Life of Social Security Fund ??

[pb4uski]

But if the deceased worker never had started SS what then? Their benefit at their age of death? Or their FRA?

I think the surviving spouse essentially steps into the shoes of the deceased worker and can take a discounted amount of the deceased workers PIA anywhere from 60 to their FRA. So if the deceased worker had never started SS and the surviving spouse starts benefits at their FRA then would get 100% of the deceased worker's PIA.

 

[pb4uski]

... The "trust funds" are essentially the current checking accounts for the two Social Security programs. Money comes in and money is paid out daily. The two SS trust funds each maintain an "asset reserve," essentially a savings account, to which excess funds are added and from which funds may be drawn when needed to pay shortfalls. That reserve has built up over the decades since the 1940s, and the balance in the OAI reserve has been well over $2 trillion since 2006. The program has added to the reserve (deposited excess funds to the savings account) each year since 1984 with only two exceptions: 2018 and 2021, the last year for which we have a trustee's report. The total OAI asset reserve for 2021, after the withdrawal from the savings account, was over $2.75 trillion.

Totally incorrect. The trust fund is not a "checking account" nor a "savings account" as you suggest. Page 169 of the 2023 Trustees Report has a detail listing of the $2.7 trillion OASI Trust Fund Asset Reserves at December 31, 2022... it is all special issue US Treasury securities.

By law, the Department of the Treasury must invest trust fund reserves in interest-bearing securities backed by the full faith and credit of the United States Government. The securities currently held by the OASI Trust Fund are entirely special issue securities sold by the Treasury only to the trust funds.

Also, 2021 is NOT the last year for which we have a Trustee's Report. The most current one is the 2023 Annual Report and has information through December 31, 2022 (link below).

https://www.ssa.gov/OACT/TR/2023/tr2023.pdf

 

[Finance Dave]

Does Life of Social Security Trust Fund question when to claim yours ??

I am 66 & am planning to claim SS at age 70, although I can claim full retirement benefit now.

Reading reports about Social Security Trust Fund getting depleted in 2033, leaves me unsettled about my plan of waiting to claim.

Reading in the press about means testing to decrease % in the benefit etc goes against the fact that it is our money which we contributed .

Although they say the lawmakers who spearhead to decrease the SS benefit of seniors may see chances of not being favored in the elections.

On a personal level, I do not know waiting to claim will have the desired result of a higher benefit for me & the survivor benefit for DW.

Thoughts ?

I think they will wait until the last minute and then make a "hero move" to save it...each party will claim they saved things...typical.

As to your above comment in bold...SS is actually a "pay as you go" system, so the money you contributed was spent on others already retired. Although you DID contribute the money, it is not THAT money that will fund your SS. Instead, it is young people w*rking today that will pay for YOUR SS.

 

[mickeyd]

Of course the POLS will have to figure this out, or lose their collective federal jobs. Since FDR started SSA, DEMS will have to get it done with some GOP agreeing.

Can you imagine all the Boomer madness if SSA goes belly up?

 

[Out-to-Lunch]

I should have been more specific. There will be more for her during the period I am most concerned about, which is the event of my death before the break even point, which is when she will most need it.

A fine analysis for your situation, indeed.

 

[pb4uski]

Of course the POLS will have to figure this out, or lose their collective federal jobs. Since FDR started SSA, DEMS will have to get it done with some GOP agreeing.



Can you imagine all the Boomer madness if SSA goes belly up?

SSA is NOT going belly up. At worst, there will be a 25% or so haircut but I agree that if that haircut happens there will be a lot of incumbents that will become "former".

 

[Car-Guy]

SSA is NOT going belly up. At worst, there will be a 25% or so haircut but I agree that if that haircut happens there will be a lot of incumbents that will become "former".

Now wouldn't that be too bad.... I mean about the haircut of course.

 

[marko]

SSA is NOT going belly up. At worst, there will be a 25% or so haircut but I agree that if that haircut happens there will be a lot of incumbents that will become "former".

If that haircut includes current and soon-to-be recipients, doesn't that throw a bunch of the past #157 posts on this thread out the window? A whole new set of calculations required. Grandfathering could drive a mob to sign up regardless of age vs waiting.

Excel sheets smoking from changed inputs!

 

[Chuckanut]

Now wouldn't that be too bad.... I mean about the haircut of course.

Years ago I ran Firecalc and a Montecarlo simulator assuming a 25% cut in my SS and pension benefits. I can survive, but will no longer be able to fly to Paris for a weekend lunch at La Scène. Instead it will be Glasgow for bangers and mash at The Idle Scotsman pub. [emoji846]

 

[Car-Guy]

^^^^^
I really don't need SS either, but I worked a long time and earned it.... I paid the max for decades and held up my end (like if I had a choice) now it's time for "them" to pay up as promised. Yes, yes, I know...

