Why am I struggling? - Social Security Question

[OldShooter]

Quote:

Originally Posted by pb4uski ... there definitely is an SS trust fund ...

I agree in an accounting sense, but I don't think that fund going to zero matters in a practical sense. As things now stand, that liability of the federal government (and the corresponding asset on SS BS) is slowly going to zero as the government borrows from other lenders and passes the money to SS. But from the point where it goes to zero nothing really changes. The government will continue to borrow from other lenders and pass the money to SS. (bookkeeping entries tbd) At some point the law will be changed to reduce the bleeding but that timing is fairly irrelevant to the "trust fund" status.

[mickeyd]

If you can afford to delay SS until age 70 (and are healthy) consider doing so. No one here can make that decision for you.

[USGrant1962]

Quote:

Originally Posted by OldShooter I agree in an accounting sense, but I don't think that fund going to zero matters in a practical sense. As things now stand, that liability of the federal government (and the corresponding asset on SS BS) is slowly going to zero as the government borrows from other lenders and passes the money to SS. But from the point where it goes to zero nothing really changes. The government will continue to borrow from other lenders and pass the money to SS. (bookkeeping entries tbd) At some point the law will be changed to reduce the bleeding but that timing is fairly irrelevant to the "trust fund" status.

This is not true under current law. The SSA can only spend SS funds, not general funds. The trust funds are prior excess SS/Medicare taxes collected and "invested" in special treasury securities - they actually earn interest which is credited to the fund. The trust fund is just as real as the 10-year Treasuries in your portfolio. When the trust fund runs out, SSA can only pay out what it collects in current SS taxes - about 75% of obligations.

Again, this is all under current law. That doesn't mean Congress can't change the law and they will clearly need to do something, sometime.

[pb4uski]

Quote:

Originally Posted by OldShooter I agree in an accounting sense, but I don't think that fund going to zero matters in a practical sense. As things now stand, that liability of the federal government (and the corresponding asset on SS BS) is slowly going to zero as the government borrows from other lenders and passes the money to SS. But from the point where it goes to zero nothing really changes. The government will continue to borrow from other lenders and pass the money to SS. (bookkeeping entries tbd) At some point the law will be changed to reduce the bleeding but that timing is fairly irrelevant to the "trust fund" status.

No, it doesn't work that way. Once the SS trust fund surplus is zero (the general fund has repaid all that it borrowed plus interest), the general fund cannot borrow from the public and pass money on to SS for benefit payments as you think... that is why there is a ~25% haircut projected for 2034... the surplus will be depleted and the trust can only pay benefits equal to the taxes that they are taking in.... the trust does not have the authority to borrow money.

[daylatedollarshort]

Without legislation changes, the probability of SS getting a 20% decrease in 2035 is basically 100%. It is what will happen under current law. What is the probability of legislation to change the current law? Likely pretty good, but I wouldn't assign a 100% probability factor to a future event that is likely but hasn't happened yet. Then add to that less than 100% chance of legislation changes, what are the chances legislation changes will involve benefit cuts (possibly in a subtle way, like chained CPI, but cuts nonetheless), means testing or tax increases for well off retirees? I'd peg those odds as actually pretty good, maybe more than 50%. One or a combination of those are in many of the proposals being floated as SS legislation fixes.

[camfused]

Because fixing it now (actually many years ago) is/was the most logical thing to do, it will be put off until the very last minute. The solution will depend, in large part, on who is in charge at that time, and what the state of the economy and markets are at that time, so the solution, if any, that is arrived at is currently not possible to predict, IMHO.

[Perryinva]

Quote:

Originally Posted by jollystomper +1 The worst case of a lot of these "problems" is leaving only $4,000,000 to ones heirs instead of $4,100,000. That is just a horrid thing to do them .

I love these threads, and that ^^^^ is the crux of the whole shebang. (Though in my case, maybe only 2M not 4M). And what irks me is that if my heirs were hard working beacons of moral improvement and appreciative of their stations in life, I wouldn’t mind. Suffice to say, the kindest thing I can say is they don’t deserve that kind of good fortune.

So since income & ACA, etc is not an issue, I am spending the money I made and invested and sweated over on us, (dragging DW kicking and screaming at spending it the whole way) and even doing that, we still have more than when we retired, so I plan to delay as long as I can stand it for the longevity insurance and in the unlikely case that DW outlives me, and to do Roth conversions. 63 1/2 now, 67 or 68 is the plan. DW started at 62.

[Markola]

Quote:

Originally Posted by daylatedollarshort Without legislation changes, the probability of SS getting a 20% decrease in 2035 is basically 100%. It is what will happen under current law. What is the probability of legislation to change the current law? Likely pretty good, but I wouldn't assign a 100% probability factor to a future event that is likely but hasn't happened yet.

I’m willing to go that far. SS is the most popular federal program, which is the only thing keeping most Americans afloat in this post-pension, 401(k) world. Any politician from either party faced with the choice of causing real pain to current voters or causing pain to future generations will choose the former. How much proof do we need?

[Gumby]

Quote:

Originally Posted by Markola ...Any politician from either party faced with the choice of causing real pain to current voters or causing pain to future generations will choose the former. ...

