Six Figure Limit on SS

[camfused]

I started a thread a couple weeks ago about this proposed "Six Figure Limit" to SS benefits, from the Committee for a Responsible Federal Budget :

Another SS fix proposal

And here is another (partial) SS fix proposal: Capping benefits at $100K per couple. https://www.usatoday.com/story/money/2026/03/25/social-security-cap-proposal/89315322007/

www.early-retirement.org

Since then, I think I understand it a bit better. The CRFB here is saying the amount could be based on what age you get/got SS. So, if you signed up at age 62, then your limit would be 70% of $50K, if at FRA age, then $50K, and if at age 70, then 124% of $50K. Example, your spouse signs up at FRA age, and you sign up at age 70, so their limit is $50K, yours is 124% of $50K = $62K, so your couple limit is $112K.

Also, they said there could be an inflation adjustment, or fixed for 20 years, or fixed for 30 years. Let's hope for the inflation adjustment.

So, my opinion (if there is an inflation adjustment) of this plan is a little better than my initial take on it. When coupled with the CRFB's proposed Employers Compensation Tax, it seems a somewhat reasonable approach to me to fix the SS shortfall.

 

[gauss]

If they do raise the SFL limit with inflation, will they ever catch anyone new with the limit other than the few initial people that have max SS earnings for all 35 years?

My fear is that they would not inflate the SFL limit for 20 or 30 years as suggested by some of the variants in the proposal.

The real insidious part of this that folks don't realize is that you can be under the cap when you first claim, but as soon as the COLA adjustments push you towards the cap, there you will be stuck.

They suggest that only the richest would be effected, but this is far from true.

I have never earned more than the SS cap and have lots of zeros in my 35 years in that I retired after 22 years of full time work. My DW may have hit the cap a few years, but it was not too often. She worked 31 years professionally.

We worked in engineering. Large legacy employer in manufacturing. Never had direct reports or had to write a performance review.

Modeling my case, we are about 10% below the SFL limit given our earnings history. As such within about 3-4 years of this proposal passing, the SS COLA, would then hit the SFL limit in our case and no more COLA adjustments would occur for us. This is a huge hit to our benefit -- and did I mention we are not ultra-rich income wise!

I am afraid that this proposal may have legs in that people at quick reading will not think that it applies to them, but like AMT, and 85% taxation of SS benefits, more and more will be ensnared as time goes on.

Also they are suggesting that this is just the beginning to fixing the SS problem. So if I loose 30% of my benefit based on this due to loss of COLA, and then they "raise the retirement age" to 70 and I loose another 24%, then I lost over 50% of my earned benefit.

I am not income-rich, but would be far better off if they do nothing and allow the 25% "insolvency reduction" under current law to kick in and apply to everyone.

Note most previous proposal to fix SS, generally apply the changes gradually the farther you are from retirement age -- thus protecting the folks near retirement. This proposal does no such thing whatsoever.


Note nearly every media report on this is parroting the claim that this will only effect the richest of the rich (at first) -- very unsettling.

-gauss



I

 

[OK EE]

Seems to punish single persons pretty harshly. Living on 100K/yr per couple is a lot easier than 50K/yr single.

 

[gauss]

Seems to punish single persons pretty harshly. Living on 100K/yr per couple is a lot easier than 50K/yr single.

And the harder it will be for everyone each year going forward as costs of living increase but SS COLA does not. IE living on 50k in year 2050.

 

[camfused]

I always compare each of these proposed solutions versus the current planned 28% cut that IS going to happen, unless something changes. With that in mind, this plan looks good to me.

 

[Al18]

I don’t think most people have thought this through. If you receive $3K per month SS benefit today and assuming 3% COLA, you will be at $50K per year in 11.1 years and frozen at that level for the rest of your life. No thanks

 

[Steelpony]

SS can be made way simpler (also TIRA withdrawls). Ever see how they calculate SS now? This is the same old gobbledygook.

