The Can That Keeps Getting Kicked Down the Road: Social Security Trustees Annual Report Has More Bad News

Category: Financial and taxes in retirement

August 15, 2017 — If you are receiving Social Security or you plan on relying on it for your retirement, this news is important. If no action is taken, your benefits will take a big haircut in just 17 years.

Every year the Social Security Trustees prepare an annual report. The one for 2016 was just published, and once again it predicts trouble ahead for the nation’s system of Federal Old Age and Survivors Insurance and Federal Disability Insurance Trust Funds (OASDI), otherwise known as Social Security. Every year the Trustees warn Congress that something must be done, and every year Congress kicks it down the road. Fixing the system will be painful, but in our opinion, something must be done. The longer it takes to correct the system, the worse the problem gets.

Income still higher than expenditures – for now
Total expenditures in 2016 were $922 billion, while total income was $957 billion: the surplus for the year was $35 billion. Asset reserves held in special issue U.S. Treasury securities continued to grow. Social Security’s total income is projected to exceed its total cost through 2021, as it has for every year since 1982.

Interest income not enough to cover program cost deficit
The Trustees project that interest income, which was $88 billion in 2016, is shrinking every year. Up to this point it has helped cover the deficit of expenses over contributions paid in. As interest income declines, however, the total surpluses will turn to deficits, starting in 2022.

When we’ll run out of money
The hypothetical combined trust fund reserves become depleted in 2034. Considered separately, the DI Trust Fund (Disability) reserves become depleted in 2028 and the OASI Trust Fund (Retirement) reserves run out in 2035. That is relative good news for the DI Fund (last year it was expected to run out in 2023). The change in the reserve depletion date for DI is largely due to continuing favorable experience for DI applications and benefit awards. The Retirement Fund is projected to run out of reserves in 2035, the same date as last year.

What this means
That doesn’t mean that starting in 2035 there won’t be any money in the till to pay benefits. Instead, any benefits paid out will have to come from what is generated from the folks paying into the system each year. Benefit payments would have to be cut to fit available income, meaning we would only get 75% of promised retirement benefits.

Two solutions offered – increase taxes or cut benefits
The Trustees offer two alternatives for shoring up the nation’s Social Security system for the next 75 years. Neither one is likely to be popular, but we must do something.

1) Increase revenues (taxes): Revenues would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.76 percentage points to 15.16 percent

(2) Reduce benefits: Scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of about 17 percent applied to all current and future beneficiaries

or (3) Some combination of these approaches.

What the Trustees recommends
The advice from the Trustees is simple and logical. Oh that it would be heard by our legislators as they enjoy their summer recess. Here is what the Trustees say in their report:

“The Trustees recommend that lawmakers address the projected trust fund
shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits and could preserve more trust fund reserves to help finance future benefits. Social Security will play a critical role in the lives of 62 million beneficiaries and 173 million covered workers and their families in 2017. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generation.”

Well said, Trustees!

For further reading:
Full Social Security Trustees 2016 Report
It’s 2017: What You Thought You Knew About Social Security

Comments? We baby boomers can take part of the blame for the coming crisis – we outnumber the people who will be paying our benefits. Both political parties share blame too. But instead of blame, what do you think the solutions should be?



Posted by Admin on August 15th, 2017

81 Comments »

  1. Put the politicians on SS and watch it get fixed in a month, along with increases!

    by Roger Sroka — August 16, 2017

  2. I believe if the cap is taken off, of earnings it would serve the purpose and also have a cap on benefits

    by peter kirk — August 16, 2017

  3. Out of couriosity, what would the OASDI balance sheet look like if all government emloyes contribute to OASDI and any trust fund money in a government sponsored retirement fund(s) be transferred into OASDI?

    by Tim Bauer — August 16, 2017

  4. Get rid of the fraud in the disability insurance. As for the retirement fund, change the age that benefits can be taken to full retirement age. No couples double dipping unless both worked and earned benefits on their own. Benefits for spouses who never worked and thus never contributed to SS, should not be given unless widowed. or divorced. If you live on a single income during your married life, then it should continue as a single income in retirement.

