Social Security Jitters Anyone ??

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moorso
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Social Security Jitters Anyone ??

Post by moorso »

With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead? I know that thought has entered my mind recently. Been running some opensocialsecurity scenarios and i-orps and claimiing a couple years early for me at 68 does not make a huge difference. Wonder if there are any others out there with similar thoughts and concerns. Thanks.
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JoMoney
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Re: Social Security Jitters Anyone ??

Post by JoMoney »

My take agrees with:
https://www.forbes.com/sites/bobcarlson ... 3b1af2e320
... retirees and near-retirees shouldn’t panic at reports the trust fund will run out of money. It’s not a good idea to accelerate the date you claim Social Security benefits simply because the trust fund will run out of money.

Payroll taxes will continue to roll into the program each year. They are estimated to be sufficient to pay 75% to 80% of promised benefits for at least 75 years.

Also, it’s likely those already retired or within five to 10 years of retirement will have their benefits protected by Congress, except perhaps for high income Social Security recipients. Most of the burden of the Social Security shortfall will fall on those who are 10 years or more away from claiming their benefits. ...
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glock19
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Re: Social Security Jitters Anyone ??

Post by glock19 »

I started receiving benefits after retirement at age 62. My breakeven point is this year, so I basically lost money. My concern then, and that same concern is even stronger now, is that eventually "means testing" will come into play. I doubt benefits will ever be discontinued because the plan is underfunded, but I can see benefits being reduced to those who have "sufficient assets".

Keep in mind my opinion has been wrong up to this point.
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nisiprius
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Re: Social Security Jitters Anyone ??

Post by nisiprius »

I think the uncertainty of the future is far greater than the crazy overprecision of the experts' analyses of claiming strategies. The existence of any choice makes people fretful about choosing the best, and the demand for knowing the best claiming strategy has created a supply of people claiming to have answers. I think people should just do whatever seems convenient in terms of personal cash flow and hope for the best. My personal bias happens to be "Ah, take the Cash and let the Credit go!"*

In any case, it isn't wise to act on anybody's politically charged speculation about the future of Social Security; none of it is certain or objective enough to act on. In estimating retirement income it might be rational to allow a margin of safety by incorporating one of those official estimates--I don't know the latest exact numbers--like "if nothing is done, there could be 23% cut in 2032."

The late "Ole Meph," the forum's foremost insurance expert, posted this in 2008: When to Take Benefits
I recommend taking SS at the earliest possible age if you and your spouse are retired or want to and are able to retire.

The fact is that life is never guaranteed tomorrow and any presumable benefits by waiting are gone forever if you die before that future date.

Take the money now while you are alive. Then you have it in hand and can spend or invest it.

It is the only rational thing to do. Betting on higher benefits down the road is pure gambling.

ole meph
My personal story is that I claimed at age 62 for the simple reason that my unemployment benefits were about to run about and I hadn't managed to land a single job interview in six months. I have no regrets at all. (Complicated followup is that I immediately landed a consulting gig that blew past the earned income limit, reducing my benefits to zero, but I just let it happened because I understood correctly how that worked, at at full retirement age an adjustment was made and the overall effect was the same as if I had retired at full retirement age).

A late friend was accurately diagnosed with terminal cancer at age 73. I visited him before things got bad and it transpired that he had never filed for Social Security. Just never gotten around to it. I said to him, "Stop right there. I am standing behind your chair and you are going to log into Social Security right now and file and I am not going to move until you have finished doing it." It took about twenty minutes. (It would have been much quicker but his wife wasn't around and he couldn't remember the date of his marriage). (He was in great cognitive shape but he literally was an "absent-minded professor.") Social Security sent him a lump sum that included retroactive benefits for about six months, but two full years of Social Security benefits were irrevocable and permanently lost. That is not an optimal claiming strategy.

*
Edward FitzGerald, translating a quatrain of Omar Khayyam wrote:Some for the Glories of This World; and some
Sigh for the Prophet's Paradise to come;
Ah, take the Cash, and let the Credit go,
Nor heed the rumble of a distant Drum!
Last edited by nisiprius on Wed Aug 19, 2020 10:06 am, edited 4 times in total.
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JoeRetire
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Re: Social Security Jitters Anyone ??

Post by JoeRetire »

moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead? I know that thought has entered my mind recently. Been running some opensocialsecurity scenarios and i-orps and claimiing a couple years early for me at 68 does not make a huge difference. Wonder if there are any others out there with similar thoughts and concerns. Thanks.
I'm 66 and still plan to delay until 70.

As far as I can tell, nothing has actually changed. I'm not sure what "all this talk" you are hearing, but are you assuming that claiming earlier would somehow insulate you from future "cutting social security"? If so, I see no evidence of that.
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JoeRetire
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Re: Social Security Jitters Anyone ??

Post by JoeRetire »

nisiprius wrote: Wed Aug 19, 2020 9:56 am A late friend was accurately diagnosed with terminal cancer at age 73. I visited him before things got bad and it transpired that he had never filed for Social Security. Just never gotten around to it.
An educator, and he had "never gotten around to it"? :oops:
A shame.
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Re: Social Security Jitters Anyone ??

Post by nisiprius »

JoeRetire wrote: Wed Aug 19, 2020 10:03 am
nisiprius wrote: Wed Aug 19, 2020 9:56 am A late friend was accurately diagnosed with terminal cancer at age 73. I visited him before things got bad and it transpired that he had never filed for Social Security. Just never gotten around to it.
An educator, and he had "never gotten around to it"? :oops:
A shame.
Oh, yeah. It was... amazing. But that's the real world, not spreadsheets and ESPlanner. I tried to get him to make up an accurate list of his assets, for the benefit of his wife, and that was amazing, too. "So is that everything?" "Yes, that's everything." "Are you sure?" "Well, I think there were a couple of IRAs I inherited from my mother but they've never amounted to much." Several cycles of "So is that everything?" "Yes. Oh, except for..."

