How do you factor in SS?

[braumeister]

So I think we'll see something similar to the last adjustment, perhaps …

Don't forget "overly optimistic assumptions about the future"

 

[HI Bill]

ALL recipients, including current recipients.... cuts will be a percentage across the board from everything that I can find.

21-25% is the overall shortfall projected. How that get's distributed would be up to Congress. I was assuming it would be across the board, or non-retirees would end up with a more than 25% reductin in benefits.

 

[YoungSaver]

I'm nowhere near SS age, but I believe it will still be around when I'm older. I do not factor SS into any of my calculations. It will be a nice bonus.

I think it's simple to fix, but no politician wants to change it. Just lower the benefits for people under X age and increase the age to claim benefits. Simple.

 

[scrabbler1]

Because I retired 10 years ago at age 45, my main priority is to get to age ~60 intact because I am using only the taxable part of my portfolio. Once I get to age ~60, I begin being able to access what I call my "reinforcements" starting with unfettered access to my rollover IRA. After that, I have my frozen company pension and SS. My SS benefit isn't a whole lot because I have only 23 meaningful earnings years in the benefit calculation, the rest being zeroes. So, if it gets reduced it isn't going to be a lot and, because I have those other reinforcements, it won't make any big dent in my long-term planning (as shown in Fido's RIP program).

 

[PatrickA5]

I think this is the most likely scenario. IIRC last time (1983?) congress didn't act until about three months before they absolutely had to. As for an across-the-board haircut, that would be political suicide for any politician dumb enough to vote for it. Not only would that be throwing Grandma under the bus, but then Grandma's kids and maybe grandkids would not want to have to make up the difference. So then you have two or maybe even three generations of people voting against that dumb politician. Politicians are generally not regarded for high intelligence but I doubt any of them are that stupid.

So I think we'll see something similar to the last adjustment, perhaps raising FRA again, raising the payroll tax, maybe even means testing but if that happens it'll be a pretty high bar so it'll only be affecting those with incomes well into six figures, more for show than having any real effect.

But hey, my crystal ball is just as cloudy as the next guy's.

You nailed it. Very doubtful that those in retirement or near retirement would take anything but a very minimal haircut, if anything. It would be political suicide. Who do you think will win between two politicians: 1)"Grandma, I'm going to cut your SS by 25%" or 2)"I promise not to cut any SS benefits".

I agree, it will be the last minute before they have the guts to do anything (again) and it will be similar to the last time they had to do it. FICA tax rate might go up a little. Maximum income to pay into SS could increase. FRA for those under a certain age will go up. Could increase tax on SS benefits to 100% taxable. COLA might be lowered. Early retirement age might go up a year or two. But, Grandma won't take a cut.

Of course, I could be wrong!

As far as my own situation, we're counting on full SS to fund 40% of our retirement - at current spending levels. We could, if absolutely necessary, get by with zero SS, but it wouldn't be fun.

 

[joeea]

As for an across-the-board haircut, that would be political suicide for any politician dumb enough to vote for it.

But the real question is: would it be political suicide to just let it happen without voting?

If nothing changes (ie, no votes), there will be an across-the-board haircut. And no member of congress will have voted for it.

 

[PatrickA5]

But the real question is: would it be political suicide to just let it happen without voting?

If nothing changes (ie, no votes), there will be an across-the-board haircut. And no member of congress will have voted for it.

Can you imagine the pressure these guys would face leading up to the cuts? Several years before it happens there will be a mass media blitz telling seniors they are going to get hit with a cut. Congress will be voted in (or out) based on what they say they will do to prevent grandma from going to the poor house.

 

[HI Bill]

I think it's simple to fix, but no politician wants to change it. Just lower the benefits for people under X age and increase the age to claim benefits. Simple.

Yes, that's the simple fix. Just as simple would be to eliminate the cap on income subject to SS withholding, or raising the percentage that is withheld. Both would be unpopular among different folks. But for those who paid regularly into SS with the promise of a certain amount (per annual statements), breaking that promise would also be nearly universally unpopular.

I'm 52 and so far, my employers and myself have paid $243K into SS (as of last year). If I were to wait until 70 to take SS, the amount paid to me by SS would exceed the amount I paid in after only 7 years (not inflation-adjusted). If you count the amount my wife will be eligible for as spousal benefits, the number of years falls to five years. Of course, this doesn't count potential earnings that SS could have made if they had invested my payments into the stock market.

The statement below infers that SS is, and always was, a pyramid scheme. You'll get out more than you put in, on average, assuming you live beyond the IRS's life expectancy age. The reduction in the birth rate is blamed for the program's insolvency, although it's far more complicated than that.

Here's what the SS Chief Actuary says on SSA.gov.

https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html

"Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits."

 

[USGrant1962]

Here's what the SS Chief Actuary says on SSA.gov.

https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html

"Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits."

Your reference is from 2010. Here is the 2018 summary - https://www.ssa.gov/OACT/TRSUM/index.html.

The math is a little fuzzy because it depends on how you look at various components of the trust funds, but the retirement fund shortfall is 23% in 2034.

The OASI Trust Fund, when considered separately, has a projected reserve depletion date of 2034, a year earlier than in last year’s report. At that time, income would be sufficient to pay 77 percent of scheduled OASI benefits.