    by R.. Dober — August 16, 2017

  5. One cannot expect the SSA fund to grow if Congress keeps barrowing from it! It’s analogous to having a savings fund earning 1% interest with a $0 balance and expecting its balance to grow!

    by Bill — August 16, 2017

  6. If you’re talking about Federal Government employees, they already do pay into OASDI and have done since 1983.

    by Fred — August 16, 2017

  7. The way I understand it, SS was meant to financially subsidize our senior citizens during the last 10 to 15 years of their life, when they would most likely be unable to work. The average age we die has been increased substantially since the inception of SS benefits but the age we qualify for the benefit hasn’t risen but a couple of years.

    I suggest, we simply use the average age we can be expected to live and subtract 15 years from that number and that is the age an individual would receive full SS benefits.

    by Bob Caddel — August 16, 2017

  8. Just another reason to start collecting SSI early as possibly.. The math will not work in 10 years.. Better to get ahead of it.

    by jo pa — August 16, 2017

  9. The trustees have the right idea. A combination of a little tax increase, less than their proposed 2.76%, and a small decrease in benefits implemented very gradually over many years would certainly lessen the strain on the system.
    As a boomer I refuse to feel any guilt. Firstly we had no control over our birth. Secondly, we are the first generation to have parents living into their 90’s and beyond that often need our help. And some boomers are helping out their adult kids too.
    A little out of the pockets of those still working and a little out of the pockets of beneficiaries…share the pain.

    by Bonnie — August 16, 2017

  10. I agree with removal of earnings cap. That would solve the insolvency issue. Too many people are already suffering from low SS and no pension fund, (like the fed employees) let alone 401k’s. Further cuts will just be drastic on health and well-being for people that are already trying to make it through. There are to many folks that are worn out and can not work to 67 or 70. So raising the retirement age is just as bad.

    by D Daigle — August 16, 2017

  11. Agree that a little higher tax, maybe no max, and tighter control over Disability Income will help. We are aware of people receiving Disability Income who are able-bodied and could work (or do work for cash).
    However, I disagree with cutting benefits just when retirees are least able to do anything about it – when elderly and unlikely to be able to supplement their income. How can we plan for the future if we can’t depend on our retiree benefits? My husband and I will certainly receive much less than we contributed over many, many years of work. It’s a bit unfair to blame us for when we were born.

    by Jean — August 16, 2017

  12. Congress will never reduce seniors’ monthly checks. Members know they would get voted out of office.

    by Glen — August 16, 2017

  13. I have several items that could help alleviate the projected shortfall:
    1. Raise the cap on earnings to $250,000. The present cap is around $120,000, after which you do not contribute
    to SS.
    2. Eliminate the “double dippers”. There are people currently collecting six figure pensions AND collecting SS
    benefits as well! Set a threshold of say $100,000. Anyone with a gross income above that should have their
    benefits reduced. There are a lot of people out there living on a far lot less.
    3. Eliminate family members from collecting any benefit to be a care-giver for an aging parent or a less functional
    child. Sure these people need help and/or care, but paying a family member to do it is wrong. To care for an
    aging parent is the same as the parent caring for the child when the child was not self-sufficient. Payback’s a
    bitch!
    See what effect the implementation of these suggestions might have on the long-term viability of SS.

    by Ed — August 16, 2017

  14. My “Greatest Generation” Dad died 3 years ago at age 95. He continued to accuse the powers that be running the U.S. Government of having their hands in the til. They need to stop taking from Social Security and utilizing the funds for whatever. It’s stealing! These long-term thefts have robbed the system for many years. STOP!

    by Nancy — August 16, 2017

  15. SS was never meant to help seniors through the last 10 – 15 years of their life. At the time SS was formulated, 65 as a retirement age was waaaay out in the future. The average life expectancy was at best, late 50’s. Sixty-five was considered to be O-L-D, probably akin to someone now who is in their 90’s!
    Let’s face it; the average life expectancy now for a white male is only 74.8 years (I’m trying hard as hell to raise that average, so do us all a favor and don’t die too soon).

    by Ed — August 16, 2017

  16. Raising the retirement age is a non-starter because so many people can’t work until age 70 or 75. Layoffs, ageism in the workplace, family illnesses, a lifetime of labor-intensive jobs that take a toll on the body, and other factors conspire against many of us working into our seventies.

