Can you count on SS?

[OHjosh]

If someone knows, please explain to me this: If you stop working at age 51 say (, how does that affect the calculation of the SS benfit you might get at 62 or if I wait, 67+?

Thanksf ro the info.
OH josh

 

[TromboneAl]

Just for fun...

If there were means testing, how do you think it would work? Would they just look at your net worth? Would they include the value of your home? Would they treat retirement accounts the same as taxable? Would they look at pensions?

 

[Rich_by_the_Bay]

If someone knows, please explain to me this: If you stop working at age 51 say (, how does that affect the calculation of the SS benfit you might get at 62 or if I wait, 67+?

I believe the calculation uses your highest 35 years of income. Letting it slide for a few years generally wouldn't have a large impact if you have nearly 35 years behind you. But they do count as zeros in the calculation. Being at my peak earnings now, I don't mind a bit when each year replaces a year of $11,000 back in the 70s.

 

[wabmester]

If there were means testing, how do you think it would work? Would they just look at your net worth? Would they include the value of your home? Would they treat retirement accounts the same as taxable? Would they look at pensions?

Take a look at medicaid, which is means tested. They basically evaluate everything other than your home, as I understand it.

 

[Martha]

Just for fun...

If there were means testing, how do you think it would work? Would they just look at your net worth? Would they include the value of your home? Would they treat retirement accounts the same as taxable? Would they look at pensions?

Can you imagine how much work it would take to report and have the bureaucracy look at all those things? I don't know how government could get their arms around it. The only easy means test would be based on your income reported for tax purposes. And we know how misleading that could be.

EDIT: With reference to Wab's comment on medicaid means testing, people have tried for years to do medicaid planning to divest themselves of assets to be eligible. I can see it now for SS.

 

[wabmester]

Can you imagine how much work it would take to report and have the bureaucracy look at all those things? I don't know how government could get their arms around it. The only easy means test would be based on your income reported for tax purposes. And we know how misleading that could be.

Why would the gov need to get their arms around anything? Tell us your "means." If we later find out that you lied to us, you'll owe us a bunch of money and perhaps go to jail. In Texas, I understand they take this one step further. If you receive LTC benefits from the state, they will look for repayment from your estate once you're dead. Even if you were entitled to those benefits. Personally, I like the idea.

 

[Martha]

Fraud, waste and abuse.

I see lots of employment opportunities in the SSA.

In Texas, I understand they take this one step further. If you receive LTC benefits from the state, they will look for repayment from your estate once you're dead. Even if you were entitled to those benefits. Personally, I like the idea.

True in a lot of other states as well. My father got medicaid legitimately and his assets were used to pay medicaid after he died.

 

[youbet]

If someone knows, please explain to me this: If you stop working at age 51 say (, how does that affect the calculation of the SS benfit you might get at 62 or if I wait, 67+?

Thanksf ro the info.
OH josh

The best way to understand and learn is to go to the SS web site and use one of the calculators. You can plug in whatever hypothetical scenario you want and see the outcome. Really helps you understand..........

 

[youbet]

Can you imagine how much work it would take to report and have the bureaucracy look at all those things? I don't know how government could get their arms around it. The only easy means test would be based on your income reported for tax purposes. And we know how misleading that could be.

Determining the formula and enforcing compliance will be tough, no doubt. But I think the political pressure to stop "wealthy" folks from receiving full SS will be very high. Politicians will buckle.

 

[Zoocat]

I really liked this advice...not for me of course, but for everyone else : "...keep working—if possible—until you are age 70 or 75. This boosts eventual retirement income because your assets are saved and invested longer."

I can't imagine a more awful fate, depending on the kind of job of course. But I have seen 65+ people trying to work the checkout lanes and they look pretty tired. People are OLD in their seventies, they can't keep working full time. And who will hire them anyway? Working until 70+ is a real good way to cut short your retirement permanently. This SS delimma will be the biggest social issue of the next decades, IMHO.

 

[donheff]

Just for fun...

If there were means testing, how do you think it would work? Would they just look at your net worth? Would they include the value of your home? Would they treat retirement accounts the same as taxable? Would they look at pensions?

I think they would (and will) base it on taxable income. That would include most of pensions, all of RMDs, and capital gains. Anything else gets too complicated.

 

[Goonie]

Congress..........fiscally sound......

Isn't that like an oxymoron

 

[tiredofwork]

Just for fun...

