Net Worth test for SS cuts

[GenXguy]

"Or, in other words, if they didn't pay benefits to non working spouses, maybe the benefits payments for the working/income earning spouse would be significantly higher?"

...or they'd get the same and the system would be solvent.

Exactly. I made this point as well. It alone doesn't solve it, but it's definitely low hanging "fairness" fruit that should be part of a larger solution. One thing that should have never been done in this case is removal of WEP/GPO, yet somehow it happened.

 

[GenXguy]

Why couldn't the SS payout system work like Medicare Part B premiums? You do your income taxes and if your MAGI exceeds designated hurdles, your SS payment is reduced. For Medicare, they increase your premiums via IRMAA. The system is already in place and working. Folks, including me, whine about it but it is the way it is and helps to fund Medicare. And implementation would be a breeze since the related Medicare IRMAA system is already well established. When they calculate your IRMAA, they just do your SS payout at the same time!

That seems like a good idea, except I don't think there should be a sudden MAGI cliff where the entire SS benefit is reduced by a significant amount, and the benefit should be slowly decreased based on household MAGI.

 

[youbet]

Don't give the govt any new ideas, please.
TYVM...

Well, hee, hee, it's not a new idea. I'm just pointing out that a form of means testing could be very easily incorporated into SS payout levels. We're already doing it for Medicare Part B payments. There is no validity to the argument that means testing SS would be complicated or unworkable. We're already doing it for Medicare.

IRMAA irks me every year when I get the letter. Rather than go without health insurance, I pay it and adjust my other expenses to compensate. I suppose if one of several adjustments that are eventually made to SS to "save it" include higher income beneficiaries receiving a bit less, I'll find a way to cope.

 

[youbet]

That seems like a good idea, except I don't think there should be a sudden MAGI cliff where the entire SS benefit is reduced by a significant amount, and the benefit should be slowly decreased based on household MAGI.

Yeah, I'm not a "cliff" fan either. Maybe they could fix that issue for IRMAA while they're implementing it for SS?

 

[youbet]

I would ask why should the Medicare Part B premiums work the way that they do? Medicare taxes are not capped so high earners paid a lot into the system to begin with compared to the average Joe and everyone gets the same Medicare benefits. So they paid more their entire working career for the same benefits. Then, to add insult to injury if one has saved and has high income in retirement then you pay more for the same benefits... again!

Why would we as society want to perpetuate such inequities?

Welcome to the USA! Examples of graduated taxes or benefits based on income are common in our system and highlighted by our graduated fed income tax. I'm not a fan, but I've come to realize that having all flat taxes and benefit payments just wouldn't work.

 

[EastWest Gal]

I would ask why should the Medicare Part B premiums work the way that they do? Medicare taxes are not capped so high earners paid a lot into the system to begin with compared to the average Joe and everyone gets the same Medicare benefits. So they paid more their entire working career for the same benefits. Then, to add insult to injury if one has saved and has high income in retirement then you pay more for the same benefits... again!

Why would we as society want to perpetuate such inequities?

BTW, I don't pay IRMMA but DM did after DF died.

To repeat one of your sentences, "Why would we as society want to perpetuate such inequities?"

Which inequities are you referring to, the income earned or the health care benefits?

Many people work 2-3 low paying jobs to make ends meet. Not everyone can have a high paying job. How much did you pay for childcare, lawn care, or housecleaning? Public school teachers are not highly paid, and private school teachers are paid even less. Do they deserve less health care in retirement?

The highest IRMAA brackets are a $487 surcharge for part B and $91 for part D, for MAGI over $500K for a single and $750K for a couple. With a $202 part B premium and $25 part D premium, the total is about 1.9% of a single person's income, leaving $490K for all other expenses. The average retirement income is about $60K-$90K, so the average single retiree pays 3.0-4.5% of their income in premiums, leaving $57K-87K for all other expenses. It seems the real inequity in the $413K-443K difference in money available for living expenses. Is there a different price for meat or milk or trash pickup or kW/hr of electricity based on income or NW? No.

A person earning $500K+ in retirement should not feel insulted or injured by having to pay more. Be grateful that you don't worry about affording food or gas or a roof over your head, and don't begrudge paying a few more dollars to keep the system solvent, unless you want to pay private health insurance premiums at age 85.

With great power comes great responsibility. In my opinion, the same can be said for great wealth.

With respect to the NW proposal, if one lives in a HCOL area, one can have a high NW based on the house you lived in. A 3 bedroom house in Sunnyvale, CA is valued at $1.5million+ whereas in Mississippi it might be $200K. Same house. A friend of ours is retired in Sunnyvale, in a house inherited from his parents in the 1990s, who bought it in the 1950s. He is still working part time and has a roommate; he was not a high earner. He might have a high NW, but it is mostly tied up in his house.

 

[EastWest Gal]

Welcome to the USA! Examples of graduated taxes or benefits based on income are common in our system and highlighted by our graduated fed income tax. I'm not a fan, but I've come to realize that having all flat taxes and benefit payments just wouldn't work.

Most countries have graduated tax systems. Out of 195 countries, 22 have flat tax rates, usually in the 10-20% range. The rest have graduated or progressive tax systems. In the U.S., a slngle person making $150K and taking a standard deduction will pay a 20% total tax rate. Paying maximum into a 401K reduces that to 16.2% tax rate. If one is able to itemize deductions to a higher amount than the standard deduction, their tax rate is even less.

 

[Dalton]

Well to begin with, many SAHMs would dispute your description of certain spouses as "non-working" but I digress.

If you have two people with identical earnings records then they would have identical SS retirement benefits whether they are married or not... marital status is not part of the benefits calculation, so if they eliminated spousal benefits it would not impact benefits paid to working spouses.

While eliminating spousal benefits would make the system more solvent, it would not make it solvent... it would only solve 4-5% of the total 75-year funding shortfall... small potatoes.

Yes, you do digress. I realize I didn't do a proper quote, but I put quote marks in there, and you quoted the same passage right above mine, so you'll have to take that up with Car-Guy (he said it).
And my point is that, before they give me a haircut, someone who directly contributed to the system every week for decades, they should have been reducing/eliminating the "takers" that didn't directly contribute. Giving money to people that didn't directly contribute is something maybe they could consider if the system was flush with cash, yet they've known of, and been reporting on, this impending failure of the system for most of my life. Continuing to pay out to the household as a survivor's benefit has some merit, but just throwing in a whole other paycheck every month because they are married? That's just trying to crash the system.

eta: I'll also add that I include the increased benefits spouses and divorcees receive with the group that we shouldn't be giving extra money away to when the system is in trouble.