SS Could Be Insolvent in 8 Years

[Markola]

The point I was trying to make was if one has a decent stash, the SS becomes insignificant.

Fair enough and I can’t disagree. I wanted to comment for those who may read this education forum and get the impression that they can’t rely on any SS in their projections, and will have to plan on working many years longer than necessary.

Personally, someday, I hope to have a simple life as a renter again, bringing substantial home equity into the mix when I get tired of snow, grass and stairs and sell the house. Until then, I keep a low interest mortgage. Using home equity is also heretical to some here but it’s another legitimate asset to use.

 

[ShokWaveRider]

Agree that SS is significant for many of us no matter how large the stash is. Our SS total is $65K, husband claimed at 70 and me will be at 62 in 3 years' time (on my own earnings record).

We would be lucky if ours was ~$40k combined. We do not take it yet.

 

[RetiredHappy]

We would be lucky if ours was ~$40k combined. We do not take it yet.

My husband's contribution into SS was closed to maximum for most of the 35 years. I only contributed 18 years because I was working overseas and was later transferred to the US by the company which I was working for, and almost all of those 18 years were contributed at the maximum level. I do get a haircut because I only had 18 years of earnings.

 

[daylatedollarshort]

The point I was trying to make was if one has a decent stash, the SS becomes insignificant.

I think I'd have to have well over $20M to think of SS as "insignificant", even though we save more than our SS checks now each year. That savings is a nice security blanket to leave to our kids, help them buy houses, pay for our LTC or some financial surprise life might throw at us in the coming years.

We do plan for the possibility of future SS cuts, but I still can't see planning for zero, especially for those with a net present value of SS in the 7 figures.

 

[RunningBum]

I think I'd have to have well over $20M to think of SS as "insignificant" ...

We do plan for the possibility of future SS cuts, but I still can't see planning for zero...

Agreed. I discount the future value of SS in case of cuts, but I don't ignore it. I probably won't start it for another 10 years, but it's likely to cover 20-30% of my expenses. Ignoring SS is like buying an annuity, and then not counting it. I guess people treat it as buffer, or an extra. I'd rather know what buffer I'm including in my plan, and I want to adjust my current withdrawals to take more now, knowing SS is coming later.

 

[pb4uski]

Is there also a possibility that, if there is eventually a shortfall, they simply try to make up the difference out of the general fund, or whatever they call it? ...

My understanding is that using general fund money for SS benefits is prohibited by statute... so to do that they would have to change that statute.

 

[Bigdawg]

Also, it is unlikely that the death of spouse when both are receiving some SS benefit will result in a 50% reduction of the total family benefit.

DW and my life time earnings are almost identical. When one of us dies our SS reduction would be almost exactly 50%. We have plans in place to mitigate the loss of one of us.

 

[Bullwinkle]

"Will be insolvent" sounds pretty alarmist, it sounds a lot more reasonable if you say "will require adjustments." Everything requires adjustments because everything is changing. Of course some people may not like some of those adjustments but then the question is who, and how much, and what are the tradeoffs?

We've been hearing a lot lately about demographic shifts (more old geezers) and the effect on social programs. My understanding is that the US definitely has the problem, but has less of it than many other places, where Japan is the most famous.

Has anyone seen a non-partisan analysis of the global situation, what strategies there are, and what various countries are more or less doing about it? Given that it's global and many places have it worse than we do, surely there has already been a lot of theorizing and policy wrangling.

Of course demographic shift will only be part of the cause for SS adjustments, there are surely many other causes, I'd be curious to hear about those too.


And to participate in the thread, I put SS estimates into the various FireCALC i-orp etc. type things, but it's starting such a long time from now for me. I figure if the plan keeps our household in the black for the gap of ~ 25 years then an extra 22k/yr is, well nothing to sneeze at, but not going to be solving a specific problem. Said another way, I can't predict the future well enough that a 22k boost at +25 years can be a critical part of the plan. If the gap were shorter then the situation would be different!

 

[corn18]

I would have had to work another 5 years if I assumed zero SS. That just seems silly to me.

 

[yhoomajor]

My understanding is that using general fund money for SS benefits is prohibited by statute... so to do that they would have to change that statute.

Even if there is such a statute (haven't heard of it before), changing it is going to take no more than an hour in DC.

Our Government is insolvent today. Has been for decades. But that has never been a problem. Just to provide some perspective.

 

[USGrant1962]

Even if there is such a statute (haven't heard of it before), changing it is going to take no more than an hour in DC.

Our Government is insolvent today. Has been for decades. But that has never been a problem. Just to provide some perspective.

