Social Security reform and ER

[RunningBum]

One side of me says to start grabbing me as early as possible before it goes away and there's none left.

The other side says that one of my biggest dangers of running out of money is living to 110. In that case I'd want to wait as late as possible to get the biggest payout for all of those years. If I die at 72 I won't really care that I could've received more money starting at 62 because I won't have come near going through my own money.

I've still got 13 years before I face this decision, assuming I'll still have an option at 62 then, so I'm not losing much sleep over the decision. But as I think about long term strategies I'm leaning towards waiting longer.

[explanade]

What is RMD?

So withdraw at a higher rate and then take SS at 70 (and reduce the withdraw rate) to spend more while you're younger?

[REWahoo]

Quote:

Originally Posted by explanade What is RMD?

Required Minimum Distribution (RMD) Definition

[Arnie]

When I was young, I assumed SS would either die or not be a significant part of my retirement income. The older I get, the more I hold out hope that I was wrong.

For me, 70 seems right - longevity insurance.

[Rustic23]

We set our retirement plans as if SS would not be there. It is, we take it, and the cruise line loves it.

[Arnie]

Just read that counting on SS is one of the "12 money mistakes you're probably making".

Excerpt:

Counting on Social Security
As they think about retirement, today's thirtysomethings should be aware that the Social Security trust fund is scheduled to run out in 2037. That means, if nothing changes, benefits will shrink to about three-quarters of what they are now, because only money that is being paid into the system will be paid out. Young professionals need to plan on funding the bulk of their retirement with their own savings.

[ziggy29]

Quote:

Originally Posted by Arnie Just read that counting on SS is one of the "12 money mistakes you're probably making". Excerpt: Counting on Social Security As they think about retirement, today's thirtysomethings should be aware that the Social Security trust fund is scheduled to run out in 2037. That means, if nothing changes, benefits will shrink to about three-quarters of what they are now, because only money that is being paid into the system will be paid out. Young professionals need to plan on funding the bulk of their retirement with their own savings.

If nothing else, the last sentence is unquestionably true and will become more and more true for each successive generation in the foreseeable future, IMO.

However, this is another common misconception -- that because SS could only fund 3/4 of current benefits, we should assume we get nothing. Now that may well be true for some if it becomes more heavily means-tested (but they aren't the ones who need to "count on it" to make the retirement numbers work), but it would still mean the average person who would be eligible for benefits today could get ~75% of today's payout. Not a great deal (and as usual, the younger you are, the worse the retirement deal gets) -- but it's a lot more than getting nothing.

[kombat]

As a Gen-X'er, my perception is that the reforms being proposed are just the latest way the Baby Boomers are taking advantage of their children. As I see it, the Boomers were born into an era of low debt and high prosperity. Government social programs expanded rapidly, and to keep taxes low, were funded with debt. They enjoyed an unprecedented (and unlikely to be repeated anytime soon) run of market prosperity that averaged 12% per year. Unfortunately, most squandered that prosperity on frivilous consumeables, rather than funding their retirement adequately.

Now today, the bill for all that excess is coming due. Social programs are being severely cramped by a federal debt whose interest alone consumes 25% of all tax revenues collected by the government. Those same Boomers, who have spent decades smoking and growing obese, are simultaneously putting a strain on a healthcare system that gets more expensive far faster than inflation.

Faced with an inability to pay for the programs they've set up, Boomer politicians are now advocating reforming those programs. But, of course, not for themselves. They'll make sure that any diminishment of Social Security only affects their children. The Boomers, on the other hand, will be sure to get through the system with all of their precious benefits intact.

Us Gen-X'ers can look forward to cleaning up the mess, and being rewarded with a fraction of the benefits our parents milked from the system. The market, having been unsustainably pumped up over the preceding 2 decades, has generated no growth at all in the past decade, while us Gen-X'ers have been trying to get established in our careers. Not to mention that now that our Boomer parents are in management of all these companies (and have secured their own defined benefit pensions, making sure they're all grandfathered in), have eliminated those same pensions for their children. I guess we should be thankful we still have jobs at all, since they're busy outsourcing our jobs overseas.