So, on any list of things to take into account when developing a claiming strategy, item number 1 is "Don't forget to claim."
Last edited by nisiprius on Wed Aug 19, 2020 10:12 am, edited 1 time in total.
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AlohaJoe
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Re: Social Security Jitters Anyone ??

Post by AlohaJoe »

moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead?
Why do you think that claiming earlier would make a difference? I don't understand.
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Re: Social Security Jitters Anyone ??

Post by tibbitts »

moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead? I know that thought has entered my mind recently. Been running some opensocialsecurity scenarios and i-orps and claimiing a couple years early for me at 68 does not make a huge difference. Wonder if there are any others out there with similar thoughts and concerns. Thanks.
I don't understand the question at all. The issue isn't claiming at 70 vs. "late 60s", it's claiming at 62 vs. much later. A year or two as you're asking about is very unlikely to matter that much one way or the other. I suppose in theory there could be grandfathering for people claiming before a certain date and that could be one day before you claimed but... really nobody can predict that now.
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Re: Social Security Jitters Anyone ??

Post by nisiprius »

AlohaJoe wrote: Wed Aug 19, 2020 10:12 am
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead?
Why do you think that claiming earlier would make a difference? I don't understand.
If Social Security goes poof and all benefits stop permanently in the year when you would reach age 67, if you claimed at age 62 you at least got five years' worth of benefits, but if you had planned to wait until age 70, you get zero.

Now adjust that in a softer, less harsh way. But that's the idea.

I believe Bobcat2, financial economist who often posts in the forum who is pitbull tenacious about waiting, says that even with 23%-cut-in-2032 or whatever, waiting is still beneficial, but obviously if the hypothetical cut is deeper and sooner, at some point it becomes advantageous to claim sooner.
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Re: Social Security Jitters Anyone ??

Post by mptfan »

nisiprius wrote: Wed Aug 19, 2020 9:56 am A late friend was accurately diagnosed with terminal cancer at age 73. I visited him before things got bad and it transpired that he had never filed for Social Security.
:shock:
I think sometimes we forget how little attention the average person pays to issues that we debate ad nauseum.
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Re: Social Security Jitters Anyone ??

Post by tibbitts »

AlohaJoe wrote: Wed Aug 19, 2020 10:12 am
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead?
Why do you think that claiming earlier would make a difference? I don't understand.
The OP is saying (s)he'd rather have more years of benefits that were reduced only by age rather than wait and have a higher percentage of years reduced by whatever algorithm is adopted.
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bligh
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Re: Social Security Jitters Anyone ??

Post by bligh »

AlohaJoe wrote: Wed Aug 19, 2020 10:12 am
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead?
Why do you think that claiming earlier would make a difference? I don't understand.
Not the OP but I believe the theory is that it would be likely that existing social security recipients are likely to be grandfathered in if the payment amounts are cut. There is likely to be less outcry when you cut the benefits of future recipients, than when you cut the benefits of existing ones. I have seen this tendency when it comes to cuts in pension programs
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Re: Social Security Jitters Anyone ??

Post by AlohaJoe »

tibbitts wrote: Wed Aug 19, 2020 10:21 am
AlohaJoe wrote: Wed Aug 19, 2020 10:12 am
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead?
Why do you think that claiming earlier would make a difference? I don't understand.
The OP is saying (s)he'd rather have more years of benefits that were reduced only by age rather than wait and have a higher percentage of years reduced by whatever algorithm is adopted.
People who claim early will also see their benefits cut by 23%. There is no "we will grandfather in people". It is a straightforward math question.

Is 1-2 years of that extra ~20% more Social Security enough to outweigh 20+ years of lower payments due to claiming early? Social Security needs to be cut by 50-80% for that to start being true. Is the OP assuming that is what's going to happen?
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Re: Social Security Jitters Anyone ??

Post by Jack FFR1846 »

The downfall of a good plan is the hope for a better plan, right?

If you're all jittery about waiting to claim....then don't. If you want to claim now, then claim now. From now until you're 70, you get to spend a bunch of free money. Sure....if you wait till 70, you get a bigger check. But from 62 to 70 is 8 years. 8 years of checks adds up to quite a bit.

Personally, I'm 63 and I'm currently waiting, but I'm also still pulling in a paycheck. I don't need SS at all and never will actually "need" it.
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Re: Social Security Jitters Anyone ??

Post by smitcat »

nisiprius wrote: Wed Aug 19, 2020 10:17 am
AlohaJoe wrote: Wed Aug 19, 2020 10:12 am
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead?
Why do you think that claiming earlier would make a difference? I don't understand.
If Social Security goes poof and all benefits stop permanently in the year when you would reach age 67, if you claimed at age 62 you at least got five years' worth of benefits, but if you had planned to wait until age 70, you get zero.

Now adjust that in a softer, less harsh way. But that's the idea.

I believe Bobcat2, financial economist who often posts in the forum who is pitbull tenacious about waiting, says that even with 23%-cut-in-2032 or whatever, waiting is still beneficial, but obviously if the hypothetical cut is deeper and sooner, at some point it becomes advantageous to claim sooner.
"but obviously if the hypothetical cut is deeper and sooner, at some point it becomes advantageous to claim sooner."
Assuming you have also taken into account these potential items:
- Roth conversions
- One spouse survival
- inheritance value
- potential downsides and upsides to each choice (and their repective impacts)
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Re: Social Security Jitters Anyone ??

Post by AlohaJoe »

bligh wrote: Wed Aug 19, 2020 10:44 am
AlohaJoe wrote: Wed Aug 19, 2020 10:12 am
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead?
Why do you think that claiming earlier would make a difference? I don't understand.
Not the OP but I believe the theory is that it would be likely that existing social security recipients are likely to be grandfathered in if the payment amounts are cut.
That's not what would happen. That would require a change in law by Congress. So we're speculating about a future where Congress gets together and decides to pass a new law about Social Security and...instead of just fixing the problem they introduce a tiny band-aid?

