Social Security OASI expected to run out of money even earlier

[Dicey]

Related: We had planned to wait until 70 to start collecting. Does this strengthen the case for filing early, for which I am currently eligible. Any thoughts?

[maizefolk]

Related: We had planned to wait until 70 to start collecting. Does this strengthen the case for filing early, for which I am currently eligible. Any thoughts?

I think it's hard because we have to read the minds of future congresses. If they stalemate and do nothing you'd expect to see the same percentage cut for both people currently drawing benefits and people filing for benefits in the future, so no argument for or against filing earlier.

If they actually push through reform, it seems more likely they'd prioritize people currently drawing benefits at the expense of those still paying into the system because, good governance aside, if you take away an existing benefit from voters they'll feel a much stronger emotional reaction than simply not providing a benefit that they'd hoped to receive in the future.

But even then my guess would be they'd use language like "effecting everyone age X or younger by given date" rather that treating a people old enough to qualify for benefits but not yet drawing them differently than people the same age who are already drawing benefits.

[chasesfish]

The government will just borrow the money until they can't.

Medicare was supposed to be self funded, now people are on it 3x longer and the taxes haven't been adjusted in close to thirty years.  The payroll taxes need to triple just to fund it.

[pecunia]

The government will just borrow the money until they can't.

Medicare was supposed to be self funded, now people are on it 3x longer and the taxes haven't been adjusted in close to thirty years.  The payroll taxes need to triple just to fund it.

Maybe, they can start to augment the existing system of privatized medicine with more socialized medicine.  If they paid for medical school and had doctors serve the public for say 8 years, they could have some control over our overpriced medical system.  The doctors for which the government paid for the training could still be paid a decent wage during their time of service.  We can't cut the dog's tail all at once, but maybe we can do it a piece at a time.

I think Social Security will be safe.  Who votes?  The old farts.  Old Farts Rule!

[DaMa]

Related: We had planned to wait until 70 to start collecting. Does this strengthen the case for filing early, for which I am currently eligible. Any thoughts?

A friend of mine, a finance professional, took hers at 62, because she was sure she'd end up with a reduced benefit if she waited.  That was 10 years ago.

She was FIREd and was not dependent on SS.  Her primary concern was that they would add a means test.

[American GenX]

I think Social Security will be safe.  Who votes?  The old farts.  Old Farts Rule!

It's probably safe from being eliminated but that doesn't mean it won't receive cuts.  In fact, it's already being done!

There's a flaw in how taxes are calculated for Social Security benefits that results in after-tax "net" SS benefits being "cut" every year and have been for years, but most people aren't aware of this.

The SS formula for determining how much of your SS benefits are taxed is NOT indexed to inflation, so that threshold has not increased since it was first introduced in 1983. For a single person, if your income combined with half your SS benefits exceeds $25,000, you have to pay income tax on up to 50% of your SS benefits. If it exceeds $34,000, you have to pay income tax on up to 85% of your SS benefits. $25K in 1983 is worth a lot more than $25K in 2018. Since your retirement distributions and SS benefits will be adjusted with inflation, but NOT the $25,000/$34,000 thresholds, a greater percentage of your SS benefits will become taxable as each year passes (for married filing jointly, the thresholds are $32,000/$44,000.) It's a built-in tax increase, reducing "net" SS benefits, hurting seniors further. The greater your combined income and SS/2, the more you will be affected by this up to a max of 85% of your benefits being taxed! It's absurd, and those thresholds should be increased to reflect inflation since 1983.

The ways it is, you should play it safe by estimating that 85% of your SS benefits well into the future will be taxable. More information about this can be found in these references:

https://www.marketwatch.com/story/people-who-saved-for-retirement-are-being-punished-by-social-security-taxes-2019-01-07
https://www.fool.com/retirement/general/2016/05/08/this-33-year-old-social-security-rule-is-wreaking.aspx
http://www.foxnews.com/story/2007/03/25/double-whammy-taxation-social-security-benefits.html
https://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html

I'm not one to support tax increases, but I would be open to paying higher FICA taxes to help shore up SS to prevent cuts to benefits and to prevent increasing the FRA for people within a decade of collecting SS.

