SS may be depleted by 2029 due to virus economy

[statsman]

Funny is the people who think that they will be fine if SS goes away because they rely on other sources.

How can you be sure of your other sources (pensions, bonds) if something as solid as SS goes away?

What if all you have is primarily SS, meaning people who aren't participants on this forum? A 31% haircut is survivable for those with pensions, investments, and a boat load of cash available.

Interestingly, 2029 is when I would turn 70. So, if I waited to take SS until then, any such haircut would happen immediately. If I were to take SS earlier than 70, that would change the "break even" numbers.

Of course, all of this could be a scare tactic to get people to take SS earlier and save the system money in the long run. /tinfoil hat off

 

[Dtail]

I would expect that the first "shot across the bow" from politicians to reduce SS costs would be an approach to reduce or eliminate benefits for wealthier retirees. In the current climate, that would be the "easier" conversation for many politicians to have. Also easier to weaponize.

"Wealthier retirees" would translate to income based means vs. asset means.
Perhaps another case for younger workers to maximize Roth IRA's vs. TIRA.

 

[youbet]

"Wealthier retirees" would translate to income based means vs. asset means.
Perhaps another case for younger workers to maximize Roth IRA's vs. TIRA.

Generally agree.

Today, the issue of someone's perceived state of "wealthiness" by our gov't leans heavily towards income vs net worth. This is going to be tough for the gov't to solve despite the fact they are very, very interested in additional taxes (beyond real estate property taxes and personal property taxes) on everyone's assets.

We already have an example of banks and brokerages reporting account values to the gov't in the case of year end TIRA values for the purpose of calculating RMD's. I suppose this could be expanded to all bank and brokerage accounts. Won't that be nice?

 

[Aerides]

I would expect that the first "shot across the bow" from politicians to reduce SS costs would be an approach to reduce or eliminate benefits for wealthier retirees. In the current climate, that would be the "easier" conversation for many politicians to have. Also easier to weaponize.

In the US, that approach rarely works, because many many people envision that one day, with enough hard work, they might be that "wealthier" person. I mean aren't many of us examples of that?

When it comes to taxes and benefits, many people vote by to protect the person they hope to be, not the person they are.

Either way, at best, we'll continue to see little tweaks and nudges to retirement age or benefits, or the caps for income, but not sweeping cuts. And those will all grandfather in, to avoid impacts to anyone already on or near SS ages.

 

[Dtail]

Generally agree.

Today, the issue of someone's perceived state of "wealthiness" by our gov't leans heavily towards income vs net worth. This is going to be tough for the gov't to solve despite the fact they are very, very interested in additional taxes (beyond real estate property taxes and personal property taxes) on everyone's assets.

We already have an example of banks and brokerages reporting account values to the gov't in the case of year end TIRA values for the purpose of calculating RMD's. I suppose this could be expanded to all bank and brokerage accounts. Won't that be nice?

One then might have to actually calculate a money under the mattress scenario vs. extra taxes.

 

[Turbo29]

Funny is the people who think that they will be fine if SS goes away because they rely on other sources.

How can you be sure of your other sources (pensions, bonds) if something as solid as SS goes away?

You know what is really funny? People love to say they are not counting on Social Security but in other posts they blather about how happy they are going to be when they are eligible for Medicare.


The Medicare trust fund is expected to be exhausted in 2026; that is a pre-covid 19 estimate so it may be sooner.

 

[USGrant1962]

Another reason why a payroll tax cut or payroll tax holiday is a stupid idea... rather than kicking the can down the road it is pulling the can closer to you.

The payroll tax holiday in the Great Recession did not affect the trust fund - for better or worse it was kept whole from general revenues (well actually borrowing). It was just a quick way to keep money in the hands of employers/workers.

I have no idea on the details of current proposals.

 

[youbet]

One then might have to actually calculate a money under the mattress scenario vs. extra taxes.

Yeah, I suppose. If you keep a very sharp pencil, you might be able to closely monitor levels where you loose benefits (higher taxes, reduced subsidies, etc.) disproportionately to the amount of money you're holding uninvested/unreported. Then it would be worth burying some in the backyard earning nothing to avoid going over an asset level cliff. It wouldn't be unlike managing income to get ACA subsidies today.

But, in general, it would be very possible for the gov't to know the vast majority of most people's assets and tax them.

 

[Beststash]

You know what is really funny? People love to say they are not counting on Social Security but in other posts they blather about how happy they are going to be when they are eligible for Medicare.

