Proposed SS means-testing (by income)...

[Independent]

Below are some details on the proposals.

http://online.wsj.com/public/resources/documents/christie_factsheet.pdf

Thanks for the link. This part of the proposal could impact current retirees:

More Accurately Measuring Inflation, While Giving Seniors Over 85 Added
Protection:
Governor Christie proposes Social Security growth be based on the true growth in the cost
of living (a concept economists call Chained-Consumer Price Index). To provide added protection for
the elderly who are most impacted by fluctuations in consumer prices, a one-time 5 percent increase in
monthly benefits will be provided to all beneficiaries when they reach the age of 85.

The current CPI calculation is used for lots of things other than SS. It seems that when he says "CPI overstates the real inflation rate" he opens the question of the right index for tax brackets, I-Bonds, TIPS, federal pensions, and many other things.

Technical note: "Chained" doesn't say much to me. "More use of substitution" does. Here's a description from the CBO.
https://www.cbo.gov/publication/44088

 

[NanoSour]

If one would like to help the economy, one should increase, not decrease, SS payments across the board. Fear mongering about SS solvency and national debt is simply uninformed nonsense.

People need to first understand that they cannot treat the government's finances as they treat their own household finances. They are completely different and have little to no correlation. The government alone has the power to make money out of thin air to deposit money wherever it wants to, whether your bank account through a SS deposits, or a payment to a defense contractor for a defense system, or for bonuses for Wall St executives. It's up to the people to see that the government allocates funds where it would do the most good for society.

I for one believe supporting our senior citizens with a dignified old age is a good thing for society. Pushing out SS payments till people our older doesn't make sense to me. Are people really employable to age 70? Just because medical technology is keeping people alive longer doesn't mean they can continue to do construction work into their late 60s. Or most other jobs for that matter.

I'll stop now before this becomes a major rant. But I will offer up a short audio blog on money that a forum member recently suggested. Episode 1 of "Money for the Rest of Us" by JD Stein.

Money For the Rest of Us - MNY001 What Is Money? | Listen via Stitcher Radio On Demand

 

[marko]

Sounds fine to me. It wouldn't adversely impact my retirement finances, since if I have enough to exceed $80k AGI or even approach $200k AGI, then I'd be living pretty high on the hog vs. today and wouldn't need the $20k/yr of SS that we are entitled to.

As has been noted on other threads, in certain parts of the country, (NE and CA for example), an income of $100K ($20KSS and another $80K of investment income) is far from 'high on the hog' living. Losing that $20K SS would really hurt a lot of people.

Of course, I believe the proposal would be graduated.

Having said all that, as also noted elsewhere, those with 'resources' have ways to keep their income under most any threshold.

 

[HFWR]

Perhaps those who feel they don't want or need SS should be able to opt out.

 

[FUEGO]

As has been noted on other threads, in certain parts of the country, (NE and CA for example), an income of $100K ($20KSS and another $80K of investment income) is far from 'high on the hog' living. Losing that $20K SS would really hurt a lot of people.

Of course, I believe the proposal would be graduated.

Having said all that, as also noted elsewhere, those with 'resources' have ways to keep their income under most any threshold.

Hey mods, neat that there's a warning about this being a hot topic.

Yeah, I get it - 100k buys a different lifestyle in NYC/SF than it does in the middle of a cornfield in Iowa. I assumed the SS loss would phase in between $80k and $200k (and is that $160k/$400k for married couples?).

It doesn't take much to game a $100k or $150k income yet show an $80k AGI and not lose SS. Pulling half from Roth and half from traditional, or receiving annuity payments that are half return of capital would all accomplish that goal. Or selling appreciated stocks that are half basis and half gain.

A $200k income is still a pretty high income regardless of where you are assuming you have a paid off house and no work-related expenses. Since SS is a safety net to prevent against indigent old folks, capping the SS benefits at some income range seems like a reasonable fix IF it would actually make the system significantly more solvent (which I doubt since it wouldn't impact that many people and we would game our AGI to dodge the SS loss).