 

[Chuckanut]

^^^^^
I really don't need SS either, but I worked a long time and earned it.... I paid the max for decades and held up my end (like if I had a choice) now it's time for "them" to pay up as promised. Yes, yes, I know...

It’s a social contract like the one French workers have or had with their government . But not with the depth of the French one.

 

[ncbill]

If that haircut includes current and soon-to-be recipients, doesn't that throw a bunch of the past #157 posts on this thread out the window? A whole new set of calculations required. Grandfathering could drive a mob to sign up regardless of age vs waiting.

Excel sheets smoking from changed inputs!

In the past Congressional intervention has been to preserve payments to lower paid workers by making those at the top end bear the cost, e.g. "85% of your SS benefit is now taxable."

Expect the same approach in the future.

 

[pb4uski]

In the past Congressional intervention has been to preserve payments to lower paid workers by making those at the top end bear the cost, e.g. "85% of your SS benefit is now taxable."



Expect the same approach in the future.

Why shouldn't SS be partially taxable just like contributory pension benefits? Or like non-deductible traditional IRA withdrawals?

Now admittedly the mechanism that determines the taxable amount is a bit crude and grants lower income people a tax break, but other than that all it does is a crude estimate of the taxable portion of contributory pension benefits.

 

[USGrant1962]

Years ago I ran Firecalc and a Montecarlo simulator assuming a 25% cut in my SS and pension benefits. I can survive, but will no longer be able to fly to Paris for a weekend lunch at La Scène. Instead it will be Glasgow for bangers and mash at The Idle Scotsman pub. [emoji846]

Yup. I've always used a 20-25% SS haircut in FIRECalc. It is just one of the conservatisms that makes me comfortable that I'm in good shape no matter what. Other include ignoring a likely inheritance, ignoring spending flexibility if needed, ignoring consulting income. Setting aside who owes who what wrt SS, I think modeling a haircut is just good practice for pulling the plug on Megacorp for early retirement.

^^^^^
I really don't need SS either, but I worked a long time and earned it.... I paid the max for decades and held up my end (like if I had a choice) now it's time for "them" to pay up as promised. Yes, yes, I know...

"Them" is our kids, just like we supported our parents' SS.

 

[GenXguy]

In the past Congressional intervention has been to preserve payments to lower paid workers by making those at the top end bear the cost, e.g. "85% of your SS benefit is now taxable."

Expect the same approach in the future.

There's a serious flaw in that law as well, as I mentioned a while back:

https://www.early-retirement.org/fo...-is-age-67-not-70-a-117137-8.html#post2901848

 

[audreyh1]

It depends. If the survivor claims survivor benefits prior to their own FRA, they would receive a reduced amount (between 71.5% - 99%) based on their age and calculated on the deceased persons full retirement age amount. If the survivor waits until they are FRA, they would receive 100% of the deceased person's full retirement age amount.

ETA: the above is assuming the deceased was not yet FRA at death. If the deceased was FRA or greater then the same percentages apply but would be based on what the deceased was entitled to on their date of death.

Thanks, I think I get it now. That was always a point of confusion for me.

Assuming the deceased never claimed SS:

So even though the deceased passed before their FRA, the survivor is entitled to the FRA amount of the deceased, as long the survivor waits until their own FRA to start SS.

If the deceased passed after their FRA, the survivor is entitled to whatever the deceased would have been entitled to at the time of their death, as long the survivor waits until their own FRA to start SS.

 

[Montecfo]

There's a serious flaw in that law as well, as I mentioned a while back:

https://www.early-retirement.org/fo...-is-age-67-not-70-a-117137-8.html#post2901848

Well, if they "fix" the taxation of benefits, it just means higher taxes and/or more age deferrals to balance out that give.

They could do that to sell it as "fairness" but I do not think taxing benefits less is high on the agenda.

Moving to 100% taxable could be, maybe extending the threshold higher to 100%. That could make sense combined with longer deferrals for folks under 45 (as they did last time) and raising the PR tax limit higher, maybe even with a graduated rate.

There are quite a few levers.

 

[JBTX]

^^^^^
I really don't need SS either, but I worked a long time and earned it.... I paid the max for decades and held up my end (like if I had a choice) now it's time for "them" to pay up as promised. Yes, yes, I know...

