FIRE's Social Security ??

[Rdy2Fire]

Just received my annual check your statement email and had a question. This may have been answered or discussed somewhere but I couldn't find it so I apologize if it has been answered.

I should preface this question with I have never and will never 'bank' on social security being available. I'll also say that my opinion is everyone should take it the day they are eligible.

In regards to eligibility and payments i.e. what I know/believe; you need 40 credits to be eligible. SS then takes the top 35 yrs of your highest earnings, averages them out and comes up with your payment. If you work less then 35 years you get a $0 amount averaged in; or so I believe.

Assuming the above is correct, which I do not know 100%; would that mean since I have only worked 25 years (and still have more then 10 years til 62) would I get 10 years of $0 bringing my expected payment way down?

Right now it says if I wait till full retirement I'd receive around $3000 and early $2000 a month so just wondering if that goes down and I fail to contribute for the next 10 years. Again not banking on this $ but thought someone might know the answers and others might be equally interested.

[SeattleCPA]

It's way too pessimistic to assume you get nothing. If Congress does nothing, I think the result is 2035-ish, benefits get cut by 25% or 30%. BTW, longer term, things work out fine. The funding problem is the boomers. (Well, really the fact that boomer parents and grandparents never paid enough into system.)

Also, the SS PIA formula is designed to get you a certain amount of minimum income. So it's really easy to get that first $10K. Slightly harder to get that next $15K. And nearly impossible to get the last $5K or whatever.

Details here: https://www.ssa.gov/oact/cola/piaformula.html

[maizefolk]

Yes it'll go down if you end up working less than 35 years, but probably by less than you expect.

Social security rewards your first ~$400k* in lifetime earnings A LOT. And it rewards your next ~$2.2M* in lifetime earnings a decent amount. After you hit ~$2.6M* in total lifetime earnings increase in social security benefits you see from additional earnings goes down a lot.

The reason it works this way is to provide higher relative payouts for people who earn low incomes for 35 years. But the way the formula works, a person who earns a high income for 10 years gets the same treatment as a person who earns a low income for 35.

*All numbers approximate and in today's dollars social security adjusts your old earnings upwards based on how much salaries have increased since the year in which you earned them.

[Dicey]

It's way too pessimistic to assume you get nothing. If Congress does nothing, I think the result is 2035-ish, benefits get cut by 25% or 30%. BTW, longer term, things work out fine. The funding problem is the boomers. (Well, really the fact that boomer parents and grandparents never paid enough into system.)

Also, the SS PIA formula is designed to get you a certain amount of minimum income. So it's really easy to get that first $10K. Slightly harder to get that next $15K. And nearly impossible to get the last $5K or whatever.

Details here: https://www.ssa.gov/oact/cola/piaformula.html

Let's clarify something please. The "boomers" aren't really the problem as you so glibly state. The reason folks have underpaid (and we completely agree on that point) is that the SS caps on income are woefully low.

https://cepr.net/calculator/when-do-high-income-earners-stop-paying-the-social-security-payroll-tax/#:~:text=Most%20people%20are%20not%20aware,two%20months%20into%20the%20year.

Key point: "Most people are not aware that Social Security contributions are capped at the first $147,000 of wage income. That means that someone who earns $1,000,000 per year stops paying into the program less than two months into the year."

Far fewer Boomers earned that kind of money back in the day. I would argue that Boomers contributed a higher percentage of their income than subsequent generations are doing now. I think I got over the cap once in my entire career, and it was very late in the year. To be sure, the cap was lower then. It has adjusted over the years, but not nearly enough. It's another example of not-well-known perks legislated to benefit the wealthy at the expense of average wage earners. Why is there a cap at all? There is probably an argument baked in that the cap is in some proportion to the projected payouts, but raising the cap would fix the problem a lot faster than blaming Boomers.

By the way, if the Feds got creative and offered tax credits or even just lower tax rates in exchange for reduced SS payments, I'd be on that in a hot minute.

Blaming Boomers does jack-shit to solve the problem. Now, get off my (non-existent) lawn!

[jim555]

Once you get past the second bend point it doesn't pay to work since you get so little extra for your efforts.

[jnw]

I don't believe SS benefits will be cut. This is a myth some politicians like to perpetuate.  JL Collins said in his book he also bought into this myth and was pleasantly surprised when he started collecting it.  People pay large amounts into it every year; if it went away that would be stealing.   There is a large 2.2T trust fund as well.

SS benefifts are significant.  If you make $80k for the required number of years, your benefit is currently around $2600 per month (in today's dollars); deduct $170 for excellent medical insurance.  If you make all the way up to the social security payment cap, it's significantly more than $2600 per month. 

I currently get $30,800 per year from SS and it's tax free -- equivalent to making about $40k per year before taxes.  It went up 6% this year, it goes up every year relative to inflation.  Despite getting so little income I still manage to save over 50% of it each month; so actually I am already financially independent but I am investing that 50% every month just to have a little extra later in case something does happen; also to save for my heir.

Social Security is a great thing.  If politicians start making cuts, people will get pissed and vote for the opposing party.  I am counting on my social security.

[ixtap]

It's way too pessimistic to assume you get nothing. If Congress does nothing, I think the result is 2035-ish, benefits get cut by 25% or 30%. BTW, longer term, things work out fine. The funding problem is the boomers. (Well, really the fact that boomer parents and grandparents never paid enough into system.)

Also, the SS PIA formula is designed to get you a certain amount of minimum income. So it's really easy to get that first $10K. Slightly harder to get that next $15K. And nearly impossible to get the last $5K or whatever.