Maybe it's because more than likely you will not go bankrupt if you don't get SS but without an affordable healthcare plan it is very possible? I'm one of those that celebrated getting on Medicare, especially prior to the ACA.


When it comes to SS, since we are spending trillions, maybe the time is right to solve the SS problem? I think it would have bi-partisan support.

 

[eytonxav]

The payroll tax holiday in the Great Recession did not affect the trust fund

But the unemployment did.

 

[nap470]

In the US, that approach rarely works, because many many people envision that one day, with enough hard work, they might be that "wealthier" person. I mean aren't many of us examples of that?

When it comes to taxes and benefits, many people vote by to protect the person they hope to be, not the person they are.

Either way, at best, we'll continue to see little tweaks and nudges to retirement age or benefits, or the caps for income, but not sweeping cuts. And those will all grandfather in, to avoid impacts to anyone already on or near SS ages.

I agree with your comments, although I wish I was as optimistic as you on people voting to "protect the person they want to be." It just feels like the younger voters want "things" now and are ready to sign up for perceived security over opportunities to control their own financial success. I hope I'm am wrong.

I'm sure every generation has said the same thing about the next generation.

 

[harllee]

The over 60 crowd is the biggest voting block. It will be political suicide for any politician to vote to make major reductions in SS or Medicare so I just don't see it happening. The politicians will just print more money.

 

[Markola]

The over 60 crowd is the biggest voting block. It will be political suicide for any politician to vote to make major reductions in SS or Medicare so I just don't see it happening. The politicians will just print more money.

Yep, not until it becomes political suicide to ignore it.

 

[Aerides]

I agree with your comments, although I wish I was as optimistic as you on people voting to "protect the person they want to be." It just feels like the younger voters want "things" now and are ready to sign up for perceived security over opportunities to control their own financial success. I hope I'm am wrong.

I'm sure every generation has said the same thing about the next generation.

Oh sure, not all, but enough to make you scratch your head, and certainly not limited to young vs. older. Folks making lower incomes in any age bracket will sometimes vote for "future me" more than they do "today me" even if "future me" is barely a pipe dream with no basis in reality.

 

[Spock]

One then might have to actually calculate a money under the mattress scenario vs. extra taxes.

Not is cash is vilified as a disease spreader and stores only accept clean digital payments.

 

[Dtail]

Not is cash is vilified as a disease spreader and stores only accept clean digital payments.

A case for Bitcoin?

 

[Spock]

A case for Bitcoin?

Grocery stores accept bitcoin?
Transactions throttled by coin miners in China?
Lastly, if its a digital transaction, it can and will be tracked and taxed when the volume is sufficient to make it worth their while.

 

[Big_Hitter]

Another reason why a payroll tax cut or payroll tax holiday is a stupid idea...

+1

 

[Rianne]

What does depleting SS or Medicare mean? The present value, future value of the funds or the projected cost by predicting how many people will be accessing those funds. Are those funds in some sort of bond or treasury fund making interest?

For instance, Medicare depleted by 2026. What if a high % of predicted 65 yr olds are not there to claim it? I don't know the models they use to predict these things. Is it based on data from 2015, 2010 census data, insurance actuaries?

There are so many opinions about the solvency of SS and Medicare. AARP says SS will definitely be there. Do we include only those over 60 yrs. old, 55 yrs. old?

I think this is too complicated to predict unless there is someone on this forum that understands the reality of the situation.

 

[samm]

Should the SS Tax Rate be Increased?

Maintaining projected SS benefits for next 30 years, with lower employment taxes, will require higher SS taxes, which are at 7.65% in 2020.

Should the taxes be increased now? How high?

(or) Should SS benefits simply be cut to match revenues?

"The Federal Insurance Contributions Act (FICA) tax rate, which is the combined Social Security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2020 up to the Social Security wage base. The maximum Social Security tax employees and employers will each pay in 2020 is $8,537.40. This is an increase of $297.60 from $8,239.80 in 2019."

 

[mountainsoft]

if a change in SS “haircut” from 24% to 31% makes a substantial difference in your retirement plan probability of success, you may have cut the numbers too close. Like others here, our plan works without any SS.

SS will play an important role in our retirement plans (in addition to my wife's pension and our personal savings). I was already planning for a 25% reduction in benefits which gave us an estimated success rate of 100%. I have now reworked our estimates with a 31% reduction in benefits which lowered our success rate to 96%. Is that cutting it too close? I don't know. I still think I'm being overly cautious with most of my estimated figures, but when we get closer to pulling the plug I might have to reevaluate if we need to work a few more months. We'll see. We still have time.

