How do you factor in SS?

[FANOFJESUS]

I find it hard to believe a cut for folks getting a check now. Folks getting a check in the future that is a different story.

 

[FANOFJESUS]

Agreed. Raise the $128,400 to $140,000 to buy some time.

I never understood this cap in the first place. I was a low income earner and have always paid on 100% of my income. Why won't this work for the high income folks?

 

[USGrant1962]

I never understood this cap in the first place. I was a low income earner and have always paid on 100% of my income. Why won't this work for the high income folks?

Well, benefits scale with lifetime payments, and the benefit is capped. Hence the payment is capped. Uncapping both (while still applying the "bend points" that make higher lifetime payments worth less incremental benefit) would be one step toward stabilizing the system.

 

[pb4uski]

..... At an estimated $1M benefit each, in todays dollars, for both me and DW (assuming we live to 100) this is not small change. ....

$1m each may be a bit optimistic.... a few years ago Kitces estimated that the maximum benefit was $572k for men and $683k for women.

https://www.kitces.com/blog/valuing...s-as-an-asset-on-the-household-balance-sheet/

So adjusting for a few years of benefit increases, perhaps $1.4 combined at the most.

 

[pb4uski]

I find it hard to believe a cut for folks getting a check now. ...

Believe it... that is what would happen under current law.

 

[pb4uski]

I never understood this cap in the first place. I was a low income earner and have always paid on 100% of my income. Why won't this work for the high income folks?

It is because there is similarly a cap on benefits so benefits are scaled to what is paid.... someone who has 35 years right at the cap pays the same and receives the same benefit as somone who earned $1million a year... because the benefits are based on the cap in both cases.

 

[Cayman]

"Current benefits aren't cut" is true only in nominal terms. Benefits wouldn't keep up with inflation, which would be the same as a cut.

The current benefit amount stays the same and future benefits are cut if we give COLAs a haircut like I proposed. The COLA is largely maintained. Current and future beneficiaries share the gradual reductions (rather than last minute, unplanned large cuts to a narrower demographic). Lower income beneficiaries will see the smallest reductions in their checks. There are 62 million beneficiaries, and that # is increasing.

For example a 2.5% COLA instead of 2.8% would:

Reduce the average monthly COLA from $39 to $35.55.

Save $2.56 billion that year and the savings will compound


I'd like to see us reduce COLAs before we yet again squeeze current/future workers at any earning level to pay even more taxes, or extend FRA yet again.

 

[joeea]

I'd like to see us reduce COLAs before we yet again squeeze current/future workers at any earning level to pay even more taxes, or extend FRA yet again.

Of course reducing COLAs squeezes both current and future workers. That makes no sense to me.

 

[Independent]

I never understood this cap in the first place. I was a low income earner and have always paid on 100% of my income. Why won't this work for the high income folks?

It was a political decision. How do you get 51% of congresscritters to vote for it without endangering their re-elections?

Low and middle income people wanted the security of a gov't basic retirement benefit. High income and wealthy people figured they could take care of themselves. The cap was a way to keep most of the cost on the people who wanted the system.

(I'm not saying I think that's the best public policy, just that it's what the political system gave us.)

 

[Independent]

The current benefit amount stays the same and future benefits are cut if we give COLAs a haircut like I proposed. The COLA is largely maintained. Current and future beneficiaries share the gradual reductions (rather than last minute, unplanned large cuts to a narrower demographic). Lower income beneficiaries will see the smallest reductions in their checks.

Depends on how you measure "smallest".

If you concentrate on the benefits that will pay for very basic food and housing, lower income people will see the biggest reductions.

That's why many of the proposals for adjusting the COLA do something to focus the impact on higher income beneficiaries.

 

[YoungSaver]

That minor increase doesn't buy much of anything.

If you want to fix it for the next 75 years, we'll need to do better than that.

It doesn't need to be fixed for 75 years though. Just until the old people die off.

 

[joeea]

It doesn't need to be fixed for 75 years though. Just until the old people die off.

How long until you are old?

 

[clifp]

For figuring max SWR I discounted my SS by 25% also. But when planning how big of an estate I might leave I assume I'm going to get the whole thing.

 

[YoungSaver]

How long until you are old?

If I can survive, then about 50 more years.

 

[Choices]

I am already spending mine. Took it early. DH will hold off until 70 in 3 years, so with his SS and RMDs we will really be in the money����.
I, too, do not believe those already taking SS will be hit. Our country is great at can kicking and youngsters will feel the pinch.
Too bad so many depend so heavily on SS. Does anyone remember the three-legged stool concept. Sadly, the youngsters find it increasingly hard to save, meaning they will be more dependent than the BabyBoomers on SS

 

[Walt34]

Does anyone remember the three-legged stool concept.

When we were working with the elder law attorney and FIL on getting his will and such up to date, DW had to leave the room momentarily and the attorney asked about our retirement. I told him pension, SS, and savings. He said I was a "financial dinosaur".

 

[joeea]

Does anyone remember the three-legged stool concept.

I remember the concept.
But most stools I see are missing the leg labeled "Pensions".

I guess it was a nice concept for its time.

 

[joel2125]

Sort of relates to the question of what success % you use in your retirement calcs. I use 100% and zero SS. If it works in that scenario then I am probably good. If you have to totally rely on SS to make it all work I would plan a 1/3 reduction but also agree that a very large cut is unlikely.

 

[Chuckanut]

I Does anyone remember the three-legged stool concept.

I certainly do:

Personal Investments
Pension and/or 401,403b,etc investments
Social Security

Diversity of income sources is very important to me in retirement.

IMHO, the ideal situation for most people is to be able to pay the costs of food/shelter/clothing/medical care on any two of them. The third is play money.

 

[RunningBum]

I certainly do:

Personal Investments
Pension and/or 401,403b,etc investments
Social Security

Diversity of income sources is very important to me in retirement.

IMHO, the ideal situation for most people is to be able to pay the costs of food/shelter/clothing/medical care on any two of them. The third is play money.

Money is money. It wouldn't bother me to have a one legged stool of personal investments if it was a longer leg than the 3 legs combined.

Sure, there's market risk that could break that leg, but if you're throwing 401/403b in that 2nd leg, that's got the same risk. Just diversify the investment legs. A one leg stool of 100% equities is not a good idea.

 

[copyright1997reloaded]

The new three-legged-stool:
* Take from others
* Borrow from other countries
* "Help" old people "move on"

Just kidding.

 

[Independent]

Money is money. It wouldn't bother me to have a one legged stool of personal investments if it was a longer leg than the 3 legs combined.

Sure, there's market risk that could break that leg, but if you're throwing 401/403b in that 2nd leg, that's got the same risk. Just diversify the investment legs. A one leg stool of 100% equities is not a good idea.

Yes, if you have enough money.
Some people bemoan the loss of defined benefit, non-COLA'd pensions. I think that if I really want that format, I can use some of my assets to buy a SPIA.