Details here: https://www.ssa.gov/oact/cola/piaformula.html

Let's clarify something please. The "boomers" aren't really the problem as you so glibly state. The reason folks have underpaid (and we completely agree on that point) is that the SS caps on income are woefully low.

https://cepr.net/calculator/when-do-high-income-earners-stop-paying-the-social-security-payroll-tax/#:~:text=Most%20people%20are%20not%20aware,two%20months%20into%20the%20year.

Key point: "Most people are not aware that Social Security contributions are capped at the first $147,000 of wage income. That means that someone who earns $1,000,000 per year stops paying into the program less than two months into the year."

Far fewer Boomers earned that kind of money back in the day. I would argue that Boomers contributed a higher percentage of their income than subsequent generations are doing now. I think I got over the cap once in my entire career, and it was very late in the year. To be sure, the cap was lower then. It has adjusted over the years, but not nearly enough. It's another example of not-well-known perks legislated to benefit the wealthy at the expense of average wage earners. Why is there a cap at all? There is probably an argument baked in that the cap is in some proportion to the projected payouts, but raising the cap would fix the problem a lot faster than blaming Boomers.

By the way, if the Feds got creative and offered tax credits or even just lower tax rates in exchange for reduced SS payments, I'd be on that in a hot minute.

Blaming Boomers does jack-shit to solve the problem. Now, get off my (non-existent) lawn!

That limit is raised regularly, possibly indexed to wages. Not sure the percentage of people reaching it has changed much. I still agree that it should change, even if that is a lower percentage as income increases above the amount that affects your own SS calculations (seems more politically feasible).

[maizefolk]

People pay large amounts into it every year; if it went away that would be stealing.   There is a large 2.2T trust fund as well.

And most of that money you and I pay into social security is immediately paid back out to other people. The money you and I have paid into the program is largely gone, paid to people receiving benefits. The social security trust fund would be gone in two years if new people weren't constantly paying into the problem.

That fact that we've voluntarily chose to tax ourselves to pay some money to ours parents generation so they aren't living on the streets in their old age does not create an ethical obligation for the next generation to choose to tax themselves to pay money to us.

Just like if you choose to hand $100 to me today, it doesn't create a legal, ethical, or moral obligation for someone else to give you $100 tomorrow.

[jnw]

People pay large amounts into it every year; if it went away that would be stealing.   There is a large 2.2T trust fund as well.

And most of that money you and I pay into social security is immediately paid back out to other people. The money you and I have paid into the program is largely gone, paid to people receiving benefits. The social security trust fund would be gone in two years if new people weren't constantly paying into the problem.

That fact that we've voluntarily chose to tax ourselves to pay some money to ours parents generation so they aren't living on the streets in their old age does not create an ethical obligation for the next generation to choose to tax themselves to pay money to us.

Just like if you choose to hand $100 to me today, it doesn't create a legal, ethical, or moral obligation for someone else to give you $100 tomorrow.

Umm your parents paid into social security their entire lives, you aren't giving them anything.

[maizefolk]

People pay large amounts into it every year; if it went away that would be stealing.   There is a large 2.2T trust fund as well.

And most of that money you and I pay into social security is immediately paid back out to other people. The money you and I have paid into the program is largely gone, paid to people receiving benefits. The social security trust fund would be gone in two years if new people weren't constantly paying into the problem.

That fact that we've voluntarily chose to tax ourselves to pay some money to ours parents generation so they aren't living on the streets in their old age does not create an ethical obligation for the next generation to choose to tax themselves to pay money to us.

Just like if you choose to hand $100 to me today, it doesn't create a legal, ethical, or moral obligation for someone else to give you $100 tomorrow.

Umm your parents paid into social security their entire lives, you aren't giving them anything.

The taxes my parents' generation paid went to my grandparents' generation. My grandparents' generated had decided to tax themselves to provide a benefit to their parents (my great grand parents) who HADN'T paid into social security their whole lives.

Again, our decision to tax ourselves to provide a benefit to one group of people does not create an ethical or legal obligation for future people to tax themselves to provide a benefit for us. They may choose to. They may choose not to. Just as we could choose to do so or choose not to do so and decided that we would.

The next generation is not stealing from us if they decide differently than we did.

[Dee18]

You can calculate what you will get here at the below site, testing various dates for early retirement:
https://www.ssa.gov/oact/quickcalc/early_late.html

I was surprised at how little early retirement affected my benefits.  Taking benefits early has a much bigger impact, but I agree with you that there can be good reasons to do that. 

One rule to be aware of is if you are still earning income while taking social security before full retirement age your benefits are reduced by $1 for every $2 you earn over the limit. For the year 2021, this limit on earned income was $18,960 ($1,580 per month).

[jnw]

I like to think of FIRE as what JL Collins calls it "FU Money".   You don't need to work but are so bored otherwise you want to work to keep busy, but you get to be your own boss.

I think it's good to work while "retired" , not just to alleviate boredom, but to buy more stocks at bargains if there is a recession.   Also it only helps your social security later on as well.

[Wolfpack Mustachian]

People pay large amounts into it every year; if it went away that would be stealing.   There is a large 2.2T trust fund as well.

And most of that money you and I pay into social security is immediately paid back out to other people. The money you and I have paid into the program is largely gone, paid to people receiving benefits. The social security trust fund would be gone in two years if new people weren't constantly paying into the problem.

That fact that we've voluntarily chose to tax ourselves to pay some money to ours parents generation so they aren't living on the streets in their old age does not create an ethical obligation for the next generation to choose to tax themselves to pay money to us.

Just like if you choose to hand $100 to me today, it doesn't create a legal, ethical, or moral obligation for someone else to give you $100 tomorrow.

Umm your parents paid into social security their entire lives, you aren't giving them anything.