And a band-aid that doesn't mathematically work? There is no way to only reduce benefits for future Social Security claimants. The whole problem is that Social Security is pay-as-you-go. And in 2023 (or whenever) there will only be enough revenue each year to pay out a certain level of benefits. There is no magic place for that extra money to come from to keep paying existing claimants their previous amounts.

And even if there were a magic pot of money, the math would mean the current claimants keep their old levels but future claimants would need to cut by, I dunno, 40% in order to make it all balance. Something way more than 23%. After all, there are way more current claimants that near future ones....that's the whole problem of dependency ratios. So suddenly telling everyone under 60 that their Social Security is being cut by 40% is seen as politically feasible? But fixing Social Security funding isn't?

If this is point of the post then we are so far away from actionable Bogleheads guidelines and so far into speculating about laws that haven't even been proposed by a single member of Congress....the thread should just be locked.

Make your financial plans based on the laws that exist today. Don't speculate.
Last edited by AlohaJoe on Wed Aug 19, 2020 11:11 am, edited 1 time in total.
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Re: Social Security Jitters Anyone ??

Post by humblecoder »

moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead? I know that thought has entered my mind recently. Been running some opensocialsecurity scenarios and i-orps and claimiing a couple years early for me at 68 does not make a huge difference. Wonder if there are any others out there with similar thoughts and concerns. Thanks.
Count me as somebody who has given in some thought, particularly since I"ll be eligible for SS around the time frame when we could go over a cliff. Nobody knows what's going to happen, so my approach is to take a "worst case scenario" view.

According to my latest benefit statement, the current projection is that by 2035 payroll taxes will cover only 79% of benefits. When I do my retirement planning, I am going in with the assumption that I'll only get 75% of my projected benefit when I retire and I am making sure that I have enough money in retirement to support myself and my family at that benefit level. If a miracle happens and I get my full 100%, then that is gravy.
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Re: Social Security Jitters Anyone ??

Post by Svensk Anga »

SS is supposed to be actuarially equivalent no matter what age you claim at. So how can they maintain that principle for someone claiming this year at 62 and his twin who claims eight years from now at 70 if benefits are cut across the board in say 2034? It seems to me that in order to be fair, the early claimant would have to suffer a deeper cut. That seems politically unrealistic given that so many claim at 62. But it also looks grossly unfair to late claimers to impose a level benefit cut. My guess is that they avoid the whole conundrum and impose the pain on those not yet of claiming age. The closer we get to trust depletion, the worse the pain of any adjustment.
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Re: Social Security Jitters Anyone ??

Post by Big Dog »

AlohaJoe wrote: Wed Aug 19, 2020 10:52 am
bligh wrote: Wed Aug 19, 2020 10:44 am
AlohaJoe wrote: Wed Aug 19, 2020 10:12 am
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead?
Why do you think that claiming earlier would make a difference? I don't understand.
Not the OP but I believe the theory is that it would be likely that existing social security recipients are likely to be grandfathered in if the payment amounts are cut.
That's not what would happen. That would require a change in law by Congress. So we're speculating about a future where Congress gets together and decides to pass a new law about Social Security and...instead of just fixing the problem they introduce a tiny band-aid?

......Make your financial plans based on the laws that exist today. Don't speculate.
Correct. Under current law, ALL SS benefits would be reduced, those for current recipients and those for future recipients.
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Re: Social Security Jitters Anyone ??

Post by JoeRetire »

nisiprius wrote: Wed Aug 19, 2020 10:10 am
JoeRetire wrote: Wed Aug 19, 2020 10:03 am
nisiprius wrote: Wed Aug 19, 2020 9:56 am A late friend was accurately diagnosed with terminal cancer at age 73. I visited him before things got bad and it transpired that he had never filed for Social Security. Just never gotten around to it.
An educator, and he had "never gotten around to it"? :oops:
A shame.
Oh, yeah. It was... amazing. But that's the real world, not spreadsheets and ESPlanner.
It wouldn't be the real world for anyone I know. Perhaps he had so much money that this benefit wasn't important?
So, on any list of things to take into account when developing a claiming strategy, item number 1 is "Don't forget to claim."
Wouldn't think that item would be necessary to list, but okay.
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Re: Social Security Jitters Anyone ??

Post by JoeRetire »

Svensk Anga wrote: Wed Aug 19, 2020 11:20 am SS is supposed to be actuarially equivalent no matter what age you claim at.
There is no "supposed to be" rule. When early claiming and late claiming were enacted, the math was constructed such that both were actuarially neutral. Since then, longevity has increased, and the math is no longer neutral.
So how can they maintain that principle for someone claiming this year at 62 and his twin who claims eight years from now at 70 if benefits are cut across the board in say 2034? It seems to me that in order to be fair, the early claimant would have to suffer a deeper cut. That seems politically unrealistic given that so many claim at 62. But it also looks grossly unfair to late claimers to impose a level benefit cut.
There is no requirement that the math be neutral. There is no requirement that things are "fair".

I was planning for years to file-and-suspend. But they changed the rules and I missed the cutoff by less than 1 year. That costs me about $40k over my lifetime. Is that fair? (shrug) It is what it is.
My guess is that they avoid the whole conundrum and impose the pain on those not yet of claiming age. The closer we get to trust depletion, the worse the pain of any adjustment.
That's an interesting guess, but is not how it will work unless the laws are changed. And we are not supposed to debate upcoming law changes here.
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Re: Social Security Jitters Anyone ??