The Social Security Act doesn't say general funds can't be used. Rather it says the Social Security Administration is only authorized to pay out Social Security funds. While Congress can certainly change that it won't take just an hour. Changing the SS program from a nominal old age "insurance" program to general welfare from income taxes is a major political leap.

 

[Out-to-Lunch]

DW and my life time earnings are almost identical. When one of us dies our SS reduction would be almost exactly 50%. We have plans in place to mitigate the loss of one of us.

We are in a similar situation. One way to mitigate that risk is to vary your claiming ages. I am planning to claim at 70, and DW at 62. Then the survivor only loses ~35% instead of 50%. (This also happens to be optimal according to opensocialsecurity.)

I think another way to say this is this: Although waiting to 70 to claim can be thought of as paying for good longevity insurance, it probably doesn't make sense for BOTH members to pay for it!

 

[yhoomajor]

The Social Security Act doesn't say general funds can't be used. Rather it says the Social Security Administration is only authorized to pay out Social Security funds. While Congress can certainly change that it won't take just an hour. Changing the SS program from a nominal old age "insurance" program to general welfare from income taxes is a major political leap.

I have to disagree. I am not seeing any plausible scenario where making social security payments going as whole will be politically contentious, to the point that there will be struggle to get majority vote. Its not even a constitutional amendment that requires 2/3rd majority. IMHO.. it will be a lopsided vote, absent one or two vote.

Having said that, there can always be ideological angles to amendments where they can make it mean tested. Lot of it would depend on demographic shift in future. But those who rely on SS will likely not see any cut.

[Edited]

 

[daylatedollarshort]

I have to disagree strongly. If you think politicians will not vote to make social security payments going as whole, then we are on completely different frame of reference in reality. Its not even a constitutional amendment that requires 2/3rd majority.

Having said that, there can always be ideological angles to amendments where they can make it mean tested. Lot of it would depend on demographic shift in future. But those who rely on SS will likely not see any cut.

I'm curious if you've read the other posts in this thread so far? There were cuts the last time SS was in crisis in the form of taxes. There are cuts in most of the proposals to fix it this time, including to current beneficiaries. What sources or research are you relying on to state there won't be cuts to current beneficiaries for the next fix? Do you have any article links for us to review?

 

[yhoomajor]

I'm curious if you've read the other posts in this thread so far? There were cuts the last time SS was in crisis in the form of taxes. There are cuts in most of the proposals to fix it this time, including to current beneficiaries. What sources or research are you relying on to state there won't be cuts to current beneficiaries for the next fix? Do you have any article links for us to review?

The era of either party pretending to worry about Deficit is gone. That is the key difference. I'm not sure why folks are struggling to see that. Its been no secret for last 12 years.

ps: I did update my one post above to clarify my take on this.

 

[USGrant1962]

I have to disagree. I am not seeing any plausible scenario where making social security payments going as whole will be politically contentious, to the point that there will be struggle to get majority vote. Its not even a constitutional amendment that requires 2/3rd majority. IMHO.. it will be a lopsided vote, absent one or two vote.

Having said that, there can always be ideological angles to amendments where they can make it mean tested. Lot of it would depend on demographic shift in future. But those who rely on SS will likely not see any cut.

Well, last time SS was in trouble (1983) Congress certainly didn't make social security payments whole or "not see any cut." For example, I'm not eligible for full SS until I'm 67 where my elders collected at 65, and SS became taxable then - both of which are cuts.

As far as "in an hour" which is what I was responding to - the SS Trustees report has been forecasting mid-2030s depletion of the Trust Fund for a long time with no substantial Congressional action. Google tells me that the SS fund ratio started declining in 1970 and it took until 1983 to pass that fix.

I'm sure Congress will eventually come up with something - but you suggested "in an hour" which is nonsense for such a complicated political/economic problem.

 

[yhoomajor]

Well, last time SS was in trouble (1983) Congress certainly didn't make social security payments whole or "not see any cut." For example, I'm not eligible for full SS until I'm 67 where my elders collected at 65, and SS became taxable then - both of which are cuts.

As far as "in an hour" which is what I was responding to - the SS Trustees report has been forecasting mid-2030s depletion of the Trust Fund for a long time with no substantial Congressional action. Google tells me that the SS fund ratio started declining in 1970 and it took until 1983 to pass that fix.

I'm sure Congress will eventually come up with something - but you suggested "in an hour" which is nonsense for such a complicated political/economic problem.

