Will Social Security be there?

[Rocky mtn high]

Exactly, SSI wasn’t a voluntary Contribution, they took it from you! I can guarantee you I would have opted out if I could have. Soo, they took your money with a promised payback and they continue to make “ADJUSTMENTS” none of which are a benefit to you. These so called adjustments are always ether reducing your benefits or taking more in the form of taxes.

 

[pb4uski]

Are the rules and regs that determine the numbers in that statement the same now as they were during all the years you payed into the system? Or have things changed?

I'm not intimately familiar with the history of the PIA calculation and bend points, but I suspect that they haven't been changed since the early 1980s other than for inflation.

 

[foxfirev5]

I'm beginning to think a Blow that Dough strategy could be rationalized for the means testing possibility. It would be more fun than my current 30% savings rate in retirement. YOLO.

 

[pb4uski]

Exactly, SSI wasn’t a voluntary Contribution, they took it from you! I can guarantee you I would have opted out if I could have. Soo, they took your money with a promised payback and they continue to make “ADJUSTMENTS” none of which are a benefit to you. These so called adjustments are always ether reducing your benefits or taking more in the form of taxes.

While I agree in general, to be fair, some of the adjustments are sensibly based on changes in facts. For example, the 1983 changes to adjust FRA from 65 to 67 were based on increased longevity from when the program was established in the 1930s. The increased longevity resulted in longer payouts so they adjusted FRA to try to reset the average number of years that payments would be received. The addition of taxation resulted in broadly aligning the taxation of SS with similar post-tax pension contribution plans like non-deductible IRAs, contributory pension plans and the like.

But to now make an adjustment based on means isn't a response to changes in facts.... it is more a response to that Congress mismanaged the program over the last 30 years and it can't afford to pay the benefits that have been promised. OASDI rates haven't been changed since 1990... from 1970 to 1990 there were 10 rate changes... if there had been periodic rate changes since 1990 it would have shed light the program's funding.

https://www.ssa.gov/oact/progdata/taxRates.html

 

[GenXguy]

Come on... smarten up for chrissakes.

SSA sends me a statement annually telling me what I would receive monthly if I retire at my FRA, at 70 or at my current age. See below. millions of American taxpayers receive them. I bet you do too.
The wording is pretty definitive...."your payment would be about".

I haven't received a mailed SS statement in years, but I check it online.

At any rate, that's not a promise. The government can completely eliminate your benefit and provide it to someone who is more needy.

I think the household "other" income phaseout of SS benefits from $30,000 to $50,000 seems fair. This would allow someone with the average SS benefit to earn close to $50,000 of "total" income without receiving any SS benefit cut, at all.

No, I won't give up my views and opinions on this. I know a lot of other people support means testing of SS so that wealthy seniors don't receive benefits that they don't need so that struggling seniors can receive more benefits.

I do fully support increases in FICA taxes to help support SS and Medicare. I think it would be a good idea to tax investment income as well for households with over $50,000/yr income to help shore up SS & Medicare.

 

[Gumby]

Just so you know, the first time my SS check comes up short, I'll be coming over to your house to take as much of your stuff as necessary to make up the difference.

 

[GenXguy]

Exactly, SSI wasn’t a voluntary Contribution, they took it from you! I can guarantee you I would have opted out if I could have. Soo, they took your money with a promised payback and they continue to make “ADJUSTMENTS” none of which are a benefit to you. These so called adjustments are always ether reducing your benefits or taking more in the form of taxes.

SSI? That's Supplemental Security Income, not to be confused with Social Security benefits being discussed here.

 

[GenXguy]

What would stop people over the threshold from pulling enough of their invested assets out and putting them in something not reportable/trackable as income (say under the mattress, or maybe in Bitcoin, although I have no idea how Bitcoin works, or whatever) so they can still get the SS payments they had planned on?.

Well, a $2M stash's return at 7% would be lot to give up for the average $1400/mo SS benefit.

 

[GenXguy]

Here's some more detail in reference to my earlier comments about "net" SS benefits being cut every year, with some references:

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 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, so perhaps those under 50 wouldn't be able to collect FRA benefits until age 70. And means testing for higher income households can help preserve the funds that struggling seniors need to survive.

 

[pb4uski]

Here's some more detail in reference to my earlier comments about "net" SS benefits being cut every year...

Pretty common knowledge around here, so you're

And I think there would be agreement that the threshold should be adjusted for inflation.