    I think it’s time to raise the cap or remove it entirely. People earning over $130K can afford to continue kicking into SS. Perhaps reduce the percentages over that $130K threshold. Instead of the current rate of 6.2% each (employer and employee) what about earnings over $130K being being taxed at 3.1% each? That would likely shore up SS without being too onerous on businesses or big earners.

    As for reducing benefits to people who are already in or near retirement (say anyone 55 and over), that plan can devastate many people who’ve used the government’s own SS charts when planning out the details of their retirement income.

    Politicians who vote in favor of cutting promised Social Security benefits will do so at their own peril. Demographics show that people over 60 already have the highest voter turnout of any US age group. (http://www.electproject.org/home/voter-turnout/demographics)

    One can only imagine what will happen if seniors are further motivated to hit the polls due to looming SS benefit amount reductions. Our generation’s children will also be motivated to vote in large numbers. After all, if Mom & Dad’s promised rates of SS get pared down, where do you think they’re going to turn when they run short of cash?

    Talk about getting out the vote!

    by JCarol — August 16, 2017

  17. Social Security Recipients who are already well off do not need the benefits. I have seen millionaires use their SS checks for Golf fees and children of deceased parents use their SS checks for non essentials..when many seniors depend on it for their whole income this is tragic. Benefits should be means tested. People making over $120,000 should have to pay in too.

    Those close to retirement need to be able to count on what they have been told they will receive especially if there is no pension or retirement savings what do they want people to do? Not everyone has children or family to depend on and many who do would not ask for their assistance. Also, before retirement, not everyone had a great job with a high income so they could save more. Social Security is a very viable part of many retirees monthly income and they need to know it will be there for them in their old age.

    by Jennifer — August 16, 2017

  18. The ceiling cut-off for payments into Social Security is too low. It should be at least $250,000.

    by Tom Simpson — August 16, 2017

  19. Getting Social Security solvent far into the future is actually very simple. The SS fund was originally set up as a separate fund from the general fund. About 50 years ago, Congress rolled the money into the general fund to balance the budget. All that it would take is to put the money back into the SS fund with a modest 2-3% interest a year. Problem solved. Unfortunately as others have said, Congress hands are in the till in one way or another so this will never happen.

    by B — August 16, 2017

  20. To the people that think the problem is that the federal government stole the SS funds and used it to balance the budget – that is just not factual. Yes, the reserves in the SS trust funds are in the Treasury. But SS is being paid interest on those funds and they will come back to SS recipients as the reserve is depleted leading up to 2035. See CBS News debunking this myth http://www.cbsnews.com/news/lets-debunk-this-social-security-myth/

    by Fred — August 16, 2017

  21. We need to raise the cap on earnings subject to Social Security taxes. Perhaps to $500,000. And a small increase in the percentage charged to both workers and employers.

    I don’t see cutting the benefits being paid to people as a viable option. People did their retirement planning based on those numbers. For far too many people, Social Security is their only retirement income.

    by Linda — August 16, 2017

  22. Cut welfare to immigrants that haven’t been in the US for 5 years, all welfare to able body citizens and all illegal immigrants. Let people on SS work without docking SS so they can pay payroll taxes. Shift the economy from retail/service to production adding more careers and less low pay low payroll tax jobs. Put the welfare revenue toward SS & Medicare and have a payroll tax on all “civilian” government employees bloated pensions… “RLTW”

    by William Holliday — August 17, 2017

  23. Give retirees a choice of collecting ss or getting a tax deduction (post Alt Min Tax calc) for the amount of ss they would have received. and move those under 30 to a 401k type plan and off ss and give same option to those over 30, require them and the employeer to split the former ss tax to the saving plan, disability ins and a life ins plan to cover dependents. stop letting those at full retirement ago to collect ss with no penalty if they haven’t retired, I know a number of people who still hold their full time jobs and are collecting ss. also, as mentioned in other comments, crack down on disability fraud.

