New Administration & Social Security

[Montecfo]

They should just get rid of the yearly cap on contributions

Well to me the starting point of reform would be gradually moving the FRA back over a number of years as they did in the 80s when SS was in crisis then, for people under 45 say.

I would expect higher taxes to be part of it as it was then, both on wages and on benefits to provide further "means testing".

 

[pjigar]

Agreed. I have never understood the reasoning behind the donut hole. It just seems to make more sense to have all income subject to taxes. Then again, that's too simple and we know government doesn't do simple.

Donut holes are easier to pass the smell test. People in the donut hole (significant percent of the population) thinks that they are not affected with this legislation (until they realize few years later!) and don't complain/oppose. The outside edge of the donut hole is typically a small percent of the constituents and hence easy to shove those complains aside. Inside portion of donut hole is the safe zone. I think this is a classic trick for passing many bills into a law.

 

[pjigar]

They should just get rid of the yearly cap on contributions

That is what will essentially happen once the donut hole naturally closes due to inflation. I remember the max wage for SS in 2000 was around $81,000 and now it is already in the $142,000 range. So yes, it may take couple of decades but it is designed to happen if the legislation is passed.

 

[bigcmagor]

Although uncomfortable to mention, I wonder whether the mounting covid toll on seniors has changed the calculus on SS depletion. There's 300,000+ that are no longer drawing from the fund and 100,000+ that never will. (insert hiding under chair emoji)

 

[NoiseBoy]

For 2021 SS is taxed on income up to $142,800. If they just passed a law increasing the cap to something a little higher than that they could begin to catch up for the eventual shortfall.

If you are already making $142,800 in salary, it would seem like paying SS on income up to $165,000 would not be that much of a burden. It's much better than shorting senior citizens who rely on it, or playing around with the full retirement age again.

I had eleven years where I hit the SS earnings limit. Other than larger net paychecks towards the end of the year, I didn't really notice the difference. I would be in favor of removing the cap.

 

[jim584672]

The Senate can do away with the filibuster by simple majority vote. It isn't a Constitutional requirement. Moderates of both parties like it because it gives cover to quash a bill, they can just say procedure killed it.

 

[Aerides]

The Senate can do away with the filibuster by simple majority vote. It isn't a Constitutional requirement. Moderates of both parties like it because it gives cover to quash a bill, they can just say procedure killed it.

Let's stick to the proposed legislation, and not the potential for Senate rules to change, or who likes them or not, etc....to allow this thread to continue, please.

 

[USGrant1962]

Although uncomfortable to mention, I wonder whether the mounting covid toll on seniors has changed the calculus on SS depletion. There's 300,000+ that are no longer drawing from the fund and 100,000+ that never will. (insert hiding under chair emoji)

~44 million retirees on SS, so ~1% "excess" deaths (realistically they are early, not excess) is unlikely to change things much. However, I've seen analyses that suggest the shutdowns and job losses are likely to move the depletion date a year or two earlier.

Here's the official model from November, forecasting one year earlier depletion: https://www.ssa.gov/oact/solvency/UpdatedBaseline_20201124.pdf

 

[pb4uski]

Although uncomfortable to mention, I wonder whether the mounting covid toll on seniors has changed the calculus on SS depletion. There's 300,000+ that are no longer drawing from the fund and 100,000+ that never will. (insert hiding under chair emoji)

Probably true, but not enough to make enough of a difference to move the needle much. Even 300,000 at $25k a head would be $7.5b and annual benefits are over $900b and the reality is that most of those who died were elderly and towards the end of the mortality table anyway.

 

[Tekward]

Thanks to the Moderators for allowing this discussion to continue.

 

[Chuckanut]

I think the most likely change will be that higher income folks will see 100% of their SS taxed.

 

[Montecfo]

I think the most likely change will be that higher income folks will see 100% of their SS taxed.

This is from memory, but I think when they reformed it before, the thinking was that it would affect all stakeholders in some way. So the young had the retirement age pushed back. Current recipients I think got a delay in a cola adjustment or two, and there were higher taxes.

I would think the prescription would be the same these days, in order to gain enough support for it. But quite possibly nothing will happen yet because it's not a crisis that is near enough from politicians' viewpoint.

I tend to think increasing benefits with no reform ( i.e., the thread topic) is something that's not going to happen.

 

[CardsFan]

I think the most likely change will be that higher income folks will see 100% of their SS taxed.

I have always planned on this happening.

 

[foxfirev5]

Like any of us over 62 or when we take ss, it becomes less of an issue with each passing month. Immortality is a myth.

 

[phil1ben]

Nothing about the poor shlubs who turned 60 in 2020?

I was also born in 1960. Those born in that year will want to pay attention to Senate Bill S. 4180 (IS) - Protecting Benefits for Retirees Act. It appears to be bipartisan and was sponsored by a Democrat and a Republican.

If adopted, it would fix the problem.

 

[Sangiovese]

I was also born in 1960. Those born in that year will want to pay attention to Senate Bill S. 4180 (IS) - Protecting Benefits for Retirees Act. It appears to be bipartisan and was sponsored by a Democrat and a Republican.

