SS Means Testing

[tessaduncan]

Newbie question here: what constitutes the "means" that might/probably will be tested? Don't want to start an argument about whether it will or won't be; just a likely definition please.

 

[REWahoo]

IF it does happen, probably something similar to the current Medicare system.

 

[FANOFJESUS]

I am guessing it will be income based at least for many years at the start.

 

[ronocnikral]

I consider SS to already be means tested. They do so through the "bend points" of calculating your PIA.

 

[tessaduncan]

Rephrasing my question - How will means be determined? Investments (IRAs, 401Ks..), income from investments, property, net worth, etc?

 

[rodi]

Rephrasing my question - How will means be determined? Investments (IRAs, 401Ks..), income from investments, property, net worth, etc?

That's the big question...

Since it's not a for sure thing... and congress can't agree on anything, including where the bathroom is, I don't think anyone can tell you details of what *might*, someday, be implemented.

 

[REWahoo]

Rephrasing my question - How will means be determined? Investments (IRAs, 401Ks..), income from investments, property, net worth, etc?

If, and as others have pointed out, that is a very big IF, it is done similar to Medicare it will be based on your Modified Adjusted Gross Income (MAGI).

 

[Huston55]

I consider SS to already be means tested. They do so through the "bend points" of calculating your PIA.

+1

There are multiple articles about how SS is already means tested; here's one below.

?Means testing? to bolster Social Security? It?s already happening. - Washington Post

 

[Texas Proud]

If, and as others have pointed out, that is a very big IF, it is done similar to Medicare it will be based on your Modified Adjusted Gross Income (MAGI).

+1 on how they would do it if it every happens....


This is the only way that they can get your numbers on an easily reportable basis that already is in place... I do not see them inventing another wheel when they already have one that can be used...


I also agree that it is already means tested as other have said... plus that it is already included in taxable income if your income is high enough...

 

[Texas Proud]

/snip/Don't want to start an argument about whether it will or won't be; just a likely definition please.

Good luck with that....


I see Porky at the end of this one...

 

[tessaduncan]

Hmmm. So a possible shelter would be a second (or more) home rather than investments that throw off income? Assuming one didn't need the income to eat

 

[jclarksnakes]

I consider SS to already be means tested. They do so through the "bend points" of calculating your PIA.

And those bend points are pretty acute. I also consider that because all of SS is tax free for people with lower incomes and up to 85% of it is taxed for people who have other income is a form of means testing.

 

[jclarksnakes]

Hmmm. So a possible shelter would be a second (or more) home rather than investments that throw off income? Assuming one didn't need the income to eat

Maybe yes, maybe no. At this time I would not purchase a second home even remotely hoping that it could save me some money on as yet unknown future means testing.

 

[ejman]

There are very few countries that tax net worth, probably because it's hard to calculate and some components of net worth may be easy to hide. As indicated the mechanism for means testing SS based on income is already in place and making it more severe will be relatively easy (assuming our congress folk can find the bathroom)

 

[Independent]

Newbie question here: what constitutes the "means" that might/probably will be tested? Don't want to start an argument about whether it will or won't be; just a likely definition please.

The correct answer is "Nobody knows".

"Means" would be defined by whatever law is passed. No law means no definition.

At this point hardly any Congress people are willing to go on record with an actual bill that states exactly what they would include or exclude.
Here's a rare exception:
GOP senators: Raise retirement age, 'means test' Social Security - First Read

As others have mentioned, there are practical problems with how to prevent people from hiding assets/income, and how to keep compliance costs down. So we can make some generalized guesses, but that's it.

If you're asking for detail like, "Would they exclude Roth IRA withdrawals while including traditional IRA withdrawals?", I don't think you're going to find it.

(and, note that we already have means testing both in the bend points in the benefit formula and in the rules for FIT)

 

[Independent]

I did a little more research. The SS actuaries have scored multiple proposals for changing SS. I could only find one that looks like "standard" means testing

Reduce individual Social Security benefits if modified adjusted gross income, or MAGI (AGI less taxable Social Security benefits plus nontaxable interest income) is above $60,000 for single taxpayers or $120,000 for taxpayers filing jointly. This provision is effective for individuals newly eligible for benefits in 2019 or later. The percentage reduction increases linearly up to 50 percent for single/joint filers with MAGI of $180,000/$360,000 or above. Index the MAGI thresholds for years after 2019, based on changes in the average wage index (AWI).

I read this as no impact on a couple with a MAGI of $120k, and a 50% reduction for a couple with a MAGI of $360k.

They probably looked at this because some Congress person asked for this specific calculation. As it happens, this reduces SS benefit costs by about 0.33% of covered payroll in 2038.

Long Range Solvency Provisions

 

[HFWR]

"I'm a man of means by no means..."

Roger Miller

 

[ERhoosier]

+1

There are multiple articles about how SS is already means tested; here's one below.

?Means testing? to bolster Social Security? It?s already happening. - Washington Post

Thanks for that link!!!!

Partly for reasons mentiioned in this article I think more & more folks will be chosing to NOT w#rk beyond FRA. At least not beyond their 1st meeting with their tax preparer when they realize how little net of their earnings they actually get to keep.

Being >10yrs from SS FRA, I fully expect to get little or nothing from SS. When DW & I had formal financial plan done earlier this yr we had them run projections on that basis. IMHO Eventual "Means Testing" of SS will bite hard into folks who would never consider themselves "rich". If I'm wrong, I'll consider SS a windfall & have a bigger beer fund

 

[EvrClrx311]

I keep forgetting to include SS in my equation... whatever I get will be a pleasant surprise.

 

[bondi688]

It seems mean to means test.

 

[M Paquette]

Newbie question here: what constitutes the "means" that might/probably will be tested? Don't want to start an argument about whether it will or won't be; just a likely definition please.

Body Mass Index. Or perhaps appearance scored in milliHelens. The national mean of the sum of the previous year's individual Social Security income and billed Medicare expenses, to winnow excess usage. Total intangible assets. Net intangible assets. Total taxable and tax exempt income including muni dividends and capital gains distributions.

I don't worry about it, and nobody else should, either. Save the worry for when something real appears. There are enough boogiemen in the world as is.

 

[heeyy_joe]

If you want me to get mean, just test me!

 

[tessaduncan]

They do so through the "bend points" of calculating your PIA

Guess I'll have to google "bend points" and "PIA".

[I don't worry about it, and nobody else should, either/QUOTE]

Not worried but it's another little check in the Pro column for buying a second home.

 

[bondi688]

I hope there will be a correction according to inflation to the amount of Modified Adjusted Gross Income before they start taxing 85% of the social security benefits. I think that amount of $34000 for an individual was put in in 1986, and, like AMT, have never been adjusted, for now over 25 years.