Future of Social Security: Boglehead View?

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surfinagin
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Future of Social Security: Boglehead View?

Post by surfinagin »

I recently read The Boglehead's Guide to Retirement Planning. Pages 178-179 provided a more positive outlook for Social Security than I expected. I'm 54, and previously thought that including Social Security when estimating my retirement income was considered a gamble.

Just taking a little poll to understand the current Boglehead Conventional Wisdom that applies to me on this topic:

-Any general agreement on the expected timing and numbers for the possible reforms? (higher FRA, lower COLA's, tax increases, and means testing).

-Should someone currently age 54 expect to receive Social Security, and therefore OK for them include SS in retirement income estimates?

Social Security isn't the cornerstone of my retirement income, but it will sure help to know it's OK to expect SS to provide a cushion for all my calcs!

Thanks For Your Time
Carl53
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Re: Future of Social Security: Boglehead View?

Post by Carl53 »

surfinagin wrote:
-Should someone currently age 54 expect to receive Social Security, and therefore OK for them include SS in retirement income estimates?
YES. If it makes you feel any better cut the expected amount by 25%, but you are likely close enough to retirement to be unaffected by so called solutions that are often bandied about should they be enacted.
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Re: Future of Social Security: Boglehead View?

Post by Wagnerjb »

I am also 54 and I am planning on it. However, if you have a healthy amount of assets (and income from those assets) in retirement, I would expect your SS benefits to be trimmed somewhat by taxes or benefit reductions. But I would be shocked if it was taken away totally, even for those with ample resources.

Just my 2 cents.
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Re: Future of Social Security: Boglehead View?

Post by mickeyd »

Social Security isn't the cornerstone of my retirement income, but it will sure help to know it's OK to expect SS to provide a cushion for all my calcs!
I am about 13 years older that you and my retirement planning from 1970 on specifically ignored SS. As luck would have it when I made it to age 66 last year, there was plenty of SS cash to go around.

My suggestion is to pretend that SS will not be there in the future and when it shows up in the mailbox decades from now, act surprised as hell!
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Re: Future of Social Security: Boglehead View?

Post by HueyLD »

Ever since I realized that my parents' generation paid in very little, but received sustantially greater social security benefits, I learned not to expect any social security benefits in my old age. As such, SSB was considered zero in my retirement planning and I will consider any future SS benefit to be a true surprise.
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magellan
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Re: Future of Social Security: Boglehead View?

Post by magellan »

Here's a link from ssa.gov with a summary on the financial state of the program:
http://www.ssa.gov/oact/trsum/index.html

It's very dry reading, but full of facts. My read is that while Social Security is not actuarially sound and will exhaust its trust fund assets sometime around mid century, the shortfall isn't terrible and could likely be corrected with relatively minor tweaks. Depending on the assumptions used, the long-term structural shortfall over the next 75 years seems to be around 20-25% of promised benefits.

So assuming you get 75% of promised benefits might not be a bad place to start in terms of sensitivity analysis for your plan. Perhaps you might run the numbers at 50%, 75%, and 100% to see how things look. This will help show how various scenarios might impact your plan.

Of course, it's anyone's guess as to how the shortfall will actually be dealt with and what will happen to promised payments. It could be fixed with higher taxes, lower payouts, a higher retirement age, reductions in benefits for higher income retirees, any combination of those things, or something that hasn't been considered yet. Forum policy probably prohibits discussion of these possibilities, but at least you can get a rough idea of the range of ideas being kicked around.

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Re: Future of Social Security: Boglehead View?

Post by nisiprius »

"About 75% of promised benefits" is the most neutral, non-political, prudent assumption one could make.
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Re: Future of Social Security: Boglehead View?

Post by clevername »

20 something here, pretty much completely writing off social security. If it's still around when I retire I'll spend it on a $5000 watch.
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Re: Future of Social Security: Boglehead View?