Post by bligh »

AlohaJoe wrote: Wed Aug 19, 2020 10:52 am
That's not what would happen. That would require a change in law by Congress. So we're speculating about a future where Congress gets together and decides to pass a new law about Social Security and...instead of just fixing the problem they introduce a tiny band-aid?
If you look at past history what has been the more likely course of action from Congress? Do you see them legislate actual long term fixes to various problems or do you see them pass temporary band-aids that kick problems a little further down the line? I know which one I see.
AlohaJoe wrote: Wed Aug 19, 2020 10:52 am
And a band-aid that doesn't mathematically work? There is no way to only reduce benefits for future Social Security claimants. The whole problem is that Social Security is pay-as-you-go. And in 2023 (or whenever) there will only be enough revenue each year to pay out a certain level of benefits. There is no magic place for that extra money to come from to keep paying existing claimants their previous amounts.
If you look at the last several years... actually, this year more than any other.. you will notice that the US government has plenty of ways of creating money out of thin air. I wouldn't rule it out as a means of meeting social security obligations instead of angering a huge percentage of voters. Though, I also wouldn't rule out cuts to future recipients through raising the age of eligibility, introducing means testing, tax treatment for wealthier recipients. I think it is unlikely that there will be straight up cuts to the amount paid out, the optics of such a move would make it politically painful to pass, and I would expect the government to go with a more convoluted and indirect approach instead.

AlohaJoe wrote: Wed Aug 19, 2020 10:52 am Make your financial plans based on the laws that exist today. Don't speculate.
Agreed. In my case, I am so far away from claiming social security, I discount it entirely in my plans. If it is there, great, if not, I will manage without it. Even if it is around in some form (which is the likely scenario), my guess is that there will be some form of means testing introduced for social security (either through taxation methods or through direct eligibility requirements) such that I would likely be ineligible for it or not benefit much from it.

In the OP's case I am not making a claim either way, I was simply answer the question as to why someone would choose to claim early instead of waiting till the age of 70 if they believed social security was going to start cutting benefits. I wasn't saying it was a good idea.
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Re: Social Security Jitters Anyone ??

Post by 400401402 »

I feel this is alarmist, atleast for now and in the near future (10-15 years), especially if we carefully dissect the facts presented below.

1. The #1 thing we have to remember is Social security is a pay-as-you-go scheme. Which means current tax payers fund current beneficiaries ( beneficiaries are defined by law based on age, disability, survivorship etc.). This is very different from a defined contribution (401k etc.) and defined benefit (pension funds) plan structure which depend on investments and returns they generate, and is arguably more closer to general budget where current tax payers fund current expenses from federal(think defense) to local (school) level.

2. From point 1, assume a simple scenario for illustration. 12.4% of first $137K of one's income (6.2 empployer +6.2 employee) go into OASI (Old age and survivor's insurance) trust fund , 1.8% of first $137K of one's income (0.9 each by employer and employee) go into DI (Disability insurance) trust fund(think of trust fund as operating account). Lets assume OASI trust fund received $100mn in a year and the SSA's beneficiaries needed exactly $100 mn to be paid out based on eligibility criteria that year - Just like a general budget, 100mn flowed in and 100mn flowed out with no surplus and no deficit; it's that simple. But this ofcourse is such a long odds scenario. Any given year receipts into trust funds will not exactly match outflows to the penny.

3. Up until 2000s, receipts into OASI and DI trust funds (the two are legally seperate, former pays age and survivor based payments, latter pays disability payments) were higher than outflows - boomers hadn't started retiring, there was large enough workforce and receipts than beneficiaries. So all the surplus over years till 2000s started accumulating in the trust funds. The trust funds lent to federal government to earn some interest on these surplus funds by buying special non tradeable/markeatble bonds issued by federal govt.

4. In early 21st century, the tide turned and the yearly payments to beneficiaries started becoming more than the receipts into trust funds that particular year. Still not a problem, because remember the trust funds built a considerable surplus for all the years, so any deficit for any given year was addressed by tapping into built up surplus (which also was appreciating due to interest payments on those bonds)

5. The current situation is that 89% of 2019 payments to OASI beneficiaries was met by payroll tax receipts in 2019 (which is still pretty good), 7.6 percent of payments was funded by tapping into surplus funds and the interest they generated and the other 3.6% was funded by federal income taxes that were paid on social security income by beneficiaries (yes some portion of this goes back into the trust fund again)

6. The current actuarial projection is that current year receipts will fund only 76% of current year payments in year 2035 (as against 89% today) and the surplus will evaporate in 2035

With the above facts in mind:
A. Social security is not even remotely close to an underfunded pension plan / defined benefit plan, its much better. Unless it's apocalypse, US will have considerable workforce even in 2035 or even 2050 (assuming current laws stay because I can't speculate) funding then beneficiaries. If this is not the case, then there are much bigger problems in this world than collecting social security (as said apocalypse)

B. Even with current actuarial projections (which assumes the payroll tax rates stay at current levels and the workforce/employment rate is at current levels) one is poised to still get 76% of benefits in 2035. So unlike a defined benefit plan / pension fund/defined contribution plan which may go under unless there is zero workforce in 2035 or 2060 and assuming current payroll tax rates/current laws, one may expect a reduced payment but never a zero payment or going over the cliff scenario. So one can always go by actuarial projections which are pretty conservative and plan around them (75% of current benefits) though congress need not address this topic until 2035

Having said all this, for some one like me in 30s, I know the deal. I contribute to social security now to benefit my fellow older residents (which is the social contracts I signed up for and respect) and plan my future where social security payment may be an icing on the cake but not my main source of income (which is why we are all on bogleheads :happy )

But for some one in their 60s, I feel they need not even think about the worst case social security scenarios as from the explanation above, it's not even remotely close to reducing payments till 2035.
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Re: Social Security Jitters Anyone ??

Post by radiowave »

I'm in my one more year (OMY) phase towards retirement next summer. My spouse and I plan on drawing SS at that time rather than waiting until 70. SS x2 along with two small pensions meet our yearly expenses after taxes. Yes, I've looked at the numbers about waiting until 70 and of course that increases monthly benefits, but as a cost of dipping into our investments to fund the gap years. So I'm in the camp of taking SS at FRA (or there about), as a way to preserve retirement investments and let them grow.
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vested1
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Re: Social Security Jitters Anyone ??

