Hypothetical SS question

[lauradrops]

My husband and I have never considered taking SS early, but I have a hypothetical question. If there were to be cuts to SS, do you think people already collecting will be grandfathered in and their payments unchanged? Just starting to explore this now and I realize nobody can say for sure. The thinking is, if it is grandfathered then maybe we are better having husband take it now at 63 instead of 67 or 70 with possible reductions put in place.

While the money is not needed for us to survive, it is something we would like to maximize after all the years of paying in.
I'm not asking if anyone feels there will be cuts or not, just wondering how you all feel it may play out if there were.

 

[freedomatlast]

No one knows. Go with your original decision, not one based on purely hypothetical guessing.

 

[perez99]

We can only guess. My guess is that those 'close' to FRA will be grandfathered.
Now 'close' could mean within 1 year of FRA, greater than 62 years old, etc

 

[Mark1]

It's impossible to predict. If this is important to you, then taking it now is likely safer.

I have also considered the scenario you discussed, but my desire for longevity insurance is still stronger.

 

[RunningBum]

If no action is taken and the fund runs out of money, I think cuts have to be across the board.

If action is taken, most likely those collecting will be grandfathered in. And maybe those of age but not yet collecting will also be grandfathered in.

I just turned 63 myself and I'm not collecting yet, but possibly I'll start at 65 once I'm on Medicare and ACA subsidies aren't a factor for me.

 

[lauradrops]

I think we are leaning towards doing the same at this point.

 

[Koolau]

Maybe I'm crazy but I just can't imagine any political entity would allow an SS benefit cut. They'll find SOME way to save SS as it exists. It won't happen until the last minute, of course, but a hero will step forward IMHO. Of course, you have to make arrangements just in case since YMMV.

 

[flyoverstate]

If no action is taken, then there is no way anyone can be grandfathered in. The SS system is required by statute to cut the amount of money going out once the trust fund is depleted. For years, SS has collected much less than it has paid out, but there is a trust fund "savings account" that had been built up over decades. In the years since collections have dropped below payments going out, SS has used the trust fund to cover the difference. Once the trust fund is gone (either 2032 or 2033 depending on who you believe), payments must be limited to the amount being collected. So, if there is an economic downturn and fewer people are paying in, the date that the trust fund is depleted is moved in, and vice versa. Unless Congress does something soon to start collecting more than is being paid out, there MUST be a cut to the amount paid out so that what is paid out matches what is being collected. This number is predicted to be 21-23%. This does not necessarily mean that everyone loses 21-23%, but if Congress protects some people, then others have to be cut by more. There is basically no way they can leave some recipients *totally* unaffected without *totally* screwing some others.

I believe that there is no way Congress will act in time, and in such a way that everyone will get what they are currently scheduled to get. Remember that SS is *already* drawing down the trust fund. Unless they start taking in more money soon, the trust fund *will* run out by 2033, and just raising the FRA for people under 60 or something isn't going to fix the problem. They either need to cut benefits, or raise taxes, by 2032. Period. Which do you think they will do?

 

[flyoverstate]

Here is a good article explaining the situation. I would argue with the author on one point: they (and other articles) say that the cuts will be "across the board", implying that everyone would take the same hit, percentage-wise. I think that is extremely unlikely to happen. If Congress does nothing else, I believe they will protect the people drawing lower benefits, at the expense of people receiving more.

No one knows what will happen or when, but it won't be good regardless.

Cuts to Social Security Benefits Could Top $21,000 for High-Income Couples

Benefits could be slashed by 21% starting in 2033 if Social Security is not fixed, according to a new report.

www.kiplinger.com

 

[38Chevy454]

My personal belief is that any cut to be perceived as "fair" with any chance of politicians passing any changes, has to be equal across all recipients. Increasing SS taxes without a cut is not likely. A combination of both seems logical. Would be easiest for politicians to eliminate the SS income threshold and collect SS taxes on all income of high earners.

All that said, gov't has a history of penalizing high earners more, so could be unequal cuts with politicians "saving" payouts at existing amounts to lower income recipients.

Just flip a coin, you have 50% chance. Predicting gov't actions is a big unknown.

 

[pb4uski]

My husband and I have never considered taking SS early, but I have a hypothetical question. If there were to be cuts to SS, do you think people already collecting will be grandfathered in and their payments unchanged? Just starting to explore this now and I realize nobody can say for sure. The thinking is, if it is grandfathered then maybe we are better having husband take it now at 63 instead of 67 or 70 with possible reductions put in place.

While the money is not needed for us to survive, it is something we would like to maximize after all the years of paying in.
I'm not asking if anyone feels there will be cuts or not, just wondering how you all feel it may play out if there were.

Everything that I have read on the topic of how the reductions would be applied under current law is that they would be across the board... so if the haircut is 23% then people collecting would receive 77% of what they are scheduled to receive. I believe that is also the way that opensocialsecurity.com models it.

Congress could change it, but given the current political polarization that seems unlikely, so I'm betting across the board.

What Will Happen If The Social Security Trust Funds Run Out?