Post by peppers »

My wife and I are 60 and 58. We have always saved and invested with the idea that SS will not be there. When the time comes if we get something, ok. If not, we didn't plan on it.
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Re: Future of Social Security: Boglehead View?

Post by rmark1 »

I expect the inflation adjustment to be eaten by rising Medicare B deductions, making it in essence a fixed pension.
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surfinagin
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Re: Future of Social Security: Boglehead View?

Post by surfinagin »

Thanks for your responses so far, hope to hear many more opinions-

Based on your comments, it appears reasonable to expect I'll receive 75% of my projected SS benefits.

I use conservative amounts estimating my retirement budget and SWR. FIRECalc and other tools provide high assurance that I'll make it to age 95 and still have a nickel in my pocket. Even so, being risk-averse the decision to begin retirement will feel somewhat uncomfortable under any circumstance. I'm looking at options that would provide 25-30K income to approx age 60, to stay active and boost my retirement finance Safety Factor.

Factoring in 75% of projected SS benefits adds another Safety Factor, providing less worry that I'll find out 30-40 years from that now the projections cranked out by these calculators were wrong.
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Re: Future of Social Security: Boglehead View?

Post by sport »

Keep in mind that for a significant percentage of retirees in the US, social security is their major or only source of income. Therefore, it seems very likely that social security, in some form, will continue for the foreseeable future. The real question is how it will be financed, but this is a political question which we cannot address here.

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Re: Future of Social Security: Boglehead View?

Post by Steelersfan »

nisiprius wrote:"About 75% of promised benefits" is the most neutral, non-political, prudent assumption one could make.
+1
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Re: Future of Social Security: Boglehead View?

Post by Alan S. »

For current age in mid 50s, I think 25% is too low, UNLESS you are a very high income/assets retiree who might get caught in some form of means testing for benefits.

Other than means testing, I think you can look for the changeover to the chained CPI index which will cut .3 or .4 off the COLAs otherwise expected. There seems to be more agreement on this change than any of the others. An increase in the retirement age will also occur, but should not affect those already in their mid 50s.

For mid to upper middle income age 50+ potential beneficiaries, I think if you use 90% of current expected benefits, you will be still be on the conservative side. Phase that downward somewhat for higher incomes and upward for lower incomes.

For those in mid 40's, you might knock off another 4-8%.
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Re: Future of Social Security: Boglehead View?

Post by rob »

It's impossible to attempt to answer that in this forum... might as well close this thread now.

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Re: Future of Social Security: Boglehead View?

Post by ThePrune »

I think that 75% of currently promised benefits would be an over-estimate for most Bogleheads. The SS Trustees have cited this 75% only as an "average" for the entire population of eligible recipients. In the end I think that the benefit reduction will NOT be equally distributed.

SSA statistics show that about 35% of current (as of 2010) retirees depend on Social Security for over 90% of their retirement income. The percentage of retirees having this extreme level of dependency on SS has been slowly rising over the past few decade and will likely continue to rise in the future.

So do you really think that these folks will be asked to take an average 25% reduction in SS benefits along with everyone else? Would YOU personally feel good about it if this happened?

So from my perspective these very low income seniors will see little to no reduction in promised SS benefits. That means that in order to achieve a 25% reduction of overall promisied benefits, the rest of us with less dependency on SS will need to see an even larger reduction than 25%.

The next statistical break point shows that 66% of SS recipients receive at least half of their income from SS benefits. And I bet most Bogleheads have saved enough to not even be in this grouping! That puts them in the richest 34%.

I'm personally doing my planning at 60% of promised benefits, and wouldn't be surprised at only 50%. But then I'm among the 34% of retirees that anticipate receiveing less than half of their retirement income from SS benefits, so I'm in a better position to absorb the reduction.
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Re: Future of Social Security: Boglehead View?

Post by Silence Dogood »

I have no idea if social security will still be around for my generation (I'm 21).