 

[pb4uski]

I haven't received a mailed SS statement in years, but I check it online.

At any rate, that's not a promise. The government can completely eliminate your benefit and provide it to someone who is more needy.

I think the household "other" income phaseout of SS benefits from $30,000 to $50,000 seems fair. This would allow someone with the average SS benefit to earn close to $50,000 of "total" income without receiving any SS benefit cut, at all.

No, I won't give up my views and opinions on this. I know a lot of other people support means testing of SS so that wealthy seniors don't receive benefits that they don't need so that struggling seniors can receive more benefits.

I do fully support increases in FICA taxes to help support SS and Medicare. I think it would be a good idea to tax investment income as well for households with over $50,000/yr income to help shore up SS & Medicare.

I get mine online too.

And while I know that the promise isn't legally enforceable, if you surveyed 1,000 people paying in to SS whether or not it was a promise, I bet 997 would say that it was a promise.... so you're picking a nit.

Are you aware that even under the current program that the benefit formula is skewed to lower income earners? Lower earners get much higher benefits in relation to their contributions than higher income earners. DW was a SAHM but is entitled to benefits based on her own work record. Based on her own work record she would get back all that she put in in 11 months. I was a high earner and it will take me 44 months to get back what I contributed. Both of those numbers ognore employer conributions and the time value of money.

Just a wild guess that not one of people that you know that support means testing of SS have been contributing for 40-50 years like most of us have.

Your whole thing about not needing benefit is a bit stupid... taken to an extreme I guess in your view that the marginal tax rate beyond a certain level of income would be 100% because those prople don't "need" it.

Are you aware that investment is currently taxed? Are you proposing to tax it a second time?

 

[MissMolly]

Well, you're young now. Wait until you are our age and see how you feel about the government taking away something they told you all your life you would receive and then yank it at the last minute.

We have all been affected by changes to SS over the years, but it was done far enough in advance that we were able to prepare for it. You can't wait until the individual has already reached the age to draw SS to then pull the rug out from under them. There is no justification for that. You just don't do that to seniors who are then unable to go back and make changes to their plans. It's too late by then.

 

[youbet]

I'm beginning to think a Blow that Dough strategy could be rationalized for the means testing possibility. It would be more fun than my current 30% savings rate in retirement. YOLO.

You're probably speaking tongue in cheek, but wouldn't that be cutting off your nose to spite your face? I mean, I mean...... you'd get off your FIRE plan and spend down wildly to avoid some minor impact of SS means testing? Not me.

There are lots of things to be considered in trying to save SS, about the only one I'm against is having young families pay higher FICA taxes to avoid me taking a small cut. DW and I can take care of ourselves without relying on others with less subsidizing us anymore than they already are.

BTW, congrats on that 30% savings rate in retirement! You are truly LBYM!
We have a very low WR at our house, but we're not saving out of current income (negative WR) as you are. Maybe you should think a bit about "blowing dat dough!

 

[HI Bill]

So it moves the break even age between taking it 62/70 out a few more years but you’re still better off if you plan on living well beyond your life expectancy to delay until 70. Unless the haircut is much more than 25-30%.

Does your 'break even' analysis include considering taking SS early (62-67) and reinvesting the proceeds? If you can defer to 70, it means you don't need the $ now, and can reinvest 100% of the early withdrawals. Then, the 'break even' point becomes much farther out. Taxes also may also move the break even point further out (if you start at 70, your income is likely to increase, and up to 85% of SS is taxable, so you'll have a larger effective tax rate if you don't lower your portfolio WR). IMHO, people who are very concerned that we will see a 23% haircut (or more) and who can take SS earlier than 2035 should consider doing so, and invest the proceeds (or lower your WR to match the proceeds). My full benefits age is 67, so I won't be able to start until 2033, regardless of what I'd like to do (so that spousal benefits are maximized).

 

[pb4uski]

.... I would not be opposed to means testing of SS benefits resulting in cuts beginning for households with over $30,000 of "other" retirement income and phasing out completely at $50,000 of other income so that the most needy of seniors can get their full promised benefit.

This is already happening. A greater percentage of SS benefits are taxed every year because the taxation thresholds are not indexed to inflation while the benefits are increased. However, they could still steepen the curve, tax 100% of SS benefits for people with over $30,000 of "other" income, for example. That would probably be a good idea, but I think it should be indexed to inflation after correcting the previous policy errors by adjusting the original thresholds to inflation.

