What Will You Get from Social Security?

I'm a big advocate of crunching retirement numbers to make sure someone is saving enough to retire when and how they want. One of the big variables in that calculation is how much someone will receive from Social Security. We're all aware that the program is not on rock-solid footing. So how much should people assume they'll receive when fiddling around with a retirement calculator?

I put that question to several experts, and their responses are below. But first, a word from our sponsor.

Blatant spousal promotion: My wife's latest children's book (The Picky Little Witch) is now available! Your kids, grandkids, nieces, nephews, and witches will love it. Plus, you could be the coolest house on the block by giving out books instead of candy this Halloween! And now, back to our regularly scheduled program…

 

As you'll see from the responses, the experts don't exactly agree on all the numbers, but they agree on a key fundamental point: Plan on getting less from Social Security than currently projected, but definitely plan on getting something. Here's what they had to say:

Alicia Munnell, Director of the Center for Retirement Research at Boston College, former member of the President's Council of Economic Advisers and Assistant Secretary of the Treasury for Economic Policy:

Social Security is going to be there for everyone — from their 20s up to their 50s. This notion that “it just won't be there for me” is wrong. The easiest way for me to think about it is: Once the trust fund is gone, the revenues are adequate to pay 80% of promised benefits. So I would take 80% as the minimum, but it probably varies by income class. It seems that everyone is concerned with protecting the benefits of those in the lower half of the income distribution and may trim something from those in the upper half. I actually think that for the lower half you can count on 90% of what you've been promised and for the very high-income earners, maybe 70%.

Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, publisher of The Kitces Report and Director of Research for the Pinnacle Advisory Group:

There are two easy ways to adjust future Social Security benefits to handle the possibility of Social Security reform. The first is to reduce the growth rate/cost-of-living adjustment on Social Security ]by 1%; in financial planning projections, this is most commonly done by entering a Social Security inflation rate that is 1% lower than the assumed general rate of inflation. The second option is to apply a flat reduction in future benefits by up to 25% (e.g., if benefits were projected to be $1,000/month, only assume a $750/month benefit).

The reason for these adjustments — a 1% reduction in cost-of-living adjustments or a maximum 25% cut in future benefits — is simply because these in fact are approximately the magnitude of adjustments required according to analysis by the Congressional Budget Office about what is necessary to render the Social Security system solvent again. Alternatively, the 25% reduction in benefits also represents the amount that benefits would decline in approximately 25 years, if we do nothing to fix the system, and the Social Security trust fund is exhausted. Notably, though, because Social Security is largely a pay-as-you-go system — with taxes on workers being used to pay benefits for retirees — even exhaustion of the Social Security trust fund results in “merely” a 25% reduction in future benefits, NOT a total loss (as it would with a pension fund that fully pays its benefits from accumulated funds). To the extent that any of our Social Security woes are solved at least in part with tax increases — not just benefits cuts — the necessary reduction for solvency would be even less than a 25% benefits cut.

Eric Tyson, former financial planner (one of the first to charge by the hour) and author of Personal Finance for Dummies and Investing for Dummies:

There's a lot of fear-mongering and pundits taking extreme views like “Anybody under 40 shouldn't count on Social Security!” That's just ridiculous. Of course you're going get Social Security. It may not be what your parents got, but you're going to get it.

Back when I was doing individual financial planning, I noticed that in the Social Security projections that they assumed benefits were going to grow 1% faster than the rate of inflation. I think part of that was because of the underlying assumption that your employment income would be on that kind of trajectory. I told clients whom I worked with to look at benefits in today's dollars, rather than it was going to grow beyond the rate of inflation.

Tiya Lim, Director of Institutional Advisory Services at the Buckingham Family of Financial Services, co-author (with Larry Swedroe) of The Only Guide You'll Ever Need for the Right Financial Plan:

Current beneficiaries should continue to receive their benefits without any reductions. With the baby boomer population being such a large segment of the voting population, it would be very difficult to take away their benefits. The one feature that may be at risk for current beneficiaries is the Cost of Living Adjustment (COLA). There has been talk of either freezing benefits or adjusting it to be linked to a different measure than CPI-U. If the Social Security Administration decides to freeze benefits at current amounts, that could be very detrimental to retirees who are very susceptible to inflation. In a low inflationary environment like this, it's less of an issue, but should the economy start expanding again, then retirees with benefits that are not adjusted for inflation will have to rethink other assets in the portfolio.

But for now, we know that current beneficiaries will continue to receive their benefits without any significant changes. The SSA is looking for ways to ensure payments will be paid by doing simple things like ending paper statements, ending paper checks, and closing loopholes like the “interest-free” loan. It is also likely that the amount of taxes going into the system will have to increase and the full age of retirement will have to rise. It has been done before and when done far in advance (affecting future beneficiaries 20 to 40 years down the line) there is less opposition.