    by jean — August 17, 2017

  24. I understand why people say screw the rich people..unfortunately, the economics of this isn’t a true solution. There aren’t enough “rich” people to bail out Social Security according to all the studies – not even a drop in the barrel. Also, the taxes become confiscatory if you tax them without taking off the cap on benefits too. (That approach simply doesn’t pass Constitutional muster, and would have to be overturned by the Supreme Court – not that I am providing legal advice here, but that’s one of the legal reasons for the current caps on both wages and benefits). Phasing out benefits completely based on someone’s net worth is not only confiscatory, but it also is difficult when you consider that homes can bethe the bulk of retiree’s net worth in many parts of the country. Making people sell their homes to buy bread and milk, would obviously be unpopular (not to mention the overall impact on the housing industry, financial planning and communities that rely on transfer taxes for large percentages of their budgets.

    On the other hand, the $120K cap does seem low for the current cap on benefits and longer life spans. It would seem that raising the cap on benefits would be acceptable, but I think they are already doing this review and trying to raise it as much as they legally can under the current laws.

    My point is that these ideas sound good, but there are actually legal reasons why they haven’t already been implemented. That brings us back to the only current options that the government actually has to raise the retirement ages, increase taxes on everyone, or cut benefits for everyone.

    by Kate — August 17, 2017

  25. Don’t forget the WEP the government took half of my already small SSN just because I have a small pension as a law enforcement Officer. I paid into the system, all I’m asking for is what I paid into. Nothing more.

    by Bill — August 17, 2017

  26. Bill – as a retired teacher, I feel your pain. The real kick in the seat is that this only happens in 14 states – we were just unlucky enough to spend our careers in one of those states. I lost more than half and it barely covers my Medicare Part B premium which is taken out of the SS check. Even more shocking is that I will not receive SS Widow’s benefits should my husband pass before me. That too is considered a “windfall” by the politicians! Like the Fed government, the state of Maine dipped into the state pension fund to balance the budget years ago and never paid it back. How can that be legal? That needs to paid back on all government levels, including the interest it would have gained. Problem solved. How about that instead of a wall on the border?

    by SandyZ — August 17, 2017

  27. We need American jobs for Social Security to survive! It takes 3 American workers to fund one Social Security check. Buy American products if you want to save SS and someone’s job! Make it against the law for Congress to borrow from the Social Security funds. Check out these politicians before you vote. Stop the fraud of SSI. For over 20 years I have heard of many children receiving SSI for behavior problems. I feel unless children are born with a disability they should not be eligible for SSI. Disability payments should be for those who got hurt working! I do not think it is fair to stop spousal SS if a woman chooses to stay at home and raise the children and is short working credits. And I have never heard of anyone getting paid to take care of their parent from SS. In fact my wife inquired on that because she takes care of her mother and was told family caretakers were no longer paid. She should at least get working credits for doing so. It sounds like some people believe that because someone has saved for retirement, invested, made sacrifices during their working years, worked hard to climb the ladder of success, they are the ones that should do without SS! If you start believing that, then down the road Social Security will be counting up ALL your assets, bank accounts, home value, vehicles…etc before you can qualify for what you paid into SS…. just like the welfare system. Social Security was set up as a “pay as you go” system. Was working just fine until politicians borrowed from it for the general fund. All we had to do was save and invest along side of it through out our working years to cushion the cost of living down the road. Now we have to save 25% more before retiring on top of whatever percentage we already had figured because it will not be a “full” check or maybe obsolete!

    by William DeyErmand — August 17, 2017

  28. I believe that all people who have paid in to SS through their working life deserve to draw a SS check when the time comes regardless if they are millionaires. No one should begrudge these people or say they can’t collect because they have a high income. Maybe the government could encourage them to donate their checks to charity and give them some incentive to do so. If they want to use it to play golf, so be it. They had to pay into the system just as the rest of us had to do. It isn’t a welfare program or a food stamp program or any kind of a hand out. If the cap is raised, then those who made money in that higher range should be compensated for paying more money into the system. Yes, you could probably say ‘they don’t need it’ but fair is fair. They paid in, they deserve to get a SS check. Has anyone done a survey to find out what rich people actually do with their SS checks?

    by louise — August 17, 2017

  29. Kate and William, I am so in agreement.

    Jennifer, you are just describing another welfare program, not a social program that was set up to benefit all who earned it.