If there were means testing, how do you think it would work? Would they just look at your net worth? Would they include the value of your home? Would they treat retirement accounts the same as taxable? Would they look at pensions?

Social Security is already means tested. Up to 85% of your Social Security income is now taxed, depending on how high your income is. Also, the top earners receive a lower proportion of their lifetime earnings as a benefit than the low earners.

So, will Social Security be means tested?? Yes, because it already is and Congress will continue to erode the benefits in ways that aren't immediately obvious to most of the voters.

 

[Cb]

Many opinions here about which age groups will be spared cuts: Nobody older than 45 needs to worry. Wait, make that 54. I wonder if the cutoff we imagine for "sanctuary" is in any way related to our own present age. "Okay, I'm on board now--pull up the ladder, let's go. Too bad about those young 'unz"


Likewise with discussions of who will pay higher taxes to shore up SS--somehow the "filthy rich who need to pay more" generally are a few bucks higher on the scale than the person doing the talking.

Most of the proposals I've seen to "fix" social security pretty much exempt those over 55 from sharing much of the pain, so I think it's reasonable for that group to presume things will remain largely unchanged for them.

You might have noticed that Bush didn't make much headway recently wrt to SS reform. I don't expect to see any meaningful reform occur during the next administration in it's first term either out of fear of losing a shot at a second term by "touching the third rail". If that's the case, we might see meaningful reform in ~2012 or later. Because of that, I think it's reasonable for folks currently over 50 to assume they'll see very little of the pain either.

My guess is they'll dole the pain out on a sliding scale, with the young bearing the brunt of the bad news, and those nearing retirement age will be largely spared as they will not have had "ample warning" to make other arrangements...

I'm 47 now, and reduce my current SSA projections by 25% in my FIRE analysis, but I really think that's probably a bit more conservative than I really need to be due to the above.

Cb

 

[Mr._johngalt]

I can't imagine a more awful fate, depending on the kind of job of course. But I have seen 65+ people trying to work the checkout lanes and they look pretty tired. People are OLD in their seventies, they can't keep working full time. And who will hire them anyway? Working until 70+ is a real good way to cut short your retirement permanently. This SS delimma will be the biggest social issue of the next decades, IMHO.

I agree. A fate worse than death.

JG

 

[OAG]

Means tested now. Up to 85% taxed PLUS 99.9% of MEDICARE Preimums come out of SS Benefits and they are now (starting in 1/1/07) means tested insofar as the preimum level. Currently approximately 25% of your SS Benefits will never hit your wallet (very low income persons excepted).

All that remains is to tweak the current, already in place system -- 85% goes up, MEDICARE preimum income level comes down.

Additionally, look for CPI adjusted versus Wage Level adjustments to current pre-benefit calculations which IMO would be a very simple, easily implimented, process and may even be possible under current law (?).

Look for the SS/MEDICARE screaming and changes to be pushed IMHO starting on 11/8/06.

 

[lets-retire]

With the Boomers being the largest block of voters in America, I don't foresee any changes as long as they are still close to SS. However after they are receiving it or have passed away, it will be up to the youngin's to figure out how to either correct the problems with the program or just scrap it all together. Since it is obvious the program is headed for shortfalls in the future. The fix will be painful, fixing it now would be less painful than fixing it later. I feel fixing it earlier would be the most likely way to keep the program and the longer we wait the less likely it will be fixable. I do not expect to ever be able to receive any appreciable amount from SS.

 

[bosco]

Also, the top earners receive a lower proportion of their lifetime earnings as a benefit than the low earners.

this is a misleading statement. The top earners don't make contributions on a lot of their earnings so why should they get higher benefits from them? This year, there are no contributions on income over $94,200.

In fact, one proposal to fix the system is to simply remove the earinings cap. That'll never happen with Republicans in power.

 

[samclem]

this is a misleading statement. The top earners don't make contributions on a lot of their earnings so why should they get higher benefits from them? This year, there are no contributions on income over $94,200.

In fact, one proposal to fix the system is to simply remove the earinings cap. That'll never happen with Republicans in power.

It is important to note that each additional dollar a recipient pays in to SS buys less benefit than the previous dollar. At the top of the scale, an individual paying SS taxes on an income of $90K per year can expect to receive very little for each new dollar put in. "Removing the cap" would be less painful if the individuals at the top end at least had the illusion that they woud derive some benefit. Today, SS is not simply an intergenerational wealth transfer, it has become a means of redistributing $$ from higher income individuals to lower income individuals.

