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Old 08-10-2020, 12:14 PM   #61
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I may need some correction to what I think is true

The SS Trust fund does not actually have any money in it. It was borrowed by the Federal Government and spent. I think that is still going on today.

So if this is true, then the same Federal Government is responsible for paying whether SS tax is continued to be collected or not. However, I suspect some other form of tax would be instituted to cover the loss of funds.

In any case, I don't believe there is a Washington Politician with B@lls enough to stop SS. Means test, maybe, raise taxes, maybe, freeze benefits, maybe, but not eliminate it.

It does pose an interesting question. How many folks on here could handle a 25% reduction in SS. DW and I could, but I hope it is a long way off.
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Old 08-10-2020, 12:24 PM   #62
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Interesting who benefits from a payroll tax holiday. The employees supposedly pay the tax, but it's the employers who cut the check.
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Old 08-10-2020, 12:45 PM   #63
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Originally Posted by Rustic23 View Post
I may need some correction to what I think is true

The SS Trust fund does not actually have any money in it. It was borrowed by the Federal Government and spent. I think that is still going on today.
Well, it depends on your definition of "money," I suppose. The Trust Fund holds securities backed by the full faith and credit of the US. If I have a bunch of Treasury bills, notes, and/or bonds, I think that I have "money."

However, your larger point is well-taken. The system was carefully designed to make people feel like the SS payments are NOT general obligations of the US. It didn't/doesn't have to be that way.
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Old 08-10-2020, 01:47 PM   #64
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The closer we get to 2035, the FED will just turn up the printing presses (Brrrrr...........) and pump out enough big bills to cover SS! Simple! (all they need is paper).

Easy peasy.....no politicians get doused with gasoline and everyone is happy!!
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Old 08-10-2020, 01:58 PM   #65
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If the second wave of cov-19 hits and bumps off more of the elderly the funds should be thete.
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Old 08-10-2020, 02:56 PM   #66
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The current news is unsettling, but the talk of 75% has been around for a long time. I always thought (hoped) that we won't get a 75% haircut across the board, but instead, higher SS payees will have to pay more taxes on the SS (by lowering the income limit or by making SS fully taxable or both) and of course, by continuing to raise the FRA. I cannot imagine, in any circumstance that the government will take away any SS money from people who have absolutely nothing but a small SS payment to live on with no other income.

I do include 25% reduction in SS in my planning although I'm hoping the percentage will be lower.
If higher amount of social security will be taxed at a higher level, would that change the strategy of delaying it to 70?
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Old 08-10-2020, 03:18 PM   #67
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Well, it depends on your definition of "money," I suppose. The Trust Fund holds securities backed by the full faith and credit of the US. If I have a bunch of Treasury bills, notes, and/or bonds, I think that I have "money."
If you give me $100 to hold. I write an IOU, put it in my drawer, and then spend the money. The money really is not there. My IOU is, and that may be good, or may not. For me, other than a law hiding this, the government owed the debt when it collected the tax, it then spent the tax. Therefore, there appears nothing magical about the trust fund going away, it went away when it was spent. All that is happening is a reduction in the IOU.
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Old 08-10-2020, 03:29 PM   #68
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The government has the ability to tax (us). So when times get tough, or they just need more revenue, they just tax us more. We will see many more actual examples of this "magic" in the coming years. That way, SS will be safe, along with a host of other funding programs.
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Old 08-10-2020, 03:30 PM   #69
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At the risk of sounding obvious - if eliminated, eliminate for those entering the workforce.
The only way this would work, is if you still collected the SS payroll tax, but didn't give them the benefits later. SS is not fully funded from you and your employer's contributions. It's been amended many times and now covers many more people than just the contributors...pretty much a pyramid scheme, and its shortfall is due to declining population growth rates.
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Old 08-10-2020, 03:36 PM   #70
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If the second wave of cov-19 hits and bumps off more of the elderly the funds should be thete.
63 million Americans currently collect SS, and we've 'only' lost 163K total to COVID (not all of these were collecting, but would have been in the future, presumably). IF COVID is here forever, and we don't get a workable vaccine, this might decrease life expectancy for everyone still living and yet to be born, which might help the numbers if most of us die after 60, after contributing to SS all of our working lives...I'm thinking of starting early, between 65 and 67, rather than 70!
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Old 08-10-2020, 03:37 PM   #71
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Old 08-10-2020, 03:45 PM   #72
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If you give me $100 to hold. I write an IOU, put it in my drawer, and then spend the money. The money really is not there. My IOU is, and that may be good, or may not. For me, other than a law hiding this, the government owed the debt when it collected the tax, it then spent the tax. Therefore, there appears nothing magical about the trust fund going away, it went away when it was spent. All that is happening is a reduction in the IOU.
85 years ago, when SS was created, the requirement in the law was that the trust funds would always be invested in securities that are backed by the U.S. Government, i.e. Treasuries. It's not like some Congress came along decades later and raided the piggy bank and just left an IOU behind for their successors to make good on. The plan from day one was to grow the fund as safely as possible by investing it in the most secure debt obligation in the world. The trust fund was never a pile of cash or gold bars sitting in a vault somewhere, which seems to be what some people envision it as.

You're right that there's nothing magic about it; the money comes in and it gets invested according to the law. You can see the SSA investment reports any time you want to here: https://www.ssa.gov/oact/progdata/investheld.html
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Old 08-10-2020, 03:57 PM   #73
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Sarcasm alert:

Haven't you all heard? Government supplied money is now endless. Remember, taxation is taking from Peter to pay Paul...but now all we need to do is pay Paul and not even take away from Peter! So there is no need for all this silly worrying about how to pay for things! All we need to do is just add money to the system, like magic. With our modern day digital system, we don't even need to make the money printing machines go Brrrrrr, all we need to do is magically have the fed buy assets (e.g. bonds) in open market operations (via member banks). The fed takes those assets off of the poor bankers hands, and in return credits those banks with the value of those assets - and just like magic there is more money in the system.