The taxes my parents' generation paid went to my grandparents' generation. My grandparents' generated had decided to tax themselves to provide a benefit to their parents (my great grand parents) who HADN'T paid into social security their whole lives.

Again, our decision to tax ourselves to provide a benefit to one group of people does not create an ethical or legal obligation for future people to tax themselves to provide a benefit for us. They may choose to. They may choose not to. Just as we could choose to do so or choose not to do so and decided that we would.

The next generation is not stealing from us if they decide differently than we did.

What you're saying might be true if that's how it was being sold to the common American citizens. Instead, it's being sold as a pension that you pay into to get out of. I doubt anyone would say there are no ethical obligations for companies to pay people back who have paid pensions into and that people are reasonable counting on (legal obligations can change with laws, of course).

There is at least some ethical obligation for people who have essentially been sold an idea that they're paying into something they will get back in the end to get it back in the end. Future generations can change that legally, of course, but to say there's no ethical obligation seems odd.

That to say, I'm not counting on it because there are inherent problems in the system as well as the fact that future generations certainly may change the laws about it. In fact, I see that as a very solid possibility after talking to youth today who seem to think everything is the fault of previous generations (not that they're completely without their reasons for this, of course) and seem to think they previous generations are owed nothing and should be screwed over as much as possible. Of course, I could just be talking to some youth who are more bitter than most.

[jnw]

There are constantly people turning 67 every year, and they will appreciate thier SS income, after putting into social security their entire lives.  They are voters as well.  The young people don't get to dictate policy.   The young complaining people will grow up , turn 67 and also appreciate their SS income. It's not going to go away.  Caps will be increased if needed to cover it.

[maizefolk]

What you're saying might be true if that's how it was being sold to the common American citizens. Instead, it's being sold as a pension that you pay into to get out of. I doubt anyone would say there are no ethical obligations for companies to pay people back who have paid pensions into and that people are reasonable counting on (legal obligations can change with laws, of course).

There is at least some ethical obligation for people who have essentially been sold an idea that they're paying into something they will get back in the end to get it back in the end. Future generations can change that legally, of course, but to say there's no ethical obligation seems odd.

I agree that it's been sold to the American public as a pension. It's been sold that way by people of our generation and previous ones. If we were talking about whether the people who made that sales pitch should be obliged to follow through on it, I'd completely agree with you. But we're not talking about the obligation of the people who did the selling, but of people who had absolutely no say in the decision.

I don't believe person A promising person B that person C will give them $100 entitles person B to accuse person C of theft if they don't follow through on a commitment they were never a party to.

[Wolfpack Mustachian]

What you're saying might be true if that's how it was being sold to the common American citizens. Instead, it's being sold as a pension that you pay into to get out of. I doubt anyone would say there are no ethical obligations for companies to pay people back who have paid pensions into and that people are reasonable counting on (legal obligations can change with laws, of course).

There is at least some ethical obligation for people who have essentially been sold an idea that they're paying into something they will get back in the end to get it back in the end. Future generations can change that legally, of course, but to say there's no ethical obligation seems odd.

I agree that it's been sold to the American public as a pension. It's been sold that way by people of our generation and previous ones. If we were talking about whether the people who made that sales pitch should be obliged to follow through on it, I'd completely agree with you. But we're not talking about the obligation of the people who did the selling, but of people who had absolutely no say in the decision.

I don't believe person A promising person B that person C will give them $100 entitles person B to accuse person C of theft if they don't follow through on a commitment they were never a party to.

That logic falls apart, though, if you compare it to the company analogy I made. The people who promised it do not matter. Company's change CEO's and management all the time. We still would feel there is an ethical obligation because the new people who came to manage the company are a part of the same system as the people who "technically" made the promises. Systemically, companies are ethically obligated to pay pensions even though the specific management that promised it may be gone. Systemically, the government bears some ethical obligation to fulfill what has been sold to existing generations as the reason they are paying for it.

[jnw]

Social Security just works and is a life saver.  With how consumerist America is, with hardly anyone saving their money, blowing it all on junk and items which instantly depreciate to $0.. Throwing away food and eating out every day.   Wasteful.  Most aren't like us who try and save as much as possible. One thing they can count on though, when they get old or unfortunately disabled, is the Social Security they paid into their entire lives at ~15%.

[SeattleCPA]

It's way too pessimistic to assume you get nothing. If Congress does nothing, I think the result is 2035-ish, benefits get cut by 25% or 30%. BTW, longer term, things work out fine. The funding problem is the boomers. (Well, really the fact that boomer parents and grandparents never paid enough into system.)

Also, the SS PIA formula is designed to get you a certain amount of minimum income. So it's really easy to get that first $10K. Slightly harder to get that next $15K. And nearly impossible to get the last $5K or whatever.

Details here: https://www.ssa.gov/oact/cola/piaformula.html

Let's clarify something please. The "boomers" aren't really the problem as you so glibly state. The reason folks have underpaid (and we completely agree on that point) is that the SS caps on income are woefully low.

https://cepr.net/calculator/when-do-high-income-earners-stop-paying-the-social-security-payroll-tax/#:~:text=Most%20people%20are%20not%20aware,two%20months%20into%20the%20year.

Key point: "Most people are not aware that Social Security contributions are capped at the first $147,000 of wage income. That means that someone who earns $1,000,000 per year stops paying into the program less than two months into the year."

Far fewer Boomers earned that kind of money back in the day. I would argue that Boomers contributed a higher percentage of their income than subsequent generations are doing now. I think I got over the cap once in my entire career, and it was very late in the year. To be sure, the cap was lower then. It has adjusted over the years, but not nearly enough. It's another example of not-well-known perks legislated to benefit the wealthy at the expense of average wage earners. Why is there a cap at all? There is probably an argument baked in that the cap is in some proportion to the projected payouts, but raising the cap would fix the problem a lot faster than blaming Boomers.