Post by vested1 »

moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead? I know that thought has entered my mind recently. Been running some opensocialsecurity scenarios and i-orps and claimiing a couple years early for me at 68 does not make a huge difference. Wonder if there are any others out there with similar thoughts and concerns. Thanks.
I guess you're talking to me, even though some of the other replies have been from those who already made their choice and are trying to justify it, which isn't answering your question. Now I'll do the same and vainly try to justify mine, but from a perspective closer to your own.

I'm 68, which from your comment I assume you are too. I'm still delaying, and am committed to continuing to do so until age 70. I remain open minded with eyes wide open about the unforeseen. At least you have options if you are delaying. Once you've filed those options disappear.

The anxiety you feel about the periodic talk about cutting SS, (your exact words), is possibly referring to something other than the somewhat flexible estimation of when the fund will be depleted, but rather more about the last two proposed yearly budgets that included slashing SS, Medicare, and Medicaid. Those proposals had no chance of passing because to do so would be political suicide, at least in my opinion. Never underestimate the fear of politicians. Seniors are a formidable block of voters.

My anxiety level on this subject is at about a 2 on a scale of 1 to 10. Then again, our fixed income is currently paying all our bills with no withdrawals from the portfolio, which hopefully won't happen until RMD's, four years hence, and a year later for my wife. You need to remind yourself of the reasons you delayed in the first place and to ask yourself if those reasons are still valid. If you're currently using a restricted application, like I am, there is even less need to worry.

My main reason for delaying was to secure the greatest amount of survivor benefit as possible for my wife, or for myself should either one of us die. I'll admit that I am a bit obsessed with tracking the amount I would currently receive if I filed immediately, which may be at the basis of your own problem. I would advise you to continue to be patient if you can. The markets are booming, somewhat illogically IMHO, but still a compelling argument. The growing amount of your benefit can be a gnawing temptation, but do you really want to trade 16% of your maximum increase to scratch that itch?

My wife made a bit less than me during her career, but still had a healthy PIA, getting over 2k at age 65 when she filed, a year before her FRA when I filed simultaneously for my restricted application (same birthday, myself 1 year older). If I am successful in my delay to age 70 and one of us dies the next day the survivor will get about $500 more a month than we are receiving right now with our combined self/restricted applications. If my wife and I had both filed at age 62 you could cut that survivor benefit number in half. It's all about managing your income and your reserves in retirement for any and all circumstances.

(The ant climbs down from the soapbox and mingles with the grasshoppers). :beer
Last edited by vested1 on Wed Aug 19, 2020 1:28 pm, edited 1 time in total.
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HomerJ
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Re: Social Security Jitters Anyone ??

Post by HomerJ »

moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead? I know that thought has entered my mind recently. Been running some opensocialsecurity scenarios and i-orps and claimiing a couple years early for me at 68 does not make a huge difference. Wonder if there are any others out there with similar thoughts and concerns. Thanks.
You should definitely consider the fact that SS benefits are scheduled to be cut to 75% or so in 2033 or so in your calculations (get exact numbers from ssa.gov).

Sure, the government will probably do something before then, but we're not supposed to talk about or plan around future possible legislation.

As it stands now, benefits will be cut. Use those numbers in your calculations.

I and my wife are definitely not planning on waiting until 70, as things stand now.
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Re: Social Security Jitters Anyone ??

Post by Big Dog »

JoeRetire wrote: Wed Aug 19, 2020 11:33 am
Svensk Anga wrote: Wed Aug 19, 2020 11:20 am SS is supposed to be actuarially equivalent no matter what age you claim at.
There is no "supposed to be" rule. When early claiming and late claiming were enacted, the math was constructed such that both were actuarially neutral. Since then, longevity has increased, and the math is no longer neutral.
So how can they maintain that principle for someone claiming this year at 62 and his twin who claims eight years from now at 70 if benefits are cut across the board in say 2034? It seems to me that in order to be fair, the early claimant would have to suffer a deeper cut. That seems politically unrealistic given that so many claim at 62. But it also looks grossly unfair to late claimers to impose a level benefit cut.
There is no requirement that the math be neutral. There is no requirement that things are "fair".

I was planning for years to file-and-suspend. But they changed the rules and I missed the cutoff by less than 1 year. That costs me about $40k
And don't forget, that "actuarially neutral" ignores spousal and survivor benefits, so married folks can do better than single folks.
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Re: Social Security Jitters Anyone ??

Post by Big Dog »

radiowave wrote: Wed Aug 19, 2020 12:25 pm I'm in my one more year (OMY) phase towards retirement next summer. My spouse and I plan on drawing SS at that time rather than waiting until 70. SS x2 along with two small pensions meet our yearly expenses after taxes. Yes, I've looked at the numbers about waiting until 70 and of course that increases monthly benefits, but as a cost of dipping into our investments to fund the gap years. So I'm in the camp of taking SS at FRA (or there about), as a way to preserve retirement investments and let them grow.
run the PV -- additional input tab on top -- on Open Social Security which accounts for spending down assets.....you may not change your decision, but at least you know what its worth.

https://opensocialsecurity.com
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Re: Social Security Jitters Anyone ??

Post by Escapevelocity »

I'm 53 and not spending too much time thinking about this but trying to stay open-minded. I'm definitely factoring SS into my retirement plans; I am retiring early at 55 and going to be withdrawing 5-6% of my portfolio annually from 55 until SS kicks in. So, I'm not too concerned that SS will go away like many of the doomsayers are warning.

I have a bias towards delaying my claiming age since my wife was a stay at home Mom and our combined benefit will be solely determined by my benefit. I see the delaying as a form of longevity insurance since it is indexed to inflation.
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El Greco
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Re: Social Security Jitters Anyone ??

Post by El Greco »

Who wants to be the political party in power when these proposed cuts are instituted? Anyone? Anyone? Anyone?