Scott Burns, financial columnist and Chief Investment Strategist at AssetBuilder, Inc.:

I believe the real squeeze will be on Medicare. There are two reasons for this. One is that Medicare is the elephant in the room; it accounts for most of the longterm problem. For example, the current unfunded liabilities of Medicare Part D, the Prescription Drug plan, are about the same size as the unfunded liabilities of the entire Social Security program, and Medicare Part D is only a small part of Medicare.

The other reason is that it will be a lot easier for the politicians to weasel out of Medicare commitments because they aren't nearly as clear as the promise of a monthly check. It is quite possible that we could reduce Medicare spending dramatically and have zero effect on life expectancy or even on disability-adjusted life expectancy.

Cutting Social Security benefits is another thing altogether. Tell the young their future benefits will be much smaller, but their taxes will be much higher, and we'll have an American Spring. [Warning: After you read that article, you may be inclined to vote for Scott Burns for president.] Tell the old their benefits will be cut today and we'll have blood in the streets. There are simply too many people totally dependent on Social Security benefits to cut them directly. They could, however, be reduced indirectly by making them fully taxable. Taxation of benefits now affects about 30% of retirees, so broadening their taxability would increase the number of retirees whose benefits were taxed, but it would still be more likely to fly than reducing benefits.

This doesn't mean the weasels won't weasel. The current discussion of
How do you include Social Security benefits when deciding how much you'll need to retire? Have these experts changed your opinion on how much you'll receive in benefits?

More about...Retirement

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
99 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Matt Drew
Matt Drew
8 years ago

Yet another politically charged article. Most of these “experts” ignore the fact that the Social Security “trust fund” consists only of special non-marketable government bonds – IOUs to the government itself. All the money that is supposedly in the trust has long since been spent. While it’s true that Social Security has a revenue stream, that stream will not be nearly enough to cover the benefits of the boomers as they retire. The only choices for Social Security will be to drastically raise payroll taxes, drastically cut spending elsewhere, or drastically cut benefits. The last one is the most likely,… Read more »

csdx
csdx
8 years ago
Reply to  Matt Drew

By “not nearly enough” in the revenue stream equation are you referring to the 70-80% numbers that everyone was putting out in this article, or is that something you’re disputing as well? If not it doesn’t really seem all that doom and gloom even if congress doesn’t do anything about this ‘ponzi scheme’.

Based on the numbers I’ve been told I really have to agree that medicare is the thing that looks ready to consume the entire US budget all by itself.

STRONGside
STRONGside
8 years ago

I have a 35 year time horizon before I can even begin to draw Social security. Honestly, I don’t factor it in at all. I imagine that something will be done to preserve it, seeing as how so many people actually rely 100% on it for their retirements, but I don’t want to count on it being available.

if it is, then it will be a nice cherry on top of my other retirement vehicles that I sock away every month.

Courtney
Courtney
8 years ago
Reply to  STRONGside

This is exactly what we’ve done (with basically the same time horizon). I don’t figure it into any of our calculations, and save as if we’ll get nothing. If/when we do get any social security, we’ll just take more vacations or something.

Well Heeled Blog
Well Heeled Blog
8 years ago
Reply to  STRONGside

As a young professional in her 20s, I strongly believe that some type of government retirement scheme will and should exist. No one is going to live high on the hog on SS – it’s a vital security net for seniors that pays for their basic necessities. I don’t think I will get 100% of my SS payments, but I am not so quick to write off the entire program. I DO expect money from Social Security… doesn’t mean I am not saving, though.

SB @ One Cent At A Time
SB @ One Cent At A Time
8 years ago

I will probably not at all depend on Social security income in my retirement life. At least I am aiming for it. Whatever benefit I receive in social security (whatever be the percentage) I will use it to enjoy my life. So, basically I agree with strongsides comment above, a cherry on the cake, but it will be bigger than just a cherry. I quick check with the math tells me that with my current social security deduction from paycheck, the total payout after accruing at 5% rate should become around $230K when I retire. If I am getting my… Read more »

wink
wink
8 years ago

What about the option were SS becomes means tested? Those that save get 0 and those that don’t will get full benefit. It could start only on the rich but like the AMT will slowly work its way into the moddle class.

Courtney
Courtney
8 years ago
Reply to  wink

The trouble with means testing is what, exactly do you means test? Total net worth? Liquid net worth? Annual retirement income? It’s a prevalent talking point, but none of the details make any sense. Means testing and raising the income cap on payroll taxes both accomplish pretty much the same end result.

wink
wink
8 years ago
Reply to  Courtney

I am only guessing but the testing would be done the way it is now through the income tax system. (if you meet certain criteria SS is taxed). I agree that raising the income cap is a better method. I just don’t see them cutting the lower end of the benefits scale but maybe by tinkering with the inflation rates they will be able to do that without anyone noticing.

wink
wink
8 years ago
Reply to  wink

sorry, middle not moddle

The reason that there will not be a straight across the board percentage cut in benefits as was suggested in the article, is that there is a segment of the population that relies on only SS for retirement income, cuts to them would be problematic. The only other option would be to shift the brurden of these people to other welfare programs.