By the way, if the Feds got creative and offered tax credits or even just lower tax rates in exchange for reduced SS payments, I'd be on that in a hot minute.

Blaming Boomers does jack-shit to solve the problem. Now, get off my (non-existent) lawn!

Hey, I think you misunderstood my point. I never meant to blame boomers. A group, I'm a member of BTW.

Rather I was trying to make two important and non-political points:

1. That the program is not going away. I.e., the worst case scenario per the source I link to below is Congress does nothing and in 2035, benefits get cut by 25%

Source: https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html

This point is really important because people who mistakenly believe the program goes away dramatically misunderstand their retirement finances.

2. And the other thin... My understanding is, this funding shortfall is different for boomers than it is for new workers entering the workforce today or people born today. This is what I was trying to say. I.e., it's problem that affects the boomers more than it affects the folks who come after them. For them? My understanding is the tax and benefit formulas work way better. Maybe not perfect. But it's the big wave of boomers that overwhelm (somewhat semi-temporarily) the program. I read this in an SSA research paper. I will try to find that.

And except for posting that reference, I think I'll leave this thread.

My point was not to start or participate in a political discussion. Rather my point was to alert people that the situation is not as bad as some worry.

[Scandium]

What you're saying might be true if that's how it was being sold to the common American citizens. Instead, it's being sold as a pension that you pay into to get out of. I doubt anyone would say there are no ethical obligations for companies to pay people back who have paid pensions into and that people are reasonable counting on (legal obligations can change with laws, of course).

There is at least some ethical obligation for people who have essentially been sold an idea that they're paying into something they will get back in the end to get it back in the end. Future generations can change that legally, of course, but to say there's no ethical obligation seems odd.

I agree that it's been sold to the American public as a pension. It's been sold that way by people of our generation and previous ones. If we were talking about whether the people who made that sales pitch should be obliged to follow through on it, I'd completely agree with you. But we're not talking about the obligation of the people who did the selling, but of people who had absolutely no say in the decision.

I don't believe person A promising person B that person C will give them $100 entitles person B to accuse person C of theft if they don't follow through on a commitment they were never a party to.

What do you mean "sold as a pension"? A pension works the same way you described SS above; the people paying in today pay for the currently retired. People working today will receive payments from the people in the future. Both are the same.

[jnw]

When ya think about it.. Social Security is actually good for the economy, right?  Over half of Americans live paycheck to paycheck, without saving any for retirement.  In their minds is "well I'll just live off social security when I get old".  So they spend every cent each month.  That's good for the economy right? Circulation of money.   If everyone saved 50% per month like we do, oh my what would happen to the economy? lol.

[Rdy2Fire]

It's way too pessimistic to assume you get nothing. If Congress does nothing, I think the result is 2035-ish, benefits get cut by 25% or 30%. BTW, longer term, things work out fine. The funding problem is the boomers. (Well, really the fact that boomer parents and grandparents never paid enough into system.)

Also, the SS PIA formula is designed to get you a certain amount of minimum income. So it's really easy to get that first $10K. Slightly harder to get that next $15K. And nearly impossible to get the last $5K or whatever.

Details here: https://www.ssa.gov/oact/cola/piaformula.html

WOW!! Ok this became a totally different thread then what I intended or was even inquiring about. So, as someone else said

"Let's clarify something please"

No where was I suggesting SS was going away or that I was going to get nothing. When I posted this

"I should preface this question with I have never and will never 'bank' on social security being available. I'll also say that my opinion is everyone should take it the day they are eligible."

I was saying that I personally have never banked on it. In other words, I wasn't necessarily planning for it to not exist just that I was not going to be dependent on it and therefore have never planned around it or planned for it as part of my 'retirement'

My question which only maizefolk seemed to understand or respond to

Yes it'll go down if you end up working less than 35 years

Was simply about the 35 years and $0 dollar entries for anything under 35 years. I guess either my question wasn't clear or people wanted to go off on a tangent but I just wanted to be clear I wasn't suggesting it was going away, I wasn't suggesting it will be cut (it probably will be) and I wasn't suggesting I needed a calculator which I know is available on the site but doesn't take into consideration what I was asking about i.e. the 35 and $0 years.

I'll continue to read the responses as some are interesting just wanted to clarify and if anyone has any further information on the calculations around the $0 years, great.

[maizefolk]

@Rdy2Fire

If you're feeling ambitious you can calculate your current benefits if you stopped working yourself. Go on SSA.gov and look up your past earnings statements.

Go to this site, put in this year, and get the factors social security would multiply each of your past years of earnings by (use 2022 for age of retirement, not your actual expected retirement age).

Add all those numbers up (assuming you worked less than 35 years).

If the number is less than $430,000 your annual benefit if you stopped working today and draw social security at full retirement age will be about 2.6% (0.026) of that number (in today's dollars, it'll be adjusted upward for future wage inflation).

If the number is between $430,000 and $2.6M, subtract $430,000 from it, multiple the remaining value by 0.9% (0.009) and add it to $430,000*2.6% to get your annual benefit if you stopped working today.

If your lifetime earnings are already more than $2.6M you should definitely not be worrying about the very modest impact on your future social security payments of stopping working early.

[maizefolk]

What do you mean "sold as a pension"? A pension works the same way you described SS above; the people paying in today pay for the currently retired. People working today will receive payments from the people in the future. Both are the same.

