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Personal Finance Topics / Macroeconomic Trends and Risks
No. of Recommendations: 4
The clock is ticking to fix Social Security as retirees face automatic cut in 9 years
https://www.npr.org/2024/05/06/1249406440/social-s...The report from Social Security trustees predicts the retirement program's trust fund will be exhausted in November of 2033. At that point, benefits would automatically be cut by 21%, unless lawmakers adopt changes before then.
There's some good news in the new forecast. Thanks to higher-than-expected worker productivity and a decline in expected disabilities, Social Security isn't burning through cash as fast as trustees predicted a year ago.
...
Medicare's finances have also improved somewhat in the last year, thanks to a strong economy and lower-than-expected spending. Still, the program which provides health care for nearly 67 million people, is expected to face its own cash crunch in 2036.One wonders if a pandemic that killed over 1 million mainly older people played a part...
Got my SS statement last week. If I pay no more in, at full retirement age I'll be due $42k/year. Or not, per the above.
Raising the FICA cap seems like a pretty straightforward move towards increased funding. I'll wager many folks don't even know there is a FICA cap.
https://www.investopedia.com/ask/answers/081514/wh...
No. of Recommendations: 5
Got my SS statement last week. If I pay no more in, at full retirement age I'll be due $42k/year. Or not, per the above.
Congress would never, ever dare to cut benefits for people over about the age of 50. Older people have money, and they vote. Plus people's parents would be left destitute. I just ain't happening.
That said, there is a reasonable concern that Congress just won't get around to fixing it and so there will be an automatic cut. But there is no law that I'm aware of that says SS must be self-supporting and can't receive money from the general fund.
No. of Recommendations: 4
That said, there is a reasonable concern that Congress just won't get around to fixing it and so there will be an automatic cut. But there is no law that I'm aware of that says SS must be self-supporting and can't receive money from the general fund.
SS is not self-supporting. It has not been for decades.
The money that is collected from SS payroll deductions goes into the general fund and the money that gets paid to recipients come from the general fund.
They just play bookkeeping games to make it seem otherwise. It's just like you putting your paycheck into your lefthand pocket and then lending it to your righthand pocket as a loan that pays interest. Like lending money to your wife. Just smoke and mirrors. It's all the same pot.
Congress will rescue SS by increasing what is collected from paychecks. Recall that up until 1994 there was a cap on the Medicare deduction, which they removed the cap so they could collect more money when Medicare "ran" out of money. They'll do the same to SS deductions, and probably increase the percentage.
The problem with continually kicking the can down the road is that eventually you run out of road.
No. of Recommendations: 4
One bit of advice from Mike Piper, primary author of the
open-source Social Security strategy calculator, is that
you handle all of your interactions with Social Security
online, if possible.
He says that sometimes things get screwed up by the office
staff due to miscommunication, but that never happens online.
Free online tool:
https://opensocialsecurity.com/about-Rubic
No. of Recommendations: 4
One thing that I found interesting was how Social Security wildly favors high income early retirees.
If you're a wage & salary earner paying maximum FICA from an early age (say your mid to late 20's), the sweet spot is to retire just before you'd hit the second bend point for the AIME calculation (a retirement at about age 45 or so.) There you'd get 77% of the maximum SS monthly benefit while only paying about half the lifetime FICA taxes.
https://retireearlyhomepage.com/socialsecurity2023...Just more evidence for my long held thesis that working for wage & salary income, while often necessary, is just about the dumbest thing you can do financially and tax-wise.
intercst
No. of Recommendations: 3
Both DW & I will be 70 this year and, together, we'll gross about $98K/yr in benefits. Now I'll happily take all that as the employer who funded my pension plan really screwed us, but somehow I don't think this was the amount the originators of SS had in mind...
No. of Recommendations: 2
Probably not.
As I recall, SS was only meant to provide subsistence for non-working elderly. I believe the retirement age at that time was about the same as the life expectancy at that time. As life expectancy rose, "retirement age" didn't keep pace. So we have average life expectancy in the 70s today, but the retirement age is still in the 60s.
FWIW, I ran one scenario where SS was killed, and we wouldn't receive a penny. The calculators said we still would be fine, so we retired. I'm pretty sure SS isn't going anywhere, even if they ultimately have to reduce benefits in some way. Whatever form it takes, it will still serve as a backstop for us. A buffer. We wouldn't have retired if we needed it to make retirement work.
No. of Recommendations: 0
As part of our retirement planning, I always ran scenarios where our SS benefits were cut in half. I have no idea if that'll ever happen, but "belt and suspenders" dontcha know.
No. of Recommendations: 3
Both DW & I will be 70 this year and, together, we'll gross about $98K/yr in benefits. Now I'll happily take all that as the employer who funded my pension plan really screwed us, but somehow I don't think this was the amount the originators of SS had in mind...
You are an outlier. The system doesn't have to be perfect, it only needs to be good enough.