I’ll throw this out:

1. No raiding SS or Medicare by the FEDS. A real lock box. You’d have to google that definition.

2. All income taxed for SS and Medicare,
no upper limits not just wages. This or individual accounts controlled by you from payroll deductions etc.

3. Starting at blank age you get blank amount and this number progresses up. Some may take it early and some may wait to say 75. Make the top limit say 85. If someone passes before taking SS a spouse gets that years amount or their own. Door 1 or 2, lol.

4.I’d base a COLA on a specific age group say over 62. This includes the higher healthcare premiums.

As an add on let people take out assets from a TIRA at blank age, whatever they want. The governments gets their taxes quicker than age 73.

 

[camfused]

I don’t think most people have thought this through. If you receive $3K per month SS benefit today and assuming 3% COLA, you will be at $50K per year in 11.1 years and frozen at that level for the rest of your life. No thanks

Well, as I said in my first post, I like this IFF they do the inflation/COLA adjusted limit. So, in your example it would be a lot more years before you would hit the limit, if ever, and the limit would be much higher than $50K at that time.

Edit: Yeah, I just put in a spreadsheet to be sure. If you COLA adjusted the $3K/month and COLA adjust the $50K limit, you will never hit the limit. Furthermore, let's say you start with 2027, and go 30 years. With this SFL (COLA adjusted) plan, you will have been paid $1.74M. With the current 28% cut in 2032 plan, you will have been paid $1.31M.

I even modeled someone who would be hit by the cut. Let's say you currently get $60K per year. If you do the SFL Cola adjusted plan, you will have been paid $2.42M over 30 years. With the current 28% cut in 2032 plan, you will have been paid $2.13M. The breakeven point is something like $5680/month, at least in my little model.



Compare this to the current planned 28% cut. How do they compare for you?

 

[pb4uski]

SS can be made way simpler (also TIRA withdrawls)

...1. No raiding SS or Medicare by the FEDS. A real lock box. You’d have to google that definition. ...

...As an add on let people take out assets from a TIRA at blank age, whatever they want. The governments gets their taxes quicker than age 73.

And how are TIRA withdrawals complicated?

#1 is a popular misconception among conspiracy theorist types. Please stop posting such nonsense.

On the last part, they already let people take out assets from TIRAs whenever they want to. You can do it at any age, but if you're under 59-1/2 then you pay tax and 10% penalty and if you're 59-1/2 or over then you just pay tax. What is so complicated about that? They have set the "blank age" to 59-1/2.

 

[rk911]

SS can be made way simpler (also TIRA withdrawls). Ever see how they calculate SS now? This is the same old gobbledygook.

I’ll throw this out:

1. No raiding SS or Medicare by the FEDS. A real lock box. You’d have to google that definition.

2. All income taxed for SS and Medicare,
no upper limits not just wages. This or individual accounts controlled by you from payroll deductions etc.

3. Starting at blank age you get blank amount and this number progresses up. Some may take it early and some may wait to say 75. Make the top limit say 85. If someone passes before taking SS a spouse gets that years amount or their own. Door 1 or 2, lol.

4.I’d base a COLA on a specific age group say over 62. This includes the higher healthcare premiums.

As an add on let people take out assets from a TIRA at blank age, whatever they want. The governments gets their taxes quicker than age 73.

I like this proposal, especially points 1 and 2. But everyone just entering the work force needs to learn and understand the theee-legged stool concept...that SS alone will not be sufficient for a comfortable retirement. Savings and investment income are absolutely necessary.

 

[Steelpony]

I like this proposal, especially points 1 and 2. But everyone just entering the work force needs to learn and understand the theee-legged stool concept...that SS alone will not be sufficient for a comfortable retirement. Savings and investment income are absolutely necessary.

I don’t know. How long does a government or others have to walk adults through life by the hand.

One of many random life experiences:

Before I retired I had a great deal of experience as a son managing my parents finances through retirement. It turned out to be for 35 years. This means I was fully aware of later life issues starting around my late 30’s, early 40’s.

It was because I wanted to be. In olden times it was called survival of the most fit.

