Will Social Security be there?

[Markola]

So, we MIGHT have to absorb a 23% reduction in 2035 specifically in the SS benefits leg of one’s retirement stool. Many retirees would still have portfolios, pensions, annuities, home equity, part time work, an incentive to downsize, international or LCOL options, inheritances, etc. There are enough options possible that I’d rather deal with it if it happens than stay in the workforce for years longer due to an overly-conservative FIRE plan that assumes, irrationally to me, that SS will disappear. YMMV.

 

[ShokWaveRider]

So, we MIGHT have to absorb a 23% reduction in 2035 specifically in the SS benefits leg of one’s retirement stool. Many retirees would still have portfolios, pensions, home equity, part time work, an incentive to downsize, international or LCOL options, etc.

Those that frequent this forum maybe? But a lot of others out there rely on it. I can name a few folks that we know that would fall into the rely on it category.

 

[Markola]

Those that frequent this forum maybe? But a lot of others out there rely on it. I can name a few folks that we know that would fall into the rely on it category.

I would assume that those worried about a 23% cut to SS in 2035 could take some action over the next fifteen years to give themselves a softer landing.

 

[RunningBum]

So, we MIGHT have to absorb a 23% reduction in 2035 specifically in the SS benefits leg of one’s retirement stool.

MIGHT is the correct word, but I don't think it's necessarily in the way you use it. 23% was based on the economic staying pretty steady, and no changes in the system. However, the pandemic has fewer people working, which means less money flowing in to SS. And the president wants payroll tax relief which also means less money flowing in unless people have to pay it back later in the year. All of this starts making a 23% reduction look optimistic.

Of course all of these things might be very short-lived, and congress may act to fund the deficit somehow, so maybe no cuts will have to be made, but smart people recognize that the sooner they take action, the easier it will be to absorb. Instead the near term actions have weakened SS, not strengthened it. I can certainly understand why people who are partly reliant on SS benefits are more worried.

 

[USGrant1962]

Actually the 2019 SS Trustees Report analyzed three cases - trust fund depletion in 2035 was the median case. The worst case (high cost case in the report) assumes a recession in 2020 followed by a very slow recovery lasting until 2028 - prescient? In that case, depletion occurs in 2030 - but I don't believe it changes the subsequent annual shortfall very much. That is kind of a steady-state where income is 20-25% below outgo for a long time.

And as I understand it, the last payroll tax holiday was reimbursed from general funds and didn't impact the trust fund. Don't know why a proposed one would be different today.

So yea, if you are using www.opensocialsecurity.com or other calculators you might want to pull the depletion date up to 2030 and use a 25% cut instead of 23% to be conservative. But cuts are likely to be at least partially mitigated by Congress.

 

[teejayevans]

The question is when will this become an issue DC can’t avoid. 2024...2028...2032?

 

[RunningBum]

And as I understand it, the last payroll tax holiday was reimbursed from general funds and didn't impact the trust fund. Don't know why a proposed one would be different today.

Thanks, good to know. So overall it's putting the country more in debt (drop in the ocean, I suppose), but probably not impacting the SS trust fund.

 

[Fermion]

SS taxes only generate about a trillion dollars each year. 25% of that is just a meager 250 billion..much less than we have spent on these stimulus checks and unemployment bonuses.

So my solution is they just start cutting some checks to SS in 2034 in the amount of $250 billion and just add it in to the national debt. A drop in the bucket by then.

 

[teejayevans]

So it moves the break even age between taking it 62/70 out a few more years but you’re still better off if you plan on living well beyond your life expectancy to delay until 70. Unless the haircut is much more than 25-30%.

 

[Koolau]

Lots of other stuff will be "defaulted" before SS. Too many voters receiving/anticipating SS for it to be messed with too much. Having said that, being paid with "printed" money may end up being the real issue. Eventually, folks will figure out that printed money may not be worth as much as it used to be. That's why my fear is not SS but inflation. As always, YMMV.

 

[Badger]

I would assume that those worried about a 23% cut to SS in 2035 could take some action over the next fifteen years to give themselves a softer landing.

+1 However, if this is the case I would expect that most of those people are in a poor financial mess already from not preparing during their working life or like 50+% that make less than $30k that are living hand to mouth. I doubt if they think that far into the future or are even aware of anything past this months paycheck.
This won't really affect me since in 2035 I will be 87 years old if I survive that long. However if I do survive I will have had the benefit of the collective wisdom of this forum that has helped guide me to financial security unlike the great majority of people in the country.


Cheers!

 

[Markola]

+1 However, if this is the case I would expect that most of those people are in a poor financial mess already from not preparing during their working life or like 50+% that make less than $30k that are living hand to mouth. I doubt if they think that far into the future or are even aware of anything past this months paycheck.
This won't really affect me since in 2035 I will be 87 years old if I survive that long. However if I do survive I will have had the benefit of the collective wisdom of this forum that has helped guide me to financial security unlike the great majority of people in the country.