If adopted, it would fix the problem.

As I understand it, bills from a previous Congress that did not receive a vote will die when a new Congress is sworn in. So it needs to be reintroduced in the new 2021-2022 Congress. Let's hope it has better luck in 2021 than it had in 2020.

 

[GenXguy]

Those changes wouldn't be at the top of my list!

The ever-increasing taxing of SS needs to be addressed.

Social Security after-tax "net" benefits are already being "cut" every year and have been for years, but most people aren't aware of how this is being done.

The SS formula for determining how much of your SS benefits are taxed is NOT indexed to inflation, so that threshold has not increased since it was first introduced in 1983. For a single person, if your income combined with half your SS benefits exceeds $25,000, you have to pay income tax on up to 50% of your SS benefits. If it exceeds $34,000, you have to pay income tax on up to 85% of your SS benefits. $25K in 1983 is worth a lot more than $25K in 2018. Since your retirement distributions and SS benefits will be adjusted with inflation, but NOT the $25,000/$34,000 thresholds, a greater percentage of your SS benefits will become taxable as each year passes (for married filing jointly, the thresholds are $32,000/$44,000.) It's a built-in tax increase, reducing "net" SS benefits, hurting seniors further. The greater your combined income and SS/2, the more you will be affected by this up to a max of 85% of your benefits being taxed! It's absurd, and those thresholds should be increased to reflect inflation since 1983.

The ways it is, you should play it safe by estimating that 85% of your SS benefits well into the future will be taxable. More information about this can be found in these references:

https://www.marketwatch.com/story/p...-punished-by-social-security-taxes-2019-01-07
https://www.fool.com/retirement/gen...ear-old-social-security-rule-is-wreaking.aspx
http://www.foxnews.com/story/2007/03/25/double-whammy-taxation-social-security-benefits.html
https://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html

I'm not one to support tax increases, but I would be open to paying higher FICA taxes including taxing all wages to help shore up SS to prevent cuts to benefits and to prevent increasing the FRA for people within a decade of collecting SS.

At some point, the FRA will need increased for younger workers also as lifetime durations increase over time. Perhaps the FRA should be increased a year or two for those of us 55 and under, maybe another year or two if you're under 50 today, etc.

And for those with high household incomes over $100,000, they could stand to get a cut in their benefits to help keep the system afloat for those who need it.

I saw there was a proposal to make everyone's SS benefits exactly the same, which I think is a very bad idea (flat rate / universal social security.)
https://www.cnbc.com/2020/12/02/uni...y-stimulus-and-how-to-pay-for-retirement.html
Biden's minimum benefit seems like a better way to lift poor people's SS, although 30 years is a long time to work.

I think spousal benefits should be eliminated when both are still alive. It makes no sense to me that someone who has never worked is getting a generous SS benefit at taxpayer expense simply because they married someone that did work, who is getting a full benefit as well. Death benefits I can understand.

 

[maestro]

If i'm not mistaken, there needs to be 60 votes in the Senate to pass any of those things. That means the plan will have to be supported by both sides so I agree there won't be anything too drastic.

+1. Our illustrious 'elitists' in Congress will put their necks on the line to preserve their own interests and benefits they feel they deserve. It's not about us.

 

[donheff]

If i'm not mistaken, there needs to be 60 votes in the Senate to pass any of those things. That means the plan will have to be supported by both sides so I agree there won't be anything too drastic.

It only takes a majority to pass the legislation but it takes 60 to end debate. At one time they actually had to keep talking but now they just table the debate if they don’t have 60 votes. This is not required it’s just a rule they adopted that they can drop with a simple majority vote. Unfortunately, or fortunately depending how you view it, getting that majority to agree isn’t likely.

 

[earlyretirement]

I was over the cap for many years and always thought that they should increase it or even eliminate it and perhaps add in a 10% bend point so those who pay more get at least a little something out of it and the rest goes to help the system as a whole.

That said, I'm not in favor of the doughnut hole in the payroll tax for earnings between $142,801 and $400,000 that has been proposed.

I'm in the same situation, due to working a lot of overtime in my life. When I was able to hit the max it would always be mid to late December. If someone making 140K can pay the max, those up to 400 can certainly afford more.

 

[Gumby]

I used to stop paying social security in February. I certainly could have afforded to pay more.

 

[Ronstar]

New Administration & Social Security

I used to stop paying social security around September - October during my working years. With direct deposit and varying working hours, I sometimes didn’t notice that social security was no longer taken from my pay. I could have afforded to pay through the entire year. I suspect that the rules will be changed so that higher earners pay more.

 

[steveark]

I was above the cap every single year of my 38 year career. Yet I'll get proportionately less than lower earners because the system is set up to favor lower earners. That's already unfair. If you remove the cap but don't increase high earners benefits that makes it even more unfair. I thought this forum was the last place I'd hear "let's tax the other guy". My wife and I will get over $70K in five years when we start taking it.

 

[Dtail]

I used to stop paying social security in February. I certainly could have afforded to pay more.

Same here due to bonuses being paid in Feb.

 

[Gumby]

Same here due to bonuses being paid in Feb.

Exactly so.