Will Social Security be there?

[Retired Expat]

Quote:

Originally Posted by CindyBlue Ok, I'll be the one to ask...yet again... I retired last August. I've been living on my savings since then (not my 403b, but savings - I planned it that way for the first year of retirement) plus my pension. I was all set to do fine in retirement. But... Will Social Security be there when I take it next March (I'm waiting until FRA)? After reading about the president approving tax cuts...and the economy...I'm worried about Social Security. I'm also worried about my (defined benefit) pension still being there. Sometimes I think all I do is worry...sigh...

Without trying to open a political discussion...

Does anyone think that the current Pandemic might actually help SS or retirement in the long run? 1 less seniors around to claim benefits since the disease is much more fatal for seniors. 2 people not able to retire now staying in the work force and delaying benefits, 3 might this cause a systemic change in people’s lives, where not wanting to be caught in the next pandemic out of work and living paycheck to paycheck create more savers and a sense of frugality. 4. Will living now without travel, shopping, dining out and spending, have a continuing impact on how we live our lives post pandemic?

For an example in #4. We have replaced our expensive gym memberships with walking, home work outs, exercising to free YouTube videos. Not going to the gym means no post work out smoothie, snack in a cafe or expensive coffee drink and less driving. I mean...sure we miss the gym, pool, steam room etc but now we are asking ourselves if it is REALLY worth it?

Anybody else feeling this way?

[teejayevans]

Quote:

Originally Posted by Retired Expat Without trying to open a political discussion... Does anyone think that the current Pandemic might actually help SS or retirement in the long run? 1 less seniors around to claim benefits since the disease is much more fatal for seniors. 2 people not able to retire now staying in the work force and delaying benefits, 3 might this cause a systemic change in people’s lives, where not wanting to be caught in the next pandemic out of work and living paycheck to paycheck create more savers and a sense of frugality. 4. Will living now without travel, shopping, dining out and spending, have a continuing impact on how we live our lives post pandemic? For an example in #4. We have replaced our expensive gym memberships with walking, home work outs, exercising to free YouTube videos. Not going to the gym means no post work out smoothie, snack in a cafe or expensive coffee drink and less driving. I mean...sure we miss the gym, pool, steam room etc but now we are asking ourselves if it is REALLY worth it? Anybody else feeling this way?

You’re a glass half full person...I like it.

[Gumby]

Quote:

Originally Posted by Retired Expat ...Does anyone think that the current Pandemic might actually help SS or retirement in the long run?....

As I see things, this is a variation of the "paradox of thrift" - saving is good for us individually, but if everyone does it, we will suffer collectively since consumer spending is the major driver of the economy. Other things being equal, you will have an easier time with retirement finances if you stop spending and save more pre-retirement, as well as spending less post retirement. However, consider the ramifications of millions upon millions of people who stop buying lattes, gym memberships, restaurant meals and new cars. That will drive down the need for employees in the businesses that provide these things. Lower employment means fewer people contributing to Social Security and, consequently, a bigger likelihood that benefits will be cut. It also means that the money you have invested in the stock market may take a hit due to the drop in consumer demand.

The big question is whether the extra money you save can offset the loss of social security and a drop in market performance. Putting aside the stock market effects, a loss of $6000 in social security income would require that you have an extra $150,000 in your portfolio in order to continue spending the same amount (reverse engineering the 4% rule). If market performance suffers as well, you'll need even more money on hand, as the 4% rule assumes a certain market return in a mixed portfolio. That's a lot of lattes.

I think the best solution is to get everyone back to work contributing to social security and driving the market higher. Then we can and should tweak the tax rates, retirement age and such, as necessary to make the program actuarially sound.

[CindyBlue]

Quote:

Originally Posted by SumDay Yoga. Seriously.

Ugh. Can't do yoga. I've tried - I just sit and think of everything I could be doing instead! I run or walk or work hard on the property to clear my mind.

I'm a lifelong worrier. I tell hubby that I'll do the worrying for him so he doesn't have to.

I also figured years ago that I'd better make peace with my worrying since I can't seem to do anything to change it. Worrying is what makes me think deeply about a problem and spurs me to work on finding solutions and resolutions. Hubby tells me that people think I'm making "snap" decisions but he knows I've been worrying about it and thinking about it already for quite some time, so it's a well thought out decision by the time I've made it public.

Retiring is one example. Everyone we knew was pretty shocked when we told them in January 2019 that we were retiring, but I'd been working on it since 2015 or so.

I think we have a lot to worry about, especially lately. Thank goodness for this forum where there are people who have done a lot of thinking about retirement issues, too, so I can get advice to help me through my worrying thought processes

[ShokWaveRider]

I guess the moral of this story is: If one NEEDs SS in any form to Retire, one should think again.

