Are You Planning on a Soc Sec Haircut?

[Beldar]

To be honest, we never took SS income in consideration for our retirement planning. We considered it "Beer Money" so to speak.

I started drawing it at FRA, and DW will do so too. There is nothing I can do to influence what happens in the future so if there is a benefit cut so be it.

_B

 

[skipro33]

I can't figure out why income is capped for SS deductions. Right now, the max an employee pays into SS is 6.2% up to $147,000. Why is it capped at $147,000? I made that much and a bit more when I retired in 2012, over 12 years ago! Seems if the government raised the amount to unlimited income, that would put SS flush with cash.

 

[Midpack]

I can't figure out why income is capped for SS deductions. Right now, the max an employee pays into SS is 6.2% up to $147,000. Why is it capped at $147,000? I made that much and a bit more when I retired in 2012, over 12 years ago! Seems if the government raised the amount to unlimited income, that would put SS flush with cash.

Right or wrong, there’s a cap on how much Soc Sec will pay a recipient, and that corresponds to the wage limit cap. The rationale is it’s not fair to tax higher income if there’s no corresponding retirement benefit. IOW, capping high-earners Social Security taxes also caps their benefits - sounds fair if you state it that way?

Again, right or wrong.

There are dozens of articles about it online. Most now are about busting the income cap while keeping the benefit cap.

 

[Out-to-Lunch]

I remember when it was thrown around investing a portion of SS in the market ( around 20 yrs ago). Could imagine what SS fund would be worth as of now. Missed the ball on that

The money that comes in as payroll taxes immediately goes out the door as SS payments to current recipients. If those payroll taxes had been diverted to corporate investments, where do you propose the money for paying current recipients would have come from?

 

[Koolau]

I took SS at age 70 seven years ago, so if anyone will be grandfathered in, it will be me. BUT I contend that no self-respecting political type will honk off 70+ million voters by cutting their benefits. Honked off seniors vote! YMMV

 

[wmc1000]

We plan for the cut but don't expect it to happen. Either way we will be fine.

 

[Koolau]

We plan for the cut but don't expect it to happen. Either way we will be fine.

I forgot to mention that IF there is a haircut, it will not be a major issue to us. We're making no special plans to deal with it. SS is nice to have but we could live without it. (But don't tell anyone!)

 

[skipro33]

Right or wrong, there’s a cap on how much Soc Sec will pay a recipient, and that corresponds to the wage limit cap. The rationale is it’s not fair to tax higher income if there’s no corresponding retirement benefit. IOW, capping high-earners Social Security taxes also caps their benefits - sounds fair if you state it that way?

Again, right or wrong.

There are dozens of articles about it online. Most now are about busting the income cap while keeping the benefit cap.

How is that any different than income tax then? There's no income cap, quite the opposite actually, but they are benefit capped.
Top percentages of taxpayers pay a heck of a lot more than they get back compared to the rest of the tax paying citizens. So why not SS as well? Besides, the higher income earners DO benefit by funding SS for lower income earners in that those lower income earners are not going to be a burden in other ways to society if they have enough funding to stay solvent. For example; I'd much rather pay taxes and not see tent cities under freeway over passes than keep my tax money and see the deterioration of society.

 

[RunningBum]

I've always used a 35% haircut to my SS benefits. I don't remember if I was being overly cautious or if that was a worst-case number I heard, but it's what I use and I'm leaving it for now.

The new administration has talked of eliminating tax on SS benefits. I read that this will drain the fund faster as tax on benefits goes back into the fund. I did not verify that and I don't recall the source. I would guess that would mean a larger haircut but offset by not having to pay taxes on the benefits. It would hurt the poor because they are probably not paying taxes today so they'd take the reduction with no offset benefit. But we'll see if they actually follow through on this.

 

[RetiredHappy]

I have not planned for any SS benefits reduction but will manage even if SS goes to zero.

 

[freetodream]

I took SS at age 63 with no regrets.Not thinking politicians will get their "Act" together so no cuts are expected till the day approaches. I wouldn't be opposed to raising the wage limit cap as one of the ways to help shore up the anticipated short fall. For me, the potential insolvency remains to be a much bigger concern for our children and grandchildren.

 

[Car-Guy]

Every year as I age, I'm more and more confident it will be here after I'm gone w/o reductions. In another 5 years or so, I won't care much.

