Social Security Jitters Anyone ??

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
User avatar
Watty
Posts: 20646
Joined: Wed Oct 10, 2007 3:55 pm

Re: Social Security Jitters Anyone ??

Post by Watty »

glock19 wrote: Wed Aug 19, 2020 9:56 am My concern then, and that same concern is even stronger now, is that eventually "means testing" will come into play.
Social Security is effectively already means tested because;

1) The way Social Security is taxed means that people with low to medium retirement income may pay no income tax on their Social Security. High income people likely have 85% of it taxes which could easily mean that they would have to pay 20% or so of their Social Security back in federal income tax.

2) The way the Social Security benefit amount is calculated is complicated but it mainly depends on the income bend points of;
a) $926 month, $11,112 a year, 90%
b) $5,583 a month, $66,996 a year, 32%
c) Above 15%

There are lots of details but for people that make more than $70K a year the amount above that counts less than half a much as the lower income amounts. I did take a quick look at a SS calculator and it said that someone with $70K in income would get $1,786 but someone with $140k in income $2,675 which is only about 50% more, even though they had double the income. That 50% more would also have 85% of it taxed.

The maximum amount of income that is subject to social security taxes also comes into play.
Last edited by Watty on Wed Aug 19, 2020 8:13 pm, edited 1 time in total.
Pigeye Brewster
Posts: 415
Joined: Thu Oct 05, 2017 7:33 pm

Re: Social Security Jitters Anyone ??

Post by Pigeye Brewster »

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.
Does it violate the forum rules against political comments to say that it was a bad idea under the previous administration and it's a bad idea under the current one? :beer
Allan
Posts: 875
Joined: Wed Feb 21, 2007 9:15 pm
Location: Houston

Re: Social Security Jitters Anyone ??

Post by Allan »

I will be 70 in 5 months, starting at age 66 I was able to draw 50% ($1,100) of my wife's Soc Sec. Waiting until 70 seemed to make sense, I have a strong self-employed work history and will continue working into my 70's. Waiting also gives my wife a nice income if I die. To answer the main question, I don't have "jitters" but I also know nothing is guaranteed in this life. But glad I have waited.
FactualFran
Posts: 1139
Joined: Sat Feb 21, 2015 2:29 pm

Re: Social Security Jitters Anyone ??

Post by FactualFran »

I do not have second thoughts about having delayed so far. I will reach age 70 next year. For me, it is more important to have a higher assured income than to have received more in benefits payments over time. Others have different priorities. I suspect that before the Trust Fund is depleted that a law will be enacted to avoid large reductions in benefit amounts.
grainne
Posts: 17
Joined: Tue Apr 30, 2019 8:10 pm

Re: Social Security Jitters Anyone ??

Post by grainne »

FactualFran wrote: Wed Aug 19, 2020 7:20 pm I do not have second thoughts about having delayed so far. I will reach age 70 next year. For me, it is more important to have a higher assured income than to have received more in benefits payments over time. Others have different priorities. I suspect that before the Trust Fund is depleted that a law will be enacted to avoid large reductions in benefit amounts.
And given the dearth of fully inflation-indexed annuity alternatives these days, that sounds like a good approach.

Thanks to all for insights into your planning.

Cheers,
Gráinne
User avatar
celia
Posts: 11386
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Social Security Jitters Anyone ??

Post by celia »

egrets wrote: Wed Aug 19, 2020 2:32 pm How many people realize that "stopping the payroll tax" is the same as reducing Social Security and Medicare funding.
If you are referring to something discussed earlier this month, you may have missed this thread. Note that this is not about STOPPING the payroll tax, but DEFERRING it, much like the tax returns (and payments due) were deferred until July 15 this year.


In all this discussion about taking SS now or waiting, I'm surprised that no one has yet brought up the related subject of deferring the start of SS as long as possible in order to use low income tax years in early retirement to do Roth conversions. As I often tell posters here, it doesn't make sense to defer RMDs from large tax-deferred accounts while enjoying low tax brackets in early retirement if future RMDs will increase your tax bracket later. It is often best to level out your income that will be taxed over all your remaining years, thus leveling out your taxes each year instead of having a few years of low tax brackets followed by many years at a higher-than-necessary tax bracket.