Cheers!

Yes, I agree that potential SS benefit haircuts is a significant societal problem for the elected representatives to address, and the sooner the better. However, no knowledgeable official is predicting the end of SS, so I was helping make the case that for people on this board it can and should be a legitimate component of one’s plan if the objective is to retire early, even if it gets trimmed in 15 years. The OP has a pension and most on this board have lots of levers to pull, so good luck to all.

 

[Unpaintedhuffhines]

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?

But that isn't how SS works. You don't put money in an account to be used later. If you're working, you pay for current retirees' SS through taxes. Then when you retire, the current workers will pay your SS through their taxes.

I definitely expect some tweaks, since that is what they've always done. As long as they don't do means testing... "hey, you have $1M or more, therefore you are rich beyond anyone's wildest dreams. You get nothing." The thing that makes me not worry about that are that wealthy people donate to campaigns.

 

[teejayevans]

I’d guess they would used the same cutoffs they do for Medicare premiums, that seems logical to me. So if less than $87000 for a single no changes, 15% reduction for those over but less than.....

 

[pb4uski]

While it is possible that they might do some sort of means testing for SS, I'm not sure if they would and even if they do it would likely be more subtle.

Part of the reason that SS enjoys so much popular support is that it is viewed as your benefit and everyone who pays in benefits. While some of use more into personal finance realize that lower income participants get a better payout than higher income participants, I don't think that is common knowledge.

Means testing changes the nature of SS to just another government welfare program and penalizes savers and rewards spenders and i think it would ickly lose the support that it has.

 

[RunningBum]

Means testing changes the nature of SS to just another government welfare program and penalizes savers and rewards spenders and i think it would ickly lose the support that it has.

You seem to think there are enough savers and few enough spenders to lose support for means testing. I wouldn't count on that.

 

[pb4uski]

We'll see. You don't know nuttin. And I don't know nuttin.

 

[GenXguy]

I'm in my 50's and am not really worried about cuts to SS benefits for me. I mean, the "net" benefit is actually already being cut because more of it is taxed every year because the tax thresholds were not indexed to inflation. But I don't expect to see reductions in the pre-tax benefit for someone my age.

For people under 50, you're probably looking at another increase in the full retirement age. It has already been increased a couple years for me vs. people some 10+ years older than me, so younger people are likely to see their retirement age increased as well, maybe to age 70 as well as an increase in FICA taxes.

I would not be opposed to means testing of SS benefits resulting in cuts beginning for households with over $30,000 of "other" retirement income and phasing out completely at $50,000 of other income so that the most needy of seniors can get their full promised benefit.

 

[pb4uski]

.... I would not be opposed to means testing of SS benefits resulting in cuts beginning for households with over $30,000 of "other" retirement income and phasing out completely at $50,000 of other income so that the most needy of seniors can get their full promised benefit.

I would be opposed to that... that isn't what the deal was.. like chaning the rules of the game in the middle of the ninth inning.

 

[Chuckanut]

You seem to think there are enough savers and few enough spenders to lose support for means testing. I wouldn't count on that.

It’s more likely they will change it by making the benefits more taxable. The benefit remains the same, but the higher the overall income, the more that is taxed away.

Means testing it is a fundamental change to the concept of SS. It would be seen as a huge betrayal.

 

[Badger]

I would not be opposed to means testing of SS benefits resulting in cuts beginning for households with over $30,000 of "other" retirement income and phasing out completely at $50,000 of other income so that the most needy of seniors can get their full promised benefit.

Now that looks like a big can of worms


Cheers!

 

[Aerides]

I would be opposed to that... that isn't what the deal was.. like chaning the rules of the game in the middle of the ninth inning.

This is the key I (think/believe/opine) - any changes will have some grandfathering and staging. In my lifetime, I do not see expect significant SS changes to impact those already on it, or about to go on it, with say, a <10year or at least <5 year window - ie, without a catch up window.

Even though I do expect more FRA slides, again, they usually keep the gate open for those that are close.

And means testing would be a massive complex overhaul to the system, as well as come with years of legal battles... so I'm putting my bets on that not happening.

 

[Rocky mtn high]

So Badger, you paid in your money for probably at least 30 years and you just want to give it away? Not me, that was my money they took for years from me and I want!

 

[Badger]

So Badger, you paid in your money for probably at least 30 years and you just want to give it away? Not me, that was my money they took for years from me and I want!

Good luck. I'm not sure which post you are referring to but I don't understand what you mean by giving it away. You do know that SS is not your personal savings account don't you? The money from those presently working is for those who are retired. When you get SS it will come from those younger than you who are working. So be nice to people who are working and contributing to SS. That is where your SS money is coming from when you qualify. I'm not giving anything away.



Cheers!

 

[LRDave]

So Badger, you paid in your money for probably at least 30 years and you just want to give it away? Not me, that was my money they took for years from me and I want!

Sorry - that's not the way SS works.....