 

[Koolau]

How is that any different than income tax then? There's no income cap, quite the opposite actually, but they are benefit capped.
Top percentages of taxpayers pay a heck of a lot more than they get back compared to the rest of the tax paying citizens. So why not SS as well? Besides, the higher income earners DO benefit by funding SS for lower income earners in that those lower income earners are not going to be a burden in other ways to society if they have enough funding to stay solvent. For example; I'd much rather pay taxes and not see tent cities under freeway over passes than keep my tax money and see the deterioration of society.

I hate to tell you this, but we already have the tent cities under overpasses. Most of the underpasses are taken, so people just camp on the streets (no over passes.) Not sure SS is a big factor one way or the other on tent cities but YMMV.

 

[Montecfo]

To be honest, we never took SS income in consideration for our retirement planning. We considered it "Beer Money" so to speak.

I started drawing it at FRA, and DW will do so too. There is nothing I can do to influence what happens in the future so if there is a benefit cut so be it.

_B

Same here. Not taking it at this point. But a haircut woud not be material to my plans So I don't worry about it.

But my guess is they will fix it in the same way they always have: Phased change to FRA, change in Cola, changes to taxed earnings. They will do this when the electorate demands it.

For those who DO plan on a haircut, I think the oft-mentioned 77% will understate the needed haircut over time, since there will be ongoing shortfalls. Maybe someone can explain why this is not the case if you disgree with this.

 

[Dtail]

An SS cut would affect our standard of living to some extent, so am hoping they will work it out.

 

[Sunset]

Seems to me gov't will ignore it until the last year possible.
They can solve it by changing the law which is their job, so that the shortfall is made up by general revenue.
Then the question becomes does it just add to debt, or do they raise tax rates or cut some other spending to make up for it.

 

[kgtest]

DW claimed her benefits, I'm delaying until 70. My plan should work with or without SS. If I change my mind on my SS benefit, I can start anytime.

I feel like this is what a lot of people who are married do. I am 27 years away from collecting. I should search the news articles from 1997 and see if threats were looming back then.

Rob peter to pay Paul is my final answer.

 

[skipro33]

I hate to tell you this, but we already have the tent cities under overpasses. Most of the underpasses are taken, so people just camp on the streets (no over passes.) Not sure SS is a big factor one way or the other on tent cities but YMMV.

Without getting into politics, I'll just say that the tents have been drastically reduced in California recently. The reason was some supreme court ruling about right to camp on public property. Currently the governor withholds state funds from local governments based on how much they dismantle the homeless camps. Bulldozers are taking them down at amazing rates according to the news reports and I see fewer than I have in the past when I do go into the major metro areas.
That has nothing to do with this threads topic, but what does is that the reduction in SS payment will, more likely than not, increase homelessness. For a politician, that will go over about as well as a fart in church!

 

[EastWest Gal]

I'll be taking SS at FRA, along with DH and spousal benefit. It will be a nice amount, paying more than half of our monthly somewhat Fat FIRE expenses, and FireCALC shows 100% success without it. If we get no SS we'll be OK. I see no reason to wait until age 70.

The SS trust fund has had over $2.7 trillion since 2012. It has started to decrease since 2021, related to demographics, not politics. I think some tweaking will be needed by Congress. Life expectancy decreasing a bit helps it, but only if us older folks die off a little sooner. Since life expectancy decreases were fueled by Covid and opioids, it's a wash if it is people on SS dying off sooner (Covid) plus younger folks still working dying from fentanyl ODs. On top of that, Type 2 diabetes is still on the rise, which affects longevity in myriad ways.

Regarding what will happen, my crystal ball has never worked very well.

 

[Midpack]

Could you please start another thread if you want to discuss tent cities?

I hate to tell you this, but we already have the tent cities under overpasses. Most of the underpasses are taken, so people just camp on the streets (no over passes.) Not sure SS is a big factor one way or the other on tent cities but YMMV.

Without getting into politics, I'll just say that the tents have been drastically reduced in California recently. The reason was some supreme court ruling about right to camp on public property. Currently the governor withholds state funds from local governments based on how much they dismantle the homeless camps. Bulldozers are taking them down at amazing rates according to the news reports and I see fewer than I have in the past when I do go into the major metro areas.