And if married, when one spouse dies, the survivor can easily be in an even higher tax bracket because the survivor will then have to start filing as Single. The space in each tax bracket for Singles is half as big as for MFJ. Once RMDs start, you have lost the opportunity to spread out your taxes over more years while enabling some of your retirement assets to grow tax-free in a Roth.
AlohaJoe
Posts: 5532
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Social Security Jitters Anyone ??

Post by AlohaJoe »

bligh wrote: Wed Aug 19, 2020 11:55 am 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.
Sure, it is technically possible. But I think many people don't understand just how expensive "maintain benefits for existing retirees but cut them for new ones" would be. It would cost $280 billion a year. That's one-third of the US military budget, so we're well beyond "oh just shuffle around some of the existing federal spending a little bit to cover things". And you would have to maintain it for 30+ years (albeit at decreasing levels as people die). My back-of-the-envelope calculation (based on 2011 mortality tables) suggests it would cost over $6 trillion to maintain benefits for existing retirees without cuts. The current debt is $22 billion -- so that would increase by nearly 33%. It is 3-6 times bigger than the estimated debt increase from the recent Tax Cuts and Jobs Act. That's not "oh Congress met for 15 minutes and decided to put a stop gap measure in place". It would be, easily, the most significant tax and budget legislation in any of our lifetimes. And remember, all of this is being paired with telling the not-yet-retired people their benefits are being cut by one-quarter.

That is not even remotely the "obvious" choice when speculating about all the possibility future legislation that might affect us over the next half century. And one shouldn't be speculating about future legislation on Bogleheads anyway!
Angst
Posts: 2421
Joined: Sat Jun 09, 2007 11:31 am

Re: Social Security Jitters Anyone ??

Post by Angst »

mptfan wrote: Wed Aug 19, 2020 10:20 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.
:shock:
I think sometimes we forget how little attention the average person pays to issues that we debate ad nauseum.
Maybe this should be part of our masthead?
For better or worse, there's a lot of living getting done outside of this forum.
TravelforFun
Posts: 2185
Joined: Tue Dec 04, 2012 11:05 pm

Re: Social Security Jitters Anyone ??

Post by TravelforFun »

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.
68 now and won't file until I'm 70. I'd like to give my younger-than-me-and mostly-stay-at-home wife the maximum survival benefits.

TravelforFun
TravelforFun
Posts: 2185
Joined: Tue Dec 04, 2012 11:05 pm

Re: Social Security Jitters Anyone ??

Post by TravelforFun »

TravelforFun wrote: Wed Aug 19, 2020 9:18 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.
68 now and won't file until I'm 70. I'd like to give my younger-than-me-and-mostly-stay-at-home wife the maximum survival benefits.

TravelforFun
tibbitts
Posts: 11855
Joined: Tue Feb 27, 2007 6:50 pm

Re: Social Security Jitters Anyone ??

Post by tibbitts »

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.
I don't understand how you can say that it's unlikely future legislation will make at least as significant changes to social security as have already been made. Just as an example, I know that when my full retirement age was changed, I didn't consider that a "tiny band-aid", and I don't think you'll find universal agreement that making previously non-taxable benefits taxable was insignificant either. None of us know what changes will occur, but there is no history basis to assume Congress would hesitate to act in fundamentally altering existing provisions of social security.
User avatar
One Ping
Posts: 934
Joined: Thu Sep 24, 2015 4:53 pm

Re: Social Security Jitters Anyone ??

Post by One Ping »

AlohaJoe wrote: Wed Aug 19, 2020 10:52 am There is no way to only reduce benefits for future Social Security claimants.
Sure there is. They actually DID do just that back in the 80's, the last time major adjustments to the program were made.

They delayed the full retirement age for future claimants. This meant: 1) if you took it early, say at 62, you took a bigger haircut than those who were before you, resulting in a smaller monthly and total benefit, 2) if you waited until your full retirement age, you received that "full PIA" benefit for a shorter duration, resulting in a smaller total benefit, and 3) if you waited until 70 you received a smaller number of delayed retirement credits and a small max benefit, resulting in a smaller monthly and total benefit than those who waited until 70 before you.

There were other changes also, but those mentioned above certainly did result in reduced benefits for future claimants.

