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Old 01-16-2018, 01:10 PM   #261
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Originally Posted by misanman View Post
For kicks I did an analysis of my 20 cousins on my father's side (mother was only child).
1 died in 30's, 1 in 40's, 1 in 60's, 3 in 70's, and 3 in 80's (84 average for these three).

Twelve survive, 2 in 70's, 7 in 80's (86 average current age for these), and 3 in 90's (94 average, oldest is 98). Two of the surviving are living in assisted living, one has dementia. The other ten are living independently, in some cases with outside aid.

Anyway, interesting for me. Maybe not so much for others.
Yep, genes matter and I share more genes with my cousins than I do with the total population.

Lifestyle matters, too. Sometimes we have more similar lifestyles with our cousins than with the general population.

I have 20+ first cousins on my Mom's side. I can't say that I see a strong trend other than higher incidence of diabetes (both genes and lifestyle, probably). I've never had any problems with sugar levels. So, ...

My comment was more aligned with the fact that general population tables include people who are currently residing in hospices, hospitals, and nursing homes. And, people living independently but with serious, life threatening, conditions.

People asking "should I defer SS?" are hardly ever in that group. So it would be nice to narrow the group to those in "normal good health". Also, the people here tend to be higher income, and more "prudent" in general. The first is known to correlate with greater lifespans, the second probably does.
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Old 01-16-2018, 01:18 PM   #262
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Originally Posted by North Texas Cajun View Post
It is clear to me that wealthy retirees have a much higher chance than non-wealthy retirees of losing some of their SS benefits once Congress does act. Politicians from both parties have already suggested that possibility. IMO, wealthy retirees should consider that chance when making a decision about when to take SS.
I agree with this.

I was trying to point out that it's possible that deferring SS moves you from the group that has enough private assets/income to trigger a reduction down into the group that doesn't have quite that much.

People who defer have to have enough current assets to live during the deferral period, but probably not enough that they can just shrug off longevity risk. They might be hanging on the border between losing and not losing benefits.

There is also the slim possibility that the rules explicitly recognize the impact of deferred retirement. I'm sure the SS actuaries understand that issue, I'm not so sure it carries weight with policymakers.

I'll admit, however, that if I were just turning 62 this year, I'd guess that future means testing rules are more likely to favor starting early than to favor starting late. It's definitely something to consider.
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Old 01-16-2018, 01:56 PM   #263
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I agree with this.

I was trying to point out that it's possible that deferring SS moves you from the group that has enough private assets/income to trigger a reduction down into the group that doesn't have quite that much.

People who defer have to have enough current assets to live during the deferral period, but probably not enough that they can just shrug off longevity risk. They might be hanging on the border between losing and not losing benefits.
Well, I understand your point. We may disagree about how many people means testing will hit. IMO, any couple with total retirement income over $150k annually will be at risk for partial reduction in benefits. If they lose half their $35k SS benefit due to means testing, they’ll still survive. But I don’t think they should ignore a possible 10% reduction in living standard.

On the other hand, if they take SS at 63 or 64, I think they could end up with more in total lifetime SS benefits even if they live to age 86. That is, assuming they are hit by means testing.

When I was referring to wealthy retirees, I was meaning a couple with total annual income - SS plus pensions plus IRA distributions - in excess of $150K. Perhaps I should have said “high income” rather than “wealthy”.
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Old 01-16-2018, 02:01 PM   #264
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How would they know?

I've seen it pointed out on another website (bogleheads?) that the government really only has verifiable data on income, not assets, so means testing would necessarily be based on income.

So I can see another situation (similar to ACA subsidies) where retirees minimize their non-SS income to ensure they get their full SS retirement check, even with 7 figures in assets.
Asset testing is done now for various government programs including Medicaid for long term care.
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Old 01-16-2018, 02:09 PM   #265
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How would they know?

I've seen it pointed out on another website (bogleheads?) that the government really only has verifiable data on income, not assets, so means testing would necessarily be based on income.

So I can see another situation (similar to ACA subsidies) where retirees minimize their non-SS income to ensure they get their full SS retirement check, even with 7 figures in assets.
At present, you are correct in that government can more easily track income. I guess I should have said “high income” rather than “assets above $2 million”.

I think most Americans with $2 million in assets hold most of it in tax-deferred accounts. With RMD, the government will know exactly who to target for means testing.