Maybe sscritic could chime in?
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Re: Future of Social Security: Boglehead View?

Post by umfundi »

The best thing that you can do, SS or not, is to achieve a retirement goal that exceeds your projected needs by a factor or at least two. Your plan should be robust to variation.

That said, I think you can trust that SS will be there for you. The worst scenario is that your SS retirement age might be delayed a year or two, or there will be some similar ploy that reduces your previously promised benefits by a few percentage points.

In my opinion, the needed adjustments to SS in my lifetime (I plan to be dead by 2051) are a few percent in lowered obligations. I don't think it (SS) will disappear in my lifetime.

For which I thank Daniel Patrick Moynihan, who fixed the problems with SS a few decades ago. Now, yes, there are new and different problems, but I think they are not terrible.

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Re: Future of Social Security: Boglehead View?

Post by nonnie »

I'm 69. I saved and saved and saved for retirement and used to "joke" that I'd only count on my Social Security for medical and dental expenses. In 2011 my SS was $11,900 and my medical and dental expenses--including Medicare, Medigap and Part D premiums-were almost $13K. Moral of the story is either stay healthy or don't count on SS or save and invest like crazy or all of the above.

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Re: Future of Social Security: Boglehead View?

Post by sscritic »

I never considered zero as a reasonable estimate of my social security, but then I also didn't estimate that stocks would decline 5% a year over my lifetime. Neither has happened, so I guess I got both right. I can understand being pessimistic, but then you should build your plan around stocks returning zero. If you think stocks will have a positive return, then I think you should expect a positive outcome from social security. What I don't get in putting a rosy lens in front of your right eye and a frosted grey one in front of your left.
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Re: Future of Social Security: Boglehead View?

Post by Kevin M »

I expect full benefits (a bit older than OP), but won't be surprised if they are more highly taxed than now. I guess means testing is a possibility, but that shouldn't be much of a problem for those of us who it might affect.

My understanding is that SS is easy to fix through a combination of raising the retirement age and increasing the tax rate slightly, and/or raising or eliminating the cap on taxed earnings. These have been done before, so why not again? This is why I don't worry about it so much.

I agree with others that the most prudent course, especially for younger people, is to try to plan your retirement without depending on it, but for some this will be very difficult.

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Re: Future of Social Security: Boglehead View?

Post by snodog »

I am 42 and imagine I will get my full benefits. Worst case I will get 75%.

In fact I think there is just as good a chance that SS will be increased rather than decreased.
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Re: Future of Social Security: Boglehead View?

Post by Tim_in_GA »

snodog wrote:I am 42 and imagine I will get my full benefits. Worst case I will get 75%.
I'm also 42 and I plan everything for worst case - so I use a 75% SS factor in my planning spreadsheet.
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Re: Future of Social Security: Boglehead View?

Post by ResNullius »

I'm 61, and I've been receiving full SS benefits via SS disability for 18 months now. Assuming I live long enough, I'll convert to regular SS at 66 and get the same amount, which is my full retirement age amount. So long as our government maintains some reasonable type of existence, I think SS will continue to be paid. Fixing SS is one of the easiests of our government fiscal problems to fix. A little tweek here and a little tweek there, and SS will be solidly solvent for another 75 years or more. Medicare is a different issues, as is the national debt. But, so long as our government can avoid default, I think SS will be paid to future retirees. That's my guess for today.
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Re: Future of Social Security: Boglehead View?

Post by momar »

Once their parents start moving in with them en masse, the kids will demand to have their SS taxes increased to cover the projected decades hence minor shortfall.
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Re: Future of Social Security: Boglehead View?

Post by etarini »

nonnie wrote:Moral of the story is either stay healthy or don't count on SS or save and invest like crazy or all of the above.
Actually, the moral of your story was that Social Security was there for you in its entirety, full stop. It' s skyrocketing health care costs that are the real long-term problem. You will hear people talk about SocialSecurityAndMedicare as if they were one program, but they're not; the degree of difficulty of their respective solutions are quite different. Health care costs have gone up faster in the private sector than in the public sector, and the costs are twice what other advanced nations pay. As others have said, maintaining Social Security in its current form requires relatively small tweaks.