One Ping
"Re-verify our range to target ... one ping only."
spammagnet
Posts: 1153
Joined: Wed Apr 27, 2016 9:42 pm

Re: Social Security Jitters Anyone ??

Post by spammagnet »

FactualFran wrote: Wed Aug 19, 2020 7:20 pm... For me, it is more important to have a higher assured income than to have received more in benefits payments over time. ...
This!
... I suspect that before the Trust Fund is depleted that a law will be enacted to avoid large reductions in benefit amounts.
As do I, but the only fact I know is the Trustees' forecast. (The forecast is not necessarily fact; that they made the forecast is.) So that's what I base my plans on.

Should that not come to pass due to congressional action, good for me! More realistically, good for my heirs because I'll leave more assets when I die.
oxothuk
Posts: 545
Joined: Thu Nov 10, 2011 8:35 pm

Re: Social Security Jitters Anyone ??

Post by oxothuk »

If we accept the premise (as I do) that a SS funding crisis is on the horizon and that something will have to be done about it, that still does not imply an advantage to filing sooner rather than later.

Just as an example, the "fix" could involve higher tax rates on the IRA which you kept intact by drawing early SS benefits. None of us know how such a crisis would play out, but a flat across-the-board cut to benefits is the LEAST likely outcome IMHO.
wootwoot
Posts: 577
Joined: Tue Jan 27, 2009 7:37 pm

Re: Social Security Jitters Anyone ??

Post by wootwoot »

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.
Who's talking about cutting social security?
User avatar
RetiredMule
Posts: 47
Joined: Sat Oct 01, 2016 4:14 pm

Re: Social Security Jitters Anyone ??

Post by RetiredMule »

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.
Appreciate very your posting this detailed and informative write-up...even more impressive is the fact that you're in your 30s (as you state in your post), and took the time/effort to present this much data that I (and possibly, many others) didn't know. :thumbsup :thumbsup :thumbsup
Topic Author
moorso
Posts: 167
Joined: Sun Feb 16, 2014 4:04 pm

Re: Social Security Jitters Anyone ??

Post by moorso »

wootwoot wrote: Wed Aug 19, 2020 11:17 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.
Who's talking about cutting social security?
Not directly just by inference that if payroll taxes were eliminated then funding for ss would be cut. In addition to the commonly anticipated reduction in benefits in 2035. For me when I hear politicians make reference to anything that could be construed as potential ss cuts it makes me think maybe they are just throwing the idea against the wall to see what the publics reaction might be. Or even trying to condition us to the idea now to make it easier to implement later on.
vested1
Posts: 2237
Joined: Wed Jan 04, 2012 4:20 pm

Re: Social Security Jitters Anyone ??

Post by vested1 »

FactualFran wrote: Wed Aug 19, 2020 7:20 pm For me, it is more important to have a higher assured income than to have received more in benefits payments over time.
I would second this, but it's already been seconded, so I guess you would call this a third. 8-)

In my opinion this reality is the perfect counter to the "breakeven" argument. SS benefits aren't a pot of gold at the end of the rainbow. They are income, pure and simple. Show me one person who has saved every SS benefit payment and who sits on that hoard, gloating like Scrooge McDuck.

There may be a few more who have followed through on their promise to take those reduced benefits for filing early in order to invest them in the hopes of beating COLA as well as delayed credits, a combined increase of >8% a year past FRA, but if there were don't you think they would be shouting the concrete results of their wisdom from the rooftops? Did those early filers also include the effect of federal taxation in their rossy predictions, which reduce the benefit as well? And what happens when they turn 65 and Medicare Part B deductions begin to lower that net amount?

My breakeven point is about 77.5 years of age. So what? A theoretical cumulative number is meaningless after that benefit has been spent. I don't know, nor have even heard of anyone who likes paying FICA taxes, or who doesn't wish to get their hard earned money "paid back" to them. They may misunderstand the fact that SS benefits are the result of what equates to an insurance policy, or more accurately, a deferred annuity, and one that is much better than anyone can buy on the open market due to COLA adjustments and survivor benefits. They are not a dollar-for-dollar reimbursement.