Stop worrying. Ain't gonna happen.
advice789
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Re: Social Security Jitters Anyone ??

Post by advice789 »

From a financial breakeven point, this is an actuarial question of whether waiting will provide more total benefits vs earlier. The stats for my situation imply another 10-15 yrs vs am more optimistic of living longer. Am not taking at 62 and will wait longer. Current cash flow can cover daily needs and Soc Sec is nice adder vs critical for day to day.
Bobby206
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Re: Social Security Jitters Anyone ??

Post by Bobby206 »

No jitters here. I anticipate I will get zero when the time comes. Anything above that is gravy!
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Re: Social Security Jitters Anyone ??

Post by FIREchief »

Big Dog wrote: Wed Aug 19, 2020 1:26 pm And don't forget, that "actuarially neutral" ignores spousal and survivor benefits, so married folks can do better than single folks.
+1. Especially wrt the survivor benefits.
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Re: Social Security Jitters Anyone ??

Post by egrets »

I started Social Security as soon as possible, since my Dad did at 62. Up until next year, age 78, I am ahead of the game. I don't regret my choice.

Social Security will be fully funded up to 2032 if no games are played reducing SS taxes, and fully funded ad infinitum if the salary cap on wages being taxed is also removed. So how the benefits do is a function of which political party is in power. That really can't be predicted, but my personal belief is the one that protects Social Security will be for at least eight years starting in 2021.
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Re: Social Security Jitters Anyone ??

Post by egrets »

El Greco wrote: Wed Aug 19, 2020 2:12 pm Who wants to be the political party in power when these proposed cuts are instituted? Anyone? Anyone? Anyone?

Stop worrying. Ain't gonna happen.
That's if people realize that's what's about to happen. How many people realize that "stopping the payroll tax" is the same as reducing Social Security and Medicare funding.
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Re: Social Security Jitters Anyone ??

Post by whodidntante »

I think you should operate in the framework of the current law and not assume doom. The law can be changed at any time and may be better or worse for you, but I do agree that worse is more likely than better. It's an extremely popular program and I think you'll get something. The unknown is how much, and there is not an action you can take that will remove the uncertainty.
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Re: Social Security Jitters Anyone ??

Post by smitcat »

egrets wrote: Wed Aug 19, 2020 2:30 pm I started Social Security as soon as possible, since my Dad did at 62. Up until next year, age 78, I am ahead of the game. I don't regret my choice.

Social Security will be fully funded up to 2032 if no games are played reducing SS taxes, and fully funded ad infinitum if the salary cap on wages being taxed is also removed. So how the benefits do is a function of which political party is in power. That really can't be predicted, but my personal belief is the one that protects Social Security will be for at least eight years starting in 2021.
"I started Social Security as soon as possible, since my Dad did at 62. Up until next year, age 78, I am ahead of the game. I don't regret my choice"
That is great but did you include these potential benifits in your comparison?:
- only compare after tax results in the comparisons
- Roth conversions
- One spouse survival
- inheritance value
- potential downsides and upsides to each choice (and their repective impacts)
North Texas Cajun
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Re: Social Security Jitters Anyone ??

Post by North Texas Cajun »

egrets wrote: Wed Aug 19, 2020 2:30 pm I started Social Security as soon as possible, since my Dad did at 62. Up until next year, age 78, I am ahead of the game. I don't regret my choice.

Social Security will be fully funded up to 2032 if no games are played reducing SS taxes, and fully funded ad infinitum if the salary cap on wages being taxed is also removed. So how the benefits do is a function of which political party is in power. That really can't be predicted, but my personal belief is the one that protects Social Security will be for at least eight years starting in 2021.
What does it really mean to say that “Social Security will be fully funded up to 2032”? From an internal accounting standpoint, SS may be “fully funded” for 12 more years. But SS benefit payments have exceeded SS taxes collected for a decade. On a strictly cash flow basis, SS has not been fully funded for quite a while.
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moorso
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Re: Social Security Jitters Anyone ??

Post by moorso »

egrets wrote: Wed Aug 19, 2020 2:32 pm
El Greco wrote: Wed Aug 19, 2020 2:12 pm Who wants to be the political party in power when these proposed cuts are instituted? Anyone? Anyone? Anyone?

Stop worrying. Ain't gonna happen.
That's if people realize that's what's about to happen. How many people realize that "stopping the payroll tax" is the same as reducing Social Security and Medicare funding.
Exactly. I don't trust politicians as far as I can throw them and it makes me wonder what they might be up to. Not overly concerned, just watching and listening.
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moorso
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Re: Social Security Jitters Anyone ??

Post by moorso »

vested1 wrote: Wed Aug 19, 2020 1:15 pm
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead? I know that thought has entered my mind recently. Been running some opensocialsecurity scenarios and i-orps and claimiing a couple years early for me at 68 does not make a huge difference. Wonder if there are any others out there with similar thoughts and concerns. Thanks.
I guess you're talking to me, even though some of the other replies have been from those who already made their choice and are trying to justify it, which isn't answering your question. Now I'll do the same and vainly try to justify mine, but from a perspective closer to your own.

I'm 68, which from your comment I assume you are too. I'm still delaying, and am committed to continuing to do so until age 70. I remain open minded with eyes wide open about the unforeseen. At least you have options if you are delaying. Once you've filed those options disappear.

The anxiety you feel about the periodic talk about cutting SS, (your exact words), is possibly referring to something other than the somewhat flexible estimation of when the fund will be depleted, but rather more about the last two proposed yearly budgets that included slashing SS, Medicare, and Medicaid. Those proposals had no chance of passing because to do so would be political suicide, at least in my opinion. Never underestimate the fear of politicians. Seniors are a formidable block of voters.

