Author Topic: Social Security-Do you plan on it?  (Read 13884 times)

Rich M

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Social Security-Do you plan on it?
« on: February 15, 2012, 09:05:39 PM »
I pay a crapload to social security in my paychecks but my retirement calculations don't assume it will be a reality.  I can't see the system viable when I are able to collect on it.

It bugs me, but I look at it as I am funding my retired father via my SS contributions. 

Are you factoring this in your retirement, assuming it will be around when you need it?



Chris

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Re: Social Security-Do you plan on it?
« Reply #1 on: February 15, 2012, 10:11:15 PM »
I'm not factoring it in at all (I'm decades away from being able to collect).  So I when I see it on my pay stub, I just consider it "boomer tax".  The social security system will be rejiggered at least once in my pre-65 life, so there may be something there when the time comes, but it's difficult to say what that will be, so I'm not factoring it in.

arebelspy

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Re: Social Security-Do you plan on it?
« Reply #2 on: February 16, 2012, 06:32:13 AM »
It will be around, but it'll be a little altered.  But I don't pay into it, so I don't worry.

Even if I did, it's a non-factor, because I plan on retiring with more than enough way before being eligible for SS (read: decades). 

I'll have to be able to retire and live for years and years without it.  So when I hit SS age (or, in my case, pension age), it won't affect anything, if it's there or not.
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EnemyMind

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Re: Social Security-Do you plan on it?
« Reply #3 on: February 16, 2012, 06:36:18 AM »
in the current state of things the best thing I can say about it is I stop paying after the 106k max.

From a simple math standpoint it doesn't seem sustainable at all.

Sparafusile

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Re: Social Security-Do you plan on it?
« Reply #4 on: February 16, 2012, 06:43:01 AM »
Social Security will still be around when we retire. There would be blood in the streets if they cancelled the program after most of us had paid into it all our lives.

The one thing you need to keep in mind is that the US is a currency issuer, not a currency user. That's the difference between the US and Greece, for example. If we need more money, we can just fire up the printing presses and create more out of thin air. The US can never "default" and the US can continue to fund any program, including SS, as long as that choice is made. We may become the next Zimbabwe with runaway inflation, but we will never run out of money.

kolorado

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Re: Social Security-Do you plan on it?
« Reply #5 on: February 16, 2012, 06:48:09 AM »
No I'm not factoring it in. I think it will be around(24 years from now)and we will receive some benefit but I don't want to stake our financial well-being as seniors on it.                                                 

EnemyMind

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Re: Social Security-Do you plan on it?
« Reply #6 on: February 16, 2012, 06:51:32 AM »
I dont think most americans are up for putting their blood on the line over anything.

arebelspy

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Re: Social Security-Do you plan on it?
« Reply #7 on: February 16, 2012, 07:01:49 AM »
From a simple math standpoint it doesn't seem sustainable at all.

Most people who say that haven't actually looked at the math.

Not you, persay, but most doom and gloomers about Social Security just heard it's in trouble and unsustainable and parrot that.  Sure, as is - to infinity - it can't stay the same, so one could technically call it "unsustainable". Okay, fine.

But it's probably more stable than you think.

Here are some facts that might alleviate some worries people reading this thread might have:
1) Social Security currently has a huge surplus of money AND a surplus coming in every year still (more being paid in than out).  The program's trust fund is projected to continue to grow steadily until 2027.

Yes, as more boomers retire that surplus per year will switch to a deficit per year, starting to eat at the surplus chunk of money sitting there (which is almost 3 Trillion at this point).

2) After that, officials estimate there will be sufficient money to pay 100 percent of benefits until 2041, when the surplus is expected to be exhausted.

That's right, Social Security - as is - can last for another 30 or so years, with no changes and paying out 100% of current benefits.

3) From that year on, payroll tax revenue alone should be able to meet 78 percent of the program's obligations even if no changes are made.

Yup, if you hit SS age 30 years from now, even if the only change is made is to reduce benefits at that time, you'll still get nearly an 80% payout just based on the money still flowing in from current workers.

Yet we're looking at making changes now (slightly older retirement age, means testing, etc.)   So likely it will be fine for much, much longer than that 30 years.

Meaning if you want to plan very conservatively, go for a projection of 75% of SS (this would assume that we never change SS at all, a silly assumption, but fine, assume we make no changes, you'll at least get that).  50% if you're really, really paranoid and think...???   But to assume no Social Security is ridiculous.

I'd be more worried about the collapse of the US as a whole than I would be about the collapse of Social Security.
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EnemyMind

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Re: Social Security-Do you plan on it?
« Reply #8 on: February 16, 2012, 07:08:09 AM »
that's interesting as I have always read/heard much different numbers then that.

if you take a look at it more from a distance you have higher unemployment/ financial instability as a whole causing less earning/spending overall, more people getting older, and then those people getting older continue to get older instead of dying, not to mention a population that is continuing to grow. I suppose one generations worth of change may stress it and not break it.

but again perhaps it just looks bleak from the zoomed out long term.

