SS may be depleted by 2029 due to virus economy

[Bongleur]

Now I gotta run my optimizer numbers again... note they also increase the haircut from 24% to 31%.

https://bipartisanpolicy.org/blog/covid-19-may-deplete-social-security-trust-funds-this-decade/

snip
To simulate a second Great Recession, we assume that over the next 10 years, Social Security revenue and excess costs from additional claims of retirement and disability benefits change as they did from 2008 through 2017.2 Since we measure the fall in total revenue, we capture the effect of lost payroll taxes, lost taxation of Social Security benefits, and lower interest income earned by the trust fund.

We make a few adjustments to these numbers to reflect current circumstances. First, we adjust the added cost from more older Americans claiming retirement benefits to account for the fact that the eligible population is larger today. Second, because the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily increased unemployment insurance payments by $600 per week and expanded eligibility, disability insurance claims may not rise by as much as they did during the last downturn. We therefore increase DI costs in 2020 by less than the amount implied by the Great Recession. Finally, the coronavirus will tragically end the lives of many seniors, who will therefore not receive (or stop receiving) Social Security benefits. We use estimates on how many older Americans will die from the virus and lower program costs accordingly.

Based on these assumptions, we estimate that another economic downturn with severity and impacts similar to the Great Recession would accelerate the depletion date of the OASI trust fund reserves from 2034 (projected in this year’s trustees’ report) to 2029, the depletion date of the DI trust fund reserves from 2065 to 2024, and the depletion date of the combined (OASDI) trust fund reserves from 2035 to 2029 (see Figure 1-3). We emphasize that these are preliminary estimates that will be revised in a forthcoming report. If trust fund reserves were depleted, benefits could be paid only from program revenues, triggering a cut of 31% in retirement benefits and 16% in disability benefits.3
snip

 

[fisemper]

Nothing I do related to retirement planning involves SS in any form or fashion. If it still around when I am eligible to apply, great. If not, no loss in my plans.

 

[Aerides]

"Social Security Depletion" is the same story decade after decade after decade, and it never happens.

 

[COcheesehead]

I’ll take 69% of my benefits and consider it a bonus.

 

[gwraigty]

Is this really a surprise? BTW, the updated unemployment count for claims filed over the last 9 weeks is 38.6 million, which exceeds the 37 million claims during 18 months of the Great Recession. While many people are gradually being allowed to return to work, it may not last if there is a significant spike in new cases, infection rates, or deaths, despite a few courts just beginning to rule that the extent of these shutdowns has been illegal. Hopefully, once we fully emerge from the shutdowns, things will stabilize. Even so, it's a lost of money lost to the system that's hard to make up for. Plan on less than 100% and hope for the best.

 

[Midpack]

No surprise. And if a change in SS “haircut” from 24% to 31% makes a substantial difference in your retirement plan probability of success, you may have cut the numbers too close. Like others here, our plan works without any SS.

 

[pb4uski]

Another reason why a payroll tax cut or payroll tax holiday is a stupid idea... rather than kicking the can down the road it is pulling the can closer to you.

 

[eytonxav]

"Social Security Depletion" is the same story decade after decade after decade, and it never happens.

That was also true for a unprecedented global pandemic like Covid, until it happened.

 

[gwraigty]

No surprise. And if a change in SS “haircut” from 24% to 31% makes a substantial difference in your retirement plan probability of success, you may have cut the numbers too close. Like others here, our plan works without any SS.

+1

That was also true for a unprecedented global pandemic like Covid, until it happened.

There have been so many unprecedented actions taken this year, I wouldn't count on Social Security continuing to be considered untouchable, even for current recipients. Means testing anyone?

 

[latexman]

I can survive without SS, but I'll have a lot more fun with it!

 

[Spock]

No surprise. And if a change in SS “haircut” from 24% to 31% makes a substantial difference in your retirement plan probability of success, you may have cut the numbers too close. Like others here, our plan works without any SS.

Some were not in control of cutting the numbers too close.
I saved 40% of my gross income most years so I did all that I could. But I did not chose to get laid off from Megacorp at age 55.

 

[WyomingLife]

That was also true for a unprecedented global pandemic like Covid, until it happened.

