Means testing SS

[scrabbler1]

I agree with ProGolderWannabe and Friar1610 that SS is already to a degree means-tested by how it is taxed relative to overall income. I would increase the brackets from the 50%-85% but also index them like other income tax brackets.

 

[73ss454]

That's exactly how college financial aid system works.

I know but one does not have to go to college, but everyone gets older.

 

[Independent]

My guesses on means testing (if it happens):

1. They will base it primarily on income during retirement, not assets.
2. They won't include SS benefits themselves in the income calc.
3. They may find a way to include Roth distributions.

Because of #2, my plan to minimize means-tested losses is to defer taking SS. That reduces my non-SS assets and income, while increasing my SS income. One is included in the calc, the other isn't.

I would prefer that they do the means test based on income before retirement. So the relevant issue is how much you could have saved, not how much you actually saved. A backdoor version of this is included in many SS reform proposals (the code phrase is "progressive indexing"). We could do a lot more of it and I wouldn't be upset.

In terms of political likelihood, note this from the R response to the SOTU speech:

It's absolutely so that everyone should contribute to our national recovery, including of course the most affluent among us. ... The better course is to stop sending the wealthy benefits they do not need, and ...

 

[Independent]

How about reining in the raids on SS? First cut out the payouts to all those who aren't even US citizens, never worked a day in this country and refuse to learn our language.

Source?

 

[samclem]

IMO, "means tested" simply means that all your assets would be taken into consideration, including cash, gold or other tangibles.

Right, but tangibles might be impossible for the government to independently verify/know about. That roll of gold coins is pretty much off the record. If it's not possible to verify something, then it's not practical to tax/weight benefits based on it. It would become a tax on honesty. Or, some would say, a tax on stupidity.

 

[NW-Bound]

I surmise that most people, like myself, are of the working stiff type who have to work to make a living through their life, meaning most if not all of their income is of the "earned income" type.

Then, how much each of us earned through our working life has already been recorded in the form of FICA tax that we paid. This in turn is already factored into the benefit that we are entitled. If two persons have the same salary history, they should have the same benefit. There is no reason to say one should now have less than his brother, because the former has saved more.

What am I missing?

...I would prefer that they do the means test based on income before retirement. So the relevant issue is how much you could have saved, not how much you actually saved...

Perhaps you meant to look at the income level that was above the FICA tax limit?

What people are hoping is that the pols may just propose to cut out SS benefits to rich people like Buffett, who would not miss it. True, billionaires would not miss it, as it is just a drop in their bucket, or perhaps they might not even bother to file for it. But even if not, how many billionaires are out there for this proposal to even make a dent?

Hence, I suspect that the benefit cut will be extended downward, to affect more people in the upper middle class. Not just the 1%, but perhaps the top 25%.

Again, I can understand helping out the poor people, but to think that I now have to subsidize many of my former colleagues, who made the same money as I did but had been indulging themselves while I saved, just drives me up the wall.

 

[ronocnikral]

I believe that SS is means tested in many ways already. One example is based on "contributing" income...from the SS website:

Social Security benefits are intended to replace only a percentage of a worker’s pre-retirement earnings. The way Social Security benefit amounts are figured, lower-paid workers get a higher return than highly paid workers. For example, lower-paid workers could get a Social Security benefit that equals about 55 percent of their pre-retirement earnings. The average replacement rate for highly paid workers is about 25 percent.

In addition, as a "young buck" here, I maintain that the issues with SS should be shared across the board. Maybe the cuts shouldn't be as deep for the old farts, but everyone should share this burden in some fashion. I'm sure there will be those claiming it is not fair, but neither is walking into the situation I see myself and other gen Y'ers walking into it--certainly we didn't borrow against the SS trust funds (at least we had absouletly, and probably still do, no clue what was going on while we were running around in diapers or just a twinkle in our parents' eyes).

 

[ziggy29]

The Morningstar webinar last Saturday also referred to changes in SS; the panel agreed that anyone over the age of 50 should not expect changes in their benefits. It's the younger employees (20 and 30) that will see the most changes.

As someone who is a little too young to be grandfathered into anything, I just hope they don't make it an all or nothing "cliff" that would royally screw those just barely too young to be sacred cows.

 

[RetireBy90]

I think before we can really solve any problems with SS we need to change our thinking about it. I always thought that it was an earned benefit, like my pension or 401K. You contribute and you can then draw on that once you are of age.

However, I've come to try to look at it as just one more tax. The $$ collected may rate some sort of notation in a SSA database, but in reality, the funds collected from our checks just go into the fund for our govt to spend. SSA gets a bond to note how much they collected and gave over to treasury, but when that bond comes due where will the $$ come from? It's no different than other taxes, the general fund must redeem the bonds with current income or more borrowing.