That's not how pensions are legally supposed to work. Pensions are supposed to save and invest each employees contributions and/or contributions made by the employer on the employee's behalf and use those investments to pay out benefits to the employee after they retire.

In principle if an employer shuts down tomorrow their pension plan should already have enough assets to pay out all its existing pension obligations to current employees and retirees.

Now often things go wrong, pensions are too optimistic about the rates of return that they'll get on their investments and the employer ends up having to pitch in more money (or goes bankrupt).

But no, pensions don't work the same way as social security.

[Rdy2Fire]

@Rdy2Fire

If you're feeling ambitious you can calculate your current benefits if you stopped working yourself. Go on SSA.gov and look up your past earnings statements.

Go to this site, put in this year, and get the factors social security would multiply each of your past years of earnings by (use 2022 for age of retirement, not your actual expected retirement age).

Add all those numbers up (assuming you worked less than 35 years).

If the number is less than $430,000 your annual benefit if you stopped working today and draw social security at full retirement age will be about 2.6% (0.026) of that number (in today's dollars, it'll be adjusted upward for future wage inflation).

If the number is between $430,000 and $2.6M, subtract $430,000 from it, multiple the remaining value by 0.9% (0.009) and add it to $430,000*2.6% to get your annual benefit if you stopped working today.

If your lifetime earnings are already more than $2.6M you should definitely not be worrying about the very modest impact on your future social security payments of stopping working early.

Interesting; and that was more in line with my question. Honestly I wasn't worrying at the impact which is why I prefaced it all with I'm not counting on SS; where the confusion lied, apparently :)  My lifetime "Taxed Social Security Earnings" are just under the 2.6M and "Taxed Medicare Earnings" just over 3.5M earnings.

I am sure I'll be fine but just an exercise in curiosity and still enjoy reading the rest of the responses around SS

[SeattleCPA]

Maybe what we really learn here is this is too sensitive a topic.

And sorry if I stressed or irritated folks.

[Dicey]

Maybe what we really learn here is this is too sensitive a topic.

And sorry if I stressed or irritated folks.

You didn't really stress me, even if it seemed like it. For one thing, I don't really feel like a "Boomer". The Boomer generation spans a longer number of years than subsequent "gens". People 18 years older than I are Boomers, for Pete's sake! They could literally be my parents. Further, a lot of change happened in the late 70's, especially for women. I have female friends that are 5-6 years older and their experiences and opportunities growling up were totally different from mine, all things being relatively equal.

Next, I still think the low cap thing makes no sense. Why the hell is it so low? Why should higher earners get a break because they earn more? If there's a rationale behind it beyond what I surmised above, I'd sure like to learn about it.

After that, we have the fact that I read "boomer parents and grandparents" as boomers who are parents and their kid's grandparents, which doesn't seem at all what you meant upon multiple readings.

Don't leave on my account. Your input is always interesting and valuable, IMO.

[ixtap]

Maybe what we really learn here is this is too sensitive a topic.

And sorry if I stressed or irritated folks.

You didn't really stress me, even if it seemed like it. For one thing, I don't really feel like a "Boomer". The Boomer generation spans a longer number of years than subsequent "gens". People 18 years older than I are Boomers, for Pete's sake! They could literally be my parents. Further, a lot of change happened in the late 70's, especially for women. I have female friends that are 5-6 years older and their experiences and opportunities growling up were totally different from mine, all things being relatively equal.

Next, I still think the low cap thing makes no sense. Why the hell is it so low? Why should higher earners get a break because they earn more? If there's a rationale behind it beyond what I surmised above, I'd sure like to learn about it.

After that, we have the fact that I read "boomer parents and grandparents" as boomers who are parents and their kid's grandparents, which doesn't seem at all what you meant upon multiple readings.

Don't leave on my account. Your input is always interesting and valuable, IMO.

Traditionally, generations were considered as 20 year cohorts. However, that has been sped up since the second half of the 20th century and we currently seem to be operating on 15 year cohorts. One reason both late boomers and gen Xers in general have trouble fitting in to any cohort is that things were changing so fast. Heck, I myself started with a SAHM and became a latch key kid when my parents started worrying about how to send my older brothers to college. Honestly, I am not sure even Gen Z will see as large of shifts as we did in regards to family representation and realities. And even they are almost grown, we just haven't named their younger siblings and children yet. (ETA: looks like we are going with Alpha)

[SwordGuy]

SS doesn't pick your highest annual earnings.  It picks your highest inflation-adjusted earnings, so a really old lower annual earnings amount might be worth substantially more than a much more recent year that was $1 higher.

As others mentioned, a few zeros doesn't make that much difference.

Basically, there are 3 "bend points" for SS taxable income.   Think tax brackets on income tax.  I'm not going to look up the exact percentages, you can do that if you look up the manual income tax calculator on the SS website.  That and your SS earnings history will let you calculate the exact impact of however many zeros you have.   (At least until the rules are modified a bit.)   The percentages I give are "close enough" to understand the basic principle.

You can count on 90% of the earnings in the lowest income bracket.

You can count on about 35% of the earnings in the next higher income bracket.   

You can count on about 15% of the earnings in the highest income bracket.

As you can see, there's a whopping big drop in those percentages.   It's to subsidize low income earners.   It also subsidizes higher income earners who retired early, a perfect example of how doing good to others can do yourself a good turn also.

[Rdy2Fire]

Maybe what we really learn here is this is too sensitive a topic.

And sorry if I stressed or irritated folks.

AS OP no stress or irritation here, I think it's a great discussion actually and it's always interesting to hear peoples thoughts, in my case I just wanted to clarify the info I was interested in.