At some point, the FRA will need increased for younger workers also as lifetime durations increase over time.

There was a bill introduced to address the problem of SS benefit taxation threshold levels to some degree, but it still wouldn't index it to inflation going forward. It doesn't look likes it's gone anywhere since it was last mentioned here.

https://www.congress.gov/bill/116th-congress/house-bill/860
https://larson.house.gov/sites/larson.house.gov/files/Larson%20Blumenthal%20Van%20Hollen_2019%200918.pdf

[chasesfish]

Related: We had planned to wait until 70 to start collecting. Does this strengthen the case for filing early, for which I am currently eligible. Any thoughts?

The FIREy argument is one of two options:

Take at 62 to attempt to maximize net worth

Delay until 70 to have the largest inflation adjusted annuity possible to protect against longevity risk.

To me it depends on if you're trying to give away all your money while alive (take at 70) or when you pass (take at 62).

 

[pecunia]

I was on a bicycle ride yesterday.  I stopped at a gas station and talked to another cyclist.  He was 69 years old.  he told me he had some back problems.  He used to go on long rides, centuries, etc.  Now he just goes on what he calls short rides of about 25 miles.

I got to thinking. Twenty Five miles is still a good ride.  Maybe, there is still living to be done after 70.  Today, I thought, maybe the higher value of Social Security at older than 62 may be better.

[ender]

I was on a bicycle ride yesterday.  I stopped at a gas station and talked to another cyclist.  He was 69 years old.  he told me he had some back problems.  He used to go on long rides, centuries, etc.  Now he just goes on what he calls short rides of about 25 miles.

I got to thinking. Twenty Five miles is still a good ride.  Maybe, there is still living to be done after 70.  Today, I thought, maybe the higher value of Social Security at older than 62 may be better.

The flip side is I had a former coworker like that, he retired at I think 62 with a full pension or so then came back consulting.

He regularly went on rides like that and was super healthy.

Then he just died really suddenly.

[PDXTabs]

Maybe, there is still living to be done after 70.

My aunt was still backpacking at 80. My mom is 69.75 and still going strong backpacking/kayaking/car camping/day hiking/gardening/etc.

EDITed to add: I'm going to take it at 62. My dad died in an automobile accident at 65.

[pecunia]

I was on a bicycle ride yesterday.  I stopped at a gas station and talked to another cyclist.  He was 69 years old.  he told me he had some back problems.  He used to go on long rides, centuries, etc.  Now he just goes on what he calls short rides of about 25 miles.

I got to thinking. Twenty Five miles is still a good ride.  Maybe, there is still living to be done after 70.  Today, I thought, maybe the higher value of Social Security at older than 62 may be better.

The flip side is I had a former coworker like that, he retired at I think 62 with a full pension or so then came back consulting.

He regularly went on rides like that and was super healthy.

Then he just died really suddenly.

Yeh - it's kind of like smoking.  Once in a while they show these 100 year old people on TV. They are still smoking.  You play the odds with life.  There are few guarantees.  The guarantee that you make more Social Security money if you wait past 62 is only a guarantee if you are there to collect it.  And,......you don't break even unless you make it to 82 or so.  If you take it at 70 and die at 75, you've lost money.  Do you feel lucky, well do ya?

[maizefolk]

The guarantee that you make more Social Security money if you wait past 62 is only a guarantee if you are there to collect it.  And,......you don't break even unless you make it to 82 or so.  If you take it at 70 and die at 75, you've lost money.  Do you feel lucky, well do ya?

If the goal is to feel like you won the game I think delaying is the way to go. If you do live long enough to come out ahead you'll have years to feel smug about your good judgement. If you file early you won't get to feel smug until you die early, at which point you probably won't derive a lot of utility from feeling vindicated.