I'm confused.

In one post you are proposing phasing out benefits is a participant has more than $30k of other income with a full phase-out at $50k of income.

In another you are proposing taxing SS 100% for people with over $30,000 of other income.

Why don't you combine the two and cut their benefits if they have more than $30k of other income but still tax them on the benefits that they would have received?

So someone with a $40k SS benefit that has $50k of other income
would have to forgo receiving the $40k and would pay tax on the $40k even though they didn't receive it.

That should raise some serious money.

 

[foxfirev5]

You're probably speaking tongue in cheek, but wouldn't that be cutting off your nose to spite your face? I mean, I mean...... you'd get off your FIRE plan and spend down wildly to avoid some minor impact of SS means testing? Not me.

There are lots of things to be considered in trying to save SS, about the only one I'm against is having young families pay higher FICA taxes to avoid me taking a small cut. DW and I can take care of ourselves without relying on others with less subsidizing us anymore than they already are.

BTW, congrats on that 30% savings rate in retirement! You are truly LBYM!
We have a very low WR at our house, but we're not saving out of current income (negative WR) as you are. Maybe you should think a bit about "blowing dat dough!

Yeah very tongue in cheek! Sometimes I daydream about going off the rails and blowing some big bucks. However there's nothing I really want that money can buy.

 

[youbet]

yank it at the last minute.

There seems to be a lot of consideration of extreme examples in this thread. In my case, I'm certainly not for "yanking it at the last minute." But, I'm also not for continuing the system as-is which would likely result in younger tax payers paying higher levels of FICA to ensure all current SS benefactors receive their so-called "promise." Before low income families pay higher payroll taxes to ensure all geezers, regardless of wealth/income, continue to receive full benefits, consideration should be given to the most financially fortunate of these geezers accepting a bit less.

 

[HI Bill]

...It would be more fun than my current 30% savings rate in retirement. YOLO.

So how does this work, exactly? You have pensions or SS, plus some percentage of a WR (let's assume 3%). And then you save (don't spend) what you don't need? If you were living off of only pensions and/or SS and/or dividends and/or rental income, it would be easier to comprehend a savings rate in retirement than if you're including a $ WR from investments.

Someone with a 1.5% WR who spends 100% of that might have a savings rate of 0%. Or someone who uses a 4% WR but only spends half has a 2% savings rate?

 

[USGrant1962]

There seems to be a lot of consideration of extreme examples in this thread. In my case, I'm certainly not for "yanking it at the last minute." But, I'm also not for continuing the system as-is which would likely result in younger tax payers paying higher levels of FICA to ensure all current SS benefactors receive their so-called "promise." Before low income families pay higher payroll taxes to ensure all geezers, regardless of wealth/income, continue to receive full benefits, consideration should be given to the most financially fortunate of these geezers accepting a bit less.

Except soaking rich beneficiaries doesn't solve the problem. This calculator, for example, suggests that zeroing out SS for beneficiaries in "the 1%" only closes 8% of the gap. Leaving 92% of the problem still to be solved. There just aren't enough truly high income people to soak.

The Reformer: An Interactive Tool to Fix Social Security

 

[HI Bill]

But, I'm also not for continuing the system as-is which would likely result in younger tax payers paying higher levels of FICA to ensure all current SS benefactors receive their so-called "promise." Before low income families pay higher payroll taxes to ensure all geezers, regardless of wealth/income, continue to receive full benefits, consideration should be given to the most financially fortunate of these geezers accepting a bit less.

IF contributions to SS had been voluntary, and there had been no implied/actual promise of benefits to be made on one's earnings history, I might agree with you. And, I would have stopped contributing in 1998, and self-funded my retirement 100%. But I was not given that choice, nor were my employers, who were forced to make contributions as well.

I made the choice to LBYM and to save 49% of my income. I forewent vacations, houses, cars, and lots of 'toy's to be able to get to where I am today. I invested in an education, and worked full-time for the past 29 years, with no gaps in employment. I moved cities and states, several times, following the work. I sacrificed and worked hard to get to where I am. The thought that those who didn't do those things (especially, those who had the same opportunities/education/salaries) should benefit from their lack of sacrifice doesn't seem ethical to me.