[Rdy2Fire]

SS doesn't pick your highest annual earnings.  It picks your highest inflation-adjusted earnings, so a really old lower annual earnings amount might be worth substantially more than a much more recent year that was $1 higher.

As others mentioned, a few zeros doesn't make that much difference.

Basically, there are 3 "bend points" for SS taxable income.   Think tax brackets on income tax.  I'm not going to look up the exact percentages, you can do that if you look up the manual income tax calculator on the SS website.  That and your SS earnings history will let you calculate the exact impact of however many zeros you have.   (At least until the rules are modified a bit.)   The percentages I give are "close enough" to understand the basic principle.

You can count on 90% of the earnings in the lowest income bracket.

You can count on about 35% of the earnings in the next higher income bracket.   

You can count on about 15% of the earnings in the highest income bracket.

As you can see, there's a whopping big drop in those percentages.   It's to subsidize low income earners.   It also subsidizes higher income earners who retired early, a perfect example of how doing good to others can do yourself a good turn also.

Thanks. Yes I know it's to subsidize the lower income earners which if also obvious but maizefolk's information above on calculations. Also this plays into why I never really used it for my personal calculations as I didn't want to be reliant on it, if it was reduces, eliminated, changed etc.

As I mentioned it was really just a curiosity since I will have more then a few zeros (more like 1/3). Thanks for the response

[Dicey]

We never expected to use/need it, especially not early. Recently we've begin considering if we should file earlier than planned so we can let our investments continue to grow. OTOH, what if they grow so much that the RMD's are huge? MPP for sure.

[EvenSteven]

We never expected to use/need it, especially not early. Recently we've begin considering if we should file earlier than planned so we can let our investments continue to grow. OTOH, what if they grow so much that the RMD's are huge? MPP for sure.

One of the solutions I've been thinking about for tax efficiency with respect to future RMDs in the case where one will have more than enough money is to use qualified charitable distributions (QCDs). If you are going to be giving to charity anyways, might as well solve any RMD problems with the same stone.

[SeattleCPA]

Basically, there are 3 "bend points" for SS taxable income.   Think tax brackets on income tax.  I'm not going to look up the exact percentages, you can do that if you look up the manual income tax calculator on the SS website.

Here they are (Source PIA Formula):

(a) 90 percent of the first $1,024 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $1,024 and through $6,172, plus
(c) 15 percent of his/her average indexed monthly earnings over $6,172.

[SeattleCPA]

We never expected to use/need it, especially not early. Recently we've begin considering if we should file earlier than planned so we can let our investments continue to grow. OTOH, what if they grow so much that the RMD's are huge? MPP for sure.

The more common optimization gambit, I think, is to delay, get larger benefit, and enjoy a form of "longevity insurance."

This is what i plan to do. Probably.

P.S. You can test this theory using cfiresim. You'll very possibly increase your success probability. But not always. Depends...

P.P.S. I forgot I've actually described in an earlier blog post how delaying SS benefits impacts your safe withdrawal rate: https://evergreensmallbusiness.com/delay-social-security-benefits-to-bump-withdrawals/

[jnw]

Not to go too far off on a tangent but:

I just want to say SS is awesome because it's tax free and I find Original Medicare to be superb medical insurance.  I can go to any hospital and see virtually any doctor or specialist without referral.

It's only $170 per month and $233 annual deductible.  They pay 80% of allowed amounts and you pay 20%. (They really negotiate the allowed amounts down to the minimum btw just like private insurance companies do.)  This means my average doctor visit is $17-20 (copay).  Same with specialists. Blood tests are free and scans like xrays/mri/ct/bone density, etc are very inexpensive.  Overnight Hospital stays are like $1400 if I recall and this includes surgery if needed.  It also includes like up to a month or two stay if I recall.. All for $1400.

I generally go to non-profit hospitals because they covered the $1400 copay medicare didnt' pay.  So it didn't cost me anything to stay there.

I got lucky and have the best primary doctor ever.  If I have  a problem I message him in the portal; I expect him to reply like within a day or two, during his normal work hours, but sometimes I am surprised he'll reply at 10PM at night or like 8AM on a Saturday... crazy nice guy.  I try to be careful with messages now.   I also have the best ever endocrinologist.   I have access to the best surgeons in the county, without being limited to "in network".

[Dicey]

We never expected to use/need it, especially not early. Recently we've begin considering if we should file earlier than planned so we can let our investments continue to grow. OTOH, what if they grow so much that the RMD's are huge? MPP for sure.

The more common optimization gambit, I think, is to delay, get larger benefit, and enjoy a form of "longevity insurance."

This is what i plan to do. Probably.

P.S. You can test this theory using cfiresim. You'll very possibly increase your success probability. But not always. Depends...

cfiresim says we'll never run out of money, so it's just a question of optimization and/or tax minimization. Again, MPP, a.k.a mo' money, mo' problems.

[moof]

Once you get past the second bend point it doesn't pay to work since you get so little extra for your efforts.

In my case I could work another 26 years and get 20% more.  You are spot on.

I ran the numbers a little while back and for each year of working increased my annual payout at 70 by about $550 a year by replacing some zeros.  Not nothing, but any real savings from working extra will totally dwarf the small social security bump.

[Paul der Krake]

1) Social Security is doing mostly fine and not going away.
2) It's highly redistributive, by design, and keeping millions of seniors out of the streets.
3) If your FIRE plans are seriously impacted by the delta of benefits you could be receiving in multiple scenarios, you're prooobably not ready to FIRE.
4) Every generation likes to shit on the other ones. Which is really stupid, because it's patently clear mine is the best.