Even better! Since people are stuck at home and some businesses closed, that money - instead of being used to buy goods and services - can be used to buy the really important things - like equities and other financial assets. Then the magic is even better with a robust stock market.

End of Sarcasm.

From a personal perspective - I can't influence or change what is happening. All I can do is adapt my own strategy to best survive it (at least for now). That means going with the flow in terms of stock prices (e.g. my largest holding Apple now at $450/share) and to realize as we debase our currency and lock our children and grandchildren into massive amounts of debt - try to hedge as much as I dare in things like a good food storage supply, land to provide wood to heat my home, and in alternative assets like gold/silver.

In the meantime, the payroll tax deferment being discussed here is just a pimple on the *ss of the overall problem.

CindyBlue, hope this makes you feel better.
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Old 08-10-2020, 06:24 PM   #74
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Old 08-10-2020, 07:11 PM   #75
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There is lots of ideas that Congress can do now but as we get closer the 2035 there are fewer and fewer options.
It would be interesting to know once the surplus is gone, what the SS tax % will need to be to keep paying out benefits.
The 25% benefit cut means that taxes would be 75% of the current benefit formula. Increasing the payroll tax rate to fill the gap would use the ratio 25/75 = .333 .

So the current 12.4% (combined employee and employer) would go to 16.5%.

IMO, that's wouldn't be a disaster if SS were the only money problem the gov't had. But, there is Medicare, an underlying annual deficit, etc.
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Old 08-10-2020, 07:34 PM   #76
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For the OP
This pamphlet was included with my Vanguard 401(k) statement back in 2006.
Sorry about the quality, had a really cheap scanner back then.

"If you are 50 years old, realize you might have another 25 years in the workforce". Yikes! Who wrote this... Stephen King?
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Old 08-10-2020, 08:01 PM   #77
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At the risk of sounding obvious - if eliminated, eliminate for those entering the workforce.

What to do about those who have been PRE-PAYING their entire adult lives?
Well, mostly we haven't been pre-paying. Social Security is not primarily pre-funded. It is mostly pay-as-you-go.

The taxes I paid were used to pay the benefits of people who were retired when I was working. (For some of us, those retired people were our parents or grandparents. Since SS was providing a benefit, we were relieved of the need to provide for them directly.)

SS was fully paygo from 1940 thru 1983. The 1983 amendments raised the tax rates higher than necessary to pay benefits at that time and the trust fund started to accumulate a noticeable balance. That extra was never intended to fully fund future benefits, it was designed so boomers paid something closer to what their children would have to pay.

So, we have a $2.9 trillion balance today. That's a huge number, but it is dwarfed by the present value of the benefits that have already been earned. If you go to the SS Trustees Report, and look at the annual taxes vs. benefits, you'll probably discover that 90% of the taxes you paid went to benefits, only 10% went to build up the trust fund. (The percentages vary depending on when you were born.)
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Old 08-10-2020, 08:07 PM   #78
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Originally Posted by Rustic23 View Post
If you give me $100 to hold. I write an IOU, put it in my drawer, and then spend the money. The money really is not there. My IOU is, and that may be good, or may not. For me, other than a law hiding this, the government owed the debt when it collected the tax, it then spent the tax. Therefore, there appears nothing magical about the trust fund going away, it went away when it was spent. All that is happening is a reduction in the IOU.
Well then, let me ask you a question. What do you think the SSA should have done with the excess funds collected for the trust fund? Should they have procured stacks of $20 bills and piled them in a back room? Should they have put them in an Ally savings account? Where the hell would you park hundreds of billions of dollars?

BTW, the critical difference in your analogy is the term "full faith and credit of the US." In your example, sure, if you spend the $100, the money is not there. But if the IOU is held by the same entity that creates "money," then the money IS still there.

But again, have you considered what the alternative would have been? Please enlighten us.
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Old 08-10-2020, 08:18 PM   #79
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Originally Posted by copyright1997reloaded View Post
Sarcasm alert:

Haven't you all heard? Government supplied money is now endless. Remember, taxation is taking from Peter to pay Paul...but now all we need to do is pay Paul and not even take away from Peter! So there is no need for all this silly worrying about how to pay for things! All we need to do is just add money to the system, like magic. With our modern day digital system, we don't even need to make the money printing machines go Brrrrrr, all we need to do is magically have the fed buy assets (e.g. bonds) in open market operations (via member banks). The fed takes those assets off of the poor bankers hands, and in return credits those banks with the value of those assets - and just like magic there is more money in the system.

Even better! Since people are stuck at home and some businesses closed, that money - instead of being used to buy goods and services - can be used to buy the really important things - like equities and other financial assets. Then the magic is even better with a robust stock market.

End of Sarcasm.

From a personal perspective - I can't influence or change what is happening. All I can do is adapt my own strategy to best survive it (at least for now). That means going with the flow in terms of stock prices (e.g. my largest holding Apple now at $450/share) and to realize as we debase our currency and lock our children and grandchildren into massive amounts of debt - try to hedge as much as I dare in things like a good food storage supply, land to provide wood to heat my home, and in alternative assets like gold/silver.

In the meantime, the payroll tax deferment being discussed here is just a pimple on the *ss of the overall problem.

CindyBlue, hope this makes you feel better.
Well...we have just finished cutting our winter wood supply and only have about 1/4 of it still to split. I do feel better about that
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Old 08-11-2020, 06:44 AM   #80
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Sigh...I'm hoping that, since there is really nothing I can do about it (except vote!), that I can figure out how to stop worrying. Thank you for letting me worry here, though, everyone!
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