Collecting Social Security at age 62 is the best decision, here is why:

[MichaelB]

Quote:

Originally Posted by pb4uski OTOH, youbet, you seem to be the master of anything that is income sensitive being "means tested".

I’ve read this three times and don’t really get what it means, though it does test my patience. Is it safe to say this debate has passed its threashold and now isn’t going anywhere?

[pb4uski]

When I was working, knowing about the system's funding problems, I always wondered why they didn't just get rid of the cap... I probably wouldn't have noticed. Having researched it the next question is if you do lift the cap whether the additional taxes paid by people earning more than the cap count towards their benefit calculation... which would be equitable but would somewhat mitigate the benefit of lifting the cap.

[youbet]

Quote:

Originally Posted by pb4uski OTOH, youbet, you seem to be the master of anything that is income sensitive being "means tested".

It's just how I see it. If the SS payout algorithm is adjusted to reduce aggregate output, I think high income folks are going to get more of a haircut than low income folks. You don't. Again, no need to be argumentative. If your take on the situation is that possible future SS benefit changes will not be tied to your non-SS income, great! We all get to take our own guess.

From Investopedia:

Quote:

[I]What does it mean to be a means tested program? A method for determining whether someone qualifies for a financial-assistance program. A common means test is the one used to determine eligibility for Chapter 7 bankruptcy. Means testing is also used in distributing Medicare benefits and has been suggested as a solution for the Social Security problem.

[youbet]

Quote:

Originally Posted by MichaelB Is it safe to say this debate has passed its threashold and now isn’t going anywhere?

More than safe.

[MichaelB]

Quote:

Originally Posted by youbet More than safe.

That’s a relief.

[joeea]

Quote:

Originally Posted by pb4uski First, the OP had no choice since he had insufficient retirement savings to stop working at 62 without drawing SS prior to FRA.

To be fair, the OP did have the choice to continue working.

[Pilot2013]

Quote:

Originally Posted by youbet My own opinion is that the cuts will be means tested in some way or another. Perhaps it will be similar to the method currently used to have folks with higher incomes pay much more for their Medicare Part B than folks with lower incomes. It won't matter what age you are or if you've already started SS or not. Your cut will depend on your other income.

I think that will be political suicide. But i am wrong (right?) 50% of the time....

[youbet]

Quote:

Originally Posted by Pilot2013 I think that will be political suicide. But i am wrong (right?) 50% of the time....

It’s working for Medicare Parts B and D today with no hint of “political suicide”that I’m aware of.

[pb4uski]

Quote:

Originally Posted by joeea To be fair, the OP did have the choice to continue working.

True, but at the same time depending on the OP's profession finding new employment at age 62 can often be challenging or in some cases even impossible.

[joeea]

Quote:

Originally Posted by pb4uski True, but at the same time depending on the OP's profession finding new employment at age 62 can often be challenging or in some cases even impossible.

Many folks are capable of changing professions. There are always other options.

[rayvt]

Quote:

Originally Posted by youbet My own opinion is that the cuts will be means tested in some way or another.

The risk is that the cut will be something like "You managed to get along quite well from 62 to 70 with no SS, so clearly you don't truly need the SS benefit."

[Sunset]

All changes that I know of where SS cut the amount paid out, left existing folks grandfathered in. Including those that were close to the point.
Example is the file and suspend (I think that's what it was called).
The reasoning being that people planned their retirement upon it.
Well, a wholesale 25% cut would not be something most SS recipients planned upon.

How to not do a random 25% cut, they could employ a number of things.
If they want to means test it (sort of backwards) then just raise the 85% taxable to 100% and raise the 50% taxable to 65%.
Plus of course raise the FRA to 68.
Remove the cap on earnings, but no increase in benefit (yep just an extra tax on the rich, but in a way the bend points are light that right now.). So if folks don't like no increase in benefits then just ad another bend point of 1%

[Ian S]

If and when we get closer to the time when the trust funds run out, I'm sure there will be a successful effort to avoid the haircut put forth by the SSA. It will be through a combination of adjustments to the cap, perhaps COLA, minor cuts to future retirees and some additional taxes on higher incomes. IMHO, the reason the SSA only describes a cut is because that's the simplest most concise way to describe the magnitude of the problem. I think the cap should gradually be raised probably starting fairly soon.