Changing the rules 30 years in is simply not fair. IMHO, neither was raising FRA more than 10 years into my career. SS benefits have been changed (mostly increased) many times. Congress has failed to act, and to shore up SS, even though the projections showed a decade ago that we would have a significant shortfall. I put the responsibility squarely in their court to fix this. I expect 100% of my projected benefits, and if they need to adjust the payroll taxes to do this, they should. Otherwise, in 40 years, the current 18-year old may be looking at another significant reduction in benefits.

 

[Math]

With reference to the OP, Cindy Blue, you need to use the website that USGrant1962 listed: opensocialsecurity.com It allows you to adjust years and percents that you think SS might be adjusted.

When I use it, it suggests that I should start drawing at age 62 but my husband should wait until age 70. That might be because I fall under the GPO Windfall offset that means I will get 40% of my SS from previous jobs because I did not pay SS because of where I did my teaching career. There are 15 states where this is true. Also, I will not qualify for any share of my husband’s SS if he should die before me.

It is a good site and gives a person a lot to think about. My husband is the designated worrier, not me.

 

[teejayevans]

Does your 'break even' analysis include considering taking SS early (62-67) and reinvesting the proceeds? If you can defer to 70, it means you don't need the $ now, and can reinvest 100% of the early withdrawals. Then, the 'break even' point becomes much farther out. Taxes also may also move the break even point further out (if you start at 70, your income is likely to increase, and up to 85% of SS is taxable, so you'll have a larger effective tax rate if you don't lower your portfolio WR). IMHO, people who are very concerned that we will see a 23% haircut (or more) and who can take SS earlier than 2035 should consider doing so, and invest the proceeds (or lower your WR to match the proceeds). My full benefits age is 67, so I won't be able to start until 2033, regardless of what I'd like to do (so that spousal benefits are maximized).

No, it was a back of envelope analysis... The problem is you can’t really know what you’re going to earn on those investments so I don’t think it’s fair to compare somewhat risky investment (stocks, bonds) with a guaranteed income. And with our current savings account interest rates not sure would make much of a difference.

 

[pb4uski]

I did a return on SS analysis a few years ago just for the fun of it. First, I created a spreadsheet and input my SS earnings by year from my annual SS statement from 1970 to now. Then I added the Social Security tax rates by year and calculated my annual contributions... the sum of the annual contributions as I calculated was within a couple hundred of the amount shown on my SS statement... close enough. I then I estimated that 72% of what I paid related to retirement benefits, with the other 28% related to disability and survivor insurance (had read that somewhere). So all those were cash outflows.

I then added the annual benefits at FRA based on my SS statement and rolled them forward to age 82 at a 2% annual COLA.

Looking at my benefits through age 82 in relation to what I paid, the IRR is 6.28%... in relation to what both I and my employer paid in, the IRR is 4.15%.

Of course, the longer that I live the longer that I receive benefit payments and the higher my IRR is.

Age	My Contrib	Me and Er Contb
70	1.91%	-0.88%
71	2.77%	0.09%
72	3.44%	0.85%
73	3.97%	1.45%
74	4.41%	1.95%
75	4.78%	2.37%
76	5.09%	2.74%
77	5.36%	3.05%
78	5.59%	3.32%
79	5.80%	3.57%
80	5.98%	3.78%
81	6.14%	3.98%
82	6.28%	4.15%
83	6.41%	4.31%
84	6.53%	4.45%
85	6.63%	4.58%
86	6.73%	4.69%
87	6.81%	4.80%
88	6.89%	4.90%
89	6.96%	4.99%
90	7.03%	5.08%
91	7.09%	5.15%
92	7.14%	5.23%
93	7.19%	5.29%
94	7.24%	5.36%
95	7.28%	5.41%
96	7.32%	5.47%
97	7.36%	5.52%
98	7.39%	5.56%
99	7.42%	5.61%
100	7.45%	5.65%

 

[youbet]

I expect 100% of my projected benefits, and if they need to adjust the payroll taxes to do this, they should. Otherwise, in 40 years, the current 18-year old may be looking at another significant reduction in benefits.

I'd like to continue receiving the SS benefits I've been receiving for the past decade +. But DW and I are a bit more flexible than you in understanding that the overall SS package is flawed (and was from the beginning) in both the input and output sides of the equation. I have no desire to see hard working young families burdened with a wealth transfer from them to me beyond what it is today. We're doing pretty well and wish the best for everyone in society.

 

[MuirWannabe]

I guess they could always cut overall government spending, pay down the debt, and redirect interest payments back to the SS and Medicare fund. That seems likely [emoji16]