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Newly retired couples may lose $16,900/year in Social Security in 2033

usatoday.com

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Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#11

Post by secabeen »

Grombobulous wrote: post #9
jauntywundrkind wrote: post #2

I've known I can't really rely on Social Security to exist when I retire, in any notable form, but man, this is so dark. And it's just a start. (Edit: I'm not certain either way! But it seems like too great a risk to rely on. And the prognosis seems not great! I have heard for decades needs serious help, and nothing seems to change. More broadly, with a few exceptions, I've seen overwhelmingly obstructionism and dest…

This isn’t what my financial advisor told me and I doubt many others would, either. Social Security is almost certainly going to exist in some form. The question is how much retirees will get from it and how that compares to the cost of living. Excessive cynicism is often dangerous because it converts the mundanely pleasant reality into an enthralling doom and gloom scenario. Of course, I’m not really saying that eve…

Indeed. The worst case scenario with no action is a ~30% cut in benefits; that's a long way from a 100% benefit cut.

Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#13

Post by Grombobulous »

eYrKEC2 wrote: post #7
jauntywundrkind wrote: post #2

I've known I can't really rely on Social Security to exist when I retire, in any notable form, but man, this is so dark. And it's just a start. (Edit: I'm not certain either way! But it seems like too great a risk to rely on. And the prognosis seems not great! I have heard for decades needs serious help, and nothing seems to change. More broadly, with a few exceptions, I've seen overwhelmingly obstructionism and dest…

It's much worse than that. Governments, when faced with shortfalls in the government pension, will absolutely nationalize your 401k or IRA. YOU, while attempting to responsibly take care of yourself, will absolutely be a piggybank to be raided. This has happened in numerous countries. You wouldn't want to be selfish, would you? Sure, you forgo the midlife crisis sports car in favor of the Toyota Corolla you've been d…

This is just wild hyperbole.

Yes, tax rates might go up. You should actually bet on that because tax rates are at a pretty low level historically.

But this concept of nationalizing private bank accounts is pretty extreme.

Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#14

Post by rpdillon »

from_memory wrote: post #3

Yes, and the sky may fall tomorrow. The longer I live the more I read these sensationalist headlines designed to gin up angst and antagonize people's peace of mind. Social Security's solvency has been the subject of much debate, but clearer heads point toward a graduation of the current system to include higher earners. That will accommodate the large aging population's demand. Case closed, easy peasy lemon squeezy.

This is fantasy. There's nowhere for the money to come from. They're going to raise the age, reduce benefits.

Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#15

Post by rpdillon »

seanmcdirmid wrote: post #6
Schiendelman wrote: post #4

Earlier quoted context omitted.

Honestly, the reporting has looked the same around this since the 1980s. I've read books from them referencing how Social Security was going to be bankrupt by the 90s, or the 2000s. The fact is that older people vote way more than younger people, so it stays funded; we will at worst pay for some of it out of income taxes.

The math has been constant, if you were reading reports saying it would hit the breaking point in the 90s or 2000s, you are either misremembering, confusing it with something else, or willfully distorting facts. Anyways, if you make claims like that you should take advantage of internet linking features and just provide your evidence directly vs a “I remember reading” anecdote. There was a point where social security…

Exactly this. The date has been very consistent for many years, and the math checks out. 2033 unless something significant changes.

Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#16

Post by bronco21016 »

Grombobulous wrote: post #13
eYrKEC2 wrote: post #7

Earlier quoted context omitted.

It's much worse than that. Governments, when faced with shortfalls in the government pension, will absolutely nationalize your 401k or IRA. YOU, while attempting to responsibly take care of yourself, will absolutely be a piggybank to be raided. This has happened in numerous countries. You wouldn't want to be selfish, would you? Sure, you forgo the midlife crisis sports car in favor of the Toyota Corolla you've been d…

This is just wild hyperbole. Yes, tax rates might go up. You should actually bet on that because tax rates are at a pretty low level historically. But this concept of nationalizing private bank accounts is pretty extreme.