Lis
Lis
8 years ago
Reply to  wink

Seriously? If I am responsible and live below my means, save and invest, I would get NOTHING? Whereas my neighbor could live beyond her means, always nicer/better stuff, fancy vacations, and then get FULL BENEFITS? That is just so wrong on so many levels. Encouraging personal/fiscal irresponsibility is not good policy.

Courtney
Courtney
8 years ago
Reply to  Lis

That’s why raising the income cap makes so much more sense than means testing (even though in the end the math is basically the same) – you and your neighbor pay based on what you make today instead of making arbitrary decisions about who qualifies for benefits down the road.

Ru
Ru
8 years ago

We have a different system in the UK with our state pensions, but I do worry about it, especially as I don’t plan to live a “normal” life (working 9 to 5, having children, etc). So my life plan at the moment is to work hard to get myself to a point where when the time comes and I can’t (or don’t want to) work as hard, I have the option not to. Stuff like living in a house without a mortgage, having the option to grow my own food, having my own studio instead of renting one. State pension… Read more »

Petra
Petra
8 years ago
Reply to  Ru

Have you looked at “early retirement extreme” for some inspiration?

I’m in the Netherlands and we also have some kind of state pension. I’m not really counting on it either (it’s still 35 years away for me, anyway).

Ru
Ru
8 years ago
Reply to  Petra

No, I hadn’t looked at Early Retirement Extreme- thank you for the suggestion! Retirement is also a long way off for me, I’m only 21. That’s why I worry about it so much. My dad got offered early retirement a few years ago and now really regrets not taking it. He’s grow to hate his job and resent the mortgage on the family home. My parents have always worked and it makes me sad to see him in his mid 50s wanting to retire and having to wait another decade. He has a good company pension from his time at… Read more »

Mom of five
Mom of five
8 years ago

We assume we’ll get nothing. I think SS will start being means tested within the next 5 years. My guess is the most people who’ve saved a million plus can hope for will be a significantly reduced amount.

Everyday+Tips
Everyday+Tips
8 years ago

Ever since I was old enough to understand what Social Security was, I was told to never count on that money because it would be gone by the time I retire. Now I don’t think it will be entirely gone (I am 44 now). However, any money we get from Social Security will be considered an added bonus.

KP
KP
8 years ago

I look at SS as paying back my college loan. I was one of the previous generation that was able to use SS to pay for college and there by generate more SS taxes into the system.

That program has ended with no analysis on what the difference in the long term balance of the trust fund with the dependents earning college degrees and having higher earnings.

20's Finances
20's Finances
8 years ago

I don’t plan to rely on social security at all. That way, if/when I do receive benefits, it will be an added bonus. This article was reassuring that I will get something for sure. I still think it is too hard to tell for sure.

Well Heeled Blog
Well Heeled Blog
8 years ago
Reply to  20's Finances

I feel that if too many people (especially folks in their 20s) talk about “not expecting” any money from SS, the government won’t have any incentive to preserve / improve the program. We are paying into the program – there better be at least some money paid out when it’s our turn to get SS.

Lindsay
Lindsay
8 years ago

Don’t worry. I work adjudicating unemployment claims right now, and I can PROMISE you the new generation of young people is already well-accustomed to sticking out their hands for government handouts when they don’t have any money.

Angie
Angie
8 years ago

I would have to stop contributing to SS in order to afford to give out that book as Halloween treats in lieu of candy as suggested (tongue-in-cheek, I’m sure)!

Kate
Kate
8 years ago

I’m all for means testing of SS. However, I have seen firsthand how elderly people and their families hide assets to qualify for benefits. I think a slightly brutal fraud patrol across the board in various government departments would be helpful, with penalties that have teeth.
Also, at the risk of starting a thread war, I think all public benefits should be restricted to resident US citizens.

El Nerdo
El Nerdo
8 years ago
Reply to  Kate

I agree with the first part but the second part is unnecessary. Already only US citizens get to collect SS. Illegal immigrants pay into it but can’t collect. Legal residents need a number of years living/working in the country before they can qualify for any kind of government benefit. Qualifying to be a legal resident is not easy and you need to prove you’re a productive person, or have a sponsor with means, and don’t have AIDS (for real, HIV+ patients can’t legally immigrate to the US) (Plus other diseases are also barred I think). So yeah, the dirty little… Read more »

SEinSF
SEinSF
8 years ago
Reply to  Kate

I think Kate is trying to deny benefits to ex-pats not immigrants. She says she want to deny benefits to people who paid into the system but are not “resident US citizens.” SS goes a lot farther in Thailand or Mexico or places like that and some folks plan to retire to other countries to try to avoid living their final years in poverty here in the US.

That is an interesting perspective and one I had not considered. She expects the elderly to spend their SS $ here in the US so there is a benefit to our economy.

