Modeling Social Security 2033 Insolvency

[badatmath]

The rub is, as always, that you need to make all sorts of assumptions regarding the legislation that will "fix" the problem, and that your results will vary depending on your estimate of what Congress will do. Other fixed that I have seen floated ( raise the retirement age, remove the cap on SS earnings ) would not necessarily alter the benefits paid to recipients. So you need to ask yourself - are you an optimist or a pessimist?

"You've got to ask yourself one question: 'Do I feel lucky?' Well, do ya, punk?" - (Dirty Harry, 1971)

 

[marko]

I think everyone should occasionally do a "SHTF" analysis on their portfolio and finances.

What would happen if your SS/pension went away, a massive 1929 market crash, LTC for X years, some black swan that completely disrupts the world status quo in a major way. How much of your portfolio could you lose and still maintain your same quality of life?

All unlikely scenarios but I found a certain peace of mind in knowing that with some moderate modifications, we'd still be ok. It's just nice to know how thick the ice is under your feet.

 

[frank05]

Personally I am not worried that much about Social Security but Medicare running out in 2031 will have a much bigger impact on my quality of life.

 

[Teacher Terry]

The moral of your very sad story is clear: No one is immune from a worst-case scenario. Sorry they were dealt such a bad hand. (They were lucky, however, to have you supporting them.)

I was married at the time and my husband and myself went over at least twice a day for two years so they could continue to live together.

It came to an end when we had a 3 week trip and he couldn’t take care of his wife anymore. His kids took him in and I found a home for her. He died within 4 months and she lived another year. His family finally stepped up when we refused to cancel our vacation.

 

[corn18]

I have the rich, broke or dead model built into my retirement spreadsheet. I update it occasionally to reflect my longevity expectations. Helps me ignore a lot of news and live my retirement to its fullest.

 

[SecondCor521]

I have the rich, broke or dead model built into my retirement spreadsheet. I update it occasionally to reflect my longevity expectations. Helps me ignore a lot of news and live my retirement to its fullest.
View attachment 52984

Any idea why there is that kink in the gray "Dead" area at age 83 or so? I've never seen that before.

 

[ERD50]

... I paid the max for 35 years, so I would be one of the people most likely to be screwed when the cliff hits. ...

What do you mean by "the cliff"? There is no threshold for the cuts in the current regulations, everyone would get hit by the same % ( 21% by current estimates).

Unfortunately, even Kiplinger's make the issue confusing by singling out "high income couples" and mentioning a high dollar figure.

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

Without legislative action, the trust fund is expected to become insolvent by 2033, resulting in a 21% cut to beneficiaries' monthly Social Security checks, regardless of marital status or income, according to the CRFB analysis.

 

[corn18]

Any idea why there is that kink in the gray "Dead" area at age 83 or so? I've never seen that before.

That's when I should be dead so the data is not meaningful past that.

 

[Koolau]

That's when I should be dead so the data is not meaningful past that.

We'll all hope you're wrong about your "expiration date."

Heh, heh, I'm thinking "poor" and alive might just beat "rich" but dead though YMMV.

 

[flyoverstate]

What do you mean by "the cliff"? There is no threshold for the cuts in the current regulations, everyone would get hit by the same % ( 21% by current estimates).

Unfortunately, even Kiplinger's make the issue confusing by singling out "high income couples" and mentioning a high dollar figure.

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

The "cliff" is what your SS payments will hit in 2032/33.

Reality is that OVERALL BENEFITS PAID will need to drop by 21-23% (depending on who you believe). If congress doesn't change FUNDING of SS by 2032, then benefits will be cut, but many believe that if funding doesn't materialize, there will be a progressive schedule of cuts based on your benefit. That could be, for example, the first $1500/mo is untouched, the next $500/mo is cut by 11%, the next $500/mo by 22%, and everything over $2500 cut by 33%. Just an example. In this example, someone making the (current) max of about $4800/mo would lose $954/mo. A couple with two maxed out earners in that scenario would lose $1908/mo, or $22,896 per year.

The number above are just a made up example, but IMHO it is *very* likely that either the cuts will be progressive as I illustrated, or there will be means testing to achieve the same result. Means testing could be as simple as "what was your MAGI last year", or it could be net worth based.

I highly doubt Congress would cut 21% from the lower 50% percentile of SS benefits. People who are set to receive more than the median are almost certain to be hit harder than those below.

 

[MC Rider]

Rich broke or dead. Good graph title. LOL.

 

[ERD50]

... I highly doubt Congress would cut 21% from the lower 50% percentile of SS benefits. People who are set to receive more than the median are almost certain to be hit harder than those below.

But rather than speculate, Congress did lay it out this way for now, everyone is affected by the same %.

SS is already progressive. At any rate, tough to say what the Congressional make up and motivation will be 9 years from now. So I'm sticking with what is known (for now).

 

[Al18]

Rich, broke or dead calculator at Rich, Broke or Dead? Post-Retirement FIRE Calculator: Visualizing Early Retirement Success and Longevity Risk - Engaging Data

 

[flyoverstate]

But rather than speculate, Congress did lay it out this way for now, everyone is affected by the same %.

