Don’t need social security

[FlaMariner]

We never counted on SS in our planning.....and thankful it looks like we will not need it to maintain our FIRE lifestyle.

I'm 59 and have been thinking of taking it at 62 and asking Uncle Sam to just forward it all over to the IRS and then I can avoid all the back and forth we seems to have about withholding.

Is it possible to do that? Can I tell Uncle Sam to keep it and I'll settle up on 4/15?

 

[MarieIG]

We never counted on SS in our planning.....and thankful it looks like we will not need it to maintain our FIRE lifestyle.

I'm 59 and have been thinking of taking it at 62 and asking Uncle Sam to just forward it all over to the IRS and then I can avoid all the back and forth we seems to have about withholding.

Is it possible to do that? Can I tell Uncle Sam to keep it and I'll settle up on 4/15?

I here you.

Last I checked this out, the maximum for withholding out of benefits received was 22 percent. I'm not sure if this has changed/ is changing. . .

 

[braumeister]

Last I checked this out, the maximum for withholding out of benefits received was 22 percent. I'm not sure if this has changed/ is changing. . .

Yes, you have only five options for withholding taxes from your SS benefit:

• 0%
• 7%
• 10%
• 12%
• 22%

 

[Gumby]

I here you.

Last I checked this out, the maximum for withholding out of benefits received was 22 percent. I'm not sure if this has changed/ is changing. . .

As far as I can tell, that's still the case. It is done by submitting Form W4-V

https://www.irs.gov/forms-pubs/about-form-w-4-v

 

[braumeister]

Yes, you have only five options for withholding taxes from your SS benefit:

• 0%
• 7%
• 10%
• 12%
• 22%

Also, a strange little wrinkle in this system is that the percentage is applied to what is left of your benefit after your Medicare deduction is made from it.

 

[marko]

Late to the game here, but wasn't there supposed to be something like a 25% haircut for everyone on SS in 2034 or thereabouts? If that is still in the works, that would/should change the calculations for those considering waiting.

 

[audreyh1]

Useful info!

 

[braumeister]

Late to the game here, but wasn't there supposed to be something like a 25% haircut for everyone on SS in 2034 or thereabouts? If that is still in the works, that would/should change the calculations for those considering waiting.

Nobody knows if that will happen in fact, but it seems prudent to consider it quite possible when making projections that go out that far. If it doesn't happen, it will be a pleasant surprise, and it if does, you will have planned for it.

 

[marko]

Nobody knows if that will happen in fact, but it seems prudent to consider it quite possible when making projections that go out that far. If it doesn't happen, it will be a pleasant surprise, and it if does, you will have planned for it.

Bird in hand, IMO.

 

[Car-Guy]

Late to the game here, but wasn't there supposed to be something like a 25% haircut for everyone on SS in 2034 or thereabouts? If that is still in the works, that would/should change the calculations for those considering waiting.

Nobody knows if that will happen in fact, but it seems prudent to consider it quite possible when making projections that go out that far. If it doesn't happen, it will be a pleasant surprise, and it if does, you will have planned for it.

I suspect we'll see something like the dreaded means testing back on the table before we see a 25% across the board SS cut.... Heck they effectively means test Medicare now to a degree (IRMAA) so why not SS...... But what do I know.

I think we've discussed this here more than a few times in the past.

 

[Fermion]

I suspect we'll see something like the dreaded means testing back on the table before we see a 25% across the board SS cut.... Heck they effectively means test Medicare now to a degree (IRMAA) so why not SS...... But what do I know.

I think we've discussed this here more than a few times in the past.

Probably not means testing, but something.

The best way to predict the future is to look to the past.

The past steps taken on SS is to:

1) Slightly raise the FRA
2) Increase the income cap for tax contributions
3) Increase the amount of SS subject to tax

I expect the future changes to be 1 to 3 or all of them. Nothing else major.

 

[TheWizard]

Late to the game here, but wasn't there supposed to be something like a 25% haircut for everyone on SS in 2034 or thereabouts? If that is still in the works, that would/should change the calculations for those considering waiting.

Hold on.
The topic of this thread is people who DON'T NEED SS due to large income streams from other sources.
So a SS haircut of any size doesn't matter, right?