The combined OASDI trust funds have a projected depletion date of 2034, the same as in last year’s report. After the depletion of reserves, continuing tax income would be sufficient to pay 79 percent of scheduled benefits in 2034 and 74 percent in 2092.

 

[joeea]

Can you imagine the pressure these guys would face leading up to the cuts? Several years before it happens there will be a mass media blitz telling seniors they are going to get hit with a cut. Congress will be voted in (or out) based on what they say they will do to prevent grandma from going to the poor house.

There are far simpler ways to relieve the pressure sooner, but congress always seems to prefer to kick the can down the road until no time remains.

Some in congress are already grumbling about the sharp increase in the federal deficit this year and mentioning entitlements rather than last year's tax cuts as the cause. I suspect they are sizing up the electorate to see if they can get away cuts to Social Security, Medicare, and Medicaid.

We'll see if voters care or not.

 

[joeea]

I think it's simple to fix, but no politician wants to change it. Just lower the benefits for people under X age and increase the age to claim benefits. Simple.

Or, increase the tax rate and wage basic. Equally simple.
Or, do a bit of both. Not quite as simple, but far more likely.

 

[YoungSaver]

Or, increase the tax rate and wage basic. Equally simple.
Or, do a bit of both. Not quite as simple, but far more likely.

Agreed. Raise the $128,400 to $140,000 to buy some time.

 

[Aerides]

It's already raised for 2019 - to $132,900

I'd like to see it skip the increases on the middle and kick in again at higher incomes - say over $200k or more, then have no cap after whatever is picked. Isolates the increase to a smaller population of very-high income earners.

 

[joeea]

Agreed. Raise the $128,400 to $140,000 to buy some time.

That minor increase doesn't buy much of anything.

If you want to fix it for the next 75 years, we'll need to do better than that.

 

[USGrant1962]

That minor increase doesn't buy much of anything.

If you want to fix it for the next 75 years, we'll need to do better than that.

If you want to play with SS fixes there are a few calculators out there that show you the impacts.

I think this has been linked before, but I like this one because it shows the % impact before you even select options: The Reformer: An Interactive Tool to Fix Social Security

So for example, "slow benefit growth for top half of earners" [tweaking the bend points] combined with "subject all wages to payroll tax" [and still crediting all of it to the individual's account] closes the gap.

 

[jkern]

I'll be 62 twelve months from now and my spreadsheet includes 100% of the projected amount. My 2020 spreadsheet also includes 100% of the projected amount.

 

[HFWR]

The eagle deposits money into my checking account, then I spend it.

 

[corn18]

The eagle deposits money into my checking account, then I spend it.

This made me smile. Great approach.

 

[Cayman]

I'm conservative, so I run Firecalc for a 100% success rate without SS. I'm 51, ER'd.

I'd like to see annual increases to SS reduced. Just a small haircut to this year's 2.8% increase would have a BIG impact on the SS funding issue, and the benefit would compound over time. There are 62 million SS beneficiaries. The average SS benefit is expected to climb by $39 to $1461/mo. in 2019.

So, let's cut the increase by a few bucks per month. Multiply that by 62M/mo. Current benefits aren't cut, the COLA is largely maintained and we start shoring up SS for future generations. Easy, No brainer. I'm going to go get a slice of cake, DH just cut one for me. Chocolate w/toffee.

 

[Crabby Mike]

So, let's cut the increase by a few bucks per month. Multiply that by 62M/mo. Current benefits aren't cut, the COLA is largely maintained and we start shoring up SS for future generations.

"Current benefits aren't cut" is true only in nominal terms. Benefits wouldn't keep up with inflation, which would be the same as a cut.

 

[gauss]

Raising the retirement age is also a cut for those who have not started drawing. I am fully planning on the 24% (8% a year) increase in monthly benefit which results from delaying the draw from age 67 until age 70.

 

[Fedup]

Raising the retirement age is also a cut for those who have not started drawing. I am fully planning on the 24% (8% a year) increase in monthly benefit which results from delaying the draw from age 67 until age 70.

I don’t think they will raise on people over 55, honestly if they do it’s going to be on the back of the younger generations like my kids. Maybe this is why some people only have very low SWR. They are thinking of their kids.

 

[ProspectiveBum]

Clearly there will be changes, IMO raising or eliminating the income cap and raising the age for full benefits are 2 very likely areas where we’ll see changes.

Since I’m nothing if not self-interested, I looked at how old the folks were who saw their full retirement age go up when they changed the SS system in ‘83. The cutoff then was folks born in 1938, so 45 years old. I just turned 46, so that’d suit me fine. Sorry whippersnappers!

 

[gauss]

The sad thing was that I started working in the late 80s and have paid the increased rates my whole career. The fix in the mid 80s was designed specifically to address the baby boomer demographic problem.

As such, I am not so ready to just suck it up without a fight. At an estimated $1M benefit each, in todays dollars, for both me and DW (assuming we live to 100) this is not small change.

BTW I am still bitter that Megacorp stopped my DB pension accruals (which are exponential in time) after 22 years of work. I missed the steep portion of the accrual curve.

-gauss

 

[Independent]

So for example, "slow benefit growth for top half of earners" [tweaking the bend points] combined with "subject all wages to payroll tax" [and still crediting all of it to the individual's account] closes the gap.

I think those are two reasonable modifications.

Many more possibilities here for people who are interested: https://www.ssa.gov/oact/solvency/provisions/index.html