Too many let their resentment for the government cloud their judgement when it comes to deciding when to file for SS, shooting their own foot while aiming at what they perceive to be injustice.
User avatar
JoeRetire
Posts: 5744
Joined: Tue Jan 16, 2018 2:44 pm

Re: Social Security Jitters Anyone ??

Post by JoeRetire »

Pigeye Brewster wrote: Wed Aug 19, 2020 6:55 pm
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.
Does it violate the forum rules against political comments to say that it was a bad idea under the previous administration and it's a bad idea under the current one? :beer
My guess is that it is a violation. I guess we'll see...
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
User avatar
JoeRetire
Posts: 5744
Joined: Tue Jan 16, 2018 2:44 pm

Re: Social Security Jitters Anyone ??

Post by JoeRetire »

celia wrote: Wed Aug 19, 2020 7:57 pm
egrets wrote: Wed Aug 19, 2020 2:32 pm How many people realize that "stopping the payroll tax" is the same as reducing Social Security and Medicare funding.
If you are referring to something discussed earlier this month, you may have missed this thread. Note that this is not about STOPPING the payroll tax, but DEFERRING it
Except that the executive memo says the Treasury Secretary, Steven Mnuchin, can decide to forgive the deferment, and the president said in recent press briefings he might forgive the debt if he gets reelected. That wouldn't be DEFERRING it.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
TJSI
Posts: 384
Joined: Thu Jan 27, 2011 4:03 pm

Re: Social Security Jitters Anyone ??

Post by TJSI »

Senior citizens vote --big time. SS won't be cut. Worry about something else and do more exercise.
User avatar
LilyFleur
Posts: 1496
Joined: Fri Mar 02, 2018 10:36 pm

Re: Social Security Jitters Anyone ??

Post by LilyFleur »

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. 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.
It is a government program, and as such is available for legislative amendments. I think the amendment to allow taxation of SS benefits, under President Ronald Reagan, has had a far-reaching effect on many senior citizens over the years.
I was on the fence about doing my first Roth conversion last year, and one of our wise Bogleheads advised me that when in doubt, diversify your sources of retirement income.
As we have seen recently with the reduction of the "stretch IRA," things can and will change, despite our best-laid plans.
I wonder about the friend of the OP--it seems he must have had rather adequate financial resources if he had not begun his Social Security by age 73. While most Bogleheads would view this as a rather egregious mistake, perhaps in his world it wasn't crucial to his happiness. I do wonder about his spouse--after his death, she will be in the much higher single tax bracket and hopefully will be OK.
egrets
Posts: 273
Joined: Sun Jul 05, 2020 2:56 pm

Re: Social Security Jitters Anyone ??

Post by egrets »

North Texas Cajun wrote: Wed Aug 19, 2020 5:48 pm
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.
I crunched numbers when I retired, and I put more into SS, counting compound interest and the fact that the balance is still earning money as I "take benefits from it" than I will ever see back before I croak, I think I had to reach 98. So it's beyond me how SS can be losing money unless the trust fund is being raided.
smitcat
Posts: 6464
Joined: Mon Nov 07, 2016 10:51 am

Re: Social Security Jitters Anyone ??

Post by smitcat »

egrets wrote: Thu Aug 20, 2020 5:23 pm
North Texas Cajun wrote: Wed Aug 19, 2020 5:48 pm
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.
I crunched numbers when I retired, and I put more into SS, counting compound interest and the fact that the balance is still earning money as I "take benefits from it" than I will ever see back before I croak, I think I had to reach 98. So it's beyond me how SS can be losing money unless the trust fund is being raided.
"So it's beyond me how SS can be losing money unless the trust fund is being raided."
Are you aware of how the two 'bend' points work with SS?
jarjarM
Posts: 276
Joined: Mon Jul 16, 2018 1:21 pm

Re: Social Security Jitters Anyone ??

Post by jarjarM »

egrets wrote: Thu Aug 20, 2020 5:23 pm
North Texas Cajun wrote: Wed Aug 19, 2020 5:48 pm
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.
I crunched numbers when I retired, and I put more into SS, counting compound interest and the fact that the balance is still earning money as I "take benefits from it" than I will ever see back before I croak, I think I had to reach 98. So it's beyond me how SS can be losing money unless the trust fund is being raided.
For most bogleheads who are/were high income, you'll never get back all the money with interest. That's why the 2 bend points exists. Also, keep in mind that spousal benefits for those who are stay at home spouses. SS was never meant to be fair to all.
magazinewriter
Posts: 394
Joined: Mon Apr 19, 2010 11:39 am

Re: Social Security Jitters Anyone ??