So, lets agree we have been miss-informed and this is a program to pay a retirement or other stippend and not $$ put aside as we were lead to believe. Only once we accept that we were taken can we look at the current situation and move forward with a solution. Either restrict future retirement benefits, look at the disability program (WSJ has run several series on the problems here.) and/or look at the income from witholdings (did you notice they renamed them again? not FICA but FED/OASDI and FED/MED).

No Politics, no names, no parties, just my view on a broken system and how to start to fix it.

Just do it after I get mine Just kidding, I'm open to reduced benefits if it is part of a REAL solution.

 

[misty57]

DH and I will both turn 55 this year and we dialed SS out of our retirement planning a long time ago. Recently, we have dialed it back in, however, as we did not anticipate the astronomical increases in the cost of health care that we have seen in the last decade. The SS that we will receive will help offset some of those costs.

I don't see how the government can effectively means test assets year in and year out, so my guess is that further means testing will be based on AGI. The $1M question is where they will draw the line.

 

[wolfbay]

I believe that SS is means tested in many ways already. One example is based on "contributing" income...from the SS website:

In addition, as a "young buck" here, I maintain that the issues with SS should be shared across the board. Maybe the cuts shouldn't be as deep for the old farts, but everyone should share this burden in some fashion. I'm sure there will be those claiming it is not fair, but neither is walking into the situation I see myself and other gen Y'ers walking into it--certainly we didn't borrow against the SS trust funds (at least we had absouletly, and probably still do, no clue what was going on while we were running around in diapers or just a twinkle in our parents' eyes).

There is a danger of intergenerational conflict in this situation. Some Boomers have been responsible,saved andLBYM but many have not and for them SS will be critical for survival in old age. I've read somewhere that for SS and Medicare to continue in it's present form young workers would need to be taxed at 80% of their income . That's not going to happen.There will be changes and they'll be painful. We've allowed our politicians to spend beyond our means for 40 years and are passing on an additional 1.5 trillion in debt every year to the younger generations. It's a shameful situation but it's going to be hard to ask for shared sacrifice when the Banksters are not prosecuted and are bailed out with taxpayer money. There could be turbulent times ahead.

 

[skipro3]

Source?

I'll find an independent source but for now, Hmong for one. USA treats Hmong as political refugees and provide them instant SS benefits as soon as their feet hit US soil. I would imagine any refugees are getting this benefit, but for now I only know of Hmong for first hand. Once arrived, they then bring in several family members. Each of them gets a SS distribution as a dependent.

 

[MichaelB]

I'll find an independent source but for now, Hmong for one. USA treats Hmong as political refugees and provide them instant SS benefits as soon as their feet hit US soil. I would imagine any refugees are getting this benefit, but for now I only know of Hmong for first hand. Once arrived, they then bring in several family members. Each of them gets a SS distribution as a dependent.

If you have a source that documents this claim would you mind posting it? The political refugees I know are not eligible for any such benefit.

 

[skipro3]

[SIZE=-1]From this website;
[/SIZE]
[SIZE=-1]
[/SIZE]
[SIZE=-1]http://www.visaus.com/benefits.html[/SIZE]
[SIZE=-1]
[/SIZE]
[SIZE=-1]Q. Can refugees receive SSI benefits?[/SIZE]
[SIZE=-1]A. Refugees can receive SSI benefits if they meet all the requirements for eligibility (such as having limited income and resources and being aged or disabled) and meet one of the following six criteria:[/SIZE]
[SIZE=-1] All refugees during their first seven years in the U.S. During their first seven years in the U.S., low-income refugees are eligible for SSI under the same rules as native-born citizens. This rule applies to all refugees, regardless of when they entered the country or whether they have adjusted their status since entering the U.S.[/SIZE]
[SIZE=-1] Refugees who were receiving SSI benefits on August 22, 1996: Refugees who were receiving SSI benefits on August 22, 1996,can continue to receive these benefits as long as they continue to meet all other SSI eligibility requirements.[/SIZE]
[SIZE=-1] Refugees who were living in the U.S. on August 22, 1996, and become disabled after that date: Refugees who were living in the U.S. on August 22, 1996, and become blind or disabled after that date are eligible for benefits if they meet other SSI requirements, regardless of when they apply or when the disability begins.[/SIZE]
[SIZE=-1] Long-term workers and certain of their family members: Refugees who have worked 40 quarters or can be credited with 40 quarters of work that qualify under the Social Security Act and who have adjusted their status to legally admitted permanent resident are eligible for SSI under the same rules as native-born citizens. Spouses receive credit for the quarters worked by their husbands/wives, and children under the age of 18 receive credit for the quarters worked by their parents. For qualifying quarters worked after December 31, 1996, to be credited, the refugee cannot have received Temporary Assistance for Needy Families (TANF), Aid to Families with Dependent Children (AFDC), SSI, Food Stamps, Medicaid, or Children's Health Insurance Program (CHIP) benefits during the quarter.[/SIZE]
[SIZE=-1] Armed Forces active personnel and veterans, and certain of their family members: Refugees who are currently in the Armed Forces and those who are veterans with honorable discharges who have met minimum active-duty requirements are eligible for SSI under the same rules as native-born citizens. The unmarried dependent children and spouses (including unremarried surviving spouses of deceased veterans) of these refugees also can be eligible for SSI if they are legally residing in the United States.[/SIZE]
[SIZE=-1] Citizens: Refugees who have become naturalized citizens are eligible for SSI under the same rules as native-born citizens.[/SIZE]