I don't know what the answer is for controlling health care costs, but as someone who's only about four years away from retirement, I do know that even at this late date, trying to predict future medical costs, including those for long term care, is far more uncertain than Social Security benefits, and that's probably true no matter what age you are.

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Re: Future of Social Security: Boglehead View?

Post by market timer »

etarini wrote: I don't know what the answer is for controlling health care costs, but as someone who's only about four years away from retirement, I do know that even at this late date, trying to predict future medical costs, including those for long term care, is far more uncertain than Social Security benefits, and that's probably true no matter what age you are.
I have the feeling there's going to be a cohort of med students who graduate with $200K in debt that will be completely hosed at some point in the near future.
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Re: Future of Social Security: Boglehead View?

Post by dbr »

I don't think a person in their fifties today should be concerned about SS evaporating. I think anyone older than fifty should consider that benefits may not accrue as much as we have been accustomed to, whether that adjustment is in the cost of living or in taxation or some such thing.

For a person under thirty, I think it is too soon to worry about it. Between age thirty and retirement so many things happen in a life that how SS eventually turns out will be far from the most important. You just can't plan a retirement situation thirty or forty years out. What you can do is operate in a financially astute manner and see what happens.
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Re: Future of Social Security: Boglehead View?

Post by FabLab »

surfinagin wrote:I recently read The Boglehead's Guide to Retirement Planning. Pages 178-179 provided a more positive outlook for Social Security than I expected. I'm 54, and previously thought that including Social Security when estimating my retirement income was considered a gamble.

Just taking a little poll to understand the current Boglehead Conventional Wisdom that applies to me on this topic:

-Any general agreement on the expected timing and numbers for the possible reforms? (higher FRA, lower COLA's, tax increases, and means testing).

-Should someone currently age 54 expect to receive Social Security, and therefore OK for them include SS in retirement income estimates?

Social Security isn't the cornerstone of my retirement income, but it will sure help to know it's OK to expect SS to provide a cushion for all my calcs!

Thanks For Your Time
Seems like an eminently lockable thread. While I can't say that I've paid much attention to SS (in my sixties and haven't filed) in my lifetime, to me the idea that it just wouldn't be around is folly. It may play to some audience, but that wouldn't include me. As to %s of benefits, no one can tell. My plan has always been to save/invest, save/invest, with the thought that what happens to SS is what happens to SS. But, again, for someone in his/her mid-50s, as you, I wouldn't expect to see any major upheavals. More adjustments on the margin, so to speak: change in COLA formula, added year or so to attain FRA, etc. If even that.

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Re: Future of Social Security: Boglehead View?

Post by hicabob »

If means testing was adopted I wonder how they would do it? Income declared on income tax returns is obvious, but for those of us without a pension, yet with considerable assets, it would be more difficult unless the fed govt collected more info than they currently do about an individuals finances.
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Re: Future of Social Security: Boglehead View?

Post by market timer »

hicabob wrote:If means testing was adopted I wonder how they would do it? Income declared on income tax returns is obvious, but for those of us without a pension, yet with considerable assets, it would be more difficult unless the fed govt collected more info than they currently do about an individuals finances.
Maybe they'll just use income and assets in retirement accounts.
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Re: Future of Social Security: Boglehead View?

Post by hicabob »

market timer wrote:
hicabob wrote:If means testing was adopted I wonder how they would do it? Income declared on income tax returns is obvious, but for those of us without a pension, yet with considerable assets, it would be more difficult unless the fed govt collected more info than they currently do about an individuals finances.
Maybe they'll just use income and assets in retirement accounts.