El Nerdo
El Nerdo
8 years ago
Reply to  SEinSF

Oh. I would totally disagree with that. $800 a month (or whatever they get) will go a lot longer in Costa Rica than in Manhattan. Don’t punish people for trying to survive.

BTW, US citizens AND legal residents pay US taxes for income earned abroad, so living elsewhere is no loophole.

http://www.irs.gov/businesses/small/international/article/0,,id=97324,00.html

Courtney
Courtney
8 years ago

The other issue I think is relevant is that the social security trust fund has been spent to pad the overall budget, and at some point those dollars are going to have to go to retirees instead of to the budget. So if the government has to raise income taxes to cover the shortfall, mathematically it’s the same thing as getting “no benefit”.

Adam P
Adam P
8 years ago

Here in Canada we have CPP (Canada Pension Plan) and as far as I know, it’s still solvent and we should expect full benefits in monetary terms per year, but I believe they will push the qualifying age up a few years again before I retire “to match life expectancy” etc. At 35 now, I’ve still got 27 years to go before I’m 62 which is when I expect the minimum age to collect will be.

Hopefully I’ll have 30 years in there with the max contributions by then.

Jake
Jake
8 years ago

Good, helpful article.

How about a follow-on article about consensus opinion on how healthcare costs will evolve over the next 50 years? And what most people will need above and beyond medicare.

Tom
Tom
8 years ago
Reply to  Jake

Good suggestion.

Marc
Marc
8 years ago

I have to say I’m a little disappointed in the content of the article. I’m not sure copy/pasting the opinions of five other people qualifies as a guest post – seems like something that was whipped up in about ten minutes in order to promote the new children’s book.

E
E
8 years ago
Reply to  Marc

I disagree. This issue is so politically charged, and there are so many different opinions on the solvency of the system, that I thought it was interesting and useful to see the contrasting views of several different experts in the field.

Petra
Petra
8 years ago

I’m in the Netherlands. We have some kind of a state pension for any resident over the age of 65 (AOW). And then part of our salary (before taxes) also goes to a retirement-providing group/agency which promises to pay you from age 65. Some of these “pensioenfondsen” have recently been freezing the amount they pay to the retired people, because of the bad economy. Hopefully they will start adjusting for inflation again in the future. The age at which you can claim these things will likely go up to 67 over the next 20 years or so. I’m 32 and… Read more »

El Nerdo
El Nerdo
8 years ago

I hope by the time I am due to collect social security there’s a means test and I don’t need any. Because means testing is also a way to “save” social security. Why a means test? Because it’s a form of insurance, not a pension plan as we’ve all come to believe. SS should always be there to avoid total destitution, but does Warren Buffet need a social security check? No. Do I want to live in expectation of it? Hell no. “Oh but I paid…” people will say. Yes, I also pay car, life, health and renter insurance premiums,… Read more »

Adam P
Adam P
8 years ago
Reply to  El Nerdo

I don’t know. If it is means tested, then there should be a way to opt out of paying into it for those whose have ample DB plans or locked in retirement savings plans, no?

El Nerdo
El Nerdo
8 years ago
Reply to  Adam P

no because that misses the point. SS should be a safety net, not a retirement plan. however solid your investments, you could get ruined later in life (e.g., you invested in enron, or troubled assets nuked your pension, or some legal liability wipes you out). that’s when you’d need the income insurance for the elderly that SS provides.

Adam P
Adam P
8 years ago
Reply to  El Nerdo

Devil’s advocate says “I’ve got a guaranteed DB plan, and solid AAA bonds and millions in real estate assets. I’ll take my chances and opt out.” If it is means tested it is just a tax and redistribution of wealth. It should be in with income tax, not a separate line item.

Betsy
Betsy
8 years ago
Reply to  El Nerdo

If someone is THAT rich, they really need to be paying into SS so that they are linked to everyone else in the country. Someone who is fortunate enough to be that wealthy still has to participate in the civil endeavor known as society.

Citizenship is not optional. Part of being a good citizen is not pushing everyone else out of the group lifeboat, even if you do have the money to say “Go to h3ll, plebes!”

Lindsay
Lindsay
8 years ago
Reply to  El Nerdo

Betsy, why can’t someone with that much money CHOOSE how they want to invest it in society? Clearly they’ve done a better job managing funds than the US Government, so I’m much more likely to be willing to let them choose social endeavors they really think have the potential to do something meaningful than just have to pay a ton of money to support a bunch of people in the way the government–several levels removed from the real people involved in the situations–sees fit.

Kristen
Kristen
8 years ago
Reply to  El Nerdo

I wish I could ‘like’ comment #23 about twelve times.

cerb
cerb
8 years ago

Robert Brokamp is my favorite guest blogger. Informative and he makes me laugh.

I agree with the input from the “experts”, that our future benefits won’t disappear entirely, but they’ll be reduced. I think Alicia Munnell’s prediction that poorer recipients might get 90% of expected benefits, while wealthier recipients might get about 70%, is probably on target. That’s where the means testing will come in. Anticipating a 25% reduction is a good way for most of us to plan for our retirement.