Post by magazinewriter »

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 have always planned to wait until 70 but recently began thinking of taking SS at my normal retirement age, 66. I turn 66 next month. I’ll decide this fall and will take it Jan. 2021 if I make the change. With the lower SS collections due to the pandemic and other talk about eliminating the SS tax it makes me wonder about the SS trust fund after 2035 or before.
User avatar
One Ping
Posts: 934
Joined: Thu Sep 24, 2015 4:53 pm

Re: Social Security Jitters Anyone ??

Post by One Ping »

egrets wrote: Thu Aug 20, 2020 5:23 pm So it's beyond me how SS can be losing money unless the trust fund is being raided.
You do understand that SS is a 'pay as you go' system, There is no 'lockbox' where 'your' money went to be reserved/invested for you.

The money you paid in basically went directly to pay benefits. Sometimes in the past more money went in to the system than needed to be paid out. That situation had prevailed for a while until just recently. That money that was not paid out in benefits during that time went into the 'Trust Fund". Within the last few years the inflow was not sufficient to satisfy the outflow. The shortfall was made up by taking withdrawals from the Trust Fund, which was it purpose to begin with. It is not being raided, it's being used for it's intended purpose. At some point in the future the Trust Fund will run dry and the system will not be able to continue making benefit payments at the same rate (unless the law is changed to 'fix' the system).
"Re-verify our range to target ... one ping only."
User avatar
JoeRetire
Posts: 5744
Joined: Tue Jan 16, 2018 2:44 pm

Re: Social Security Jitters Anyone ??

Post by JoeRetire »

egrets wrote: Thu Aug 20, 2020 5:23 pmSo it's beyond me how SS can be losing money unless the trust fund is being raided.
The trust fund isn't being raided.

If you really want to understand why the trust fund is being depleted you can educate yourself by reading how Social Security actually works.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
User avatar
JoeRetire
Posts: 5744
Joined: Tue Jan 16, 2018 2:44 pm

Re: Social Security Jitters Anyone ??

Post by JoeRetire »

magazinewriter wrote: Thu Aug 20, 2020 6:01 pm I have always planned to wait until 70 but recently began thinking of taking SS at my normal retirement age, 66. I turn 66 next month. I’ll decide this fall and will take it Jan. 2021 if I make the change. With the lower SS collections due to the pandemic and other talk about eliminating the SS tax it makes me wonder about the SS trust fund after 2035 or before.
How much do you think "lower SS collections due to the pandemic" will actually impact the depletion of the SS trust fund? Think 2-3 weeks...
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
User avatar
LilyFleur
Posts: 1496
Joined: Fri Mar 02, 2018 10:36 pm

Re: Social Security Jitters Anyone ??

Post by LilyFleur »

It seems that the greatest group of people dying from COVID is those people collecting Social Security. Time will tell of the effect of this disease on the SS trust fund.
AlohaJoe
Posts: 5532
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Social Security Jitters Anyone ??

Post by AlohaJoe »

JoeRetire wrote: Thu Aug 20, 2020 8:05 pm
magazinewriter wrote: Thu Aug 20, 2020 6:01 pm I have always planned to wait until 70 but recently began thinking of taking SS at my normal retirement age, 66. I turn 66 next month. I’ll decide this fall and will take it Jan. 2021 if I make the change. With the lower SS collections due to the pandemic and other talk about eliminating the SS tax it makes me wonder about the SS trust fund after 2035 or before.
How much do you think "lower SS collections due to the pandemic" will actually impact the depletion of the SS trust fund? Think 2-3 weeks...
The Penn Wharton Budget Model suggests the impact is 2-4 years, not 2-3 weeks.

https://budgetmodel.wharton.upenn.edu/i ... oronavirus
tj
Posts: 3329
Joined: Thu Dec 24, 2009 12:10 am

Re: Social Security Jitters Anyone ??