As I see it, those with $2 million in tax deferred accounts - or with $1.5 million in tax deferred accounts plus significant pensions - will not be able to minimize non-SS income. And many boomers will have significant non-SS pensions. One study revealed that 40% of Boomer couples have at least one such pension.
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Old 01-16-2018, 02:11 PM   #266
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Asset testing is done now for various government programs including Medicaid for long-term care.
Solution: gift assets to an irrevocable trust.

Already done to qualify for Medicaid, you just have to wait out the 5-year look-back.

You can bet the above will only become more popular should anyone suggest asset-based means testing for SS retirement.

Again, since it is far easier for the government to match/verify income, so that's the approach I would expect.
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Old 01-16-2018, 02:15 PM   #267
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As I see it, those with $2 million in tax deferred accounts - or with $1.5 million in tax deferred accounts plus significant pensions - will not be able to minimize non-SS income.
Why not? Someone under the age of 70 can take out as much or as little as they want from tax deferred accounts. RMDs don't kick in until age 70.5.
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Old 01-16-2018, 04:39 PM   #268
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.... SS is already cash flow negative, and the largest segment of baby boomers are just now turning 62.
You're half right... currently benefits paid exceed taxes collected... but taxes collected plus interest income exceed benefits paid... all per the 2017 Trust Fund Report Summary at https://www.ssa.gov/oact/TRSUM/index.html

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.... Social Security's total income is projected to exceed its total cost through 2021, as it has since 1982. The 2016 surplus of total income relative to cost was $35 billion. However, when interest income is excluded, Social Security's cost is projected to exceed its non-interest income throughout the projection period, as it has since 2010. The Trustees project that this annual non-interest deficit will average about $51 billion between 2017 and 2020. It will then rise steeply as income growth slows to its sustainable trend rate as the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

After 2021, interest income and redemption of trust fund asset reserves from the General Fund of the Treasury will provide the resources needed to offset Social Security's annual deficits until 2034, when the OASDI reserves will be depleted. Thereafter, scheduled tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2091. The ratio of reserves to one year's projected cost (the combined trust fund ratio) peaked in 2008, declined through 2016, and is expected to decline steadily until the trust funds are depleted in 2034. ....
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Old 01-16-2018, 05:36 PM   #269
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You're half right... currently benefits paid exceed taxes collected... but taxes collected plus interest income exceed benefits paid... all per the 2017 Trust Fund Report Summary at https://www.ssa.gov/oact/TRSUM/index.html
All that matters is cash flow. SS benefits cannot be paid from “interest” which is just an accounting entry in the Trust Fund.

The federal government understands that the Social Security Trust Fund cannot pay benefits.

From page 385 of the Analytical Perspectives section of President Obama’s FY2017 budget, prepared on February 9, 2016 by Obama’s Office of Management and Budget:

“When trust fund holdings are redeemed to fund the payment of benefits, the Department of the Treasury finances the expenditure in the same way as any other Federal expenditure—by using current receipts if the unified budget is in surplus or by borrowing from the public if it is in deficit. Therefore, the existence of large trust fund balances, while representing a legal claim on the Treasury, does not, by itself, determine the Government’s ability to pay benefits.”

https://www.govinfo.gov/features/featured-content/Budget-FY2017

Again, the only thing that really matters is where the cash comes from to pay SS benefits.

The special purpose securities held in the Trust Fund are IOU’s. Those IOUs were generated in two ways:

1. Surplus FICA collections from prior years;
2. An accounting entry labelled “interest earned” which is the T Bill rate times the average balance in the Trust Fund account.

But those special purpose securities (SPS) cannot pay SS benefits. SS beneficiaries want cash.

You should be able to understand why the Trust Fund is meaningless if you look at how benefits would be paid if it did not exist:

1. If the Trust Fund exists:
a. Treasury pays some SS benefits using FICA taxes;
b. SS sends SPS to Treasury in the amount of the shortfall;
c.Treasury borrows from the public in the amount of the shortfall and pays remaining benefits.

2. If the Trust Fund did not exist:
a. Treasury pays some SS benefits using FICA taxes;
b.
c.Treasury borrows from the public in the amount of the shortfall and pays remaining benefits.