My anxiety level on this subject is at about a 2 on a scale of 1 to 10. Then again, our fixed income is currently paying all our bills with no withdrawals from the portfolio, which hopefully won't happen until RMD's, four years hence, and a year later for my wife. You need to remind yourself of the reasons you delayed in the first place and to ask yourself if those reasons are still valid. If you're currently using a restricted application, like I am, there is even less need to worry.

My main reason for delaying was to secure the greatest amount of survivor benefit as possible for my wife, or for myself should either one of us die. I'll admit that I am a bit obsessed with tracking the amount I would currently receive if I filed immediately, which may be at the basis of your own problem. I would advise you to continue to be patient if you can. The markets are booming, somewhat illogically IMHO, but still a compelling argument. The growing amount of your benefit can be a gnawing temptation, but do you really want to trade 16% of your maximum increase to scratch that itch?

My wife made a bit less than me during her career, but still had a healthy PIA, getting over 2k at age 65 when she filed, a year before her FRA when I filed simultaneously for my restricted application (same birthday, myself 1 year older). If I am successful in my delay to age 70 and one of us dies the next day the survivor will get about $500 more a month than we are receiving right now with our combined self/restricted applications. If my wife and I had both filed at age 62 you could cut that survivor benefit number in half. It's all about managing your income and your reserves in retirement for any and all circumstances.

(The ant climbs down from the soapbox and mingles with the grasshoppers). :beer
Yes, I guess I was talking to you....very similar situation as myself. Ultimately I dont think I will lose patience, cave in and claim on my 68th birthday but wanted to see who out there might be second guessing their plan to wait to 70... thanks all for the input, some good and well thought out conversations. BTW, I am currently receiving ex spousal benefits, so that makes waiting a little easier.
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Re: Social Security Jitters Anyone ??

Post by midareff »

glock19 wrote: Wed Aug 19, 2020 9:56 am I started receiving benefits after retirement at age 62. My breakeven point is this year, so I basically lost money. My concern then, and that same concern is even stronger now, is that eventually "means testing" will come into play. I doubt benefits will ever be discontinued because the plan is underfunded, but I can see benefits being reduced to those who have "sufficient assets".

Keep in mind my opinion has been wrong up to this point.
I'm six years to my break even point if I only figure half the situation. Started at age 64..... then bought back a year and restarted at 65. When I look at the money I made on the funds I would have had to take out of the market I doubt there is going to be any difference depending on my expiration date.
Wrench
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Re: Social Security Jitters Anyone ??

Post by Wrench »

Historically, we have been here before, and congress has seen fit to make many changes to SS during the 20th century. See
https://www.ssa.gov/history/reports/crsleghist2.html
I count about 30 different amendments to the law from 1935 to 2000. During the last crisis in the late '70s (I believe - my memory is a little fuzzy on exact date) general funds were used to support SS before new changes were implemented. In 1983 the full retirement age was raised to a sliding scale based on birth date (what is in place now) in order to fund the retirement of baby boomers. Based on this history, I think it is reasonable to assume retirees within the next 5-10 years will get the benefits at levels currently promised whether they retire at 62, 70 or some age in between. (How they are taxed is a different question though!) Those retiring after that may see changes, for example an increase in the maximum salary for withholding, or increasing the full benefit retirement age or some combination of both. To think otherwise is to believe there will be a major breakdown of a social contract that has been in place for almost 90 years. Given the fact that retirees vote in very large numbers, to do so would be political suicide for an elected official. Sure, it could happen. But I am not going to lose sleep over that remote possibility.

As an aside, I have NOT claimed SS retirement benefits yet, and am planning to do so at 70, about 4 years from now. But, I HAVE received SS benefits. I was orphaned at age 19 and in those days, benefits for dependent children were provided to age 22 for full time students. That money helped defray my college expenses. Today, those same benefits are only available until age 18 - that age was changed in one of the amendments passed in the 'late '70s or '80s.
joylesshusband
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Re: Social Security Jitters Anyone ??

Post by joylesshusband »

400401402 wrote: Wed Aug 19, 2020 12:03 pm I feel this is alarmist, atleast for now and in the near future (10-15 years), especially if we carefully dissect the facts presented below.

1. The #1 thing we have to remember is Social security is a pay-as-you-go scheme. Which means current tax payers fund current beneficiaries ( beneficiaries are defined by law based on age, disability, survivorship etc.). This is very different from a defined contribution (401k etc.) and defined benefit (pension funds) plan structure which depend on investments and returns they generate, and is arguably more closer to general budget where current tax payers fund current expenses from federal(think defense) to local (school) level.

2. From point 1, assume a simple scenario for illustration. 12.4% of first $137K of one's income (6.2 empployer +6.2 employee) go into OASI (Old age and survivor's insurance) trust fund , 1.8% of first $137K of one's income (0.9 each by employer and employee) go into DI (Disability insurance) trust fund(think of trust fund as operating account). Lets assume OASI trust fund received $100mn in a year and the SSA's beneficiaries needed exactly $100 mn to be paid out based on eligibility criteria that year - Just like a general budget, 100mn flowed in and 100mn flowed out with no surplus and no deficit; it's that simple. But this ofcourse is such a long odds scenario. Any given year receipts into trust funds will not exactly match outflows to the penny.

3. Up until 2000s, receipts into OASI and DI trust funds (the two are legally seperate, former pays age and survivor based payments, latter pays disability payments) were higher than outflows - boomers hadn't started retiring, there was large enough workforce and receipts than beneficiaries. So all the surplus over years till 2000s started accumulating in the trust funds. The trust funds lent to federal government to earn some interest on these surplus funds by buying special non tradeable/markeatble bonds issued by federal govt.