62 and 1 month in 2044    $1,833.00
67 in 2049    $2,607.00
70 in 2052    $3,232.00

projected on me maxing it out. those numbers are not to me worth what I am putting into it. - non inflated amounts.

frugalman

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Re: Social Security-Do you plan on it?
« Reply #9 on: February 16, 2012, 08:23:13 AM »
Wow, Arebelspy, I really think you are wrong on this: "Social Security currently has a huge surplus of money".  It is my understanding there is NO money set aside. The surplus, rather, is a bunch of IOU's, NOT treasuries or other tangible items.  I believe the payroll taxes are spent every year and are not used to purchase treasuries for example.

From Wikipedia:
The Office of Management and Budget has described the distinction as follows:

    These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense.... They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. (from FY 2000 Budget, Analytical Perspectives, p. 337)
« Last Edit: February 16, 2012, 08:26:14 AM by frugalman »

MEJG

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Re: Social Security-Do you plan on it?
« Reply #10 on: February 16, 2012, 08:30:09 AM »
Hmmm, thought I had already written my reply.

I am 28, my Mr. is 30.  We are not planning on any SSI.  We're planning on using 401k and Roth IRA investments for late (60-65 and up) retirement money and taxable accounts for early (when we get there) retirement.

If there is SSI when we reach payout age, which I honestly don't know if there will be but since we're not planning on it I don't care to research, we'll see it as a bonus.

If we get SSI it will go to travel, grandkid education or something like that.

Ben

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Re: Social Security-Do you plan on it?
« Reply #11 on: February 16, 2012, 08:30:31 AM »
Re: Will it still be here?

You can never end social welfare programs- once they are in, they typically run for the life of that government. My perspective is that it will be around, but altered- a little less paid out, a little later. Considering the standard 'soak the rich' mentality, people that have saved more throughout their lives will receive less or none. Personally, I believe that the eligibility date should be tied to U.S. life expectancy so that it will continue to (slowly) rise.

Ben

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Re: Social Security-Do you plan on it?
« Reply #12 on: February 16, 2012, 08:42:23 AM »
Re: Social Security Surplus

Ah, yes, the classic 'where is the money I put in?' question. If boomers' social security payments exceeded payouts to retirees by a large margin (and they did), but they benefited from low taxes and programs that ran a deficit during those years, whose money is it? US Debt is the safest investment that the social security fund could make, but that debt has led to splurging on things we can't afford at the federal level (namely, paying for defense, social welfare policies, etc. on an installment plan).

We are continuing to run a huge deficit (social security checks aside) that will have to be paid by someone. Reducing retiree benefits to make social security 'solvent' could be seen as an indirect tax to pay for some of the bells and whistles that we didn't pay for earlier. Or it could be viewed as a breach of contract since retirees have paid money into social security with an expectation that they will get it back later.

Regardless of who made foolish policies in the past, we now have substantial debt for things that may no longer benefit us, but that we are obligated to pay off- just like the car bought on credit that is now worth less than you owe.

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Re: Social Security-Do you plan on it?
« Reply #13 on: February 16, 2012, 08:43:18 AM »

We are not planning on any SSI.  We're planning on using 401k and Roth IRA investments for late (60-65 and up) retirement money and taxable accounts for early (when we get there) retirement.

If there is SSI when we reach payout age, which I honestly don't know if there will be but since we're not planning on it I don't care to research, we'll see it as a bonus.

If we get SSI it will go to travel, grandkid education or something like that.

This is how I view it. Not factoring it in really - will be more like a bonus when/if I'm able to tap it. Plan on using the (almost) hubby's Roth when I'm 53 and he's 60 and able to tap it - we're probably just going to put enough in his to last us the 6 years until we can tap mine (assuming we need it) because my ROTH is much larger at this point than his. Now just have to save enough in taxable accounts to last me the 30 years until then....

palvar

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Re: Social Security-Do you plan on it?
« Reply #14 on: February 16, 2012, 08:59:56 AM »
I would worry much more about Medicare being significantly different when retirement comes around.  Small changes to social security can be made to ensure that we still see it's benefits.  Medicare expenses are growing much more quickly and affect the federal budget in more significant ways.

adam

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Re: Social Security-Do you plan on it?
« Reply #15 on: February 16, 2012, 09:00:31 AM »
From a simple math standpoint it doesn't seem sustainable at all.

Most people who say that haven't actually looked at the math.

Not you, persay, but most doom and gloomers about Social Security just heard it's in trouble and unsustainable and parrot that.  Sure, as is - to infinity - it can't stay the same, so one could technically call it "unsustainable". Okay, fine.