Indeed they have that info but it wouldn't be "fair" in many situations. I wonder how accurate the collection of "wealth tax" is in the few countries that still do?

http://en.wikipedia.org/wiki/Wealth_tax
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Re: Future of Social Security: Boglehead View?

Post by richard »

magellan wrote:It's very dry reading, but full of facts. My read is that while Social Security is not actuarially sound and will exhaust its trust fund assets sometime around mid century, the shortfall isn't terrible and could likely be corrected with relatively minor tweaks. Depending on the assumptions used, the long-term structural shortfall over the next 75 years seems to be around 20-25% of promised benefits.
My reading is that social security could pay full promised benefits for about 25 years and thereafter could pay 75-80%. Minor tweaks could correct any shortfall.
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Re: Future of Social Security: Boglehead View?

Post by richard »

hicabob wrote:If means testing was adopted I wonder how they would do it?
Taxing social security benefits is a form of means testing. That's already in place.
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Post by VictoriaF »

FabLab wrote:Seems like an eminently lockable thread.
Perhaps. One hope I have is that if the Consumer and Reaction Forum cannot be recovered, perhaps, we could have an Economics Forum. IRS cannot argue that Economics are unrelated to Personal Finance. :greedy

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Re: Future of Social Security: Boglehead View?

Post by Alan S. »

market timer wrote:
hicabob wrote:If means testing was adopted I wonder how they would do it? Income declared on income tax returns is obvious, but for those of us without a pension, yet with considerable assets, it would be more difficult unless the fed govt collected more info than they currently do about an individuals finances.
Maybe they'll just use income and assets in retirement accounts.
It's a good question. Form 5498 shows a year end value of IRA accounts, even Roth IRA accounts where that value is not needed to calculate RMDs. QRPs could be required to provide that same information fairly easily. But it certainly would not sit well if any means testing was limited to retirement account balances while those whose retirement savings consisted of a bunch of rental housing units escaped any asset based means testing.

15% of SS benefits are currently not taxed for anyone as this % is supposed to be an approximation for the average "investment in the contract", ie the employee's own contribution amounts into SS. Taxing that 15% would amount to double taxation, but double taxation certainly exists in other tax provisions. Maybe for purists Congress converts what would be a double income tax into some sort of excise tax separate from line 20 of Form 1040.

On one hand, we hear alot about not claiming benefits until 70, so speculation over cuts, how much, and when will discourage some from waiting, instead they will claim earlier per the "bird in hand" adage.
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What do you do *without* expecting Social Security?

Post by VictoriaF »

I am planning on getting about 70-75% of my estimated Social Security payments. I am also planning to take Social Security as late as possible to maximize the payout. An important question for me is whether the prudence of waiting may disappear with increased taxation of Social Security.

Important questions for those who do not expect to receive any Social Security payouts are how they plan for retirement. What do they do differently from those of us who do plan to receive at least some of it. Some questions are:

- How do you expect to provide for your retirement needs without Social Security?
- Do you hold more equities to have your investments grow faster?
- Do you plan to work longer?
- Do you spend less now?
- Are you planning to buy an annuity?
- Are you so wealthy that Social Security is a minor part of your income (assuming that assets can be used for income)?

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Re: Future of Social Security: Boglehead View?

Post by VictoriaF »

Alan S. wrote:
market timer wrote:
hicabob wrote:If means testing was adopted I wonder how they would do it? Income declared on income tax returns is obvious, but for those of us without a pension, yet with considerable assets, it would be more difficult unless the fed govt collected more info than they currently do about an individuals finances.
Maybe they'll just use income and assets in retirement accounts.
It's a good question. Form 5498 shows a year end value of IRA accounts, even Roth IRA accounts where that value is not needed to calculate RMDs. QRPs could be required to provide that same information fairly easily. But it certainly would not sit well if any means testing was limited to retirement account balances while those whose retirement savings consisted of a bunch of rental housing units escaped any asset based means testing.
The power of the modern data mining is such as that identifying 90% of assets of 90% of the population is fairly trivial.
Alan S. wrote:On one hand, we hear alot about not claiming benefits until 70, so speculation over cuts, how much, and when will discourage some from waiting, instead they will claim earlier per the "bird in hand" adage.
I have the same question. For me, it is not as much the question of the "bird in hand," as the question of getting a smaller amount that is taxed less vs. getting a larger amount that is taxed more.