It doesn’t even have to be raiding of accounts. They can modify rules of RMD to drive tax revenue or even entirely change the rules of 401k withdrawals such that if your balance is over a certain amount you pay an extra tax.

I don’t think it’s far fetched that 401ks of a certain value start to experience penalties to make up shortfalls. After all, the whole reason they would need to do this is because they failed on the promise of social security. Why not fail on the promise of the 401k?

Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#17

Post by Grombobulous »

rpdillon wrote: post #14
from_memory wrote: post #3

Yes, and the sky may fall tomorrow. The longer I live the more I read these sensationalist headlines designed to gin up angst and antagonize people's peace of mind. Social Security's solvency has been the subject of much debate, but clearer heads point toward a graduation of the current system to include higher earners. That will accommodate the large aging population's demand. Case closed, easy peasy lemon squeezy.

This is fantasy. There's nowhere for the money to come from. They're going to raise the age, reduce benefits.

Tax rates could be raised, especially on the wealthy, who enjoy historically low tax rates.

Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#18

Post by jasongi »

Can someone explain the legal structures in place in the US that make Social Security "run out"? Because it just sounds like deliberate indirection put in place by the government to cut funding for pensions?

In Australia, we have a universal, means-tested pension funded through consolidated revenue (i.e taxes). The pension can't "run out", because it is just a law that says that the government will pay you $X after you turn a particular age, if your assets are below a threshold. But if X were too high the Government would need to raise taxes, borrow money or print money to fund it, like all government spending.

Separately, we have superannuation - which I think is similar to 401k except compulsory for employers to pay 12% of your salary into, which are personal retirement savings held in trust to be released at your retirement, but generally these are account-based and in addition to the pension if you are eligible (i.e what you put in is what you get out).

There are older "defined benefits" superannuation funds where payouts aren't account-based (I think based on years of service in government roles or something like that) but they have been phased out to avoid the moral hazard of something government-adjacent having pension liabilities they cannot meet with their member's funds.

So what exactly is Social Security if it can run out? It sounds like a defined-benefits fund that is run by the government - in which case why has nobody closed it off to new members like Australia did when the writing was on the wall?

Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#19

Post by bronco21016 »

Schiendelman wrote: post #4
jauntywundrkind wrote: post #2

I've known I can't really rely on Social Security to exist when I retire, in any notable form, but man, this is so dark. And it's just a start. (Edit: I'm not certain either way! But it seems like too great a risk to rely on. And the prognosis seems not great! I have heard for decades needs serious help, and nothing seems to change. More broadly, with a few exceptions, I've seen overwhelmingly obstructionism and dest…

Honestly, the reporting has looked the same around this since the 1980s. I've read books from them referencing how Social Security was going to be bankrupt by the 90s, or the 2000s. The fact is that older people vote way more than younger people, so it stays funded; we will at worst pay for some of it out of income taxes.

As others have pointed out, the date has long been mid/early 2030s.

You may be remembering that it’s been a hotly debated issue since the 80s.

I distinctly remember it being a massive election issue in 2000 between Gore and Bush (the first election I’m old enough to remember in detail). It was the whole “lockbox” vs government funding of private accounts debate.

Re: Newly retired couples may lose $16,900/year in Social Security in 2033

#20

Post by mgh95 »

jasongi wrote: post #18

Can someone explain the legal structures in place in the US that make Social Security "run out"? Because it just sounds like deliberate indirection put in place by the government to cut funding for pensions? In Australia, we have a universal, means-tested pension funded through consolidated revenue (i.e taxes). The pension can't "run out", because it is just a law that says that the government will pay you $X after y…

Social security is funded through payroll taxes on employees and emloyers. The "run out" is in the sense of the amount of money going out exceeds that coming in and the saved funds have been depleted. In this sense, it can "run out" that the savings are depleted and the plan is cash flow negative.
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