But it's probably more stable than you think.

Here are some facts that might alleviate some worries people reading this thread might have:
1) Social Security currently has a huge surplus of money AND a surplus coming in every year still (more being paid in than out).  The program's trust fund is projected to continue to grow steadily until 2027.

Yes, as more boomers retire that surplus per year will switch to a deficit per year, starting to eat at the surplus chunk of money sitting there (which is almost 3 Trillion at this point).

2) After that, officials estimate there will be sufficient money to pay 100 percent of benefits until 2041, when the surplus is expected to be exhausted.

That's right, Social Security - as is - can last for another 30 or so years, with no changes and paying out 100% of current benefits.

3) From that year on, payroll tax revenue alone should be able to meet 78 percent of the program's obligations even if no changes are made.

Yup, if you hit SS age 30 years from now, even if the only change is made is to reduce benefits at that time, you'll still get nearly an 80% payout just based on the money still flowing in from current workers.

Yet we're looking at making changes now (slightly older retirement age, means testing, etc.)   So likely it will be fine for much, much longer than that 30 years.

Meaning if you want to plan very conservatively, go for a projection of 75% of SS (this would assume that we never change SS at all, a silly assumption, but fine, assume we make no changes, you'll at least get that).  50% if you're really, really paranoid and think...???   But to assume no Social Security is ridiculous.

I'd be more worried about the collapse of the US as a whole than I would be about the collapse of Social Security.

75% is the number I have heard as well, but I'm still not planning on it.  I also get a pension from my current job, but I'm not planning on that either.  They would both be gravy as far as I'm concerned.

MMM

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Re: Social Security-Do you plan on it?
« Reply #16 on: February 17, 2012, 01:57:12 PM »
Very well put!

I also often try to calm down the Social Security Doubters (in fact I wrote an article on it long ago but still haven't published it), but you've summed it up nicely with those few bullet points.

And the funny part is, a Mustachian couple who both worked to partial eligibility could easily live off of social security payments alone. They are not tiny dollar amounts.

Joe, do you have any citations of website sources for your points that I could pull in if I use them?


arebelspy

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Re: Social Security-Do you plan on it?
« Reply #17 on: February 17, 2012, 02:22:59 PM »
Joe, do you have any citations of website sources for your points that I could pull in if I use them?

Sure.  Some are more recent, the others a few years older.

My claim of almost 3 trillion (and growing) surplus, mentioned in this May 2010 article: http://www.epi.org/press/epi_expert_explains_social_securitys_sustainability/

"Social Security is currently running a surplus, and the two and a half trillion dollar trust fund is projected to keep growing for at least another decade."

As for the exact number of years the surplus will last, it varies based on different assumptions, but a Google search - http://www.google.com/search?q=social+security+"fully+funded"+until - will give you numbers from 2037 to 2054.  I chose 2041, as it's a fairly commonly cited one, but really the surplus is going to last the next 20-30 years, easy.

Here's the best source though, as it's a direct source.

The 2010 Social Security Trustees Report shows retirees will receive 100% of benefits until 2037, and 78% of promised benefits after that, paid out of incoming payroll taxes: http://www.ncpssm.org/news/archive/2010_ss_trustees_report/
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Mike Key

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Re: Social Security-Do you plan on it?
« Reply #18 on: February 17, 2012, 04:40:15 PM »
That's great, if they raise the retirement though, it still won't help me. In 2041 I will only be 59, I won't be able to draw yet. And I really don't think the same United States that exists today will exist in 2041. :)

GG

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Re: Social Security-Do you plan on it?
« Reply #19 on: February 18, 2012, 07:08:31 PM »
when I was in my early 20's, I was told to not expect SS to be around for me to collect, that I had to find another way to retire.  That was 30+ years ago.  Things have not changed much since then except for required tweaks to the system to keep it going.  A few tweaks are required in the future.   SS is a great thing and will continue to help a lot of people, not just retirement but for disability and survivors. JMHO.

Joementum

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Re: Social Security-Do you plan on it?
« Reply #20 on: February 19, 2012, 11:01:48 PM »
I have no doubts that it will be around when I retire, but no I do not count on it. I'm currently 21, so I'm a long ways away. I figure it will just be bonus money when I retire.

AJ

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Re: Social Security-Do you plan on it?
« Reply #21 on: February 20, 2012, 04:37:00 PM »
I don't count on it, but not because I think it will disappear. SS calculates your payment based on your highest 35 years of earned income. If you don't have 35 years of earned income, you get zeroes for the other years. If I ERE, I will only have 18 years of earned income, and many of those were summer jobs in high school and college that I didn't make much at. I will probably only have 12 good years to calculate from, and the rest will be zero or nearly so. *Maybe* I will earn income in retirement, but I don't want to have to count on it. Its just easier to ignore SS entirely, and have it be a happy bonus if/when it comes.

arebelspy

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Re: Social Security-Do you plan on it?
« Reply #22 on: March 23, 2019, 07:45:58 PM »
Bumping this thread from... 7 years ago. Because a great article was posted on why you should count on SS, essentially expanding on a post I made above.

