Will Social Security be there?

[CindyBlue]

Remember that all the worries and pessimistic predictions about Social Security inevitably include the phrase "unless Congress takes some action."

I think it's probably wise to expect "some action" even if the can continues to be kicked down the road for some time yet.

I am hoping this is true. Up until recently I was pretty sure that the government world fix the problem before the haircut was necessary. Now I'm not so sure...sigh...

I know there are no real answers because no one can predict the future. But it sure feels good to me to be able to share my concerns here and read your responses. It makes me feel that I'm not alone in all this

 

[Time2]

For the OP
This pamphlet was included with my Vanguard 401(k) statement back in 2006.
Sorry about the quality, had a really cheap scanner back then.

What changes if any, have been made to SS since this 2006 paper?

 

[tmm99]

The current news is unsettling, but the talk of 75% has been around for a long time. I always thought (hoped) that we won't get a 75% haircut across the board, but instead, higher SS payees will have to pay more taxes on the SS (by lowering the income limit or by making SS fully taxable or both) and of course, by continuing to raise the FRA. I cannot imagine, in any circumstance that the government will take away any SS money from people who have absolutely nothing but a small SS payment to live on with no other income.

I do include 25% reduction in SS in my planning although I'm hoping the percentage will be lower.

 

[Alex The Great]

I always thought (hoped) that we won't get a 75% haircut across the board, but instead, higher SS payees will have to pay more taxes on the SS (by lowering the income limit or by making SS fully taxable or both) and of course, by continuing to raise the FRA.

Yes I still hope for it too.
But there may be another option: raise retirement age. For example, instead of 62 make it 65 when anyone can claim SS, and make the retirement age 70 rather than 67 as it is currently set for me.

 

[T-Minus]

...Sometimes I think all I do is worry...sigh...

Well, if it isn’t Social Security, there’s COVID-19, Murder Hornets, Solar Flares, Bomb cyclones, Supervolcano eruptions, GMO’s, deorbiting satellites, cell phone radiation, zombies, etc. - a LOT of stuff to fill your day with worry!

 

[CindyBlue]

Well, if it isn’t Social Security, there’s COVID-19, Murder Hornets, Solar Flares, Bomb cyclones, Supervolcano eruptions, GMO’s, deorbiting satellites, cell phone radiation, zombies, etc. - a LOT of stuff to fill your day with worry!

Point well taken!

 

[teejayevans]

There is lots of ideas that Congress can do now but as we get closer the 2035 there are fewer and fewer options.
It would be interesting to know once the surplus is gone, what the SS tax % will need to be to keep paying out benefits.

 

[REWahoo]

Well, if it isn’t Social Security, there’s COVID-19, Murder Hornets, Solar Flares, Bomb cyclones, Supervolcano eruptions, GMO’s, deorbiting satellites, cell phone radiation, zombies, etc.

Oh, please!

How could you have possibly omitted an asteroid strike?

 

[CindyBlue]

Oh, please!

How could you have possibly omitted an asteroid strike?

 

[ownyourfuture]

But there may be another option: raise retirement age. For example, instead of 62 make it 65 when anyone can claim SS

I sure hope not.

 

[Rustic23]

I may need some correction to what I think is true

The SS Trust fund does not actually have any money in it. It was borrowed by the Federal Government and spent. I think that is still going on today.

So if this is true, then the same Federal Government is responsible for paying whether SS tax is continued to be collected or not. However, I suspect some other form of tax would be instituted to cover the loss of funds.

In any case, I don't believe there is a Washington Politician with B@lls enough to stop SS. Means test, maybe, raise taxes, maybe, freeze benefits, maybe, but not eliminate it.

It does pose an interesting question. How many folks on here could handle a 25% reduction in SS. DW and I could, but I hope it is a long way off.

 

[Mr._Graybeard]

Interesting who benefits from a payroll tax holiday. The employees supposedly pay the tax, but it's the employers who cut the check.

 

[Out-to-Lunch]

I may need some correction to what I think is true

The SS Trust fund does not actually have any money in it. It was borrowed by the Federal Government and spent. I think that is still going on today.

Well, it depends on your definition of "money," I suppose. The Trust Fund holds securities backed by the full faith and credit of the US. If I have a bunch of Treasury bills, notes, and/or bonds, I think that I have "money."

However, your larger point is well-taken. The system was carefully designed to make people feel like the SS payments are NOT general obligations of the US. It didn't/doesn't have to be that way.

 

[aja8888]

The closer we get to 2035, the FED will just turn up the printing presses (Brrrrr...........) and pump out enough big bills to cover SS! Simple! (all they need is paper).

Easy peasy.....no politicians get doused with gasoline and everyone is happy!!

 

[ransil]

If the second wave of cov-19 hits and bumps off more of the elderly the funds should be thete.

 

[flyingaway]

The current news is unsettling, but the talk of 75% has been around for a long time. I always thought (hoped) that we won't get a 75% haircut across the board, but instead, higher SS payees will have to pay more taxes on the SS (by lowering the income limit or by making SS fully taxable or both) and of course, by continuing to raise the FRA. I cannot imagine, in any circumstance that the government will take away any SS money from people who have absolutely nothing but a small SS payment to live on with no other income.