Don’t be swayed by scary headlines. Learn about the reality of Social Security’s financial status and act to protect your retirement.

www.forbes.com

 

[GrayHare]

Which do you think they will do?

I expect this time won't be different, that is, Congress will contimue to act the same, and that means more borrowing.

 

[Exchme]

I expect this time won't be different, that is, Congress will contimue to act the same, and that means more borrowing.

Agreed, no politician can withstand cuts to grandma's benefits, so they will just wait until the last minute and borrow money like they always do.

 

[RetiredHappy]

Cut has to be across the board. Changes like delaying FRA can be made with cutoff age.

 

[flyoverstate]

Cut has to be across the board. Changes like delaying FRA can be made with cutoff age.

Here is the problem: Congress has kicked the can down the road for so long, that even if they change FRA to 68 or 69 or whatever for people who are 60, it won't help. The cliff is is only seven years away. They lost that option. If they had done that ten years ago, it might have helped. Now, their "only" options are to cut benefits for people already getting them, or raise the SS tax, or both. Once the SS trust fund is depleted, they must cut benefits to only pay out what is coming in. Or, as previous posts said, start borrowing money to pay SS, which would be a disaster.

We are not supposed to talk about politics on this board, but what incentive does the current administration have to address this issue? Think real hard about that. IMHO, the answer is none. Kick the can to the next administration and let them deal with it. The "solution" is almost certainly going to cause whatever administration is in charge to lose the following election.

 

[RetiredHappy]

Here is the problem: Congress has kicked the can down the road for so long, that even if they change FRA to 68 or 69 or whatever for people who are 60, it won't help. The cliff is is only seven years away. They lost that option. If they had done that ten years ago, it might have helped. Now, their "only" options are to cut benefits for people already getting them, or raise the SS tax, or both. Once the SS trust fund is depleted, they must cut benefits to only pay out what is coming in. Or, as previous posts said, start borrowing money to pay SS, which would be a disaster.

We are not supposed to talk about politics on this board, but what incentive does the current administration have to address this issue? Think real hard about that. IMHO, the answer is none. Kick the can to the next administration and let them deal with it. The "solution" is almost certainly going to cause whatever administration is in charge to lose the following election.

Yep, current or past adminstrations have been the problem.

 

[Texas Proud]

I have read many times it is across the board... people who believe they will not be cut are being hopeful for no reason...

And one article I read said that in reality they will not reduce the payment to you, just how often they pay you... IOW, if you get $1000 now you will continue to get $1000... but not every month...

 

[Midpack]

Yep, current or past adminstrations have been the problem.

Thanks to most voters who have no interest in sharing the pain.

There are only two options, cut benefits and/or raise revenues (higher %, higher cap). Any “fix” is going to make at least some group of folks worse off than before and, mostly likely, will cost the party in power votes in an upcoming election when the fix is implemented. Special interest groups amplify the problem. There is no lobby for fairness…

I’m planning on a benefit haircut.

I don’t think claiming Soc Sec early will make much difference. Congress may come up with a progressive scale for haircuts (less for older, more for younger) but all beneficiaries will be affected.

 

[frank05]

I predict they will just take the money out of general funds.

 

[Harpy Eagle]

My husband and I have never considered taking SS early, but I have a hypothetical question. If there were to be cuts to SS, do you think people already collecting will be grandfathered in and their payments unchanged? Just starting to explore this now and I realize nobody can say for sure. The thinking is, if it is grandfathered then maybe we are better having husband take it now at 63 instead of 67 or 70 with possible reductions put in place.

While the money is not needed for us to survive, it is something we would like to maximize after all the years of paying in.
I'm not asking if anyone feels there will be cuts or not, just wondering how you all feel it may play out if there were.

From all I have read nobody would be spared if there are cuts.

 

[Midpack]

I predict they will just take the money out of general funds.

How?

 

[aja8888]

Ha!

They will just ask the Treasury to print more paper each year to cover the shortfall. Or Congress may even cut spending on things like the Chips Act to make more funds available for SS! I'll bet the Conressperson's parents on SS will be excluded from benefit cuts and there will be no Government workers SS sacrificed! /s

On the home front......Another possible outcome is SS payments to career non-working spouses can be eliminated! Oh, eliminate SSDI for people who can't work! /s

Lots of options to pick away at.

And, pity the politician(s) who cut grandma's SS income.

 

[wrigley]

I predict nothing will change. Stop worrying.

Mike

 

[Rianne]

I run Firecalc and FI calc (Vanguard's version) a number of different ways. A SS cut, no SS at all, a market downturn of 50%, like you start off the calculation with 1/2 of index portfolio. I try to plan for the worst and of course, hope for the best. 2008 hit hard and was a crisis that no one saw coming, except a few in the know on Wall Street.

 

[Sunset]

I think if politicians continue to be self-serving then nothing will be done and the 21% cut will come for everyone (which is fair).
Maybe they will change the taxability to 100% instead of 85% to make "richer" people pay.

OP - Regardless of what will be done, should there be any legislation change like grandfathering current collectors, it will be discussed and in the news a lot, so if it looked likely then I'd claim. Otherwise I'm waiting to age 70 to do Roth conversions.