However, the numbers were quite different in what he posted and what I did.

I have more faith this forum will be around in a decade than that blog will (no offense, Eric! :) ), so I want my comment here as well, so in a decade I can look it up to compare again.

Here's the blog post:
https://bonusnachos.com/why-i-count-on-social-security/

And here's the comment I left:
Quote
I absolutely agree and wrote something similar in the past. I decided to link to it, so I googled and found it: https://forum.mrmoneymustache.com/ask-a-mustachian/social-security-do-you-plan-on-it/msg625/#msg625

Interestingly, the numbers have chained what Id consider a fair amount in the 7 years since I wrote that (two days after the MMM forum launched).

I had there (stats were written in early 2012, and I likely sourced them from 2010 stats, since it is unlikely 2011 data was out yet):
the fund would keep growing until 2027. You have that it will likely have stopped growing and start drawing down in 2018, a full 9 years earlier.
the fund would fund 100% of benefits until 2041. You have that it will stop that (assuming no changes) in 2034, a full 7 years earlier.

Im curious why the changes have been so drastic. Was something done in the intermittent time to lower SS taxes (related to ACA? Other tax cuts?). If not, how did those projections change so drastically? And if 7 years caused that much change in the projection, I wonder what another decade will do.

Im still not worried, and think one should definitely count on getting a good chunk of SS, as I argued there, and you argued here. But the changes are definitely making me cock my head and wonder.

Anyone know the answer to why that changed so much?

EDIT: This link above is relevant.
The 2010 Social Security Trustees Report shows retirees will receive 100% of benefits until 2037, and 78% of promised benefits after that, paid out of incoming payroll taxes: http://www.ncpssm.org/news/archive/2010_ss_trustees_report/

Looks like their own report changed from 2037 to 2034, not as drastic of a decrease (especially since it's now 79% instead of 78% of benefits). Still discouraging to see in just over half a decade the projections brought in multiple years.
« Last Edit: March 23, 2019, 07:48:07 PM by arebelspy »
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Mr. Green

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Re: Social Security-Do you plan on it?
« Reply #23 on: March 24, 2019, 01:16:44 AM »
 President Obama lowered the SS payroll tax rate from 6.2% to 4.2%.for one year, 2011, in the wake of the financial crisis. I wonder what a 1/6 cut in SS revenue for one year had on trust fund projections? I'm too lazy to go back and read the 2012 or 2013 Trustees Report and see if it's mentioned.

Eric

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Re: Social Security-Do you plan on it?
« Reply #24 on: March 24, 2019, 10:18:48 AM »
I have more faith this forum will be around in a decade than that blog will (no offense, Eric! :) ), so I want my comment here as well, so in a decade I can look it up to compare again.

Hahaha.  No offense taken.  I would also expect MMM has a lot better chance of being around than my little project.

Here's the blog post:
https://bonusnachos.com/why-i-count-on-social-security/

And here's the comment I left:
Quote
I absolutely agree and wrote something similar in the past. I decided to link to it, so I googled and found it: https://forum.mrmoneymustache.com/ask-a-mustachian/social-security-do-you-plan-on-it/msg625/#msg625

Interestingly, the numbers have chained what Id consider a fair amount in the 7 years since I wrote that (two days after the MMM forum launched).

I had there (stats were written in early 2012, and I likely sourced them from 2010 stats, since it is unlikely 2011 data was out yet):
the fund would keep growing until 2027. You have that it will likely have stopped growing and start drawing down in 2018, a full 9 years earlier.
the fund would fund 100% of benefits until 2041. You have that it will stop that (assuming no changes) in 2034, a full 7 years earlier.

Im curious why the changes have been so drastic. Was something done in the intermittent time to lower SS taxes (related to ACA? Other tax cuts?). If not, how did those projections change so drastically? And if 7 years caused that much change in the projection, I wonder what another decade will do.

Im still not worried, and think one should definitely count on getting a good chunk of SS, as I argued there, and you argued here. But the changes are definitely making me cock my head and wonder.

Anyone know the answer to why that changed so much?

EDIT: This link above is relevant.
The 2010 Social Security Trustees Report shows retirees will receive 100% of benefits until 2037, and 78% of promised benefits after that, paid out of incoming payroll taxes: http://www.ncpssm.org/news/archive/2010_ss_trustees_report/

Looks like their own report changed from 2037 to 2034, not as drastic of a decrease (especially since it's now 79% instead of 78% of benefits). Still discouraging to see in just over half a decade the projections brought in multiple years.