The bigger picture issue is while we paid in for years, some of us at high rates, at the same time our generation took out a lot on the other side, unfunded wars, unfunded Medicare part D, multiple tax cuts with no spending offsets, etc, and partially funded those by borrowing from the social security fund, and still leaving behind a sizable tab in debt.

Ultimately the program needs to brought back into some degree of balance, and doing that all by higher taxes on the next generation of workers (at a lower worker to retiree ratio) is probably not sustainable, as they also have the burden of paying interest on $32trillion of national debt.

 

[marko]

The bigger picture issue is while we paid in for years, some of us at high rates, at the same time our generation took out a lot on the other side, unfunded wars, unfunded Medicare part D, multiple tax cuts with no spending offsets, etc, and partially funded those by borrowing from the social security fund, and still leaving behind a sizable tab in debt.

.

I, personally, had nothing to do with it.

Suddenly this is my problem? I paid my money, I want my benefit.

Yes, the program is seriously in trouble, needs fixing and I'll reluctantly take whatever medicine is necessary, but I'm not gonna be guilt-tripped.

 

[pb4uski]

Well, if they "fix" the taxation of benefits, it just means higher taxes and/or more age deferrals to balance out that give.

They could do that to sell it as "fairness" but I do not think taxing benefits less is high on the agenda.

Moving to 100% taxable could be, maybe extending the threshold higher to 100%. That could make sense combined with longer deferrals for folks under 45 (as they did last time) and raising the PR tax limit higher, maybe even with a graduated rate.

There are quite a few levers.

Since our SSA statements provide how much we paid in in SS tax and did not get a deduction for, it would be very easy to treat SS retirement benefits like life annuity benefits for tax purposes... the portion representing return of contributions would be tax-free.

 

[gman1234]

Let's say that I decide to wait until age 70.

If I take money at 62, I will have 228K (assuming no returns on this money) at age 70 when I would otherwise start. If I get a reasonable 4% return, I'll have 267K (it would actually be higher than this as I would be getting the money monthly and I would put it straight into investments).

So, at age 70, I decide to get SS and spend the money. In my case, I would get $3,706 instead of the age 62 amount of $2,105 - a difference of $1,601 (not inconsequential).

If instead, I took at age 62 and invest the money, I would have 276K to invest when I turned 70.

Admittedly, it would take a 7% return on the 276K to make up the difference which is unrealistic based on the risks at that age. However, it's not that far off. And I have an extra 276K in the bank in case of some sort of emergency.

 

[fishfactory]

gman1234, you make a very good point. And if you take at 62 and have the misfortune of passing away at age 70 or shortly after, you have $276k to pass on to your heirs vs. very little or none if you start at age 70.

 

[pb4uski]

^^^ But what if you live to be 90? or 100% Post 86 of this thread.

^^^ But, if you are currently 62, male and in average health then there is a 50% chance that you will live another 24 years to 86 according to the Society of Actuaries and American Academy of Actuaries Longevity Illustrator tool.

What does Excel show if you live to be 86 which is as likely as not?

When looking out into your future, it’s important to consider the likelihood that you will live for many years. This chart shows the probability of living beyond a certain number of years starting from your retirement age or your current age if you are already retired. The information is intended to provide reasonable estimates; however, you or your spouse/partner’s actual lifetime can differ significantly from these estimates, either above or below.

For instance, you may be comfortable setting your planning horizon to consider the period until there is only a 25% chance that you will live longer than the number of years indicated by the bar. In this case, based on the chart, you would set your planning horizon for 30 years. If you want to be more cautious, you might set your planning horizon such that there is only a 10% chance you will live longer (34 years from the chart).

Note that these probabilities are calculated from your retirement age. If you are not currently retired, the ALI assumes that you will live to your retirement age.

Probability	John Doe
90%	8
75%	16
50%	24
25%	30
10%	34

...



https://www.longevityillustrator.org/Profile?m=1

 

[pb4uski]

gman1234, you make a very good point. And if you take at 62 and have the misfortune of passing away at age 70 or shortly after, you have $276k to pass on to your heirs vs. very little or none if you start at age 70.

And it is true that if your health is questionable or family longevity is poor that you should start earlier. We learned yesterday that one of our class of '73 classmates, who DW dated in high school, died. We had seen him on and off over the years but it was clear that his health was questionable and that he should start at 62. OTOH, both DW and I are in good health and ahve good family longevity so we are waiting... buying longevity insurance.

 

[fishfactory]

I estimated break even at around 83 years old. My family history is such that it is likely I would not last past that, so for me 62 makes sense. In these decisions, each person has to think through these variables. You are correct in pointing out longevity as a big factor. I have also lost a couple of friends from high school class of '82 due to health issues. Very sad.