"From each according to his abiilty, to each according to his needs."
-K. Marx

 

[FIRE'd@51]

IMHO, the best way to fix SS would be to get an equity component into the returns to the trust fund. This could have happened with President Bush's plan but, unfortunately, his plan got bogged down over the argument of private accounts. Current law mandates that the SS trust fund be invested in government securities, but this law could be changed by Congress. Private accounts would not be necessary. The Clinton admiministration looked into doing this, but he got bogged down in the Lewinsky mess, which, politically, made it virtually impossible for him to tackle SS. IIRC, the trust fund currently earns something like a 2% real rate of return on it's assets. With the magic of compounding over many years, a relatively small increase in that rate of return makes all the solvency problems with SS go away.

 

[astromeria]

Just a reminder that SS contributions buy more than a retirement annuity. There's widows/widowers' and orphans' insurance, disability insurance, and payments for spouses that earned less than the main breadwinner (or didn't work at all). There are plenty of women who never or barely worked and are collecting $10,000-20,000/year in their own names based on their husband's (dead or alive-) SS participation.

Astro's plan to fix SS:
-- Raise the income cap a little faster
-- Phase in equity investments based on US total market (up to 25% of SS funds, max)
-- Phase out the benefit for spouses who collect 50% of their living spouse's benefit

 

[youbet]

this is a misleading statement. The top earners don't make contributions on a lot of their earnings so why should they get higher benefits from them? This year, there are no contributions on income over $94,200.

Folks earning big bux don't get higher benefits from their earnings over the cap. For example, if you max out at $94,200 you will get the same credit as if you made $1,000,000. Of course, you only pay tax on the first $94,200 for SS. You pay tax on the whole $1,000,000 fo Medicare.

The SS web site is unusually informative and full of easy to understand tables and calculators. They clearly show that low wage earners get a higher percentage of their income back as SS payouts than high wage earners and that SS is a system of wealth redistribution from the highly paid to the low paid. Personally, I have no problem with that.

Here is a statement I picked up from the SS site:

Relationship Between Earnings & Benefits:

• Benefits are earnings related -- the higher the
earnings, the higher the benefit.

• The benefit formula is weighted in favor of
low wage earners -- the lower the earnings,
the higher the replacement rate (initial
benefits as a percent of pre-retirement
earnings).

One of the interesting provisions is WEP. WEP recognizes that some folks have pensions from jobs where they don't pay into SS such as teachers or some government workers. But, some have part time jobs, summer jobs and other sources of small amounts of income that is taxed under SS. To the regular SS calculation system, they would appear to be long term low wage earners and would benefit from the weighting which favors low wage earners. The WEP corrects this by putting these folks into a separate category where their SS benefit is calculated using a formula which does not weight in favor of low wage earners.

As stated by earlier posters, SS is weighted in favor of low wage earners. Whether it is weighted enough is a somewhat different question and of significant social and political consequence.

 

[youbet]

-- Phase out the benefit for spouses who collect 50% of their living spouse's benefit

This idea seems to be popular with spouses who worked and have their own benefits equal to at least 50% of their spouse's benefit. It's less popular with spouses who held low wage jobs, only worked part time or never worked at all.

 

[donheff]

Just a reminder that SS contributions buy more than a retirement annuity. There's widows/widowers' and orphans' insurance, disability insurance, and payments for spouses that earned less than the main breadwinner (or didn't work at all). There are plenty of women who never or barely worked and are collecting $10,000-20,000/year in their own names based on their husband's (dead or alive-) SS participation.

Astro's plan to fix SS:
-- Raise the income cap a little faster
-- Phase in equity investments based on US total market (up to 25% of SS funds, max)
-- Phase out the benefit for spouses who collect 50% of their living spouse's benefit

Good points Astro. They reinforce my belief that SS is a cost efficient program. With a little tweaking it will continue to pay for itself. And, as with the TSP, the admin costs are less than what you would pay to a commercial outfit. The fact that we are in a crisis now has nothing to do with the SS system being unable to pay for itself and everything to do with the US running up huge deficits elsewhere that bust the budget and make it impossible to pay back the "loans" we took from the "trust fund."

 

[d]

This SS delimma will be the biggest social issue of the next decades

it should have been the biggest social issue of the last century!. it was clear in the 70's that the system was unsustainable, but rather than attempting to fix it, the politicians were content to continuously raise benefits and push-off the problem to the next election cycle.