[SIZE=-1]This got me thinking that there is a difference between Social Security and Supplemental Security. That led me to this;[/SIZE]
[SIZE=-1]
[/SIZE]
[SIZE=-1] Difference between Social Security disability and SSI disability[/SIZE]


[SIZE=-1]That was about as clear as mud. So then I decided, who does one go to apply for SSI and found this;[/SIZE]


[SIZE=-1]http://www.socialsecurity.gov/pubs/11000.html[/SIZE]


[SIZE=-1]So I'm guessing here but Social Security manages SSI but uses general tax dollars instead of wage taxes? A tax is a tax in my book.
[/SIZE]

 

[Bestwifeever]

....I've read somewhere that for SS and Medicare to continue in it's present form young workers would need to be taxed at 80% of their income...

Again, no source? (I caved in and looked it up for you, and came up with one: https://www.cato.org/dailys/03-30-00.html--perhaps you have others?)

but it says

the government's own reports indicate payroll tax increases of 40 percent to 80 percent would eventually be needed to pay all benefits promised to today's young workers.

This is not the same as being taxed at 80% of their income--it's up to an 80% increase on payroll taxes.

(The reason I think sources are important when we read something "somewhere" is that it lets other people see where we read it and decide what it means.)

 

[Alan]

I'll find an independent source but for now, Hmong for one. USA treats Hmong as political refugees and provide them instant SS benefits as soon as their feet hit US soil. I would imagine any refugees are getting this benefit, but for now I only know of Hmong for first hand. Once arrived, they then bring in several family members. Each of them gets a SS distribution as a dependent.

Here is a link from the SS site regarding the eligibility of refugees to receive SSI benefits. Nothing quantitative but I can't imagine the numbers of refugees collecting SSI having mcuh of an impact on the finances of the SS system.

Supplemental Security Income For Noncitizens

Have you perhaps heard of this after receiving an e-mail claiming a major injustice?

http://www.factcheck.org/2009/04/social-security-for-immigrants-and-refugees/

To sum up: This email’s claim that immigrants and refugees get more generous Social Security, SSI and Medicaid benefits than ordinary citizens is completely wrong.

 

[Texas Proud]

I do not know about inevitability, but this has been discussed before in this forum. See this.


Well, in fact SS is already a form of welfare. To see for yourself, go to SS web site and try out the SS calculator. A person who makes $100K/year contributes 2X the amount from someone that makes $50K/year, and 4X the amount from someone that makes $25K. Yet, the pay-out is not at all proportional to the pay-in. Other individual retirement plans such as 401K and IRA, etc..., all pay out proportionally to what one paid in.

I myself do not mind this, as SS is a social program to help the workers at the bottom rung.

But now, they are going to say that two persons who both made the same, say $50K/year in the working years, and paid the same into the system, now the one that was LBYM has to subsidize the spender, because the former has more "means" while the latter has more "needs".

Heck, that would quickly cause the country to turn into profligate spenders, so that they would all have more "needs" and less "means". Just another example of how I find it difficult to think highly of any politician.

Comment on the bold part....

That has already happened... when they made SS income taxable IF you make more money, then the person who has no other income pays no tax on SS and someone who saved a lot and has outside income will pay taxes on their SS income...

The different results are only due to the one saving more money... a backdoor way of means testing...

 

[skipro3]

Here is a link from the SS site regarding the eligibility of refugees to receive SSI benefits. Nothing quantitative but I can't imagine the numbers of refugees collecting SSI having mcuh of an impact on the finances of the SS system.

Supplemental Security Income For Noncitizens

Have you perhaps heard of this after receiving an e-mail claiming a major injustice?

FactCheck.org : Social Security for Immigrants and Refugees

Well, I don't know about receiving an e-mail...