That would be a bold politician indeed. And it would amuse the hell out of me to hear all the whining.

[daylatedollarshort]

Quote:

Originally Posted by Markola I’m willing to go that far. SS is the most popular federal program, which is the only thing keeping most Americans afloat in this post-pension, 401(k) world. Any politician from either party faced with the choice of causing real pain to current voters or causing pain to future generations will choose the former. How much proof do we need?

Changes were made in the past to reduce benefits and tax benefits in the Reagan years, the last time SS was in crisis. The articles on what changes happened under Reagan and what changes are being floated to fix the current crises are all on Google, like means testing and chained-CPI. If the historical facts of the SS changes under Reagan, and passed by Congress, don't factor into your opinion, then there really isn't much else for me to say on the topic.

"Understand that fixing the problem is not the same as guaranteeing your benefits. The 1983 reform of Social Security is an example. Congress was able to avert a looming shortfall in Social Security, but at a cost to the consumer. They raised the full retirement age and increased the payroll tax, and this was accomplished through an agreement between a conservative, Ronald Reagan, and a liberal, former House Speaker Tip O’Neill. Any fixes made this go-around may cost consumers as well.

If you are a retiree already receiving Social Security retirement benefits, both the use of a more conservative cost-of-living formula and an increase in the amount of benefits subject to income tax will help shore up the long-term security of your benefits. But, realistically, it may also lower your after-tax, inflation-adjusted benefit. The system does become safer, but at your expense." Source - https://www.forbes.com/sites/stevepa...h=5095d6d83b1e

[teej1985]

The 1983 Fix will have worked for over 50 years. We can only hope the next fix extends it a similar amount of time.

The odds of Congress doing nothing is 0, in my view.

[Crabby Mike]

Quote:

Originally Posted by daylatedollarshort ... and an increase in the amount of benefits subject to income tax will help shore up the long-term security of your benefits.

Why would that be the case? It seems to me that such a change would only increase income tax revenue, which presumably would not flow to the benefit of Social Security funding.

[Crabby Mike]

Quote:

Originally Posted by Markola I’m willing to go that far. SS is the most popular federal program, which is the only thing keeping most Americans afloat in this post-pension, 401(k) world. Any politician from either party faced with the choice of causing real pain to current voters or causing pain to future generations will choose the former. How much proof do we need?

Presumably you meant the latter.

[pb4uski]

Quote:

Originally Posted by Crabby Mike Why would that be the case? It seems to me that such a change would only increase income tax revenue, which presumably would not flow to the benefit of Social Security funding.

You presumption is incorrect.... as I recall, statute requires that income taxes on Social Security benefits go into the SS Trust Fund.

[daylatedollarshort]

Quote:

Originally Posted by Crabby Mike Why would that be the case? It seems to me that such a change would only increase income tax revenue, which presumably would not flow to the benefit of Social Security funding.

"Under legislation enacted in 1983, the Social Security Trust Funds receive income based on Federal income taxation of benefits. The funds receive taxes on up to 50 percent of benefits from single taxpayers with incomes over $25,000 and from taxpayers filing jointly with incomes over $32,000.

Legislation enacted in 1993 extended taxation of benefits. The legislation increased the limitation on the amount of benefits subject to taxation from 50 percent to 85 percent for single taxpayers with incomes over $34,000 and for taxpayers filing jointly with incomes over $44,000. All additional tax income resulting from the 1993 legislation is deposited in Medicare's Hospital Insurance Trust Fund." Taxation of benefits (ssa.gov)

[youbet]

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Originally Posted by RobbieB Yeah, dead people do not think -

They do here in Chicago. They think it's time to vote! Or so the traditional humor goes........

[Crabby Mike]

Quote:

Originally Posted by pb4uski You presumption is incorrect.... as I recall, statute requires that income taxes on Social Security benefits go into the SS Trust Fund.

Ah, I didn't know that. Thanks!

[meleana]

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Originally Posted by MRG Yeah after all I'll be really ticked off if I take it at 70 and die before I break even.

But you'll be dead so you won't know it. LOL!

[meleana]

We are living on cash until hubby turns 70 and collecting SS. We are 67 and 65).



I am also waiting until age 70. Working with a FA and he advises such. Wants us to do Roth conversions even more so than Traditional IRA withdrawals It will help with alleviating some of the tax burden that will come once we have to take RMD's at age 72.


Yeah- it bothers me a bit to do this. Using cash and paying taxes on Roth conversions with more of our cash instead of taking our SS. My thing is if we die before then, our son gets less inheritance. Otherwise, I wouldn't care about it.

[RunningBum]

Quote:

Originally Posted by meleana Yeah- it bothers me a bit to do this. Using cash and paying taxes on Roth conversions with more of our cash instead of taking our SS. My thing is if we die before then, our son gets less inheritance. Otherwise, I wouldn't care about it.

The way I see it, if you die relatively early, you probably have a lot of money for him to inherit even if you aren't taking SS. But if you live long, you're more likely to still have some at the end, so he'll still get some. Or you'll be better able to handle any special needs you might have in old age. Or you can be gifting him some, knowing that you've got a larger SS benefit coming each month.