[Gumby]

Quote:

Originally Posted by ShokWaveRider I guess the moral of this story is: If one NEEDs SS in any form to Retire, one should think again.

Since I first started retirement planning back in the 1980's, I have assumed that I would receive zero from social security and have saved accordingly. As it turns out, I'll get $25k per year starting in 6 months, and I'll be happy to take it even though I don't really need it for day to day living. Once we can travel again, that will fund a couple of nice vacations a year.

[tmm99]

I calculated - It looks like I can spend as much as I've been spending with zero SS, but that's while assuming the market won't tank drastically and stay there...

I could always manipulate the end of life timing (currently set to 97)...

[CindyBlue]

Quote:

Originally Posted by ShokWaveRider I guess the moral of this story is: If one NEEDs SS in any form to Retire, one should think again.

I wish that were true, but the fact is that a lot of people, including me, are counting on Social Security as part of our "3 legged stool" for retirement income.

Yep, I need it. I have savings but could never retire on only that..I can't count on the market.

[tmm99]

Quote:

Originally Posted by CindyBlue I wish that were true, but the fact is that a lot of people, including me, are counting on Social Security as part of our "3 legged stool" for retirement income. Yep, I need it. I have savings but could never retire on only that..I can't count on the market.

I'm sure we will get SS of some kind. It won't be zero. The question is how much... I often use a 25%-30% haircut number for retirement calculations and make it a regular pension (100% taxed). I also tweak my discretionary spending (eg. travel) and check different scenarios.

[CindyBlue]

Quote:

Originally Posted by tmm99 I'm sure we will get SS of some kind. It won't be zero. The question is how much... I often use a 25%-30% haircut number for retirement calculations and make it a regular pension (100% taxed). I also tweak my discretionary spending (eg. travel) and check different scenarios.

I do the same thing - I calculate that all of my income will be "taxed" and enter the resulting info into FireCalc. I figure that will produce my smallest income possibility and then I can go from there.

[Rianne]

Quote:

Originally Posted by Gumby However, consider the ramifications of millions upon millions of people who stop buying lattes, gym memberships, restaurant meals and new cars. That will drive down the need for employees in the businesses that provide these things. Lower employment means fewer people contributing to Social Security and, consequently, a bigger likelihood that benefits will be cut. It also means that the money you have invested in the stock market may take a hit due to the drop in consumer demand.

My bold. The stock market is nearing an all time high and my portfolio has exceeded its all time high. Small businesses are suffering, large corporations are flourishing. I still see a long line at the Starbuck's drive thru. And their stock price is up. The economy is shifting. I don't know where that leaves SS or employees. Are large corps going to hire more? Maybe better jobs, better benefits, higher salaries? I might be dreaming, if so, don't wake me up. I posted this article in another thread but applies to this discussion.

Education is more important than ever.

How Pandemics Past and Present Fuel the Rise of Large Companies

[daylatedollarshort]

Quote:

Originally Posted by Retired Expat 4. Will living now without travel, shopping, dining out and spending, have a continuing impact on how we live our lives post pandemic? For an example in #4. We have replaced our expensive gym memberships with walking, home work outs, exercising to free YouTube videos. Not going to the gym means no post work out smoothie, snack in a cafe or expensive coffee drink and less driving. I mean...sure we miss the gym, pool, steam room etc but now we are asking ourselves if it is REALLY worth it? Anybody else feeling this way?

I don't know the impact on SS, but I think there's quite a bit of healthy and money savings changes we will keep, post pandemic - more hiking and garden visits, more time to try new recipes at home, less going out to eat and drinking. I miss concerts and plays, but we did that pretty often and it meant sitting on our rears instead of hiking up a hill. We've been getting more house projects done, too, with being home more and that feels good. I've started growing some of my own food for the first time.

[explanade]

Quote:

Originally Posted by Aerides *Let's try to avoid politics to allow this thread to have a chance* OP I think for you, yes it will be there. The larger haircuts - IF they happen - are more likely to apply down the road, to those retiring later, vs. already on it or about to be. (IMO)

Retiring later or claiming the benefit later?

Is there an advantage to collecting earlier, like at 62, so you've collected for longer before any haircuts?

[RunningBum]

Quote:

Originally Posted by explanade Retiring later or claiming the benefit later? Is there an advantage to collecting earlier, like at 62, so you've collected for longer before any haircuts?

I assume they meant claiming the benefit later.

As to the advantage, the worst case for an individual is they make cuts when you are just reaching 70 and held out to start SS at 70.