Victoria
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Re: Future of Social Security: Boglehead View?

Post by BHCadet »

For calculation purpose, I use 50% as planning of my estimated SS benefits.
It would be great if we can get 75 to 100%.
However, I think we have enough resources that it will be fine if SS is not available to us.
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Re: Future of Social Security: Boglehead View?

Post by nonnie »

etarini wrote:
nonnie wrote:Moral of the story is either stay healthy or don't count on SS or save and invest like crazy or all of the above.
Actually, the moral of your story was that Social Security was there for you in its entirety, full stop. It' s skyrocketing health care costs that are the real long-term problem. You will hear people talk about SocialSecurityAndMedicare as if they were one program, but they're not; the degree of difficulty of their respective solutions are quite different. Health care costs have gone up faster in the private sector than in the public sector, and the costs are twice what other advanced nations pay. As others have said, maintaining Social Security in its current form requires relatively small tweaks.

I don't know what the answer is for controlling health care costs, but as someone who's only about four years away from retirement, I do know that even at this late date, trying to predict future medical costs, including those for long term care, is far more uncertain than Social Security benefits, and that's probably true no matter what age you are.

Eric
Interesting observations and I totally agree with you and thanks for making your points about the difference between Medicare and SS. I guess my post was inarticulately worded-- yes SS has been there for me (and for my partner who was able to collect SSDI until he converted to SS) but since health care costs are eating up so much of my SS I should have said, "don't count on SS alone." It really makes me shudder when I read the stats about how many folks depend on SS alone and even with small savings in the era of low interest rates it's very difficult for a lot of seniors. Thanks for your post!

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Re: Future of Social Security: Boglehead View?

Post by Cb »

You're already 54, and I think the likelihood of the government addressing SS funding challenges within the next 12 months is about zero.

Once you make 55 I think you can count on 100% of the SS projections, but it'd probably be reasonable for a middle-class couple to lop off a couple percent because SS taxation will likely increase in the future, even for those over 55.

Cb
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Re: Future of Social Security: Boglehead View?

Post by Clearly_Irrational »

Tim_in_GA wrote:I'm also 42 and I plan everything for worst case - so I use a 75% SS factor in my planning spreadsheet.
I think that's being optimistic. Personally I count on getting zero dollars from SS, anything I do end up getting will be a bonus. Remember SS isn't a savings account, it's just a politician's promise that they'll use future cash flow to pay your benefits.

Realistically I think you can expect that SS promises won't actually be broken, they'll just be folded, spindled and mutilated. For example, they'll probably change the way inflation is calculated. Expect that and plenty of other accounting type tricks to reduce the actual value of the benefit you receive.
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Re: Future of Social Security: Boglehead View?

Post by 2wolves »

BHCadet wrote:For calculation purpose, I use 50% as planning of my estimated SS benefits.
It would be great if we can get 75 to 100%.
However, I think we have enough resources that it will be fine if SS is not available to us.
Current actuarial calculations (which have been very accurate) say that even if nothing is done to fix the anticipated SS deficit, it will still pay out at 77% once the fund is depleted.
Alan S.
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Re: Future of Social Security: Boglehead View?

Post by Alan S. »

It will probably pay the 70-80% or even more, but not necessarily to allocated as in the past. Look for those with lower benefits to suffer much less than those with higher benefits. There might also be a way to factor in other assets of a retiree in reducing their SS benefit, not just using the amount of the benefit itself. You can be sure that various think tanks are already deeply involved in hatching proposals.