[ERD50]

Quote:

Originally Posted by Sunset ... Well, a wholesale 25% cut would not be something most SS recipients planned upon. ...

I took a very rough cut at what a 25% overall cut would look like. It sure looks like it would be pretty tough to get 25% out of the top half and leave the average people alone.

I found a source that says the average SS is ~ $16,000, and max (at 70) is ~ $42,500. I took a stab at doing a distribution across that, 30 entries, weighted with average numbers, and fewer entries going above and below. It's hard to hit 25% overall even if I cap everyone at the average. It depends on the actual distribution of course, but obviously a problem along those lines exists - if the distribution was normal, half the money would be above average, and to get 25% overall out of half the total, you need to take 50% from that upper half. If you do that to the ones making a little more than average, they now make less than average (so that doesn't work!). So then you need to take even more than half from the high SS payments.

I suppose with means testing, if someone has a very high income, they could have 100% of SS cut. But I'm guessing there just isn't enough "there" there, to get 25% out of the total, w/o it being unacceptable/weird.

So doing by cuts alone might be very tough, w/o digging down to the average folks.

-ERD50

[ncbill]

even with means testing couldn't income be "managed" to qualify, as many already do for ACA subsidies?

[teejayevans]

Quote:

Originally Posted by ncbill even with means testing couldn't income be "managed" to qualify, as many already do for ACA subsidies?

Be harder to do once past 70 1/2, RMDs would force income up.

[jimnjana]

Quote:

Originally Posted by omni550 Since we are discussing SS possibly running out of funds down the road, I wonder why they don't eliminate the caps (6.2 % SS tax on income, capped at $127,200 in 2017) on SS contributions paid by wage-earners. .. omni

I think this and other SS/FICA tax increases are likely. Capped benefits, increase FRA, wealthy paying more, etc is the way the politicians will go. No way are most seniors gonna see a big cut in benefits.

[Chuckanut]

Most likely we will see a tax scheme to take away SS benefits from higher income people. Like ER forum folk.

[homestead]

Something to think about, those who delay SS to FRA or 70 stand to lose more if there is a 25% cut in SS.

[PatrickA5]

Quote:

Originally Posted by Sunset All changes that I know of where SS cut the amount paid out, left existing folks grandfathered in. Including those that were close to the point. Example is the file and suspend (I think that's what it was called). The reasoning being that people planned their retirement upon it. Well, a wholesale 25% cut would not be something most SS recipients planned upon. How to not do a random 25% cut, they could employ a number of things. If they want to means test it (sort of backwards) then just raise the 85% taxable to 100% and raise the 50% taxable to 65%. Plus of course raise the FRA to 68. Remove the cap on earnings, but no increase in benefit (yep just an extra tax on the rich, but in a way the bend points are light that right now.). So if folks don't like no increase in benefits then just ad another bend point of 1%

Exactly, the Social Security administration is just saying that they would have to cut benefits if NOTHING is done. They aren't saying that is what ultimately is going to happen. I don't think the career politicians (that want to keep their jobs) are going to allow granny to have a 25% pay cut. My guess is those 50 and over get grandfathered in to the old system with maybe some minor adjustments (COLA, etc).

Raising the 85% taxable to 100% might make a little money. They might as well make all SS taxable because the 0% and 50% brackets are so low now it's pretty darn hard for someone not living almost entirely on SS to not pay taxes on it. When I went out to the SS calculator and plugged in my DW and my numbers using "future" dollars, our combined SS at age 70 (11 years from now) will be over $100K per year, and we're nowhere near maximum SS. With those kinds of numbers, the vast majority of people will be paying the max 85% taxable in the not too distant future.