If they do it fairly, they would figure out how to make it to the same breakeven point whether you started at 62, or held off til 70. But that would be complex, and confusing to many, so I'd bet they'd just do a haircut across the board rather than try to explain the complexities for those eligible but have held off.

I ran a spreadsheet for that worst case for me, with an assumption of a 5% return on asset return and 2% inflation, my breakeven moves from age 84 to 91. Considering that I turn 62 near the end of 2033, it's a very real possibility that I'd be in that worst case scenario. That's still over 13 years away for me, so I'm not sweating the decision. Too much could change over that time.

[Dtail]

Quote:

Originally Posted by CindyBlue I wish that were true, but the fact is that a lot of people, including me, are counting on Social Security as part of our "3 legged stool" for retirement income. Yep, I need it. I have savings but could never retire on only that..I can't count on the market.

Same here. We have a decent amount of retirement monies, but could not live our current and projected lifestyle without SS.
In fact, my DGF already collects SSDI.

[teejayevans]

Quote:

Originally Posted by Dtail Same here. We have a decent amount of retirement monies, but could not live our current and projected lifestyle without SS. In fact, my DGF already collects SSDI.

Ditto, and I wanted to spend down my IRA, and take advantage waiting till I’m 70, but now....

[bada bing]

Disclosure: I have hated SS my entire working life. I am a corner case that statistically gets shortchanged the worst by SS benefit formulas: 45 year work history, 35 year capped contribution record, no qualifying spouse, ex-spouse or dependents. I knew the math 20 years ago and knew I was getting hosed by it 20 years ago.

The thing I find worrisome is the unknown of how "fixes" to SS will be designed. It is well established that there will be a ~25% funding shortfall starting in ~12 -15 years. That in no way implies any individual can plan on a 25% haircut. SS has always been a political football, with some people (like me) charged much more to grant enhanced benefits to others. The proposals floated so far run the gambit - increasing retirement age, eliminating the earnings cap, increasing taxable percent of benefits, means testing. All of those are intended to concentrate the burden on some to the benefit of others. In no way can anyone be confident that they will take only a pro-rata haircut. You may individually take anything from 0% to 100% haircut.

I am not going to get overtly political in this post. Just want to point out that any assertion that ~25% is a good planning number for the haircut is a pipe dream. It is almost certain your individual number is going to be something different from a pro-rata share.

[Dtail]

Quote:

Originally Posted by teejayevans Ditto, and I wanted to spend down my IRA, and take advantage waiting till I’m 70, but now....

Yeah always a tough decision. I am managing ACA until age 65, then age 65 pension, then a year by year decision from there when to take SS.

[Gumby]

Quote:

Originally Posted by Rianne My bold. The stock market is nearing an all time high and my portfolio has exceeded its all time high. Small businesses are suffering, large corporations are flourishing. I still see a long line at the Starbuck's drive thru. And their stock price is up. The economy is shifting. I don't know where that leaves SS or employees. Are large corps going to hire more? Maybe better jobs, better benefits, higher salaries? I might be dreaming, if so, don't wake me up. I posted this article in another thread but applies to this discussion. Education is more important than ever. How Pandemics Past and Present Fuel the Rise of Large Companies

I can't see a surplus of idle labor leading to higher pay and benefits. It is a market like any other; when supply exceeds demand, prices drop.

[pb4uski]

Quote:

Originally Posted by CindyBlue Does that meant that when I get Social Security next March, it will stay the same (with cost of living increases) for my lifetime? Or will I get a "haircut" later on? Are the decreases in Social Security projected for 2035 only for those who take it in 2035, or across the board for everyone?

As of right now, the SS surplus is about $2.9 trillion.

If Congresscritters fail to act to reform SS, the most likely outcome is that you would receive your full SS benefit until sometime in 2035 and then your benefit will be reduced about 23%.

Quote:

If substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations. Much larger changes would be necessary if action is deferred until the combined trust fund reserves become depleted in 2035. For example, maintaining 75-year solvency with changes that begin in 2035 would require: (1) an increase in revenue by an amount equivalent to a permanent 3.65 percentage point payroll tax rate increase to 16.05 percent starting in 2035, (2) a reduction in scheduled benefits by an amount equivalent to a permanent 23 percent reduction in all benefits starting in 2035, or (3) some combination of these approaches.

From everything that I have read, the haircut would be across-the-board. By statute, the SS Trust Fund cannot deficit spend, which is why benefits would have to be reduced.

https://www.ssa.gov/policy/trust-funds-summary.html
https://www.ssa.gov/OACT/TR/2019/tr2019.pdf