Social Security,now or later?

[evilanne]

We might have Social Security, but I would not trust in it being funded and provided to me at the levels currently represented/calculated. I fully expect that at some point in the next 10 years or so, things will dramatically change...and not for the better. Politicians continually lie to us and cannot be trusted, as they have been building a house of cards fir decades. The articles that Tsunami posted are very good!

I don't believe All income should be subject to Social Security tax. Tax should be on "wage" income (I,e. applied to those who are to receive Social Security). Otherwise your simply taking from one to give to another, but employers are already putting that in for each employee as a fringe benefit for their employees. So what other (non-wage) income do you think should be taxed?

SS has an income tax cutoff right now I think is around 135kish. I think the proposals to raise SS taxes is to raise that limit higher which would still be wage taxes. I think that would be a more palatable tax but there will always be resistance to raising taxes at all for many people.

DBA, The current tax system already takes from one to give to others.

I agree that raising the limit or taxing all wages would solve part of the problem. We should raise it at least to the amount that congress critters get paid and get rid of the ones that fall under the old CSRS system as they have been there way too long.

 

[ALRetiree]

I don't believe All income should be subject to Social Security tax. Tax should be on "wage" income (I,e. applied to those who are to receive Social Security). Otherwise your simply taking from one to give to another, but employers are already putting that in for each employee as a fringe benefit for their employees. So what other (non-wage) income do you think should be taxed?

SS has an income tax cutoff right now I think is around 135kish. I think the proposals to raise SS taxes is to raise that limit higher which would still be wage taxes. I think that would be a more palatable tax but there will always be resistance to raising taxes at all for many people.

 

[DreamboatAnnie]

I highly recommend reading some of the many excellent articles and analysis by Daniel Amerman regarding when to start collecting social security.

Two examples:

Making Optimal Social Security Claiming Decisions by Daniel Amerman

Using Personal Math Instead Of Abstract Theory To Make Better Retirement Decisions (Social Security Debate) by Daniel Amerman

Two points:

#1. The $160k wasn’t the Biden number. That was the compromise agreed to after republicans refused to allow the Biden number. Remember, republicans wanted ZERO stimulus this last time around.

#2. $160k is a huge number for the vast majority of the remaining “middle class” in this county. While some in big cities like NEW YORK and LA don’t find $160k to be wealthy, a lot of America subsists on more like $45-50k a year for a family. To the majority of America, $160k isn’t middle class, it’s downright wealthy.

Social Security will always be here- it’s just a matter if how it is funded, and where the break points are. If ALL income was equally subject to the social security tax, SS would be solvent for another 75 years, with no rate hike, and no benefit cut.


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We might have Social Security, but I would not trust in it being funded and provided to me at the levels currently represented/calculated. I fully expect that at some point in the next 10 years or so, things will dramatically change...and not for the better. Politicians continually lie to us and cannot be trusted, as they have been building a house of cards fir decades. The articles that Tsunami posted are very good!

I don't believe All income should be subject to Social Security tax. Tax should be on "wage" income (I,e. applied to those who are to receive Social Security). Otherwise your simply taking from one to give to another, but employers are already putting that in for each employee as a fringe benefit for their employees. So what other (non-wage) income do you think should be taxed?

 

[James48843]

If this new Biden stimulus cut off at $160k married is any indication, it doesn't look promising for most of the middle class.

Two points:

#1. The $160k wasn’t the Biden number. That was the compromise agreed to after republicans refused to allow the Biden number. Remember, republicans wanted ZERO stimulus this last time around.

#2. $160k is a huge number for the vast majority of the remaining “middle class” in this county. While some in big cities like NEW YORK and LA don’t find $160k to be wealthy, a lot of America subsists on more like $45-50k a year for a family. To the majority of America, $160k isn’t middle class, it’s downright wealthy.

Social Security will always be here- it’s just a matter if how it is funded, and where the break points are. If ALL income was equally subject to the social security tax, SS would be solvent for another 75 years, with no rate hike, and no benefit cut.


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[Bullitt]

Despite my previous comment, I do agree with you on longevity EvilAnne. Longevity risk is probably the most underestimated risk we face in retirement.

The longer you can delay collecting the higher lifetime risk free return you can count on - and the less chance you'll have to rely on children to float you. The stocks thing sounds great but most people only consider the rosiest of scenarios when investing. Realistically, how many years can one make with eight years (62-70) of investing? I'd guess that once you hit 80+, you'll be hoping you waited and got that extra risk free return.

One more thing to consider, by time age 80 hits, chances are you've drawn from savings in at least one real bear market (not this "new normal" correction caused mostly by the China virus). Drawing in a bear market can really decimate funds in a hurry. I'd imagine it was not fun for those pulling from savings accounts from 2007-2010. Those hefty drawdowns have long term implications.

I don't think social security will go away. Simply put, it can't, too many rely on it as a sole means to live. The one worry I do have is who will be paying more and who will be receiving less in the years ahead. If this new Biden stimulus cut off at $160k married is any indication, it doesn't look promising for most of the middle class.

 

[evilanne]

When I started with the government, I didn't plan on SS being around when I retired. Just started getting the FERS Supplement but I don't plan on taking SS until 70. If taken at 62 you get a 6% per year or 30% reduction and the difference between FRA of 67 and 70 is 8% per year or 24% more (+any COLAs) for the rest of your life. If you anticipate living a long time, it makes sense to delay for as long as possible. IRS life expectancy tables go up to 115

 

[Bullitt]

The ones telling you to delay are the ones collecting now or soon to collect. They'd rather see you kick the bucket waiting until 70 than you taking money from the limited kitty.