Rebecca
Rebecca
8 years ago

I think (tongue in cheek here) that people should only be allowed to draw Social Security based on the income of their children(ie, they’ll be collecting their SS from only their children). Therefore, people will do their best to raise productive members of society. And I think Social Security represents a broken generational contract. Baby Boomers want SS, but they don’t care what having it will do to their grandchilden. I’ve always thought of SS the way FDR originally intended (or atleast the way I interpreted FDR as intending it)—to protect widows and mentally handicapped from poverty. Not for some… Read more »

Mom of five
Mom of five
8 years ago
Reply to  Rebecca

The problem with thinking of SS as a welfare program for widows and orphans is that there’s a line item tax on everybody’s pay stub. And for a few years there we were all getting our own personal statements.

I think we all need to accept the reality that SS will be means tested, however, my guess is when that happens they’ll remove the line item tax from our paychecks.

Kristen
Kristen
8 years ago
Reply to  Rebecca

So… those of us to choose not to have children, and therefore pay higher overall tax rates (no dependent deductions!) and pay huge amounts into local schools which we will never send children to attend… get NOTHING? That’s horribly unfair. Glad your comment is tongue in cheek. I don’t want to live in that world!

BD
BD
8 years ago
Reply to  Kristen

This!
Not everyone can have kids, and not everyone *wants* them. I’m glad our society doesn’t have a retirement plan based on whether or not one has kids.

Rebecca
Rebecca
8 years ago
Reply to  BD

This! It’s what I’m talking about when I say a broken generational contract.

Just because you don’t have or want kids doesn’t mean you can ignore the generation coming up behind you. Who’s going to take care of you when you’re old? I mean, handle your finances, your public policy, your health, your medications, clean your house, mow your lawn? Your peers? Trust me, no. It’s that sort of myopic view that led to the crisis in Social Security.

Lindsay
Lindsay
8 years ago
Reply to  Kristen

Kristen, do you really fail to see how much you benefit from an educated younger generation? Older generations do have an obligation to younger generations. We choose to give financial privileges to those who invest the most to fulfill that obligation (their parents–though I’d argue we should also do a ton more for their teachers than we do).

If you live to an average life expectancy, someday the major decisions are going to be made by people a generation or more behind you. At that point maybe you’ll realize how glad you are they’re educated.

Aaron
Aaron
8 years ago

I’m annoyed at the promotion of the children’s book smack dab in the middle of an post on personal finance (as far as I can tell the book has nothing to do with personal finance). Can we expect future in-line advertisements in blog posts on GRS? IMHO the ads belong on the right ad-bar, not as a call out in the text. If all it takes is a simple guest writer post with a link to an irrelevant product advertised within to get my amazon referral code associated to millions of readers who might click on the link, sign me… Read more »

Mom of five
Mom of five
8 years ago
Reply to  Aaron

I think it looks like a cute book – I’ll buy one when it comes out in paperback, but fourteen bucks for a hardback is a little too rich for my blood.

Diane
Diane
8 years ago

Here’s a question I’ve never seen answered: What happens to the numbers if I retire early? It looks like they assume your earnings will continue to increase annually until retirement age. How can I calculate the impact on my SS if I quit working in ten, five or even three years? I know the calculations are based on 35 years work history. I still have a couple of very low or zero years from my college days, how does those years dropping off affect the total? Okay, that’s more than one question, but lots of your readers are hoping to… Read more »

k
k
8 years ago
Reply to  Diane

You can kind of hack an answer through their calculator here:

http://www.ssa.gov/oact/quickcalc/

I put in a retirement date 4 years from now, though I can’t receive retirement until 2036. It let me know what I would start receiving in 2036, which is less than what I would receive (about half as much, look at the disability payout to the right to get an idea) if I worked until 67 and then took benefits.

I’m sure if you used the more complex calculators you could get some passable estimates for more complex scenarios.

Ted
Ted
8 years ago
Reply to  k

And for those of you who want to do the actual math, rather than replying on obfuscating calculators, the formula is here:
http://www.ssa.gov/oact/COLA/piaformula.html

In short, it’s this:
(a) 90 percent of the first $749 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $749 and through $4,517, plus
(c) 15 percent of his/her average indexed monthly earnings over $4,517.

The tricky part is calculating Average Indexed Monthly Earnings, but the above is the formula once you have that.

PJTAIA
PJTAIA
8 years ago
Reply to  Diane

I kknow the answer. My brother just started collecting SS at age 62. He retired and stopped paying FICA at age 35. His check is EXACTLY the same as if he had worked the subsequent 27 years. In other words, his entire “contribution” for 27 years would have been entirely wasted…

slowth
slowth
8 years ago

This article reads like a plea to the younger folks to not usher in the American Spring.