The clout of the senior vote will result in political reluctance to act as aggressively as many would like. But it is also true that major delays in acting will force the final measures to be more severe than they would be if action was taken sooner.
galectin
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Re: Future of Social Security: Boglehead View?

Post by galectin »

"Current actuarial calculations (which have been very accurate) say that even if nothing is done to fix the anticipated SS deficit, it will still pay out at 77% once the fund is depleted."

Not to be a 'Debbie Downer', but this assumes that the "Trust Fund" will be paid out in full between now and 2035, or so when this depletion is predicted to occur. I understand the political firestorm that not doing this would entail, but consider it a possibility, although it would not be presented in as stark terms as this.

I don't have any sure-fire solution, but my hope is that a combination of 1)raising the retirement age by a year or so, 2)raising the upper limit for contributions without raising the amount that these high earners would get back, 3)reducing the inflation calculation, and 4)long-term economic growth higher than predicted (which has been what happened in the '70s and '80's, I think, would address the problem. Of course, items 1 to 3 above would be resisted by various people.

I'm 62, think that I will probably retire at 66 and claim then, and will be able to get the stated benefit. But, If I was looking at claiming 15 years down the line, I would be considerably more pessimistic.
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Midpack
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Re: Future of Social Security: Boglehead View?

Post by Midpack »

I plan on 50% but everything seems to suggest we'll receive closer to 70%. I'd rather be pleasantly surprised than scramble to deal with a shortfall when I am an even older geezer. I am always curious why most people ask about Social Security when Medicare has the more dire solvency issue?
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nonnie
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Re: Future of Social Security: Boglehead View?

Post by nonnie »

Midpack wrote: I am always curious why most people ask about Social Security when Medicare has the more dire solvency issue?
Because it's easier to put income $$$s into your financial plan for the future than it is to figure out how sick you're going to be and how much Medicare you're going to require at 65 up? :D But--you're correct about the solvency issue of Medicare which has been discussed upthread.

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Atilla
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Re: Future of Social Security: Boglehead View?

Post by Atilla »

Being (for now) 20-ish years from retirement, I think it's prudent to assume a 25% cut at a minimum.

The cut will not be straightforward or obvious. The clawback will be done in multiple sneaky ways. Raising the age requirements, raising the income limit on taxes collected, raising the tax rate, means testing, adjusting the already steep regressivity of benefits vs. amount paid in, fiddling with the COLA adjustment, adjusting taxation of benefits, etc.

It all amounts to an effective huge tax increase on future recipients while leaving current recipients relatively untouched. But that's a result of elective political reality.
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Tim_in_GA
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Re: Future of Social Security: Boglehead View?

Post by Tim_in_GA »

nonnie wrote: Because it's easier to put income $$$s into your financial plan for the future than it is to figure out how sick you're going to be and how much Medicare you're going to require at 65 up? :D
True. My workaround is moving to a country with affordable national healthcare. The lower cost of living will be a nice bonus too.
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Re: Future of Social Security: Boglehead View?

Post by nonnie »

Atilla wrote:Being (for now) 20-ish years from retirement, I think it's prudent to assume a 25% cut at a minimum.

The cut will not be straightforward or obvious. The clawback will be done in multiple sneaky ways. Raising the age requirements, raising the income limit on taxes collected, raising the tax rate, means testing, adjusting the already steep regressivity of benefits vs. amount paid in, fiddling with the COLA adjustment, adjusting taxation of benefits, etc.

It all amounts to an effective huge tax increase on future recipients while leaving current recipients relatively untouched. But that's a result of elective political reality.
Every proposal I've ever seen has NOT ever limited any of these things, "raising the income limit on taxes collected [applicable if you're collecting and still working], raising the tax rate, means testing [a form of this already exists] ... fiddling with the COLA adjustment, adjusting taxation of benefits," only to future recipients so I wouldn't jump on that generational warfare bandwagon just yet.

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