My one hour reference was about trying to get congressmen onboard to save Social security. I still standby my comment. If anything, it will be one of the most lopsided political decision ever (with little to no opposition). But that's my opinion.

Wasn't referring to clerks typing the proposal or lawyers putting the language together... or different committees reconciling different proposals together. The real hurdle - to secure Enough Votes for saving Social Security will not take an hour.

 

[daylatedollarshort]

This is an interactive tool made by a think tank on different ways Social Security may be fixed. Note that a number of the options would involve benefit cuts to current recipients, especially high earners - The Reformer: An Interactive Tool to Fix Social Security (crfb.org)

The CRFB seems to be a bi-partisan group overseen by a 40-member board of directors composed of experts and prominent figures in federal budget, tax and fiscal policy.


ETA - In the 1983 crisis, Congress did not print more money to solve the SS shortfalls. They raised SS taxes and cut benefits, which is what all the current proposals I've read suggest. If anyone has links to a "just print more money" serious article as a past or future fix, I would be interested in links to those articles.

 

[cyber888]

The government will print more money. Problem solved.

 

[USGrant1962]

This is an interactive tool made by a think tank on different ways Social Security may be fixed. Note that a number of the options would involve benefit cuts to current recipients, especially high earners - The Reformer: An Interactive Tool to Fix Social Security (crfb.org)

The CRFB seems to be a bi-partisan group overseen by a 40-member board of directors composed of experts and prominent figures in federal budget, tax and fiscal policy.


ETA - In the 1983 crisis, Congress did not print more money to solve the SS shortfalls. They raised SS taxes and cut benefits, which is what all the current proposals I've read suggest. If anyone has links to a "just print more money" serious article as a past or future fix, I would be interested in links to those articles.

Yes, I really like that calculator. And is shows that the simple answers are not enough (see my sig).

 

[Koolau]

SS is still the proverbial 3rd rail of politics. Congress won't honk off 65 million recipients - especially since they are the most reliable voters in the country.

 

[teejayevans]

Well, last time SS was in trouble (1983) Congress certainly didn't make social security payments whole or "not see any cut." For example, I'm not eligible for full SS until I'm 67 where my elders collected at 65, and SS became taxable then - both of which are cuts.

Well…the age for full retirement wasn’t actually a cut, back when SS was enacted the life expectancy wasn’t like today. So even at 67 we are getting more out of SS then our elders because we’re collecting for a longer period of time.
And SS being tax wasn’t a cut, just an increase of taxes.

No way would a politician cut SS. They may increase the retirement ages, tax it at 100%, but they won’t cut it.
I expect the solution will be to add SS tax to non W2 income. After all, that will only affect the rich.

 

[scrabbler1]

Two proposals for fixing SS I oppose: The first is raising the wage income cap subject to SS taxes without raising the same cap on SS benefits. This lessens the link between SS taxes paid in and SS benefits received. It's telling higher income people, "Receive no additional SS benefits, but thanks for the added SS taxes you pay which get you that added nothing!" The second is subjecting non-wage income to the SS taxes. Same idea, "Receive no additional SS benefits, but thanks for the added SS taxes you pay which get you that added nothing!"

That being said, I am fine with subjecting more of the SS benefits to income taxes; that is, eliminating some of the currently more favorable tax treatment of SS benefits, a backhanded means test.

I can also see tweaking the COLA, raising the FRA a little, maybe to 68 (as long as nobody who had their FRA raised while paying into the system with the FRA=65 gets it raised a second time), tweaking the benefits bend points, and raising the SS tax rate a little.

 

[pb4uski]

... Our Government is insolvent today. Has been for decades. But that has never been a problem. Just to provide some perspective.

No, our government is not insolvent and never has been. And contrary to the title of this thread, SS will not be insolvent or "broke" as some like to claim, it just will not have sufficient tax revenues to pay benefits in full.

Unlike a company or individual, a reserve currency government's debt never needs to be fully paid off. We are burdening our children or grandchildren as some claim because the principal never really needs to be paid... it can be rolled over for as long as there is no better alternative.

Don't get me wrong, the levels of spending, annual deficits and debt are concerning, but do not rise anywhere near a claim of insolvent, so let's stop being foolish.

 

[piccolopat]

That's why I suggested them all, a little misery for everybody. I usually have 5 ideas, but couldn't come up with the fifth and still haven't.

Here's a fifth - Gradually eliminate the spousal benefit. People should only collect SS based on their own income history. It is patently unfair that a non-working spouse can collect more of a spousal benefit because they married "rich" than someone who worked all of their lives but never made much. We've come a long way from the time when most women didn't work.