I heard of this by working in Burma on a mission trip. (Republic of the Union of Myanmar) We cross the river from Thailand and help the mountain people with procuring clean drinking water.

Here's another link from Social Security about refugee benefits;
Understanding Supplemental Security Income (SSI)-- SSI Eligibility

 

[Alan]

Well, I don't know about receiving an e-mail...

I heard of this by working in Burma on a mission trip. (Republic of the Union of Myanmar) We cross the river from Thailand and help the mountain people with procuring clean drinking water.

Here's another link from Social Security about refugee benefits;
Understanding Supplemental Security Income (SSI)-- SSI Eligibility

Now that we know that it is SSI, not SS, we are talking about, are you aware that, although SSI is administered by the SS department, it is not funded by SS contributions but out of the general fund? It is a government expense but does not affect the SS fund any more than any other government spending program.

 

[skipro3]

Now that we know that it is SSI, not SS, we are talking about, are you aware that, although SSI is administered by the SS department, it is not funded by SS contributions but out of the general fund? It is a government expense but does not affect the SS fund any more than any other government spending program.

I mentioned in my post that it was not clear to me the relationship between the two. I even included a web address specific to just that. However, a tax is a tax. SSI is for those who don't meet the SS requirements. If we are going to bring reduction in SS benefits to the table, then EVERYTHING needs to go to the table including SSI. Especially so for a sacred cow like SS.

I get a mental image of our 'leaders' holding SS in front of them as a shield just as a Taliban might hold a woman or child. For the politician, he's protecting programs like bullet trains, hospitals for prisoners, grants for college to illegal aliens, etc. (all California I know, but any state has their own too.) by threatening to cut public safety, education, fire, etc. It's a cowardly act.

 

[MichaelB]

For those not following or reading the links, political refugees are eligible for the same benefits, including SSI, as other lawful immigrants. US immigration policies usually require aspiring candidates to demonstrate they can provide for themselves so few relocate to the US and then file for assistance. Political refugees are the exception - and a minority. I have never found any data that shows this to be a significant component of public spending. I has been a while since I looked at gov't assistance data but the largest single group of beneficiaries of public aid has typically been single mothers and their children.

 

[cashbalancetrouble]

I think we have a very recent indication of how means testing will be put into affect.

The payroll taxcut approved in December for two months, ie SS HOLIDAY, phases out when you reach an income of about $110K. When you file your taxes for 2012 in 2013, if your income is higher than $110K, you start paying back the taxcut. I do not know how this works but let's say at an income of $220K you have paid all the before $110K cut back plus what would have been collected at the normal rate from $110 to 220.

For SS means testing, I would envision a similar income AGI where your "SS benefit" is paid or "taxed" back until you get none. This way if your assets are used to produce income, they are means tested but if you own an expensive house, it would not be included in any means testing.

This fits into the tax game playing pattern of our laws in that one could move income all into one year and lose the SS beneift one year but have low income the next and get. Keep in mind, this methods lets the IRS oversee this with their unlimited access to information. etc.

 

[samclem]

How about reining in the raids on SS? First cut out the payouts to all those who aren't even US citizens, never worked a day in this country and refuse to learn our language.

There are probably few folks who fit this description. Political refugees would be one group, another group getting full SS benefits would be alien (legal or illegal) spouses of US citizens who are entitled to SS.

More here.

Folks in prison get SS. I wonder if there shouldn't be some clawback provision for the room and board.

 

[wolfbay]

Again, no source? (I caved in and looked it up for you, and came up with one: https://www.cato.org/dailys/03-30-00.html--perhaps you have others?)

but it says

This is not the same as being taxed at 80% of their income--it's up to an 80% increase on payroll taxes.

(The reason I think sources are important when we read something "somewhere" is that it lets other people see where we read it and decide what it means.)

My figure was incorrect. In movie IOUSA David Walker stated that taxes would have to double but this was in 2007 and the situation is much worse now. What ever the exact figure is I maintain it won't happen. Every American should watch this movie.We may be in denial as a nation.

 

[73ss454]

In addition, as a "young buck" here, I maintain that the issues with SS should be shared across the board. Maybe the cuts shouldn't be as deep for the old farts, but everyone should share this burden in some fashion. I'm sure there will be those claiming it is not fair, but neither is walking into the situation I see myself and other gen Y'ers walking into it--certainly we didn't borrow against the SS trust funds (at least we had absouletly, and probably still do, no clue what was going on while we were running around in diapers or just a twinkle in our parents' eyes).

I think maybe our government should just keep their hands off of the general fund and we will all be better for it. I'm thinking there is plenty of money for everyones SS but it's being used for other things. Sort of like a piggy bank for the government.