Hey, it’s okay, you’ll get something! And something is better than nothing, right…right? Please don’t ruin my retirement now, because they’ll sort you all out eventually. Really, the government will take care of you. (Please don’t revolt.)

But seriously, I consider Social Security another tax of which I’ll never see a single, shiny dime in return. Good times.

retirebyforty
retirebyforty
8 years ago

I’m in my late 30s. From all I read, it seems I will get some social security payment. I’m not counting on it for retirement though. I’ll make sure the income from other sources will cover the necessary retirement expenses and anything from social security will be gravy. It can go into the travel fund. 🙂

kramer
kramer
8 years ago

Like the first comment said, there’s no money in social security AND you have no rights to get money out of it if the government decides to not pay. The supreme courted ruled that back in 1960: “there is no contractual right to receive Social Security payments”. http://en.wikipedia.org/wiki/Flemming_v._Nestor

Lindsay
Lindsay
8 years ago

Let’s just raise both the retirement age and the tax rate for people born after 11/9/1993…none of whom will be old enough to vote in the next election anyway. Or what if the expected retirement age changed based on life expectancy? 65 just isn’t as old as it used to be. For kids who are 10 now, 65 could very well be 25-30 years before death. Say we just set the expected retirement age as 90% of the current life expectancy for someone born in a particular year? Sure, that means some people will die without ever seeing a dime… Read more »

Courtney
Courtney
8 years ago
Reply to  Lindsay

The problem with raising the retirement age is that while, yes, people are living longer, a lot of it has to do with medical care that delays death rather than increasing productive lifespans. Bodies still wear out, even if your worn out body is alive for a longer period of time, and “working until you dropped dead” was a lot more doable when you dropped dead between 55 and 65, instead of 90.

Lindsay
Lindsay
8 years ago
Reply to  Courtney

My point, though, is that 70 used to feel as old as 80 or 85 does now. People’s bodies do still wear out, but they’re wearing out a LOT later than they once did, largely because we know about the dangers of things like smoking, not just because we can now perform expensive medical treatments to keep people alive. That’s certainly part of it, but it’s reasonable to expect that my children (who haven’t yet been conceived) will be stronger at 75 than I will be at 65. We’re not just living longer. We’re healthier longer too.

Courtney
Courtney
8 years ago
Reply to  Lindsay

Maybe if you have a white collar desk job. But I think it’s incredibly unrealistic to expect a construction worker, fire fighter, nurse, coal miner, etc etc to keep working physical jobs for an extra 5-10 years just because the overall population is dying later.

Lindsay
Lindsay
8 years ago
Reply to  Lindsay

Is it? We now have, for example, firefighters in their 40s. Never would’ve been possible 30-40 years ago. They’re not holding anyone back. They’re just that much healthier and stronger than they could’ve expected to be back then.

jim
jim
8 years ago
Reply to  Lindsay

Full retirement age was actually already raised up to 67 years for future beneficiaries not 65. Raising full retirement age to 70 would cut half the long term shortfall.

Ru
Ru
8 years ago
Reply to  Lindsay

Isn’t the obesity problem cancelling out rises in life expectations though? People keep saying that my generation will die earlier than our parents did because we’ll all get coronary heart disease and joint problems and cancer and have strokes.

Kate
Kate
8 years ago

Funny, the less people rely on it, the more argument the government has for getting rid of it.

Megan E.
Megan E.
8 years ago

It’s a good thought – and I appreciate the author working through all the opinions out there – but at 27, I still don’t think I’ll see anything. Let’s first assume the age will rise: put it at 72 when I retire (if not higher) then let’s assume 1% decrease every year until then (as per the article): 55% So at best, when I hit 72, I may get 55% of benefits that someone gets now… And what is that 55% OF? I’m currently in graduate school, a full paycheck is a few years off still for me… and once… Read more »

jim
jim
8 years ago
Reply to  Megan E.

“let’s assume 1% decrease every year until then (as per the article):” No they are not saying they will cut benefits 1% a year. Its not going from $1000 to $990 to $980. They are talking about cutting the annual increase by 1%. Right now social security has an annual cost of living increase automatically based on the inflation index. So if inflation is 3% they raise everyones checks 3%. The dea is to raise the checks by 1% less so if inflation is 3% you get +2%. So thats still going to grow year over year likee $1000.. $1020..… Read more »

partgypsy
partgypsy
8 years ago

I think that social security is fixable, with a few adjustments, and it’s worth it to do so because it is an enormous benefit for many many Americans. I commend the posters who can retire without relying on social security, but that is just not reality for a big segment of the population. And with other changes going on (job raises not keeping pace with cost of living or productivity measures, loss of private pensions) I just don’t see that getting any better. And like another poster mentioned, just because people may not die until they are 90, doesn’t mean… Read more »

CNM
CNM
8 years ago

I’ve essentially come to the same conclusion as the financial experts. Completely doing away with SS would be political suicide and, therefore, there is no way that is going to happen. I can easily see benefits being cut or a rise in the age limits but completely gone? no way.