I spent some time looking into this as well after your comment Rebs.  Like your edit above, I also see that the 2010 SS Trustees report listed trust fund exhaustion in 2037 (as opposed to 2034 from the 2018 report that was used for my post). And at that point the Trust Fund is exhausted, both reports say that it can still pay around three quarters of promised benefits, so that hasn't changed.

Once I started really digging into this stuff, I found that it was pretty easy accidentally use the wrong numbers if you weren't very careful about what you were reading.  That's because they report on 3 different trust funds, one each for the 3 parts of the SS program, Old Age, Survivors, and Disability.  So while I'm not sure, I think it's possible that your numbers from your 2012 post above may have been looking at only one part and not the combined OASDI.

Some links for your reading pleasure:
https://www.ssa.gov/oact/TR/index.html (this is a list of all the reports from every year)

https://www.ssa.gov/oact/TRSUM/2010/index.html (summary of the 2010 report)

Where the 2010 report states:
Quote
Projected OASDI tax income will be sufficient to finance about 75 percent of scheduled annual benefits in 2037 through 2084 after the combined OASI and DI Trust Funds are projected to be exhausted.

https://www.ssa.gov/oact/TRSUM/ (summary of the 2018 report)

Where the 2018 report states:
Quote
until 2034 when the OASDI reserves will be depleted. Thereafter, scheduled tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2092.

I do agree that it's a bit concerning that they had to pull the date in 3 years over the last 8, but that just means that the fix needed will simply have to be implemented sooner.  Or people will just receive less money, but I still have trouble seeing that come to fruition.

When I started doing all my research for the post, the part that was most crazy to me was when I read the section of the 2018 report stated that a simple 2% SS tax increase (1% for employer, 1% for employee) would allow SS to pay full benefits for the next 75 years.  But it would have to start immediately.  How has this not already been done?  It's so simple.

arebelspy

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Re: Social Security-Do you plan on it?
« Reply #25 on: March 24, 2019, 01:49:31 PM »
Yeah, any of a number of minor tweaks would solve it. It's like when you're going 100mph, a tiny turn of the wheel leads to big direction changes.

SS is so big, a tiny tweak leads to massive changes.

But more taxes isn't popular. Nor is cutting benefits.  So even the simple fixes aren't done.
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mcneally

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Re: Social Security-Do you plan on it?
« Reply #26 on: March 24, 2019, 03:20:59 PM »
I don't remember if I saw this posted here or the old FatWallet Finance forums, but saying you expect to get nothing from SS is no more reasonable than saying that you expect to get nothing from Medicare and paying $30k/ yr for health insurance in old age. At least be consistent in your "expectations".

Bloop Bloop

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Re: Social Security-Do you plan on it?
« Reply #27 on: March 24, 2019, 11:41:10 PM »
The way it works in my country is that rich people pay a lot of tax to fund pensions for poor people without getting any pension in return.

Brother Esau

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Re: Social Security-Do you plan on it?
« Reply #28 on: March 25, 2019, 05:27:05 AM »
Check out the book "Social Insecurity". SS will be around for quite some time.

terran

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Re: Social Security-Do you plan on it?
« Reply #29 on: March 25, 2019, 05:57:15 AM »
Anyone know the answer to why that changed so much?

I just replied to that post/comment, so I may as well put my reply here too:

Quote from: terran
Regarding Joes question of why the projections might have gotten so much worse from 2010 to 2018, I wonder if its as simple as treasury bond rates having gone down in the intervening years? If the projections were based on higher yields for the trust fund investments (which are all government securities), that that might explain the change. You can see reports of how the trust fund was invested for any month here: https://www.ssa.gov/OACT/ProgData/investheld.html. The average rate of return of investments in December 2010 was 4.444%, and in December 2018 it was 2.850%. Future rate expectations used in the projections might be lower now than they were in 2010 too.

Mother Fussbudget

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Re: Social Security-Do you plan on it?
« Reply #30 on: March 25, 2019, 10:28:34 AM »
Very old thread - I'm surprised this was revived instead of starting a new one...

In any case, the book "Get What's Yours: The Secrets to Maxing Out Your Social Security" is a great read on this subject.  Lawrence Kotlikoff is an expert on the subject, and often shows up on the news channels when this issue comes up.  I checked it out from the library.

Bottom line is:  No, I'm not relying on it for FIRE, but am hoping it will be around when I'm old enough to sign up. (All the best!)

FIREstache

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Re: Social Security-Do you plan on it?
« Reply #31 on: April 14, 2019, 02:56:18 PM »
Bottom line is:  No, I'm not relying on it for FIRE, but am hoping it will be around when I'm old enough to sign up. (All the best!)