The Special Purpose Securities (SPS) are meaningless.
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Old 01-17-2018, 04:50 AM   #270
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Not sure if this link has already been posted but FWIW here is the link to a 4 old poll on this forum on when people here were planning to, or had already taken SS.

http://www.early-retirement.org/foru...ssa-69230.html
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Old 01-17-2018, 05:13 AM   #271
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All that matters is cash flow. SS benefits cannot be paid from “interest” which is just an accounting entry in the Trust Fund. .....
The Special Purpose Securities (SPS) are meaningless.
I guess that we will have to agree to disagree on this one. Interest does count. When the time comes the general fund will need to pay the SS Trust Fund, by issuing bonds if necessary. However, the national debt will not increase because the $20 trillion of national debt already includes the $2.8 trillion owed to the SS Trust Fund, so as debt is issued to outsiders and the proceeds used to pay the SS Trust Fund the net impact on the national debt will be a wash ($0). The SS Trust Fund will then use the proceeds to pay beneficiaries.

Or put another way... since the Trust Fund already exists and owings to it are already included in the national debt your item 1 above would be different, as follows:

a. Treasury pays some SS benefits using FICA taxes;
b. SS sends SPS to Treasury in the amount of the shortfall;
c.Treasury borrows from the public the amount of the SPS (and the shortfall) and redeems the SPS from SS
d.SS uses the proceeds of the SPS redemption to pay remaining benefits.
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Old 01-17-2018, 07:23 AM   #272
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Actually, the longevity calculator indicates that DW and I have a 75% chance of living to 86/83 and our estimated life expectancy is 94/91 (which I suspect means a 50% chance of living to those ages).

See https://annuities.blueprintincome.co...g-will-i-live/
I like this longevity calculator. It says I will live to 98. On the other hand, that means I will have to listen to the forum members debate SS and SWR for the next forty years. On second thought, maybe the calculator is overly optimistic.
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Old 01-17-2018, 07:25 AM   #273
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I guess that we will have to agree to disagree on this one. Interest does count.
Sorry, but you are mistaken. Interest only counts if cash is moved as a result. Treasury never sends cash to SS for the accounting entry “Accrued Interest”.

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When the time comes the general fund will need to pay the SS Trust Fund, by issuing bonds if necessary. However, the national debt will not increase because the $20 trillion of national debt already includes the $2.8 trillion owed to the SS Trust Fund, so as debt is issued to outsiders and the proceeds used to pay the SS Trust Fund the net impact on the national debt will be a wash ($0). The SS Trust Fund will then use the proceeds to pay beneficiaries.

Or put another way... since the Trust Fund already exists and owings to it are already included in the national debt your item 1 above would be different, as follows:

a. Treasury pays some SS benefits using FICA taxes;
b. SS sends SPS to Treasury in the amount of the shortfall;
c.Treasury borrows from the public the amount of the SPS (and the shortfall) and redeems the SPS from SS
d.SS uses the proceeds of the SPS redemption to pay remaining benefits.
Again, Treasury does not send cash to SS. Social Security checks are sent to SS beneficiaries directly from Treasury - either via paper in the past or electronically today. SS Administration is primarily an accounting and enforcement entity. They do tell Treasury who to send checks to and how much.

By not focusing entirely on cash flow, you are distorting - as the SS Adminstration has distorted - the true financial situation of the government’s SS program. The SS Trust “Fund” is very much like Enron’s Special Purpose Entities: both have hidden from investors/taxpayers the true picture of how underfunded or over-leveraged is the business/program.
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Old 01-17-2018, 07:26 AM   #274
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But..... but..... but..... I thought money was fungible?
Money if fungible, but not all money is the same. You can't compare money that you have in hand (IRA) with a promise to give you a monthly check (SS).


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Most of the advocates promoting delayed SS benefits have assumed full SS benefit availability in their analyses. I do not believe that is a prudent assumption.
Yes!
Just look at what happened with the recent tax bill. How many people were counting on being able to deduct their state and local real-estate tax forever? How many people were counting on HELOC interest being deductible forever?

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[re: means testing] How would they know? I've seen it pointed out on another website (bogleheads?) that the government really only has verifiable data on income, not assets, so means testing would necessarily be based on income.
The IRS knows the year-end balance of IRA accounts. That's probably a pretty good enough proxy as the first step to means testing SS. It wouldn't be hard for the government to make brokers report the year-end balances of non-IRA accounts, too.