Take the money ASAP and invest it.

 

[Cactus]

James, be aware that SS does use inflation adjusted values for your earlier salaries so calculating this yourself is not so easy.

In my mom's case she had a lot of partial employment early on because dad was army and we moved a lot. AAFES also had a habit of not hiring mom back right away at the new post because with a long enough break in service you lost vesting for retirement. She did eventually get a small pension from AAFES after dad retired and stayed put, but none of those early years counted toward that. Good thing she has SS.

 

[James48843]

I
Turns out she really enjoyed getting 2 SS raises every year. She got the COLA raise in January but SS would also recalculate her highest 35 earning years and give her a raise every November. Apparently she was making more in retirement than she did earlier in her work history. That worked for her and she never regretted it.

Interesting. I did not know they recalculated if you continue working. this is the first time I've ever heard of that. THAT could significantly make a difference to my math. I will have to investigate and re-run my math.

THANK YOU for that tidbit!

 

[Cactus]

It really does come down to personal choice. I tried to talk my mom into waiting but she wouldn't. She took SS at 62 and continued to work part time making sure not to go over the annual earning limit.


Turns out she really enjoyed getting 2 SS raises every year. She got the COLA raise in January but SS would also recalculate her highest 35 earning years and give her a raise every November. Apparently she was making more in retirement than she did earlier in her work history. That worked for her and she never regretted it.

 

[nasa1974]

Collecting Social Security really comes down to a personal choice.

For me I'm retired CSRS and the Social Security payments I made outside the Government will be penalized once I start to collect SS. So I decided to wait until I get closer to 70 to collect. One my monthly check will be a little larger and two the penalty against my SS is smaller. That and I failed retirement and I'm working full time paying into SS.

 

[Tsunami]

I highly recommend reading some of the many excellent articles and analysis by Daniel Amerman regarding when to start collecting social security.

Two examples:

Making Optimal Social Security Claiming Decisions by Daniel Amerman

Using Personal Math Instead Of Abstract Theory To Make Better Retirement Decisions (Social Security Debate) by Daniel Amerman

 

[Hallatauer]

I'll add my .02.

I made up my mind without any of the impressive math I see in this thread. Here is my theory:

I will never be as young and healthy as I am now. Give me the money while I can enjoy it; tomorrow is not promised. I'll use what I need, and invest the rest.

Oh, another thing; in my case, I'm law enforcement and lose my FERS supplement when I turn 62 - so I'm taking the hint

I'm in the same boat, forced out and receiving the supplement... 62 and it goes away so to maintain my current lifestyle I will need that SS check. It will be bigger than the supplement so I won't need to spend it all. I have no direct descendants so don't have a need to leave anyone anything. Also figure once I'm 90+ years old I won't need to depend on the bigger check if I had waited as I will probably be in a nursing home drooling on myself. heh

 

[nasa1974]

Except for one thing- if you take SS before your full retirement age, and you then earn income, your SS is reduced $1 for every $2 you earn over the minimum amount. That kicks in starting at just earnings of $18,240 in 2020.

For me, THAT is the big question- what other earnings do i think I’m likely to make after I retire from the Fed job? And is it worth it to claim and then risk not getting anything, because I’ve earned too much?


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Great point. Some of us forgot about that. The reduction goes away when you reach full retirement age.

 

[James48843]

Except for one thing- if you take SS before your full retirement age, and you then earn income, your SS is reduced $1 for every $2 you earn over the minimum amount. That kicks in starting at just earnings of $18,240 in 2020.

For me, THAT is the big question- what other earnings do i think I’m likely to make after I retire from the Fed job? And is it worth it to claim and then risk not getting anything, because I’ve earned too much?


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[nnuut]

One thing, I surely don't want to be Old and Broke and I'm not broke and getting older every day! Old Age isn't for Sissies.

 

[DreamboatAnnie]

Hi vintage! Thank you for analysis and your thoughts on taking SS early or waiting. I have been thinking the same thing. Also, had a doctor tell me recently that he heard 1/3rd of folks do not make it to age 65. Seems rather grim/sad. I need to look into that a little more....

In any case, I am so very sure-footed, I must do quite a bit more analysis-wise to closely how much disposable income I will have left and get a very sober understanding of the expenses I will incur after retirement. I also need to get mentally ready. Not there yet. Eventually, I will have to take the plunge and retire. Goal is to retire in two years....

 

[1965Vintage]

I'm going to draw at 62. I did the math between taking it at 62 and 67. If I waited till 67 to take it, I would be 77 before I broke even on the money I drew for the 5 years between 62 and 67. I'm not willing to gamble that I'll live to be 77.


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[dave123]

I'll add my .02.

I made up my mind without any of the impressive math I see in this thread. Here is my theory:

I will never be as young and healthy as I am now. Give me the money while I can enjoy it; tomorrow is not promised. I'll use what I need, and invest the rest.

Oh, another thing; in my case, I'm law enforcement and lose my FERS supplement when I turn 62 - so I'm taking the hint

 

[Skorcher]

My most recent Social Security statement states that by 2035 only about 80% of your benefit can be paid. So that would be another factor to take it earlier rather than later.