SS is already progressive. At any rate, tough to say what the Congressional make up and motivation will be 9 years from now. So I'm sticking with what is known (for now).

It isn't nine years. It is seven years. A solution must be found by 2032, and it is almost 2025.

 

[Drake3287]

As long as politicians are elected, Social Security won't be going anywhere. Will we see changes for the current younger generation? You can bet on it.

 

[Al18]

I’ve read multiple articles, saying the incoming administration is implementing changes that will cut 3 years from the projected insolvency date.

 

[robnplunder]

I've heard SS going away 10 years ago, 20 years ago, as long as I remember in fact. If and when it goes away, we'd have bigger things to worry about than SS ($ losing its status as the world's currency e.g.) So, relax and enjoy life. Better yet, save enough money so that you don't have to rely on SS. Isn't that why most of us are here in this forum?

 

[marko]

I've heard SS going away 10 years ago, 20 years ago, as long as I remember in fact. If and when it goes away, we'd have bigger things to worry about than SS ($ losing its status as the world's currency e.g.) So, relax and enjoy life. Better yet, save enough money so that you don't have to rely on SS. Isn't that why most of us are here in this forum?

Agree 100%. But while I don't "rely" on SS, that extra $60k between the two of us sure is nice! A few years ago a poll here showed (going by memory) that SS comprises about 45% of their retirement income. For some here I'd guess that it reduces the withdrawal rate just enough to make early retirement a reality.

 

[audreyh1]

I've heard SS going away 10 years ago, 20 years ago, as long as I remember in fact. If and when it goes away, we'd have bigger things to worry about than SS ($ losing its status as the world's currency e.g.) So, relax and enjoy life. Better yet, save enough money so that you don't have to rely on SS. Isn't that why most of us are here in this forum?

Because we retired very early we left SS income out of our plans.

 

[FindingForward]

As long as politicians are elected, Social Security won't be going anywhere. Will we see changes for the current younger generation? You can bet on it.

That's my view...it's the third rail, for sure. Another thought: they may be less likely to change anything for those already getting SS....and focus all efforts on modifying for those who haven't yet started. If that ends up the case, many younger boomers who vowed to maximize at 70 may find themselves shifting gears and starting earlier, to "lock" in their benefits.

 

[marko]

That's my view...it's the third rail, for sure. Another thought: they may be less likely to change anything for those already getting SS....and focus all efforts on modifying for those who haven't yet started. If that ends up the case, many younger boomers who vowed to maximize at 70 may find themselves shifting gears and starting earlier, to "lock" in their benefits.

The other thing is that we boomers are the biggest draw on SS right now just by virtue of our population. But that draw diminishes with every new entry in the newspaper's obituary column. I wonder how much pressure will there be on the program in 15 years as the overall population gets more spread out and newer arrivals to the program dont come as one big gulp..

 

[ERD50]

The other thing is that we boomers are the biggest draw on SS right now just by virtue of our population. But that draw diminishes with every new entry in the newspaper's obituary column. I wonder how much pressure will there be on the program in 15 years as the overall population gets more spread out and newer arrivals to the program dont come as one big gulp..

I'm pretty sure that the 2033 prediction is taking all that into account. Hopefully, they didn't use a simple, static model?

 

[ncbill]

But rather than speculate, Congress did lay it out this way for now, everyone is affected by the same %.

SS is already progressive. At any rate, tough to say what the Congressional make up and motivation will be 9 years from now. So I'm sticking with what is known (for now).

In the past SS fixes preserved benefits for lower earners at the expense of higher earners.

I would except the same with any future fixes.

 

[RunningBum]

I've heard SS going away 10 years ago, 20 years ago, as long as I remember in fact. If and when it goes away, we'd have bigger things to worry about than SS ($ losing its status as the world's currency e.g.) So, relax and enjoy life. Better yet, save enough money so that you don't have to rely on SS. Isn't that why most of us are here in this forum?

Some people were forced into retirement due to health issues, working conditions, or other reasons, and will rely on having at least some SS. I don't think such a flippant attitude about a major income flow is stock advice for all.

 

[flyoverstate]

In the past SS fixes preserved benefits for lower earners at the expense of higher earners.

I would except the same with any future fixes.

I agree. The political optics of taking 23% out of someone's $1200/mo benefit are much worse than taking 30% out of someone who paid in the max for 35 years. Never mind that some people who paid the max for 35 years may be every bit as reliant on their SS as someone who paid the minimum for 40 quarters.

Prepare for the term "affluent retiree" to be twisted by the media to become a slur, in preparation for screwing over "affluent" retirees. As in: "The XYZ plan to save Social Security includes cuts to benefits for low income beneficiaries, while the ABC plan preserves benefits for lower earners, while taking more from affluent retirees who don't rely on Social Security. The ABCs say it is unfair to cut benefits for those who most need them, while the XYZs say that a 30% cut to affluent retirees is much larger in dollars, and penalizes those who paid in more to the system."

The political fights over this issue are going to be epic.