Leigh
Leigh
8 years ago

I’m sorry, but what’s with the sponsored message? That really has nothing to do with the rest of the post and it doesn’t even flow well.

krantcents
krantcents
8 years ago

I think of Social Security as the fixed income portion of my retirement. Could I live without it? Yes, but I won’t have to since I am close to retirement.

Kowala
Kowala
8 years ago

Zero tollerence for “Blatant Spousal Promotion”. Copy/paste articles can be found a dime a dozen. This site is all about quality writing, something that keeps me coming back.

Just my thoughts…

MDAccount
MDAccount
8 years ago

I was recently at a small dinner where one of the guests was a Member of Congress. The Congresswoman told me that fixing Social Security is actually simple — remove the current cap (earnings after roughly $100K aren’t taxed) and it will be fully funded for the foreseeable future. Medicare, however, is not easily fixed at all.

I don’t know enough to agree or disagree, but I thought I’d share what I was told.

Coley
Coley
8 years ago
Reply to  MDAccount

Simple, sure, and she’s probably correct. But that completely changes the fundamental nature of the program. It was never supposed to be a tax so much as a mandatory savings plan. The reason it’s capped around $106k is because benefits stop increasing proportionally beyond that amount of annual individual earnings. It’s like if your congresswoman said “Many Americans don’t have sufficient retirement savings, but there’s a simple fix. We’re going to tax an additional 10% of all of the 401k contributions right off the top from people who earn more than $100k per year, and pass it on to them.… Read more »

jim
jim
8 years ago
Reply to  MDAccount

Yes the congresswoman was correct. Lifting the cap on taxed earnings was one of the findings of the Congressional Budget Office when they examined various possible fixes and doing so would resolve the entire long term short fall and make social security solvent effectively forever (75+ years).

Nicole
Nicole
8 years ago
Reply to  jim

It helps but does not completely remove the deficit.

PawPrint
PawPrint
8 years ago

I like Rick Ferri’s response, but that’s probably because my husband and I are over 57. However, I don’t use SS in calculating how much money we’ll have in retirement.

Random+Anonymous
Random+Anonymous
8 years ago

Matt Drew in comment 1 hit the nail on the head. The most likely scenerio is the government will inflate the currency and find a way to keep the inflation out of CPI. This has the effect of repaying substanitive contributions with worth less paper. Medicare problems are much easier to solve. Keep reducing reimbursements to doctors and more doctors will refuse to treat Medicare patients. All seniors will be covered by Medicare, but they will not be able to find a doctor to receive treatment. The government expenditures will drop as fewer doctors perform fewer procedures for less money.… Read more »

Coley
Coley
8 years ago

In my opinion, you guys are way too harsh about the innocent book plug.

For a topic like this, I actually like the format where he shared the varied ideas of a number of knowledgeable people. It’s more convincing than the opinion of one person.

jim
jim
8 years ago
Reply to  Coley

I totally agree. The little ad for his wifes book is totally harmless, obviously light hearted in nature and hurts nothing. Its not like they were plugging Viagra or something.

Laura
Laura
8 years ago
Reply to  Coley

Yes, I agree with Coley on both counts– both the book plug and the “multiple opinions”. The book plug wouldn’t be appropriate for a reader’s story, but Robert Brokamp is a regular contributor, and JD (and others) commonly write about their families/ real life situations. To me, it humanizes the blog and keeps it from being a dry financial slog through the numbers. Mentioning his wife’s achievement is very different than hawking diet supplements. And it is appropriate to present multiple opinions on this topic because there certainly is no “right” answer– nobody knows what is going to happen. And… Read more »

Only counting on myself...
Only counting on myself...
8 years ago

Let’s raise the age at which you can retire, then turn around and complain that older folks are not retiring and letting new graduates have those jobs! [That always struck me as illogical]

jim
jim
8 years ago

Thank you for writing this. I think it hits the nail on the head.

There is far too much scare mongering and ignorance about social security’s financial state and its future.

People have been claiming that social security is doomed to imminent failure for about 76 years now.

Kathryn
Kathryn
8 years ago

I read GRS every day and usually love it when Brokamp posts–he’s typically informative and very funny. That being said, I was disappointed in today’s post. The experts’ opinions were interesting, but I kept looking for more below the ad. Without some original analysis, the article seems a bit pointless, just a bunch of quotes strung together–I felt like I might as well have googled the topic and read the search results. I’m looking forward to reading *Brokamp’s* thoughts next time.

Ian
Ian
8 years ago

The SS system can take a flying leap, as far as I’m concerned. I’m 28, and I’m certainly not expecting it will be anything meaningful if/when I ever get it. Surely not as much as I could have had by using the SS tax money myself. My plan is to retire as soon as possible (probably by age 30), and keep my taxable income low enough to avoid paying much in. If I could opt out of the whole crooked program, I would do so in a heartbeat. The Feds can’t (yet) tax a paid-for house or a garden, so… Read more »

imelda
imelda
8 years ago
Reply to  Ian

Uhhh, I think that’s what’s called property tax.

