfying to know that our decision to delay means that our combined SS benefits easily cover our "normal" spending. That includes routine gifts to children and charity.

I maybe missed the "thrill" in that first big check because it was for the wrong amount (too low). It took six months to get the amount corrected. But, I'm still happy with our SS decision.

-----

Unlike you, I don't feel like I "earned" this money. I figure that my taxes went to pay my parents and in-laws SS benefits. If SS hadn't been here, I would have been supporting them out-of-pocket. I prefered supporting them through taxes.

 

[Independent]

Agreed... but is there anything that says that rather than an across-the-board 21% haircut that they could pay existing recipients what they currently receive and haircut those who begin benefits after x date whatever they need to to match payouts with revenues?

So an existing recipient might get 100% of that they expected and a future recipient might get 50% of what they are expecting.... I can't see this happening for obvious political reasons but it is not clear if it woudl be prohibited or not.

I don't think so. It's hard for me to imagine that Congress gave the SS administrators that kind of power.

I once had an (online) discussion with a retired SS actuary. He said that when they studied the law, they weren't sure they had the authority to do a percentage haircut. If there is money in the Trust Fund, they have to send the formula benefit. If there isn't money in the Trust Fund, they send nothing.

On average, it would take about 5.5 weeks of tax revenue to fund one month's checks. So he imagined a literal reading saying the people would get their full "monthly" benefits, but only get 9 or 10 payments per year.

 

[Independent]

I think it's more likely that those above a certain income level (IOW, many people here) will simply pay more income tax on the SS benefits they get.

IIRC, the current number over which SS is taxable was chosen decades ago and is not adjusted for inflation, so this process is already in effect.

You are correct, the factors in the SS taxable calculation were established long ago, and are not adjusted for inflation. Therefore, people with less than 85% taxable will see their ratios go up as inflation eats away at those factors.

The SS actuaries know this is true. I have to believe it is already in their projections.

 

[USGrant1962]

I don't think so. It's hard for me to imagine that Congress gave the SS administrators that kind of power.

I once had an (online) discussion with a retired SS actuary. He said that when they studied the law, they weren't sure they had the authority to do a percentage haircut. If there is money in the Trust Fund, they have to send the formula benefit. If there isn't money in the Trust Fund, they send nothing.

On average, it would take about 5.5 weeks of tax revenue to fund one month's checks. So he imagined a literal reading saying the people would get their full "monthly" benefits, but only get 9 or 10 payments per year.

That makes sense in the context of the government agencies I'm familiar with (not SSA). It is how government bureaucrats think, and is somewhat in line with appropriations law.

But, the fact is that Congress will do something. Probably at the last minute, and who knows what "something" will be? But they are not going to let an across-the-board 21% benefit cut happen.

 

[W2R]

I turned 70 last year. Yes, it is really satisfying to know that our decision to delay means that our combined SS benefits easily cover our "normal" spending. That includes routine gifts to children and charity.

I maybe missed the "thrill" in that first big check because it was for the wrong amount (too low). It took six months to get the amount corrected. But, I'm still happy with our SS decision.

How awful! I am impressed that you were able to get the amount corrected at all; what a nightmare that must have been.

You're right. Now that I think about it, I should have postponed my joyful posts about this until the first deposit at least appeared in the bank, for the right amount. However I did get a communication from SS saying how much it would be. Their calculations were only $1 less than what I calculated. Good enough.

But until it shows up in the bank I won't know for sure. That should be around July 11th I think.

 

[samclem]

My surely oversimplified understanding of things is that the current payments to SS recipients come from1) current SS taxes on those still working and 2) the "cashing out" of the special bonds that SS received from the Treasury in previous years when SS taxes exceeded outgo. That money was spent by the government, and SS received these bonds in return.

So, when those bonds are redeemed for real money (used to pay SS recipients their checks)--the funds have to come from somewhere, and I would think it would be the US government's "general fund." If that's right, then these bonds may serve an important role in helping to "keep track" of which "pot" is owed by which "pot," but the money (represented by the special bonds) is >already< coming from the US Government. From now until these bonds run out the government will will be borrowing, printing, extracting through taxation, or in some other way getting the money to back the redemption of these bonds so that SS recipients can get their checks. So, as a practical matter, how do things change when the bonds run out? If the line item is already in the budget to pay this money in 2033 before the bonds run out, why will it be fiscally impossible to make the same payment the following year when the bonds are gone? I'm sure legislation would be required, and I'd bet someone's ox gets gored, but it doesn't seem that there's anything fundamentally different about the USG balance sheet when these bonds run out. They are an accounting device between various parts of the government, they don't represent a box of gold that exists independent of the federal balance sheet.

But, I am very far from an expert.

 

[pb4uski]

I don't think so. It's hard for me to imagine that Congress gave the SS administrators that kind of power.

I once had an (online) discussion with a retired SS actuary. He said that when they studied the law, they weren't sure they had the authority to do a percentage haircut. If there is money in the Trust Fund, they have to send the formula benefit. If there isn't money in the Trust Fund, they send nothing.

On average, it would take about 5.5 weeks of tax revenue to fund one month's checks. So he imagined a literal reading saying the people would get their full "monthly" benefits, but only get 9 or 10 payments per year.

A distinction without much difference... if everyone gets 9 of 12 payments then they get 75% of what they were expecting, which is effectively a 25% haircut, right?