[friedmmj]

In my view, this ranks right alongside the debt ceiling issues that pop up every few years. It's a great way to get everyone all riled up but the end result is the status quo is maintained.

Spot on.  I wish I could figure out a way to profit off everyone's fears on this topic.  For example, I would gladly sign up to guarantee a future SS recipient a private payment of 85% of their projected benefit in return for being able to split 50/50 anything above that level in perpetuity.   I would make up any shortfall in exchange for pocketing any excess above the agreed upon level (e.g., 85%).

[slappy]

Maybe, there is still living to be done after 70.

My aunt was still backpacking at 80. My mom is 69.75 and still going strong backpacking/kayaking/car camping/day hiking/gardening/etc.

EDITed to add: I'm going to take it at 62. My dad died in an automobile accident at 65.

Do you plan to take it early because you feel like tomorrow is never guaranteed? I've heard of people taking it early when family members passed because of cancer of something, but not because of an auto accident. My FIL always said he wanted to wait as long as possible because he wanted the most amount possible, but he passed from cancer at 67. Even though it's unlikely my husband will have the same kind of cancer (my FIL drank and smoked for 50 years), I still feel like I will have him take it ASAP, because the men in his family do not typically have long life spans. Then again, the women tend to live into their 90's, and husband is quite healthy and fit, so you just never know.

[PDXTabs]

Do you plan to take it early because you feel like tomorrow is never guaranteed? I've heard of people taking it early when family members passed because of cancer of something, but not because of an auto accident. My FIL always said he wanted to wait as long as possible because he wanted the most amount possible, but he passed from cancer at 67. Even though it's unlikely my husband will have the same kind of cancer (my FIL drank and smoked for 50 years), I still feel like I will have him take it ASAP, because the men in his family do not typically have long life spans. Then again, the women tend to live into their 90's, and husband is quite healthy and fit, so you just never know.

Sort of. I at least want to get $1 after paying in for decades! But also I'm on this forum so I won't need to work past 62 (or 55, etc). On average all the ages are the same, so I may as well get to enjoy some checks.

[fuzzy math]

In my view, this ranks right alongside the debt ceiling issues that pop up every few years. It's a great way to get everyone all riled up but the end result is the status quo is maintained.

Spot on.  I wish I could figure out a way to profit off everyone's fears on this topic.  For example, I would gladly sign up to guarantee a future SS recipient a private payment of 85% of their projected benefit in return for being able to split 50/50 anything above that level in perpetuity.   I would make up any shortfall in exchange for pocketing any excess above the agreed upon level (e.g., 85%).

The hand wringing of the past is nothing compared to what it will be now with a $29 trillion deficit.

[pecunia]

In my view, this ranks right alongside the debt ceiling issues that pop up every few years. It's a great way to get everyone all riled up but the end result is the status quo is maintained.

Spot on.  I wish I could figure out a way to profit off everyone's fears on this topic.  For example, I would gladly sign up to guarantee a future SS recipient a private payment of 85% of their projected benefit in return for being able to split 50/50 anything above that level in perpetuity.   I would make up any shortfall in exchange for pocketing any excess above the agreed upon level (e.g., 85%).

The hand wringing of the past is nothing compared to what it will be now with a $29 trillion deficit.

Sounds like cuts are coming.  Should some of those cuts come from "defense" for which the US spends as much as the next 11 countries combined?  The US has 800 known bases outside the United States.  Or should we cut money from Grandma?

[calimom]

In my view, this ranks right alongside the debt ceiling issues that pop up every few years. It's a great way to get everyone all riled up but the end result is the status quo is maintained.

Spot on.  I wish I could figure out a way to profit off everyone's fears on this topic.  For example, I would gladly sign up to guarantee a future SS recipient a private payment of 85% of their projected benefit in return for being able to split 50/50 anything above that level in perpetuity.   I would make up any shortfall in exchange for pocketing any excess above the agreed upon level (e.g., 85%).