I'm relying on it.  If I was a lot younger, maybe not, but I'm already in my mid 50's, not much younger than you, so it's close enough that I expect at least most of the benefit to still be paid.  Hopefully, I'll get the full benefit that I calculate with the ssa calculators.

Quote
Very old thread - I'm surprised this was revived instead of starting a new one...

There have been others, such as this more recent one, which was an interesting read.
https://forum.mrmoneymustache.com/welcome-to-the-forum/social-security-will-not-be-bankrupt/
« Last Edit: April 14, 2019, 03:01:57 PM by FIREstache »

ender

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Re: Social Security-Do you plan on it?
« Reply #32 on: April 14, 2019, 06:43:47 PM »
There are both:

  • way too many obvious solutions for "fixing" Social Security
  • too many people depending on it

Which cause me to really scratch my head when people talk about it going away.

Buffalo Chip

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Re: Social Security-Do you plan on it?
« Reply #33 on: April 14, 2019, 07:15:30 PM »
SS is not going away anytime soon, and yes I will rely on it somewhat in retirement. Im also in my 50s, so probably older than the average mustachian.  I dont see SS going away, but I do see changes being made. Probably increasing retirement ages, reducing benefits and more likely a combination.

frugaldrummer

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Re: Social Security-Do you plan on it?
« Reply #34 on: April 15, 2019, 11:57:36 AM »
I'm in my early 60's (no, not early retiring - thank you divorce and health issues) but in good shape now to retire any time.

Social security is about a third of my projected income. The other sources are a good pension (which does not include COL adjustments so becomes less good over time) and about $500k in retirement savings.

Since I plan to live to 100 (don't laugh - longevity runs in my family) inflation is an issue and although Social Security COLA are not quite what they should be, it's still an important part of my retirement plan as it DOES adjust somewhat with inflation.

Still, since I have three streams of income (and maybe another since I might pick up a side hustle once retired) I feel like I could adjust for decreases or losses in social security by downsizing my home or other adjustments (such as renting out rooms in my home). If I were relying solely on social security I would be worried.

robartsd

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Re: Social Security-Do you plan on it?
« Reply #35 on: April 15, 2019, 12:46:45 PM »
Currently I don't include Social Security into my projections (20 to 30 years from claiming retirement benefits). I actually expect to get a benefit, but think it will probably be reduced 10-20% from what the current formulas would provide. I'll probably start including it in projections with a very conservative 50% of defined benefit as I get closer to actually retiring.

wenchsenior

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Re: Social Security-Do you plan on it?
« Reply #36 on: April 15, 2019, 12:52:48 PM »
There are both:

  • way too many obvious solutions for "fixing" Social Security
  • too many people depending on it

Which cause me to really scratch my head when people talk about it going away.

Most young people who are convinced SS is not going to be there seem to not grasp that the majority of retired Americans (close to 60%) rely on SS as their major or ONLY source of income. And another ~30% rely on having it as a minor source of income. 

We are an aging country.  Old people vote. We are not going to be a country full of tent cities of old people.   

Hence, SS will be around, in some form, for sure.

We assume we'll receive around 75% of currently projected benefits, but we could survive without it. 

secondcor521

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Re: Social Security-Do you plan on it?
« Reply #37 on: April 15, 2019, 01:37:51 PM »
I'm 50 and factor 50% of my projected benefits.  I think that is conservative and expect at least that much.  If it is less or even zero I'll still be OK; it's a small part of my overall FIRE picture (about 17%).

FIREstache

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Re: Social Security-Do you plan on it?
« Reply #38 on: April 15, 2019, 08:09:34 PM »

When I say that I rely on it, I mean that I rely on it to meet my desired discretionary spending level.  I'm not relying on it in the sense that I'll be out on the street without it, but I do expect it and factor it in to maintain a specific lifestyle.  If future benefits are cut, it would mean a cut to my future  potential discretionary spending unless the stash grows enough to compensate.

spartana

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Re: Social Security-Do you plan on it?
« Reply #39 on: April 16, 2019, 09:41:36 AM »
I believe SS will be around a long time but may be reduced after 2035 if current funding projections are true. Although I don't personally count on it as I will only get a very small amount even if funded 100% as I quit paying into it after age 30 when I started a gov job and paid into a pension instead. So between all those zero contribution years and the zero years I will have in FIRE until full retirement age at 67 (37 years of zero contributions) I won't get much. Plus any SS I am entitled to will get reduced by the Windfall Elimination Provision (WEP) because of recieving a small gov pension. I will qualify for Medicare though as my old gov job paid into that.
« Last Edit: April 16, 2019, 09:44:45 AM by spartana »

partdopy

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Re: Social Security-Do you plan on it?
« Reply #40 on: April 16, 2019, 10:17:55 AM »
I plan on whatever remains of SS to be completely disposable money, as my savings will be more than enough to support my lifestyle.  SS will allow me to maybe rent a Corvette rather than a Fiat when I travel out of the country at age 65.