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Solution: gift assets to an irrevocable trust.
Already done to qualify for Medicaid, you just have to wait out the 5-year look-back.
Solution(s): 1) New law that counts an irrevocable trust against you. 2) Modify the current law and extend the lookback period to 20 years.
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Old 01-17-2018, 08:15 AM   #275
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I sense means testing is for the younger generation who has not contributed. The older population that contributed their whole life would throw a sh_t fit. I've contributed since age 14. DH, close behind. They need to raise the cap from $118K. What's wrong with that and save the entire program, right? Do kids know how to save better than we did? My experience says, not.
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Old 01-17-2018, 08:36 AM   #276
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I sense means testing is for the younger generation who has not contributed. The older population that contributed their whole life would throw a sh_t fit. I've contributed since age 14. DH, close behind. They need to raise the cap from $118K. What's wrong with that and save the entire program, right? Do kids know how to save better than we did? My experience says, not.
Not sure if we’re allowed to speculate on what the government might do. But I think we can talk about how economists’ proposals might impact our rtirement planning.

Here’s what I’ve generally seen proposed by economists for solving the SS shortfall (which is real today, not in 16 years):

1. SS full retirement age is gradually increased to age 70;

2. SS benefits are means tested - very soon - so that retirees with $500k non SS income receive $0, smaller sliding scale reductions for retirees with $499k down to $150K in non-SS income;

3. Income tax cap for SS tax eliminated.

For me - currently age 66 - that current retirees paid in all their lives is unimportant. Younger people will also pay in all their lives but will likely also see reduced benefits from current levels (in real, inflation adjusted $).
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Old 01-17-2018, 08:40 AM   #277
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Sorry, but you are mistaken. Interest only counts if cash is moved as a result. Treasury never sends cash to SS for the accounting entry “Accrued Interest”.



Again, Treasury does not send cash to SS. Social Security checks are sent to SS beneficiaries directly from Treasury - either via paper in the past or electronically today. SS Administration is primarily an accounting and enforcement entity. They do tell Treasury who to send checks to and how much.

By not focusing entirely on cash flow, you are distorting - as the SS Adminstration has distorted - the true financial situation of the government’s SS program. The SS Trust “Fund” is very much like Enron’s Special Purpose Entities: both have hidden from investors/taxpayers the true picture of how underfunded or over-leveraged is the business/program.
No.... you're wrong. Even now, taxes collected are less than benefits paid... the Treasury pays the excess and reduces the amount that it owes the SS Trust Fund by the amount that they paid... which is substantively the same as what I stated above. Currently, the interest on the trust fund assets exceeds the deficiency so a portion of the interest on trust fund assets is paid in cash and the remainder is reinvested.

Also, the fact that the general Treasury owes money to the SS Trust Fund is very prominently disclosed as a portion of the National Debt. If it was excluded from the National Debt number then you might have a point.

Google "fund accounting" to learn more. It is no different than if the SS Trust Fund was a separate entity from the US Government and had bought US Government bonds with its surpluses over the years and was now using some pf the interest from the bonds to make up the difference between taxes taken in and benefits paid out.

The funding status of SS is all well laid out in the SS Trustees annual reports which are readily available to the public... it is no deep, dark secret.
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Old 01-17-2018, 09:19 AM   #278
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Just curious - If I (the higher income earner) decide to delay to 70 and I die before 70, does DW receive my FRA amount?
I think they receive any delayed retirements credits you earned as of the date of your death.

https://www.ssa.gov/planners/retire/otherthings.html

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However, when you start your retirement benefits also affects the amount your surviving spouse may receive. If you start your benefits:
  • before full retirement age, we cannot pay your surviving spouse the full benefit amount from your record. The maximum survivors benefit is limited to what you would receive if you were still alive.
  • after full retirement age, your surviving spouse may receive your full benefit amount plus any accumulated delayed retirement credits.
Accidents or unexpected changes in your circumstances can't be ruled out, of course, so your final decision may be based on your "best guess" about your future.
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Old 01-17-2018, 11:59 AM   #279
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I think they receive any delayed retirements credits you earned as of the date of your death.

https://www.ssa.gov/planners/retire/otherthings.html
That has nice, clear language that answers a question that comes up here from time to time. I thought I'd save the link. But, when I followed the link, I didn't see this. Did you click through to some other page?
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Old 01-17-2018, 12:39 PM   #280
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Then how do you explain that while longevity has improved over the last 20-30 years (a fact... due to advances in medicine, less smoking, et al partially offset by higher obesity) that the discount for taking SS early and the premium for delaying has not changed over the last 20-30 years?
Interesting, I wonder if it's in the future.

Canada has increased their discount for taking CPP earlier , they phased it in over 5 years.
It used to be 0.5% , now after phasing it in, is it 0.6% taken off for every month earlier than age 65. CPP can be taken as early as age 60.

https://retirehappy.ca/taking-cpp-ea...akeven-points/
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