 

[LARS]

Funny is the people who think that they will be fine if SS goes away because they rely on other sources.

How can you be sure of your other sources (pensions, bonds) if something as solid as SS goes away?

You are so right: Inconvenient truth.

If SS fails to deliver than much hurt is across all four corners of the United States.

As to means testing, it is a "window dressing" solution for politicians. Would have to drop so far into Middle Class land to make a difference that it is not a viable option. Moreover, if you are Asset rich and Income poor (i.e. no pension) I think even with Means Testing you have very little to worry about unless you're sitting on $30-40 million plus in Assets (and even then I think it unlikely).

Put another way, any Means Testing will be Income driven not Asset driven.

 

[youbet]

As to means testing, it is a "window dressing" solution for politicians.

You may look at means testing SS as "window dressing," but it is very popular with many of our fellow citizens and a block of our political leadership. Both taxing up to 85% of your SS benefits and the graduated schedule which allows for higher percentage payouts for lower level lifetime contributors are really examples of means testing already happening today. Future additions to means testing might include:

1. Additional bending of the curve further reducing payout percentages at higher incomes.

2. Changing the current "up to 85%" level of SS benefits taxed as income to 100%.

3. Removing the annual cap on FICA contributions.

4. Establishing a graduated scale of FICA tax levels similar to graduated income tax. This would be similar to IRMAA for Medicare and would be convenient since the hardware and methodology are already in place.

5. Adding an asset-based component in determining payout levels or FICA tax levels. In this age of computers and the Internet, having the fed gov't know your real estate, banking and brokerage assets would be simple. For us geezers, your bank and/or brokerage is already doing this on your TIRA accounts for purposes of calculating your RMD.

I'm not a proponent of means testing SS. But, it's already begun. Adding more means testing would be relatively easy. Some politicians like it because it gives them someone to villainize (the "rich"). I'm betting some expansion of means testing SS occurs within the next decade. This is a downer to me.......

And so be it........

 

[Sunset]

You may look at means testing SS as "window dressing," but it is very popular with many of our fellow citizens and a block of our political leadership. Both taxing up to 85% of your SS benefits and the graduated schedule which allows for higher percentage payouts for lower level lifetime contributors are really examples of means testing already happening today. Future additions to means testing might include:

1. Additional bending of the curve further reducing payout percentages at higher incomes.

2. Changing the current "up to 85%" level of SS benefits taxed as income to 100%.

3. Removing the annual cap on FICA contributions.

4. Establishing a graduated scale of FICA tax levels similar to graduated income tax. This would be similar to IRMAA for Medicare and would be convenient since the hardware and methodology are already in place.

5. Adding an asset-based component in determining payout levels or FICA tax levels. In this age of computers and the Internet, having the fed gov't know your real estate, banking and brokerage assets would be simple. For us geezers, your bank and/or brokerage is already doing this on your TIRA accounts for purposes of calculating your RMD.

I'm not a proponent of means testing SS. But, it's already begun. Adding more means testing would be relatively easy. Some politicians like it because it gives them someone to villainize (the "rich"). I'm betting some expansion of means testing SS occurs within the next decade. This is a downer to me.......

And so be it........

I mostly agree, these are possibly candidates.

The first 3 are the easiest as are simply modification of existing SS rules.

I think you missed one which is Eligibility:

1. Used recently is raise the age for SS Full Retirement, this could of course be raised higher to 67 or 68.
2. As well, there is the concept that since people pay into SS, they get a benefit, so raise the 10 yr rule to 15.
3. Removal of spousal benefit entirely, leaving just survivor benefit, meaning 1 SS benefit per worker, and not 1.5 just because you got married.

There are lots of options, none will be pleasantly accepted by the entire population.

 

[Sunset]

You are so right: Inconvenient truth.

If SS fails to deliver than much hurt is across all four corners of the United States.

As to means testing, it is a "window dressing" solution for politicians. Would have to drop so far into Middle Class land to make a difference that it is not a viable option. Moreover, if you are Asset rich and Income poor (i.e. no pension) I think even with Means Testing you have very little to worry about unless you're sitting on $30-40 million plus in Assets (and even then I think it unlikely).

Put another way, any Means Testing will be Income driven not Asset driven.

Our neighbor both worked and both collected SS at age 62. They literally have practically no other savings, except for a small 401K at best.

Any cut to SS will have a dramatic effect on their lives.