4. In early 21st century, the tide turned and the yearly payments to beneficiaries started becoming more than the receipts into trust funds that particular year. Still not a problem, because remember the trust funds built a considerable surplus for all the years, so any deficit for any given year was addressed by tapping into built up surplus (which also was appreciating due to interest payments on those bonds)

5. The current situation is that 89% of 2019 payments to OASI beneficiaries was met by payroll tax receipts in 2019 (which is still pretty good), 7.6 percent of payments was funded by tapping into surplus funds and the interest they generated and the other 3.6% was funded by federal income taxes that were paid on social security income by beneficiaries (yes some portion of this goes back into the trust fund again)

6. The current actuarial projection is that current year receipts will fund only 76% of current year payments in year 2035 (as against 89% today) and the surplus will evaporate in 2035

With the above facts in mind:
A. Social security is not even remotely close to an underfunded pension plan / defined benefit plan, its much better. Unless it's apocalypse, US will have considerable workforce even in 2035 or even 2050 (assuming current laws stay because I can't speculate) funding then beneficiaries. If this is not the case, then there are much bigger problems in this world than collecting social security (as said apocalypse)

B. Even with current actuarial projections (which assumes the payroll tax rates stay at current levels and the workforce/employment rate is at current levels) one is poised to still get 76% of benefits in 2035. So unlike a defined benefit plan / pension fund/defined contribution plan which may go under unless there is zero workforce in 2035 or 2060 and assuming current payroll tax rates/current laws, one may expect a reduced payment but never a zero payment or going over the cliff scenario. So one can always go by actuarial projections which are pretty conservative and plan around them (75% of current benefits) though congress need not address this topic until 2035

Having said all this, for some one like me in 30s, I know the deal. I contribute to social security now to benefit my fellow older residents (which is the social contracts I signed up for and respect) and plan my future where social security payment may be an icing on the cake but not my main source of income (which is why we are all on bogleheads :happy )

But for some one in their 60s, I feel they need not even think about the worst case social security scenarios as from the explanation above, it's not even remotely close to reducing payments till 2035.
+1
Well presented point of view.
Fully agree with the "alarmist" perspective, despite being 61 myself.
No plans to claim earlier than 70 as long as my wife (the lower earner) is still alive.
Retired July 2018 @ age 59. Posting here purely for amusement.
North Texas Cajun
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Re: Social Security Jitters Anyone ??

Post by North Texas Cajun »

Wrench wrote: Wed Aug 19, 2020 5:04 pm Historically, we have been here before, and congress has seen fit to make many changes to SS during the 20th century. See
https://www.ssa.gov/history/reports/crsleghist2.html
I count about 30 different amendments to the law from 1935 to 2000. During the last crisis in the late '70s (I believe - my memory is a little fuzzy on exact date) general funds were used to support SS before new changes were implemented. .....
I agree that SS had cash flow shortfalls In the 1980s, and that the shortfalls were funded from the general fund. But things are very different now. The federal deficit level is far greater than we experienced in the 1980s. More important is that the current SS cash shortfalls, and the ones projected over the next ten years, far, far exceed the SS deficits of the 1980s. That’s because the senior population has exploded, and will grow even faster as those born from 1956 to 1964 retire.

No one should assume that a fix will emerge that will make everyone’s future SS benefits whole. It is pure gambling to base one’s retirement planning on a SS miracle.
000
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Re: Social Security Jitters Anyone ??

Post by 000 »

Yep. I'm concerned about to what lengths they will go to keep the program going.
fareastwarriors
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Re: Social Security Jitters Anyone ??

Post by fareastwarriors »

Doesn't seem actionable.

Lock?
grainne
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Re: Social Security Jitters Anyone ??

Post by grainne »

No need to lock if people can stay away from political discussions. This is a big planning issue for people in their 50s.

Thanks,
Gráinne
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HomerJ
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Re: Social Security Jitters Anyone ??

Post by HomerJ »

fareastwarriors wrote: Wed Aug 19, 2020 6:14 pm Doesn't seem actionable.

Lock?
Hugely actionable.

SS will probably cover 50% of our retirement expenses. It's a pretty big deal.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Nestegg_User
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Re: Social Security Jitters Anyone ??

Post by Nestegg_User »

HomerJ wrote: Wed Aug 19, 2020 1:20 pm
moorso wrote: Wed Aug 19, 2020 9:31 am With all this talk (and hopefully thats all it is) with cutting social security, are there any soon to be 70 ss claimants who are having second thoughts about waiting to 70 and possibly claiming earlier in your late 60's instead? I know that thought has entered my mind recently. Been running some opensocialsecurity scenarios and i-orps and claimiing a couple years early for me at 68 does not make a huge difference. Wonder if there are any others out there with similar thoughts and concerns. Thanks.
You should definitely consider the fact that SS benefits are scheduled to be cut to 75% or so in 2033 or so in your calculations (get exact numbers from ssa.gov).

Sure, the government will probably do something before then, but we're not supposed to talk about or plan around future possible legislation.

As it stands now, benefits will be cut. Use those numbers in your calculations.

I and my wife are definitely not planning on waiting until 70, as things stand now.
after doing enough calculations, both with and without the potential cuts, the other concerns are: relative PIA's and likely expirations. For us, I'm older with a bit lower PIA and without a family history of longer lives (typically mid 80's, but neither of my parents were past 62)... so I used the higher range of about 2X the std dev (which appears to be about 7 years) to give a likely maximum age of 78 +2(7)= 92 for which I looked at outcomes. I also considered the effects of my potential earlier demise (with the result of surviving spouse claiming until age 70, there upon switching to spouse's own max 70 benefit at that time) and also remembering that the money NOT spent delaying would be fully available for any surviving spouse. That I didn't want to potentially lose out on benefits if I claimed too early (relative to surviving spouse concerns in the unlikely event that I'm the surviving spouse).... and the ability to do some Roth conversions at a somewhat lower tax rate...makes the start of SS, in consideration of the likely cuts, around FRA (I'm already "of age" to collect but still deferring).
{As we're currently at 2 - 2.5% wr, without kids, the decision isn't as pressing as it might be for others}

[As for retirement, I've always considered that if you absolutely "needed" the full level of SS to retire that you were likely cutting it too close and needed to either work longer or save a lot more. ]
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