FYI, OP, your link is busted, but here's one that works: Christie Proposes Overhaul of Social Security Benefits | Fox Business

It's also interesting to consider the effective marginal tax rate of the benefit phaseout between $80k and $200k. Assuming one would get a near maximum SS benefit of $30k/yr, and straight line phase out between 80k and 200k, it amounts to a 25% additional marginal effective tax rate. Add that to a 25%+ federal tax rate and a hefty state income tax rate (CA or NYC for example) and you're looking at a total marginal tax rate of 60-70%+

 

[pb4uski]

Sounds fine to me. It wouldn't adversely impact my retirement finances, since if I have enough to exceed $80k AGI or even approach $200k AGI, then I'd be living pretty high on the hog vs. today and wouldn't need the $20k/yr of SS that we are entitled to.

Though I agree with the other poster that it won't likely have any significant impact on SS solvency since so few in their late 60's and 70's have $80k+ or $200k salaries.

WADR we need to think bigger than just the impact on us personally. I probably would not be affected either, but I object on principle that it penalizes savers and rewards spenders.

I did note in the details that the proposal indicated that the thresholds would be higher for couples, so it seems that the proposed phaseout of benefits for those who have income from other sources between $80-$200k was for singles. If the thresholds were doubled for couples then it is a pretty high bar that would have negligible impact so I don't see it is worth doing.

Another concern would be how to administer it given that people's income can vary with changes in dividends, capital gains activities, etc. It would likely be administered similar to Obamacare subsidies where you get benefits based on estimated income and then true up when you file your return and know what your actual income is... and we know what fun that process is. Or pay full benefit to everyone and then claw back those whose income is over the threshold at tax time. Either way, not something I would like to see as we have enough complications with our taxes as things stand and I see no need to make things more complex.

 

[Bestwifeever]

What, no good bridge + SS jokes?

 

[athena53]

Perhaps those who feel they don't want or need SS should be able to opt out.

Believe me, I'd love that, but there are two big problems with it.

First, the people who could make that decision and have a legitimate chance of being able to fund their own retirement are high-earners. SS needs their contributions because they get a smaller % of their indexed average wages back in SS.

Second, there will be people who opt out of SS to get more take-home pay now but who will find at retirement that they don't have enough to live on-either they spent it all, or invested it badly. Now what? I doubt we're the kind of society that would let them die in the street so other public funds would have to be found to take care of them.

 

[HFWR]

Believe me, I'd love that, but there are two big problems with it.

First, the people who could make that decision and have a legitimate chance of being able to fund their own retirement are high-earners. SS needs their contributions because they get a smaller % of their indexed average wages back in SS.

Second, there will be people who opt out of SS to get more take-home pay now but who will find at retirement that they don't have enough to live on-either they spent it all, or invested it badly. Now what? I doubt we're the kind of society that would let them die in the street so other public funds would have to be found to take care of them.

I was referring to not taking their SS benefit. They would still have to pay in!

 

[2B]

I was referring to not taking their SS benefit. They would still have to pay in!

I think most people would opt out if they didn't have to pay in. The millennials know they won't ever get the "value" back for their contributions. Most younger baby boomers won't either. Anything that is done to "save" SS will only make this worse.

When the original taxation of SS benefits was started, it only impacted a very few, very high income individuals. The income level for this taxation was not indexed to inflation and, as of today, it only exempts low income individuals. In a few more years people with poverty level incomes will be paying taxes on their SS if nothing is done. Scott Burns had a recent article on this.

At the risk of disturbing REWahoo, I think it is way too early to pay any attention to anything from any of the announced or possible nominees from any party. I wouldn't pay any attention to [mod edit] All any of the potential candidates are doing are floating trial balloons or posturing for different voting groups. Who and what we hear during the eventual election are too far off for me to predict or care about. I just thought LOL!'s thought [mod edit] was interesting. , You can call it a "bold" proposal but it also doesn't seem to appeal to any significant voting block. As a trial balloon it doesn't seem to be getting any positive traction.

 

[rodi]

Thanks for the discussion.

This thread was (re) closed because of political discussion including discussion of specific candidates and parties. The thread had been designated a "Hot Topic" yet the specific candidate discussion continued.


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