 

[TheWizard]

At age 72 now, I have three income streams in retirement that hit my checking account each month.
From largest to smallest they are:
1) lifetime pension/annuity
2) SS (claimed at age 70)
3) RMD

I have excess income from these sources and invest most of it into stock index funds in my taxable account.
For 2021 (last year) I invested considerably more than my gross SS income, so from that perspective, I certainly don't NEED my SS income to get by.

But it's really nice to have excess retirement income and a negative withdrawal rate, so I'll keep it...

 

[marko]

Hold on.
The topic of this thread is people who DON'T NEED SS due to large income streams from other sources.
So a SS haircut of any size doesn't matter, right?

The way I look at it is regardless of need, I'd imagine one would want to maximize their benefit if the possibility of a reduced benefit were on the horizon. That possibility does change the equation IMO simply from a standpoint of wasting one's opportunity. Why walk away from money simply because you don't need it.

If the benefit was steady state that might be different, but the possibility of a reduced benefit leaves money on the table regardless of need.

Sooner or later you have to take it so why waste it? A fine line for sure.

Apologies if I'm out of line on the thread.

 

[RunningBum]

The way I look at it is regardless of need, I'd imagine one would want to maximize their benefit if the possibility of a reduced benefit were on the horizon. That possibility does change the equation IMO simply from a standpoint of wasting one's opportunity. Why walk away from money simply because you don't need it.

If the benefit was steady state that might be different, but the possibility of a reduced benefit leaves money on the table regardless of need.

Sooner or later you have to take it so why waste it? A fine line for sure.

Apologies if I'm out of line on the thread.

I think a potential reduction of SS benefits in or around 2034 is a reasonable factor to consider. It's a wildcard factor because it may or may not happen, and we don't know to what degree the cut might take.

A few years ago I ran some scenarios that showed me a 25% cut in 2034 pushes the breakeven age back a few years (how much depends on investment return and inflation assumptions), but if longevity insurance is the goal, it might still be better to delay taking it.

Reviewing this now, I realize I didn't compare that to taking SS earlier, and buying SPIAs with those early benefit payments. Does that provide better longevity insurance? Probably not with full lifetime SS benefits, but maybe with a later cutback. That's not a calculation I'm going to work through tonight, but I will try to do it another time before I start having the option to take SS at any time. If anyone else has, I'd appreciate if they'd share their findings.

Does anyone ever change their mind in these ongoing discussions? Maybe...

 

[COcheesehead]

I plan on about 72% of what SS tells me I’ll get, but it goes up 8% a year, so…

 

[1242Vintage]

I’ll be 60 soon and planning to take SS at 62.

Doing what I can to live a healthy and active lifestyle but genetics for heart disease and shorter lifespan run deep in my family. (No Uncles on either side reached age 70) And if cardiac issues strike me down first, wife loses most of my SS due to windfall elimination provision.

I have a healthy pension with survivor benefits so dear wife will be just fine financially should I pass first.

 

[Lakedog]

Although I don't need SS, being single with fed pension (with SS subject to WEP), I started mine at 65 to coincide with medicare. My annual spend is typically way less than the pension alone (unless I buy a new vehicle or toys), so SS is added to investments. I expect that investing the SS may work out at least as well as waiting for the larger check at 70, but I did hedge a bit by taking SS at 65 (rather than 62).

 

[Rianne]

Plan to make SS whole for the future.


https://www.fool.com/retirement/2022/10/29/4-social-security-changes-joe-biden-wants-to-enact/

 

[pb4uski]

My thoughts.

• Donut hole appears to be just a political gimmick. Forget that and just make all earnings subject to SS and create a new bend point so those paying more get at least a little something as a result. When I was working I always thought it odd that there was a limit.
• Switching from CPI-W to CPI-E seems appropriate to me.
• Increasing benefits at older ages seems inappropriate... forget that.
• On the fence on the last one... I could concede that the minimum SS retirement benefit should exceed the poverty level since the whole purpose of SS is to avoid senior poverty but 125% of poverty level seems too generous... also, SS was supposed to be one leg of a 3-legged stool not a pogo stick.

 

[aaronc879]

My thoughts.