Post by tj »

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.
Who knows, There could be a larger workforce 20-30 years from now with all the quarantining and what not. I've seen a lot of "Oops' baby announcements on Facebook recently!
User avatar
HomerJ
Posts: 15152
Joined: Fri Jun 06, 2008 12:50 pm

Re: Social Security Jitters Anyone ??

Post by HomerJ »

JoeRetire wrote: Thu Aug 20, 2020 1:04 pm
celia wrote: Wed Aug 19, 2020 7:57 pm
egrets wrote: Wed Aug 19, 2020 2:32 pm How many people realize that "stopping the payroll tax" is the same as reducing Social Security and Medicare funding.
If you are referring to something discussed earlier this month, you may have missed this thread. Note that this is not about STOPPING the payroll tax, but DEFERRING it
Except that the executive memo says the Treasury Secretary, Steven Mnuchin, can decide to forgive the deferment, and the president said in recent press briefings he might forgive the debt if he gets reelected. That wouldn't be DEFERRING it.
LOL.. It's not up to the Treasury Secretary or the President.

https://www.forbes.com/sites/kellyphill ... c9a94e4c41

She went on to ask, "How does that money get generated if not through this tax cut? Where does the money come from to replace it?"

Mnuchin responded, "Well, we're going to create a level of certainty for employers that want to participate. We can't force people to participate. But I think many small businesses will do this and pass on the benefits. But I think the President would like to do a payroll tax cut so he'll go back to Congress when he wins the election and ask Congress to have this money forgiven and have the Social Security trust fund fully topped up so that in no way does this impact Social Security."
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.”
ballons
Posts: 441
Joined: Sun Aug 18, 2019 3:05 pm

Re: Social Security Jitters Anyone ??

Post by ballons »

humblecoder wrote: Wed Aug 19, 2020 11:10 am 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.
Pretty sure covid19 has pushed that to 2029-2033 already and estimates of 30% cuts.
https://www.forbes.com/sites/nextavenue ... -benefits/
Big Dog
Posts: 2006
Joined: Mon Sep 07, 2015 4:12 pm

Re: Social Security Jitters Anyone ??

Post by Big Dog »

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.
In previous times when they've stopped the Payroll Tax, Congress has back-filled the SS trust accounts with 'cash' (aka IOU's) from the Treasury general fund. Most recently, this was done back in 2010-11 during the financial crisis.
ballons
Posts: 441
Joined: Sun Aug 18, 2019 3:05 pm

Re: Social Security Jitters Anyone ??

Post by ballons »

TJSI wrote: Thu Aug 20, 2020 1:22 pm Senior citizens vote --big time. SS won't be cut. Worry about something else and do more exercise.
You underestimate people voting against their own self interest with a giant smile across their faces.
illumination
Posts: 859
Joined: Tue Apr 02, 2019 6:13 pm

Re: Social Security Jitters Anyone ??

Post by illumination »

Zero jitters. I think many people want to use hyperbole on this issue.

When the economy takes a dive, that also effects how much is collected in the payroll tax. If the economy hits a bump, is everyone jumping out of the window that their Social Security is getting cancelled? Someone taking early Social Security over this fear is shooting themselves in the foot. If they are going to take it away from someone who's technically eligible to collect (but has waited a few more years) who's to say they don't also take away from current recipients?

If SS is changed, it will be at the margins and it will be bipartisan, but it's not going away. If they do something like they increase the age a year or two, it's not going to be for the guy that's 6 months away from claiming it and he somehow gets left out in the cold and gets completely shafted. Last time this was done in the 1980s, it was bipartisan and the increase in age was 65 to 67 and it took decades to realize. And people already taking Social Security were effected on things like the level they were taxed on it. So someone getting in "early" didn't somehow shield them.
User avatar
oldcomputerguy
Moderator
Posts: 9187
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods in East Tennessee

Re: Social Security Jitters Anyone ??

Post by oldcomputerguy »

This topic has run its course (topic exhausted, derailing into politics and debate on possible changes to Social Security law) and has been locked. See Politics and Religion:
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
  • Common religious expressions such as sending your prayers to an ailing member.
  • Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
  • Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed laws or regulations are prohibited.
  • Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)
Locked