And fyi, the reason you’re able to earn a good income and, for sure, retire at a young age, is because you live in a society with other people. You depend on other people (vis a vis the government) to get you through every day of your life. Is your life goal really to contribute as little as possible in return?

Lindsay
Lindsay
8 years ago
Reply to  imelda

Okay, fine. Contribute through the government’s means as little as possible.

Why do so many people seem to think the only way to contribute to society is to give more and more money to the government? Don’t we have, I don’t know, a long, impressive history of American philanthropy?

Karim
Karim
8 years ago

As a 25 year old, I agree with all the comments here on not counting on getting ANY money out of the system. To anyone that disagrees with me, please go to http://www.ssa.gov/estimator/

Notice the error message whenever you try and estimate benefits? I take it as a warning sign…

Courtney
Courtney
8 years ago
Reply to  Karim

Are you getting an error because you don’t have enough credits (40) to even qualify for any social security benefit at this time? You would have had to worked at least part-time, consistently, at a wage-earning job since you were 15 in order to get enough credits to qualify by 25. I’m 30 and I don’t even have enough credits yet (because I got a stipend in grad school that wasn’t subject to payroll taxes).

Karim
Karim
8 years ago
Reply to  Courtney

I’ve been working since I was 16 so if I don’t have enough I’m awful close. Either way, it’s pretty sad that a system taking close to $4,000 of my money each year can’t tell me how close I am to qualifying or even an estimate of what my benefits would be. $4,000 should equate to more than an “error” message.

imelda
imelda
8 years ago

This is why the biggest threat to Social Security is the people who insist it’s a failing system. My biggest SS fear is that a Tea Party-esque Congress will get rid of SS altogether. If they don’t, I expect to get something (in 40 years).

Assuming that doesn’t happen, this article was really helpful – I’ve often wondered how best to include SS in my calculations; generally I just don’t, which makes my calculations really depressing. Now I have concrete numbers I can play with.

Robert
Robert
8 years ago

The social security system is flawed, I admit, but not evil altogether. And it has benefited more people than it has harmed, to be very true. Don’t know what will be though when and if the Tea Party comes to power 😐

Kaytee
Kaytee
8 years ago

While I am 30 and currently paying into SS, I don’t expect a return on this “investment” that is equivalent to what I put in. This is naive of me I know, but it doesn’t bother me all that much. Why? My grandmother receives SS, as do my husband’s grandparents. My grandmother is nearing 80 and still works part time to cover part of her living expenses and to pay for medical debt accrued during the remaining years of my grandfather’s life. They scrimped and saved and then were walloped with major medical in the end. Are there flaws in… Read more »

Megan E.
Megan E.
8 years ago
Reply to  Kaytee

I do agree that of course we can see the benefits around us – people of our grandparent’s era that DO need the money. But – my grandparents are dead and they also saved, had pensions, etc. My parents are saving and expecting pensions (educators). So that leaves me to save, with no pension and little to no SS AND THE SAME ISSUES with medical care, high bills at the end, etc. So sure, I do feel for them, but I also expect a good rate of return for my “investment” – if I don’t get it from one place… Read more »

pc repair
pc repair
8 years ago

I’m in my 30s, too. I’m not counting on getting much, or any Social Security, because the baby boomers will use up all the resources. I hope I’m wrong.

Courtney
Courtney
8 years ago

I’m curious to know if the recent announcement that the administration wants to not only extend the current 1-year 2% payroll tax cut, but increase it to 3.1% changes any of the experts’ numbers at all? Since it’s anticipated that current workers will only be paying in half of the previously expected amount, and businesses will be paying in significantly less as well, should we halve all the numbers in this post?

lk
lk
8 years ago

My assumption of not getting anything from Social Security is based on the assumption that they’ll keep raising the age to get it to the point where it will be mostly irrelevant: we’ll have the choice of working full time until we’re 85, or funding retirement by other means.

Lindsay
Lindsay
8 years ago
Reply to  lk

That’s essentially how it started. 65 was past the average life expectancy, so average people didn’t live long enough to collect it in retirement anyway. I’m not sure it’s unfair to raise the age accordingly for longer-living generations.

Nicole
Nicole
8 years ago

Something important: It is *still* true that the sooner we make cuts/increase revenues, the less drastic those cuts/revenue increases will have to be.

Also… Social Security is nothing compared to Medicare.

http://nicoleandmaggie.wordpress.com/2011/08/12/a-much-requested-picture-about-the-future-of-the-economy/

Felice
Felice
8 years ago

I think I will treat social security like those scratch-able lotto tickets you buy and then you win a buck, but forget to cash it. Basically, I am not planning on social security. I am focusing on other means for the future. If I do end up with something, that will be a pleasant surprise.

shares