[jnw]

Also you can look at Social Security contributions as a large charitable donation for a good cause in case you die before you benefit from them.  Much like money you might save for charity or heirs.  Except you are helping all the elderly and disabled people instead. I think it's rewarding anyways. It's security for yourself and for society.  It's honorable and should perhaps feel proud to contribute.  Either for your own security and/or for every other American who also pays into it.  I think it is a wonderful program.

[SeattleCPA]

People pay large amounts into it every year; if it went away that would be stealing.   There is a large 2.2T trust fund as well.

And most of that money you and I pay into social security is immediately paid back out to other people. The money you and I have paid into the program is largely gone, paid to people receiving benefits. The social security trust fund would be gone in two years if new people weren't constantly paying into the problem.

That fact that we've voluntarily chose to tax ourselves to pay some money to ours parents generation so they aren't living on the streets in their old age does not create an ethical obligation for the next generation to choose to tax themselves to pay money to us.

Just like if you choose to hand $100 to me today, it doesn't create a legal, ethical, or moral obligation for someone else to give you $100 tomorrow.

I personally am not bothered by the weird cross-subsidies that permeate the system. But seems reasonable to note there are a lot them:

• Richer workers support poorer workers (E.g., bend points, how earned income credit refunds SS taxes, etc)
• Single workers support non-working spouses of married workers (Spousal benefits)
• Childless workers support  (Survivors benefits)
• Etc.

Key to understanding (if not accepting) the system is that it attempts to minimize poverty for older members of our community.

And then looping back to your point, the system was designed to be one where one generation paid benefits to the earlier generation... but then could look forward to someday, probably, receiving benefits themselves.

[SeattleCPA]

Maybe what we really learn here is this is too sensitive a topic.

And sorry if I stressed or irritated folks.

You didn't really stress me, even if it seemed like it. For one thing, I don't really feel like a "Boomer". The Boomer generation spans a longer number of years than subsequent "gens". People 18 years older than I are Boomers, for Pete's sake! They could literally be my parents. Further, a lot of change happened in the late 70's, especially for women. I have female friends that are 5-6 years older and their experiences and opportunities growling up were totally different from mine, all things being relatively equal.

Next, I still think the low cap thing makes no sense. Why the hell is it so low? Why should higher earners get a break because they earn more? If there's a rationale behind it beyond what I surmised above, I'd sure like to learn about it.

After that, we have the fact that I read "boomer parents and grandparents" as boomers who are parents and their kid's grandparents, which doesn't seem at all what you meant upon multiple readings.

Don't leave on my account. Your input is always interesting and valuable, IMO.

OK. I'm back. And BTW didn't mean to imply I'd been treated roughly. I just, at least for this topic, do not want to be stirring up frustration or anger.

[SeattleCPA]

Also you can look at Social Security contributions as a large charitable donation for a good cause in case you die before you benefit from them.  Much like money you might save for charity or heirs.  Except you are helping all the elderly and disabled people instead. I think it's rewarding anyways. It's security for yourself and for society.  It's honorable and should perhaps feel proud to contribute.  Either for your own security and/or for every other American who also pays into it.  I think it is a wonderful program.

This matches the way I think about the program. Thank you, @JenniferW for articulating this line of thinking.

And also, I think another healthy feature of the program is this: It's something that pretty much all workers participate in. So, yeah, the contributions people pay work differently. (Some people don't actually pay once you consider the earned income credits they get. Most people pay with pretax dollars. But some don't.) And the benefit formulas skew toward certain groups (married people, the disabled, parents, more modest income folks). But as a whole, everybody pays and everybody gets benefits.

Also, just to say this, you can't really tell whether you personally got a good deal or a bad deal until the music stops.

[maizefolk]

I personally am not bothered by the weird cross-subsidies that permeate the system. But seems reasonable to note there are a lot them:

• Richer workers support poorer workers (E.g., bend points, how earned income credit refunds SS taxes, etc)
• Single workers support non-working spouses of married workers (Spousal benefits)
• Childless workers support  (Survivors benefits)
• Etc.

Key to understanding (if not accepting) the system is that it attempts to minimize poverty for older members of our community.

And then looping back to your point, the system was designed to be one where one generation paid benefits to the earlier generation... but then could look forward to someday, probably, receiving benefits themselves.

I agree that social security does a lot of good and desirable things. Including a lot of the redistributive aspects of the program. I'm happy to pay taxes that go to keeping old people from starving in the streets. I think the program should continue.

It is only the idea that people who weren't even born yet when I started paying social security taxes are obligated to tax themselves to provide me with a benefit in my old age and if they end up deciding not to do so that they're somehow stealing from me that I object to.

[PDXTabs]

I personally am not bothered by the weird cross-subsidies that permeate the system. But seems reasonable to note there are a lot them:

• Richer workers support poorer workers (E.g., bend points, how earned income credit refunds SS taxes, etc)
• Single workers support non-working spouses of married workers (Spousal benefits)
• Childless workers support  (Survivors benefits)
• Etc.

Key to understanding (if not accepting) the system is that it attempts to minimize poverty for older members of our community.

Yes, SS is a horrible investment because it isn't an investment. It's insurance. But every time I look at my benefit statement I am heartened to know that my kids won't live on the street if I die while they are young. If I have to pay extra to keep the children of other parents off the street that is a compromise (dare I say investment?) that I'm willing to make.

[zolotiyeruki]

It's way too pessimistic to assume you get nothing. If Congress does nothing, I think the result is 2035-ish, benefits get cut by 25% or 30%. BTW, longer term, things work out fine. The funding problem is the boomers. (Well, really the fact that boomer parents and grandparents never paid enough into system.)

The last time I looked at the projections and played with a "how would you fix SS" calculators, the trust fund was expected to run dry in 2037, and the passing of the baby boomer generation would allow it to become solvent again, but not until something like 2070-something.  That's a lot of years, during which the shortfall will need to be covered with funds from the General Fund.