 

[Gumby]

..... In olden times it was called survival of the most fit.

I blame the saber-toothed tigers. Back in the day, the stupid and inattentive humans were just gobbled up. But then the tigers went extinct, damn them.

 

[GrayHare]

No more saber-tooths but now we have have lotteries.

 

[rk911]

I don’t know. How long does a government or others have to walk adults through life by the hand.

One of many random life experiences:

Before I retired I had a great deal of experience as a son managing my parents finances through retirement. It turned out to be for 35 years. This means I was fully aware of later life issues starting around my late 30’s, early 40’s.

It was because I wanted to be. In olden times it was called survival of the most fit.

As a kid and young adult I wasn't seriously thinking about "the future". I was happy with my new life married to my HS sweetheart and working to help support us.

Like many here my folks and grandparents were Great Depression "survivors". Grandpa was fully employed during that time and my folks were kids. Dad grew up in an orphanagw and joined the US Army a year before Pearl Harbor. None of them trusted Wall Street and had just bank savings accounts and some Series E Savings Bonds (although my FIL did have a Vanguard account much, much later in life thanks to his son). Dad died early and mom and my grandparents were largely dependent on SS.

So my wife and I grew up believing "the market' was extremely risky and should be avoided much less thinking of retiring in 40+ years for that matter. But in 1982 my wife's brother, who had been investing in mutual funds for a few years convinced her to open an American Century account. I was initially quite nervous but over time came to see the wisdom. It didn't take long before we were 'all in'. That led to establishing a monthly budget which included monthly mutual fund investments, the opening of IRAs, eventually deciding to start shedding debt and the possibility of retiring at 55. We started looking at SS as icing on the cake, nice to have but certainly not needed.

I suspect many of those in their 20"s and 30's are like us at that age...not thinking seriously about their future which likely did not include SS. Financial classes in high school, maybe even earlier, would go a long way to opening their eyes and embarking on a financial future of which SS is irrelevent.

 

[Koolau]

One more potential irritant I'm choosing to ignore for now. Let me know how it turns out.

 

[GrayHare]

A high schooler reports being taught basic finances at the local public school, things like S&P 500 index investing, how to sign up at one of the big brokerages, how to put Roth IRAs to work. I was surprised.

 

[Koolau]

A high schooler reports being taught basic finances at the local public school, things like S&P 500 index investing, how to sign up at one of the big brokerages, how to put Roth IRAs to work. I was surprised.

That is truly amazing. I wish more schools would teach basic financial survival skills.

 

[flyoverstate]

I'll say it again. Just remove the $^%&ing cap. I don't care if Richey Rich has to pay more in than they get out. I hit the SS limit for 30 years. If I had paid the entire 12 months instead of cutting out in Sept/Oct/Nov/Dec, it wouldn't have killed me. If Bob Billionaire hits what used to be the limit on January 2, I don't really care, and 95% of people don't either. Cry me a river.

Instead, we are going to end up with another convoluted bureaucratic nightmare where the government will choose winners and losers, again.

 

[VanWinkle]

I'll say it again. Just remove the $^%&ing cap. I don't care if Richey Rich has to pay more in than they get out. I hit the SS limit for 30 years. If I had paid the entire 12 months instead of cutting out in Sept/Oct/Nov/Dec, it wouldn't have killed me. If Bob Billionaire hits what used to be the limit on January 2, I don't really care, and 95% of people don't either. Cry me a river.

Instead, we are going to end up with another convoluted bureaucratic nightmare where the government will choose winners and losers, again.

Just follow the money, Richie Rich has more political capital than you, and that's the way it has been
for 250 years. I agree that increasing the amount subjected to SS taxes will help, but it's not the
only answer.

 

[target2019]

DOGE 2.0 to the rescue.

 

[Car-Guy]

 

[MichaelB]

<mod note> This topic was discussed one month ago and ended badly, with excessive bickering and incivility. Nothing has changed since then and this discussion is already headed in the same direction.