• Donut hole appears to be just a political gimmick. Forget that and just make all earnings subject to SS and create a new bend point so those paying more get at least a little something as a result. When I was working I always thought it odd that there was a limit.
• Switching from CPI-W to CPI-E seems appropriate to me.
• Increasing benefits at older ages seems inappropriate... forget that.
• On the fence on the last one... I could concede that the minimum SS retirement benefit should exceed the poverty level since the whole purpose of SS is to avoid senior poverty but 125% of poverty level seems too generous... also, SS was supposed to be one leg of a 3-legged stool not a pogo stick.

SS benefits WERE supposed to be part of a 3-legged stool. However, pension barely exist in private companies anymore so SS is part of a 2-legged stool. Maybe have SS pay a minimum of 100% of the FPL unless your previous year income was less than 200% FPL then SS pays 125% FPL minimum. That helps those who are struggling most. Don't remove the 40 credit rule though.

 

[CRLLS]

My thoughts.

• Donut hole appears to be just a political gimmick. Forget that and just make all earnings subject to SS and create a new bend point so those paying more get at least a little something as a result. When I was working I always thought it odd that there was a limit.
• Switching from CPI-W to CPI-E seems appropriate to me.
• Increasing benefits at older ages seems inappropriate... forget that.
• On the fence on the last one... I could concede that the minimum SS retirement benefit should exceed the poverty level since the whole purpose of SS is to avoid senior poverty but 125% of poverty level seems too generous... also, SS was supposed to be one leg of a 3-legged stool not a pogo stick.

1) I would agree, just skip making a donut hole on earnings taxed. I'm not sure about adding another bend point for those earners.
2) As I understand it, the CPI-E has averaged higher than the CPI-U since 1984. I'm not sure how changing the COLA to CPI-E would help solvency.
3) I agree with you. If the CPI-E is used then the need for increased benefits as we age should be included. Possibly if the CPI-U is retained it might provide some assistance.
4) Just thinking out loud here, since the SS and IRS do work hand in hand somewhat, couldn't the SS use a simple formula of SS benefit plus RMD <125% of poverty level for providing a bonus to those who need it? This does ignore any large after-tax accounts. I don't like the idea of such bonuses tied to one's assets. It would be similar to taxing one's net worth.

 

[aaronc879]

1)
4) Just thinking out loud here, since the SS and IRS do work hand in hand somewhat, couldn't the SS use a simple formula of SS benefit plus RMD <125% of poverty level for providing a bonus to those who need it? This does ignore any large after-tax accounts. I don't like the idea of such bonuses tied to one's assets. It would be similar to taxing one's net worth.

That would leave too many 62-72 year olds who are physically unable to work and can't survive on $1000/mo from SS. Those who are most likely to be unable to work are the same people who are most likely to have low SS payments.

 

[Time2]

I’ll be 60 soon and planning to take SS at 62.

Doing what I can to live a healthy and active lifestyle but genetics for heart disease and shorter lifespan run deep in my family. (No Uncles on either side reached age 70) And if cardiac issues strike me down first, wife loses most of my SS due to windfall elimination provision.

I have a healthy pension with survivor benefits so dear wife will be just fine financially should I pass first.

Back in the early 90s I had an Italian coworker that was about to withdraw all the money from his IRA. He said that all his uncles died in their 50s and he didn't expect to be any different. Even with my rantings he still did it. I call him about once a year, a couple months ago he was 69 yrs old and still doing well.
My father had the first of 3 heart attacks at 43 yrs old, and at some point he had a quadruple bypass, both legs had a zipper from groin to heal, because they had a hard time finding a healthy vein to use. I feel lucky at 67 to have no sign of any heart disease.

 

[pb4uski]

SS benefits WERE supposed to be part of a 3-legged stool. However, pension barely exist in private companies anymore so SS is part of a 2-legged stool. Maybe have SS pay a minimum of 100% of the FPL unless your previous year income was less than 200% FPL then SS pays 125% FPL minimum. That helps those who are struggling most. Don't remove the 40 credit rule though.

The original 3-legged stool was SS, pension and personal savings. The personal savings are what we think of today as after-tax savings. Today, tax-deferred retirement savings (401ks, tIRAs, et al) replaced pensions, so today's 3-legged stool is SS, tax deferred retirement savings and personal savings.

Unfortunately, too many of our peers never got the memo that SS would only ensure that you don't starve but would not provide a good retirement and they never saved enough. Sucks to be them, but they had their chance and blew it.