robartsd

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Re: Social Security-Do you plan on it?
« Reply #41 on: April 16, 2019, 10:32:13 AM »
I believe SS will be around a long time but may be reduced after 2035 if current funding projections are true. Although I don't personally count on it as I will only get a very small amount even if funded 100% as I quit paying into it after age 30 when I started a gov job and paid into a pension instead. So between all those zero contribution years and the zero years I will have in FIRE until full retirement age at 67 (37 years of zero contributions) I won't get much. Plus any SS I am entitled to will get reduced by the Windfall Elimination Provision (WEP) because of recieving a small gov pension. I will qualify for Medicare though as my old gov job paid into that.
Have you actually looked into the calculations? In today's dollars, it only takes $388,920 subjected to Social Security tax to fill the first bend point which provides about $830/mo at full retirement age (you also have to meet the minimum qualifying "quarters" to claim any benefit - $5280+ in a year earns 4 quarters).

spartana

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Re: Social Security-Do you plan on it?
« Reply #42 on: April 16, 2019, 11:01:32 AM »
Yeah I've earned 40 quarters and have done the math but because of the WEP reduction (SS benefit reduced by half your pension monthly benefit up to a max - currently around $450/month deduction) whatever I'm entitled to would be reduced by that amount.  I was also a low income earner so during the years I worked and paid into SS so didn't earn much during that time so a smaller benefit.

ETA I could also qualify for a SS benefit based on my ex-DH's record but the I would be subject to something called the Government Pension Offset (GPO) which could actually mean zero in SS benefits because it reduces any spousal benefit I'd get by 2/3rds of my pension amount. Ex is younger then me too but I think once both of us are 62 or older I could file on his record or mine. Although not sure how that works. In either case I never planned my FIRE on SS benefits and in my case that was probably wise.
« Last Edit: April 16, 2019, 11:16:56 AM by spartana »

Rosy

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Re: Social Security-Do you plan on it?
« Reply #43 on: April 16, 2019, 01:06:54 PM »
Oh wow @spartana those are some harsh penalties. I googled GPO in a panic and I did remember reading about that windfall provision. It doesn't apply to me, but you had me reeling there for a moment envisioning having to pay back thousands of SS dollars.

Yes, I planned on SS as part of my retirement. Most baby boomers do, since politicians made a big thing out of "saving" SS for us - back in the day. Had they been more courageous they could have fixed it then for everyone for a long time to come - a missed opportunity.

However, I hadn't realized the significant impact it would have on my financial life - in a good way. I would hate to be in a position where it represented my only income though. At near $1800 mo I could barely live on it, it sure would require a much tighter budget.

I always saw SS as "my money", part of my retirement income. I never grasped the concept that it is a type of "welfare" program. How can it be welfare when I paid into it all my life? Yeah, well, I get it now after endless discussions on this board.
Actually, I do think politicians will take measures to fully fund SS in time, there are solutions aplenty.

spartana

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Re: Social Security-Do you plan on it?
« Reply #44 on: April 16, 2019, 01:47:20 PM »
Oh wow @spartana those are some harsh penalties. I googled GPO in a panic and I did remember reading about that windfall provision. It doesn't apply to me, but you had me reeling there for a moment envisioning having to pay back thousands of SS dollars.

Yes, I planned on SS as part of my retirement. Most baby boomers do, since politicians made a big thing out of "saving" SS for us - back in the day. Had they been more courageous they could have fixed it then for everyone for a long time to come - a missed opportunity.

However, I hadn't realized the significant impact it would have on my financial life - in a good way. I would hate to be in a position where it represented my only income though. At near $1800 mo I could barely live on it, it sure would require a much tighter budget.

I always saw SS as "my money", part of my retirement income. I never grasped the concept that it is a type of "welfare" program. How can it be welfare when I paid into it all my life? Yeah, well, I get it now after endless discussions on this board.
Actually, I do think politicians will take measures to fully fund SS in time, there are solutions aplenty.
Not too harsh as I do get a gov pension - at 50 too!  - so no complaints from me. But, like many other people, I knew nothing about the existence of the WEP or the GPO. I think I first heard about it here and started googling. Of course this only affects those with government pensions who didn't pay into SS but had a future SS benefit based on other employment. Maybe things will change in the next 10 or so years and I'll get more $$ when I apply.