Thanks, Dad. Enjoy that fat pension and full Social Security, while I look forward to working longer, for less benefit, and paying off the trillions in debt you racked up.

But I'm not bitter.

[rescueme]

Quote:

Originally Posted by kombat But I'm not bitter..

Dosen't sound like it ...

BTW, while I'm an early boomer, I am either obese nor have a pension.

My SS contributions went to my parents/grandparents (as yours does today).

I get no pension, unlike my parents/grandparents. Oh yes, I was "promised" a pension at two jobs earlier in my wo*king years, but those were eliminated and I was told to go save for myself (at the age of 36) and figure it out on my own in the early 80's, since it was a completely different way of preparing for your future.

Then I was told that my FRA age would be 66 rather than 65 - an age that I was planning on retiring at (since the early 70's).

BTW, on the health side, I am a type 2 diabetic. That's due to my exposure to AO (agent orange) during my government sponsored "vacation" in SEA and not caused by eating too much (yes, I watch my diet, and I exercise - even as an old bastard). I didn't have to worry about what to do at the age of 18, since I received my draft notice a month after my birthday.

On the flip side, I get a small disability check (tax free!) every month due to the "inconvience" affored me at an earlier age. It pays for my morning coffee.

Additionally, my (disabled) son's "challanges" were brought about quite prossibly due to my AO exposure (incident's known/logged, but not yet accepted by the government as basis for a claim).

Anything else you wish to complain about?

BTW, I'm not bitter either. Life is what happens...

[ziggy29]

Quote:

Originally Posted by kombat As a Gen-X'er, my perception is that the reforms being proposed are just the latest way the Baby Boomers are taking advantage of their children. As I see it, the Boomers were born into an era of low debt and high prosperity. Government social programs expanded rapidly, and to keep taxes low, were funded with debt. They enjoyed an unprecedented (and unlikely to be repeated anytime soon) run of market prosperity that averaged 12% per year. Unfortunately, most squandered that prosperity on frivilous consumeables, rather than funding their retirement adequately. Now today, the bill for all that excess is coming due. Social programs are being severely cramped by a federal debt whose interest alone consumes 25% of all tax revenues collected by the government. Those same Boomers, who have spent decades smoking and growing obese, are simultaneously putting a strain on a healthcare system that gets more expensive far faster than inflation. Faced with an inability to pay for the programs they've set up, Boomer politicians are now advocating reforming those programs. But, of course, not for themselves. They'll make sure that any diminishment of Social Security only affects their children. The Boomers, on the other hand, will be sure to get through the system with all of their precious benefits intact.

Yes, I think we Xers and those after us are fated to getting screwed. Having said that, these unsustainable entitlements are not the fault of Boomers; these things were in place well before the Boomers gained political power. The Boomers are just trying to build the house of cards a little higher before it comes crashing down -- or hoping the can can be kicked a few more years down the road to give them what the previous generation had. (Choose your favorite metaphor...)

It wasn't so much the Boomers who benefited most from the unsustainable post-WW2 prosperity but the Silent generation who came before them. The Silents were economically born at the ideal time; too young to be sent off to the war, they only entered adult life into the immediate post-war economic boom when the employment deal was never better in many ways. And by the time the economy hit the fan, they were largely retired and didn't have to worry about finding or maintaining employment.

And by the time they reached their peak earning years, the beginning of the huge bull market in 1982 let their investments grow. They still mostly got the old "full SS at 65" deal and had more corporate pensions than their descendants.

Many of the Boomers today, IMO, are seeing that erode and they are trying to protect that deal for themselves at the expense of their kids and grandkids, who wouldn't be grandfathered into most of the unsustainable retirement "sweetheart deals" that were born of the post-WW2 economic boom as if it would never end. But the Boomers didn't make these promises -- they're just hoping that these promises aren't broken for their generation.

Quote:

Originally Posted by kombat Thanks, Dad. Enjoy that fat pension and full Social Security, while I look forward to working longer, for less benefit, and paying off the trillions in debt you racked up.

