The Social Security 2100 Act

[joeea]

Since discussion of the Secure Act was permitted, it seems like it might make sense to discuss the impact of The Social Security 2100 Act on FIRE and claiming strategies.

https://www.cnbc.com/2019/08/10/con...retiree-savings-pensions-social-security.html

"In July, the House Ways and Means Committee held a hearing on a new bill introduced by Rep. John Larson, D-Conn., called the Social Security 2100 Act.

The plan also would increase the amount of non-Social Security income one can earn before benefits begin to be taxed. The new limits would go to $50,000 for individuals and $100,000 for couples, up from today’s $25,000 and $32,000 thresholds.

In order to pay for those changes, the bill calls for raising payroll taxes on wages over $400,000. Wages up to $132,900 are currently taxed.

It also calls for increased payroll contributions from workers and employers. That rate would increase to 7.4% from 6.2% and would be gradually phased in from 2020 to 2043.

The bill currently has more than 200 co-sponsors in the House. Supporters plan to hold a markup of the legislation in the fall, and then move it to the House floor for a vote.


[mod note - post edited to ensure copyright compliance http://www.early-retirement.org/forums/f32/copyright-the-dmca-and-cut-and-paste-62748.html ]


So if this were to pass into law, would this change anyone's approach to FIRE?

Would this change anyone's claiming strategy? I would imagine with the "21% benefit cut in 2034" off the table, more would be willing to delay until 70?

 

[MichaelB]

The thread was moved to the policy forum

 

[joeea]

The thread was moved to the policy forum

Thank you for moving it!

 

[Rianne]

It would certainly make our strategy secure. $100K SS income before taxes.
"The plan also would increase the amount of non-Social Security income one can earn before benefits begin to be taxed. The new limits would go to $50,000 for individuals and $100,000 for couples, up from today’s $25,000 and $32,000 thresholds."
Also, if we knew SS was secure at the current income at 62, we definitely would re consider taking early (well 63-64), since we're 62 this year and did not plan for it anyway.

 

[pb4uski]

While I am enthusiastic about SS reform, I can't find much enthusiasm for this bill.

The notion of expanding minimum benefits to 125% of poverty would be hugely expensive, effectively doubling the minimum benefit I think, as can be seen in the increase in the tax rate needed to support it.

That provision seems to be intended to change SS from one leg of a three-legged stool to three legs.... there is no need to waste brain cells on how it would affect my claiming strategy because it will never become law (and it should not become law).

 

[MarieIG]

We had already planned to postpone DH's SS until age 70, but this is good to know.

The plan for mine at this point is age 62, but I will need to speak with our accountant as to whether I should also postpone as I will be doing Roth conversions.

 

[CaptTom]

Anyone want to hazard a guess on the chances of this thing passing both houses and Executive?

No need to get political; I've just noticed that there's always a lot of noise when a new bill is proposed, but very few of them make it to becoming law. It's not really worth wasting a lot of time speculating about something that's just a pipe dream, with no real hope of being enacted.

I'm just wondering which category this one might be in.

 

[joeea]

Also, if we knew SS was secure at the current income at 62, we definitely would re consider taking early (well 63-64), since we're 62 this year and did not plan for it anyway.

Hmm, I don't think I understand this.

You are saying that if SS was secured by this new legislation, you would be more inclined to start early at 62? If so, why?

 

[Rianne]

Hmm, I don't think I understand this.

You are saying that if SS was secured by this new legislation, you would be more inclined to start early at 62? If so, why?

Currently at 62, our SS per year is $32,364 (combined)
With 25% haircut, $24,264.

If this legislation goes through, say next year, we know we'll get $32,364 provided all the other considerations...early death and survivorship benefits. All those calculations will be adjusted.

We're 62 this year and had not planned on taking it, the 25% haircut is a consideration in our decision. And if you're not taxed up to $100K income in new legislation, that makes a difference, if I'm understanding this correctly.

Say we take at 64, this is a guess right now, have not looked at the income tables for before FRA, but say, $40K/year at 64, we do not have to pay any tax with new legislation, again if I understand this.

 

[joeea]

Currently at 62, our SS per year is $32,364 (combined)
With 25% haircut, $24,264.

If this legislation goes through, say next year, we know we'll get $32,364 provided all the other considerations...early death and survivorship benefits. All those calculations will be adjusted.

We're 62 this year and had not planned on taking it, the 25% haircut is a consideration in our decision. And if you're not taxed up to $100K income in new legislation, that makes a difference, if I'm understanding this correctly.