For starters, pandemics are not uncommon. They happen quite frequently over the course of human history.

Second, folks have been forecasting the arrival of the next pandemic -- i.e., this one -- for a long time.

And there will be other pandemics after this one.

 

[Fermion]

Funny is the people who think that they will be fine if SS goes away because they rely on other sources.

How can you be sure of your other sources (pensions, bonds) if something as solid as SS goes away?

 

[jollystomper]

There have been so many unprecedented actions taken this year, I wouldn't count on Social Security continuing to be considered untouchable, even for current recipients. Means testing anyone?

+1

I do believe means testing will be looked at more closely. Similar to 85% of SS benefits being taxed if you make over a certain amount. For example, if your income is above X amount, any SS benefit greater than Y is either reduced, "recaptured" when you file taxes, or taxed a some high rate (say 70%, like high income used to be).

 

[USGrant1962]

For starters, pandemics are not uncommon. They happen quite frequently over the course of human history.

Second, folks have been forecasting the arrival of the next pandemic -- i.e., this one -- for a long time.

And there will be other pandemics after this one.

Yes, the pandemic was hardly unprecedented. The response was, however.

Here's a good visual of pandemics: https://www.visualcapitalist.com/history-of-pandemics-deadliest/

 

[MichaelB]

This thread is now in the COVID forum. Another discussion regretfully sidetracked by pointless debate about COVID.

 

[Aerides]

I’ll take 69% of my benefits and consider it a bonus.

Nice

 

[gwraigty]

Funny is the people who think that they will be fine if SS goes away because they rely on other sources.

How can you be sure of your other sources (pensions, bonds) if something as solid as SS goes away?

If SS completely goes away, you are quite right. I was referring to SS still existing, but being reduced or completely eliminated for high earners, made effective nearly as quickly as the states shut their economies down. Well, not with mere hours notice, but something like a letter from SS saying that effective next month...

They used the federal tax returns to decide who would get a stimulus payment. They could use them to decide who qualifies for a monthly SS payment, how much, and recompute on a periodic basis, maybe every year or two, including necessary adjustments for inflation. Certain things could be exempt from the computation, like large capital gains.

 

[eytonxav]

Second, folks have been forecasting the arrival of the next pandemic -- i.e., this one -- for a long time.

That was my point in responding to the other posters comment about SS insolvency, although Covid has been more extreme than past pandemics, possibly sans 1918, and yes, we have been warned about it for a long time.

 

[Montecfo]

They already means test SS through taxability which cuts back after-tax benefits.

Cutting back benefits to zero for example for people with AGI over say $1M would make little difference to the solvency of SS. And it flies in the face of the philosophy that this is in effect a government pension that you pay into and thus have earned a right to benefits.

The real levers will be increasing FRA
(on future retirees) and increasing the cap on SS tax, IMHO.

 

[Dtail]

Hey we are counting on some form of SS, so it does matter to us.
We shall see where everything goes.
There are many folks who are dead set against any form of socialism. Perhaps volunteer to give up their portion of our largest socialist type programs like SS or even Medicare.

 

[Sunset]

If Congress doesn't want to fix SS and get re-elected, then the gov't might have to re-balance some spending from other high spending programs, for example cut the military spending by 25% to make SS solvent.

 

[VanWinkle]

"Social Security Depletion" is the same story decade after decade after decade, and it never happens.

+1

 

[nap470]

I would expect that the first "shot across the bow" from politicians to reduce SS costs would be an approach to reduce or eliminate benefits for wealthier retirees. In the current climate, that would be the "easier" conversation for many politicians to have. Also easier to weaponize.

 

[youbet]

I would expect that the first "shot across the bow" from politicians to reduce SS costs would be an approach to reduce or eliminate benefits for wealthier retirees. In the current climate, that would be the "easier" conversation for many politicians to have. Also easier to weaponize.

Yep. The current status of SS already includes a bit of "means testing" via fed income taxes. I expect slowly adding either additional taxes on SS or actually reducing SS payments (likely using the IRMAA system) will come into play. By keeping most of the impact to the top 10% - 15% income folks, political pressure will be minimized. A cut that applies to everyone would likely be more painful to the politicians than they'd like.