I do include 25% reduction in SS in my planning although I'm hoping the percentage will be lower.

If higher amount of social security will be taxed at a higher level, would that change the strategy of delaying it to 70?

 

[Rustic23]

Well, it depends on your definition of "money," I suppose. The Trust Fund holds securities backed by the full faith and credit of the US. If I have a bunch of Treasury bills, notes, and/or bonds, I think that I have "money."

If you give me $100 to hold. I write an IOU, put it in my drawer, and then spend the money. The money really is not there. My IOU is, and that may be good, or may not. For me, other than a law hiding this, the government owed the debt when it collected the tax, it then spent the tax. Therefore, there appears nothing magical about the trust fund going away, it went away when it was spent. All that is happening is a reduction in the IOU.

 

[aja8888]

The government has the ability to tax (us). So when times get tough, or they just need more revenue, they just tax us more. We will see many more actual examples of this "magic" in the coming years. That way, SS will be safe, along with a host of other funding programs.

 

[HI Bill]

At the risk of sounding obvious - if eliminated, eliminate for those entering the workforce.

The only way this would work, is if you still collected the SS payroll tax, but didn't give them the benefits later. SS is not fully funded from you and your employer's contributions. It's been amended many times and now covers many more people than just the contributors...pretty much a pyramid scheme, and its shortfall is due to declining population growth rates.

 

[HI Bill]

If the second wave of cov-19 hits and bumps off more of the elderly the funds should be thete.

63 million Americans currently collect SS, and we've 'only' lost 163K total to COVID (not all of these were collecting, but would have been in the future, presumably). IF COVID is here forever, and we don't get a workable vaccine, this might decrease life expectancy for everyone still living and yet to be born, which might help the numbers if most of us die after 60, after contributing to SS all of our working lives...I'm thinking of starting early, between 65 and 67, rather than 70!

 

[Gumby]

My planning involves taste testing various brands of cat food and driving around to scope out the undersides of bridges and overpasses.

 

[cathy63]

If you give me $100 to hold. I write an IOU, put it in my drawer, and then spend the money. The money really is not there. My IOU is, and that may be good, or may not. For me, other than a law hiding this, the government owed the debt when it collected the tax, it then spent the tax. Therefore, there appears nothing magical about the trust fund going away, it went away when it was spent. All that is happening is a reduction in the IOU.

85 years ago, when SS was created, the requirement in the law was that the trust funds would always be invested in securities that are backed by the U.S. Government, i.e. Treasuries. It's not like some Congress came along decades later and raided the piggy bank and just left an IOU behind for their successors to make good on. The plan from day one was to grow the fund as safely as possible by investing it in the most secure debt obligation in the world. The trust fund was never a pile of cash or gold bars sitting in a vault somewhere, which seems to be what some people envision it as.

You're right that there's nothing magic about it; the money comes in and it gets invested according to the law. You can see the SSA investment reports any time you want to here: https://www.ssa.gov/oact/progdata/investheld.html

 

[copyright1997reloaded]

Sarcasm alert:

Haven't you all heard? Government supplied money is now endless. Remember, taxation is taking from Peter to pay Paul...but now all we need to do is pay Paul and not even take away from Peter! So there is no need for all this silly worrying about how to pay for things! All we need to do is just add money to the system, like magic. With our modern day digital system, we don't even need to make the money printing machines go Brrrrrr, all we need to do is magically have the fed buy assets (e.g. bonds) in open market operations (via member banks). The fed takes those assets off of the poor bankers hands, and in return credits those banks with the value of those assets - and just like magic there is more money in the system.

Even better! Since people are stuck at home and some businesses closed, that money - instead of being used to buy goods and services - can be used to buy the really important things - like equities and other financial assets. Then the magic is even better with a robust stock market.

End of Sarcasm.

From a personal perspective - I can't influence or change what is happening. All I can do is adapt my own strategy to best survive it (at least for now). That means going with the flow in terms of stock prices (e.g. my largest holding Apple now at $450/share) and to realize as we debase our currency and lock our children and grandchildren into massive amounts of debt - try to hedge as much as I dare in things like a good food storage supply, land to provide wood to heat my home, and in alternative assets like gold/silver.

In the meantime, the payroll tax deferment being discussed here is just a pimple on the *ss of the overall problem.

CindyBlue, hope this makes you feel better.

 

[jollystomper]

 

[Independent]

There is lots of ideas that Congress can do now but as we get closer the 2035 there are fewer and fewer options.
It would be interesting to know once the surplus is gone, what the SS tax % will need to be to keep paying out benefits.

The 25% benefit cut means that taxes would be 75% of the current benefit formula. Increasing the payroll tax rate to fill the gap would use the ratio 25/75 = .333 .

So the current 12.4% (combined employee and employer) would go to 16.5%.

IMO, that's wouldn't be a disaster if SS were the only money problem the gov't had. But, there is Medicare, an underlying annual deficit, etc.