Say we take at 64, this is a guess right now, have not looked at the income tables for before FRA, but say, $40K/year at 64, we do not have to pay any tax with new legislation, again if I understand this.

Okay thanks.

I'm surprised because some folks claim that their expectation of a "haircut" makes them decide to start benefits at 62 rather than waiting. (I'm not saying that I agree with that thought process.)

You had not planned on starting at 62. Wouldn't the delayed retirement credits, along with the assurance that there will be no "haircut" make you more confident in delaying at least the higher earner's benefits until 70?

 

[4legsgood]

I would definitely take SS later if something gets passed that keeps it solvent, unless my heath fails.

 

[Dtail]

I would definitely take SS later if something gets passed that keeps it solvent, unless my heath fails.

+1 or my TIRA goes down too much as the substitute for SS between 65 and 70 y.o.

 

[Alan]

Would this change anyone's claiming strategy?

Not me.

 

[Mr._Graybeard]

Anyone want to hazard a guess on the chances of this thing passing both houses and Executive?

No need to get political; I've just noticed that there's always a lot of noise when a new bill is proposed, but very few of them make it to becoming law. It's not really worth wasting a lot of time speculating about something that's just a pipe dream, with no real hope of being enacted.

I'm just wondering which category this one might be in.

Yep. At the newspaper we had a policy that whenever we covered the introduction of a bill, that legislation process had to be covered until it either a) became law; b) died in committee; or c) foundered anywhere in between. That eliminated a lot of meaningless hoopla from lawmakers seeking headlines.

 

[kimcdougc]

Taking social security at 62 because long lives are not in my family genes. Better to get some than none. Not worried about a hair cut with ss. We have prepared (hopefully) for the worst.

This will be an interesting thread to keep up with.

 

[Bir48die]

This thread isn't really about when we plan to take SS. It's about legislation in the House to deal with a number of issues. These proposed changes are attempting to delay or eliminate "taking a haircut" like many of you suggest.

I do like the idea of raising income limits to not tax our 85% of SS. We'll see if that goes.

I love the idea of raising the income levels from current $100,000+ to $400,000 limit. I have been a huge supporter of this and I was a high earner so it certainly would have affected me. But, I feel that this is the only re-distribution of wealth policy that I've ever agreed with.

Also the raising of the withholding rate makes sense to me.

For much of the legislation I've seen recently, this I think has more overall value than anything else.

Just my two cents

 

[Tiger8693]

I think it was still limiting at current ~$132k, but starting back at $400k+ (creating a donut hole)?

 

[joeea]

I think it was still limiting at current ~$132k, but starting back at $400k+ (creating a donut hole)?

Yes.

 

[frayne]

I'd rather see the RMD age bumped up to 72-74.

 

[joeea]

I love the idea of raising the income levels from current $100,000+ to $400,000 limit. I have been a huge supporter of this and I was a high earner so it certainly would have affected me. But, I feel that this is the only re-distribution of wealth policy that I've ever agreed with.

This law doesn't exactly do what you seem to love.

Instead, it leaves the basic cutoff where it is, but it starts again when income is above $400,000.

 

[joeea]

I'd rather see the RMD age bumped up to 72-74.

RMDs being bumped up to 72 is part of a different act - The Secure Act. It was already discussed in several other threads.

There's no reason both couldn't be enacted.

 

[joeea]

The notion of expanding minimum benefits to 125% of poverty would be hugely expensive, effectively doubling the minimum benefit I think

I don't think it would be doubled.

A person who worked at least 30 years is currently guaranteed a minimum of $10,470 per year.

Under the proposed legislation, that would go to $15,612. That's less than a 50% increase.

 

[Jerry1]

It would not change my strategy. My strategy assumes full funding already. Of course my overall budget considers the possibility of a reduction in SS right along with several other risks that money could get tight later in life. But for when to claim SS, the specific possibility of a reduction in SS was not considered so this proposal would not change my strategy.

 

[joeea]

It would not change my strategy. My strategy assumes full funding already. Of course my overall budget considers the possibility of a reduction in SS right along with several other risks that money could get tight later in life. But for when to claim SS, the specific possibility of a reduction in SS was not considered so this proposal would not change my strategy.

Same here.

But if I was confident in a higher level of Social Security income going forward, I might get a bit more aggressive with my invested assets.

 

[hulurt1]

I might be wrong. There is a lot of talk about taking some IRA and 401k...It could be added to SS. There is a working group in Boston working on it right now.