The hand wringing of the past is nothing compared to what it will be now with a $29 trillion deficit.

Sounds like cuts are coming.  Should some of those cuts come from "defense" for which the US spends as much as the next 11 countries combined?  The US has 800 known bases outside the United States.  Or should we cut money from Grandma?

Do you mean the 800 medium-ish sized  cities around the globe that no one knows what, exactly they do or are for? Where there are schools, hospitals, roads and housing paid for by the US taxpayer? Yes, yes, that would be a good place to start on some cuts.

[rosarugosa]

The guarantee that you make more Social Security money if you wait past 62 is only a guarantee if you are there to collect it.  And,......you don't break even unless you make it to 82 or so.  If you take it at 70 and die at 75, you've lost money.  Do you feel lucky, well do ya?

If the goal is to feel like you won the game I think delaying is the way to go. If you do live long enough to come out ahead you'll have years to feel smug about your good judgement. If you file early you won't get to feel smug until you die early, at which point you probably won't derive a lot of utility from feeling vindicated.

I love this.

[Paper Chaser]

Control what you can control.
I can't control the solvency of SS. I can't control what age I might be able to collect it, or what the amounts might be at that time (30+ years currently). Therefore I don't include it in my planning, just as I don't include any potential windfalls or inheritance. If I do get something when the time comes, great.

Ultimately I think the system is boned. At least as it's currently structured. It relies on ever growing populations and/or productivity from employees. Populations are shrinking (and the pandemic is cratering birth rates even further). Jobs are being replaced by automation, outsourcing, or simply expecting workers to do more than they were before. Eventually a generation is going to collect less than they put into the fund, or it will only be used as a social safety net for those in need rather than something that nearly everyone collects to some degree.

[zing12]

or it will only be used as a social safety net for those in need rather than something that nearly everyone collects to some degree.

I don't disagree with any of what you said, but the problem is that there's going to be a big chunk of people 'in need' given the other trends you mentioned about jobs.

[pecunia]

or it will only be used as a social safety net for those in need rather than something that nearly everyone collects to some degree.

I don't disagree with any of what you said, but the problem is that there's going to be a big chunk of people 'in need' given the other trends you mentioned about jobs.

Sometimes I think these big businessmen should kind of put two and two together.  I could envision one big shot talking to another,

"Jeff, have you noticed the big slump in sales?"
"yeh"
"Jeff, if nobody has jobs, then they can't buy our stuff."
"yeh"

Maybe, they'll get on the phone to their lobbyists in Washington and get some changes made.

[mm1970]

I was on a bicycle ride yesterday.  I stopped at a gas station and talked to another cyclist.  He was 69 years old.  he told me he had some back problems.  He used to go on long rides, centuries, etc.  Now he just goes on what he calls short rides of about 25 miles.

I got to thinking. Twenty Five miles is still a good ride.  Maybe, there is still living to be done after 70.  Today, I thought, maybe the higher value of Social Security at older than 62 may be better.

The flip side is I had a former coworker like that, he retired at I think 62 with a full pension or so then came back consulting.

He regularly went on rides like that and was super healthy.

Then he just died really suddenly.

Yeah, one of my coworkers died a year ago.  He was super healthy his whole life - long runs, then switched to very long bike rides.  He started suffering from neuropathy from some sort of disease (possibly Guillian Barre, possibly something else).  Lost feeling in his feet, started affecting his hands. 

He re-evaluated his retirement plan from "do a bike race across the country" to "enjoy bike rides with my wife".  He cut his hours to deal with the pain.  Ended up going through a lot of various drugs and treatments.  He turned the corner and was finally on the upswing when he died in his sleep.  Just a year shy of being eligible for Medicare.  I thought he was invincible.

The race I ran this weekend, the one guy who is almost always my pace (aka, the caboose), is 71 years old.