I guess I was lucky. My Dad (Silent born in 1935) saved most of his SS payments to pass along as an inheritance. He made it clear to me that he expected to see his kids get screwed even while his generation got the best deal that ever was, and that saving SS to pass down to us since we wouldn't get the same good deal from it was a way to assuage generational guilt about what was going to happen to his kids and grandkids.

[Arnie]

I can understand some of that sentiment, kombat. But for someone who has been making plans for decades based on certain assumptions, SS among them, it is probably unreasonable (not to mention political suicide) for the gov to change those assumptions just as folks are reaching the finish line. Assuming whatever changes are made now for younger folks, there will be lots of years to plan around them, and those folks would be justified in being upset if the rules changed as they reached the finish line.

[kyounge1956]

Quote:

Originally Posted by chinaco (snip) I would not surprise me to see the income tax against SS to raise to 100% if total income is above some low level.(snip)

Chinaco, do you mean you would not be surprised if (above some low income level)

• 100% of SS was included in taxable income (vs IIRC a max of 85% now), or that
• the tax rate on SS benefits was raised to 100% (i.e. a net SS benefit of zero)?

[teejayevans]

Y'all realize that SS is easy to fix, just modify the retirement like they did last time, SS is not going away. At worst you'll pay some more tax on it. If you want a problem to worry about try Medicare.
TJ

[teejayevans]

Quote:

Originally Posted by travelover In theory, this might work, but I kind of see it as doubling down on a bet.

That SS will be there, yes, if we're in such bad shape we have to cut SS, the lack of SS will be the least of your problems.
TJ

[youbet]

Quote:

Originally Posted by explanade Obviously they won't yank the rug out from under people in their mid to late 50s.

Really? Don't count on this. There is sentiment for means testing of SS even for those already receiving it. In fact, it already began with SS becoming susceptible to income tax.

Don't expect huge changes and overhauls at once. Look for constant nibbling and trimming on an ongoing basis with a bias towards less for those who have other resources, income or wealth.

[ziggy29]

Quote:

Originally Posted by youbet Don't expect huge changes and overhauls at once. Look for constant nibbling and trimming on an ongoing basis with a bias towards less for those who have other resources, income or wealth.

And as I've said before about any number of aspects of future gummint policy regarding taxes and entitlements, I hope those of us who are planning to "engineer" a high net worth/relatively low income retirement fly under the radar because we're few enough in number to go after -- and that "means testing" continues to look only at income and not assets or net worth.

[youbet]

Quote:

Originally Posted by Arnie But for someone who has been making plans for decades based on certain assumptions, SS among them, it is probably unreasonable (not to mention political suicide) for the gov to change those assumptions just as folks are reaching the finish line.

I think there is sentiment to means test SS even for those already receiving it. Divs, Int and CG's as well as pension income reported on your fed income tax could be key to what happens to your SS. Actually, this has already started. Look for it to continue and accelerate.

[rescueme]

Quote:

Originally Posted by youbet Look for constant nibbling and trimming on an ongoing basis with a bias towards less for those who have other resources, income or wealth.

As an old phart (along with my DW) of SS age, we don't have a problem with any "surtax" on our future SS income (we're delaying - but that's another story). We expect 100% of our future SS benefits to be taxed.

We're fortunate to be in the financial situation we are in, at our time of life. While SS is part of our retirement income plan, it is not the primary source of funds to support our projections.

And as we have calculated our "return" (e.g. our annual SS statement of contributions vs. our projected SS income) we will be receiving many multiples of our contributions, over the years.

We will still be ahead, by several different views of our possible outcomes.

[TromboneAl]

Quote:

Originally Posted by RunningBum One side of me says to start grabbing me as early as possible before it goes away...

I wouldn't worry too much about that, but let's try to stay focused on SS.

[73ss454]

Ziggy, are you under the assumption that if us old folks give up some of our SS that the government isn't going to figure out another way to screw the younger folks out of it.

Stop it!

If the government would keep their hands out of the general fund there would be plenty of money for everyones SS. After all we did put it there to get it later, no?