For the GPO in case anyone is interested:

How much will my Social Security
benefits be reduced?
We’ll reduce your Social Security benefits by
two-thirds of your government pension. In other
words, if you get a monthly civil service pension
of $600, two-thirds of that, or $400, must be
deducted from your Social Security benefits. For
example, if you’re eligible for a $500 spouses,
widows, or widowers benefit from Social
Security, you’ll get $100 a month from Social
Security ($500 – $400 = $100). If two-thirds of
your government pension is more than your
Social Security benefit, your benefit could be
reduced to zero.
If you take your government pension annuity in
a lump sum, Social Security will calculate the
reduction as if you chose to get monthly benefit
payments from your government work
« Last Edit: April 16, 2019, 01:57:31 PM by spartana »

FIREstache

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Re: Social Security-Do you plan on it?
« Reply #45 on: April 16, 2019, 03:31:43 PM »
WEP seems only fair as that lowest range before the first bend of the SS benefit ranges assumes you're not getting other retirement income and is more generous so that those only getting SS can survive on it.  WEP puts you past that bend just as higher incomes over time get you into those less generous ranges as well.

Agreed - SS is not a welfare program.  You pay into it all of your life, and if you're lucky, you'll live long enough to get a benefit someday.

robartsd

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Re: Social Security-Do you plan on it?
« Reply #46 on: April 16, 2019, 04:03:14 PM »
Persons born before 1954 who qualify to receive benefits on a spousal record can apply for those benefits at full retirement age while delaying benefits against their own record; for the rest of us, if we apply spousal benefits, we automatically apply for our own retirement benefit too - the benefit actually paid will match whichever record provides the most benefit.

Montecarlo

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Re: Social Security-Do you plan on it?
« Reply #47 on: April 16, 2019, 09:03:32 PM »
I simply don't worry about it.  I'll be retired before 35.  The kind of stash that will last me until I'm eligible to withdrawal will last me forever, plus I'm planning on working part time in retirement and growing my net worth.

If it's there, great, but if not, I'll be okay.

spartana

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Re: Social Security-Do you plan on it?
« Reply #48 on: April 17, 2019, 01:36:56 AM »
WEP seems only fair as that lowest range before the first bend of the SS benefit ranges assumes you're not getting other retirement income and is more generous so that those only getting SS can survive on it.  WEP puts you past that bend just as higher incomes over time get you into those less generous ranges as well.

But it only applies to those with certain government pensions not private pensions or government pensions where you paid into SS. Your benefits aren't reduced if you get those. I realize it was enacted to prevent double dipping and I don't have a problem with it. However it does seem unfair to those who paid into SS for years and then changed jobs to one that didn't. It seems that you should be allowed to earn an unreduced benefit based on the years you did contribute on the first job. And earn whatever pension you'd get on the second job - no combining of years. Just like you would if getting a private pension. For me, as a low income person with a small pension who'd only get a small amount of SS at full retirement age, cutting my SS benefit by half may be more impactfulful than a person with a private pension and who gets full SS.

ETA: I asked this question on another thread but maybe someone here can answer it:

@ender I'm curious about the approx amount a lower income person who didn't pay much into SS would get if they had left employment at 30 and didn't pay into it again. I can't imagine it would be very much at 67. There are a few around here who didn't have high salaries but retired at 30 or earlier and use real estate or some other income for FIRE. I contributed approx 12 years into SS from 18 to 30 at a low income (very low by today's standards) and think a full benefit at 67 would be around $700/month (not counting the Windfall Elimination Provision reduction I'd be subject to of approx $450 in today's dollars). I guess that would be high for only contributing 12 low income years plus teenager jobs.
« Last Edit: April 17, 2019, 02:26:58 AM by spartana »

spartana

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Re: Social Security-Do you plan on it?
« Reply #49 on: April 17, 2019, 01:54:41 AM »
Persons born before 1954 who qualify to receive benefits on a spousal record can apply for those benefits at full retirement age while delaying benefits against their own record; for the rest of us, if we apply spousal benefits, we automatically apply for our own retirement benefit too - the benefit actually paid will match whichever record provides the most benefit.
I was just trying to figure out how a spousal (or ex spouse or widow/er) benefit works for people born later. Looks like it's 50% of the spouse's benefit at full retirement age - less if you get it earlier (30% less if taking at 62).  So if a spouse got $2000/month, you could claim a spousal benefit of $1000/month at full retirement age. Or if your own benefit was higher you'd get that instead. Which ever is higher but not both. Then if you were subject to the WEP or the GPO any benefit you received would be reduced by that.  Seems complicate but I don't have to think about it for a long time yet. Although I plan to file for my couple hundred bucks once 62 instead of 67.

 I wonder how claiming a spousal benefit on a younger spouse's record works? I guess you'd file for your own benefit first and then could apply for it to be based on their record once they were 62 if it were higher.
« Last Edit: April 17, 2019, 02:04:58 AM by spartana »