(They really negotiate the allowed amounts down to the minimum btw just like private insurance companies do.)

As an aside, one of the unintended consequences of the ACA is that insurers actually have a much, MUCH lower incentive to pursue lower costs, due to the cap on profit margins.  In fact, since their profits are limited to 15% of premiums, they are incentivized to pay more for procedures, because it allows them to increase premiums (and profits) accordingly.

[SeattleCPA]

I personally am not bothered by the weird cross-subsidies that permeate the system. But seems reasonable to note there are a lot them:

• Richer workers support poorer workers (E.g., bend points, how earned income credit refunds SS taxes, etc)
• Single workers support non-working spouses of married workers (Spousal benefits)
• Childless workers support  (Survivors benefits)
• Etc.

Key to understanding (if not accepting) the system is that it attempts to minimize poverty for older members of our community.

Yes, SS is a horrible investment because it isn't an investment. It's insurance. But every time I look at my benefit statement I am heartened to know that my kids won't live on the street if I die while they are young. If I have to pay extra to keep the children of other parents off the street that is a compromise (dare I say investment?) that I'm willing to make.

Totally, absolutely, 1000% percent agree SS is insurance. Not an investment.

But an interesting fact I recently read in a think tank whitepaper. For the average person, SS does pay an ever so slight positive rate of return. The number given was 8/10ths of a percent annually. So not anywhere close to what someone expects their IRA to do. But given the insurance element, not a dumpster fire either.

And then to your point about the safety net part of this, for folks that need help (like children who've lost a breadwinning parent), the system works pretty well.

[SeattleCPA]

The last time I looked at the projections and played with a "how would you fix SS" calculators, the trust fund was expected to run dry in 2037, and the passing of the baby boomer generation would allow it to become solvent again, but not until something like 2070-something.  That's a lot of years, during which the shortfall will need to be covered with funds from the General Fund.

FWIW, I tried to find the source for this info (about the system getting solvent again after the boomers like me, er, exit)... and I couldn't locate any really good source. Though just to say this, I think it was me who made this point first earlier in this thread. So awkwardly I can't point to a good source to backup my earlier comment.

I suspect the difficulty in finding good source is that over least year or so, the really long-term financial robustness has slightly sagged. (This from the trustees most recent report.)

The other thing I noticed in the trustees most recent report is that they really don't know enough yet about the effect of the pandemic.

[zolotiyeruki]

The last time I looked at the projections and played with a "how would you fix SS" calculators, the trust fund was expected to run dry in 2037, and the passing of the baby boomer generation would allow it to become solvent again, but not until something like 2070-something.  That's a lot of years, during which the shortfall will need to be covered with funds from the General Fund.

FWIW, I tried to find the source for this info (about the system getting solvent again after the boomers like me, er, exit)... and I couldn't locate any really good source. Though just to say this, I think it was me who made this point first earlier in this thread. So awkwardly I can't point to a good source to backup my earlier comment.

I suspect the difficulty in finding good source is that over least year or so, the really long-term financial robustness has slightly sagged. (This from the trustees most recent report.)

The other thing I noticed in the trustees most recent report is that they really don't know enough yet about the effect of the pandemic.

Yeah, I tried to find it too--I remember there being a graph that showed SS deficits, and how it would get a lot better in about 50 years due to the baby boomer generation passing.

[Much Fishing to Do]

The SSA site is a little more helpful than it used to be for OP's central question.  It'll looks at your earnings and give you your payouts at early/full/late if you keep earning what you earned last year to that date.  Right there is a box of expected future earnings you can put 0 into to see the difference of stopping working today. 

I've crossed the second bend point and am 50.  If I keep working to 67 I'll get 40k/year at that full age.  If I stop working today its $30k.  Its a significant difference....but for 17 more years of working...forget that....

The number I actually look at is the late (70) payout which would be $38k if I stop working today. Including my spouse it would be about $60k/yr.  I'd admit, on average, I might be better off taking early and investing the payments, but I look at ss as the only decent option as far as longevity insurance goes (those policies where you throw down a chunk of money now to get payouts starting at 80 or whatever are extremely expension and I am more wary of their solvency/insruance backing than SSs).  As far as the state of SS today I think last numbers I saw was that if benefits were cut about 20% it would be fine.  So I assume at 70+ we can get ~$50k/year in todays dollars.  $50k in todays dollars covers our basic living expenses (and with all the kids grown I assume wouldn't be even be that tight).  Of course I don;t know this to be 100% true that SS will be there, but thats the case with every assumption I ever make.

This tells me no matter how horribly my portfolio performs, it only HAS to survive 20 years (50 to 70).  If it fails in 30 (when I'm 80) thats the point at which I'm down to my basic living expenses (SS).

It's a simplistic way to look at it and plan but that is usually what makes me feel most confident, which, when you really have very little chance of a portofolio failing in your lifetime, I'm much more worried about my confidence failing than my actual portfolio, so this takes that edge off.

[Rdy2Fire]

The SSA site is a little more helpful than it used to be for OP's central question.  It'll looks at your earnings and give you your payouts at early/full/late if you keep earning what you earned last year to that date.  Right there is a box of expected future earnings you can put 0 into to see the difference of stopping working today. 

Yes but this is based on if you stopped working today, as you stated, not if you stop working today but still have 12+ years like myself, you as well, until you collect. Those 12+ years are $0 hence the question, how do you calculate for all the $0 years; pretty much answered above. Anyway seems like neither of us will have an issue, as I said, it was just more of a curiosity thing when I received the yearly SS email.