    My mom was born in 1923 and by the time she passed away at age 90 she had received way more income from SS than she ever put in, even adjusted for inflation. But after 40 years of working, 20 of those as a self-employed small business owner, I have paid over $350,000 into the SS fund. I feel like I will never see much of that back in my pocket during my old age. And now I see people talking about how or where we get to spend the money? I earned it through my labor, had to give it up to the government and now they are threatening to cut by 25%?
    I would rather see EVERYONE feel a little of the sting with maybe a small decrease across the board in benefits and a small increase in FICA across the board.

    by Bonnie — August 17, 2017

  30. Fred… read the article… what part of ” Yes, Congress spends the money the Trust Fund invests in special bonds”, did you not understand? These bonds are cashed in on the maturity date and paid back immediate, but not the profit from them. They borrow more, buy more, profit more! Sure they pay an interest rate… but they use the rest of the profit to fund the Federal budget. Until a bond has a maturity date, it has a zero value while waiting for the return…and if you keep on buying bonds…with the Trust fund… you will eventually have to make cuts to the Social security system to keep the Trust fund balanced.

    by William DeyErmand — August 17, 2017

  31. How about privatizing a percentage of SS, if not all of it? Americans are so ignorant when it comes to Economics.The government should stay out of health care, social security, etc. They only drive the costs up and the returns down. People be responsible for your own safety and security. If things continue on the this path we’ll be like Greece and Venezuela in twenty years. The government will be unable to sustain itself , let alone provide for basic police and fire protection, based on present models. Look at California and Illinois.

    by David — August 17, 2017

  32. I take issue with the comment that SS checks are going for golf fees or non-essentials for minor children. Until we walk in another person’s shoes, own their bank accounts, and see out of their eyes, we cannot know their lives.

    In the early 1980s I worked as a grocery checker for a short time. A woman using food stamps had a birthday cake among her groceries. By her side, barely able to contain her excitement, was the young birthday girl. After they left, the next customer harrumphed at length about “my taxes paying for birthday cake.” The woman behind her said gently, “Is that child not deserving of a birthday celebration simply because her family is poor? One of the reasons we pay taxes is to make sure that all children have moments of joy.” It was a lesson I never forgot.

    Fred and Kate – thank you for the interesting information.

    Agree with all that means or asset testing would be disastrous. I think privatizing it would be even worse.

    by JCarol — August 17, 2017

  33. William, I take issue with “what part don’t you understand”. I am afraid you have a basic misunderstanding of how the system works. This is from the Trustee’s report cited in the article.

    ” Interest earned on invested trust fund asset reserves accounted for 9 percent of OASDI
    income. The Department of the Treasury invests trust fund reserves in inter-est-bearing securities issued by the U.S. Government. In 2016, the combined trust fund reserves earned interest at an effective annual rate of 3.2 percent. ”

    The Treasury IS paying interest on the trust fund reserves. It is not “stealing” the money from SS

    by Fred — August 17, 2017

  34. Bonnie. I would agree to a 15% decrease in SS benefits if they raise the payroll tax 10% and only use the profit from these bonds to cover Medicare and Medicaid spendings in the Federal budget. Either the politicians agree to something soon, or we will be depended on what we have saved prior to retirement. And I don’t ever see these politicians agreeing to anything. Too many campaign promises(lies) to get my vote by politicians who head to Capitol Hill and then we’re forgotten. I can count on me to save, invest and plan as long as I can keep working.

    by William DeyErmand — August 17, 2017

  35. No offense intended Fred but they do use the profit to finance some of the Federal budget. I never said they were stealing. I just explained how they borrow, pay interest and profit to use on the Federal Budget. Why not put the profit totally back in Social Security? They have been doing this system since 1983. They knew the Boomers were coming…

    by William DeyErmand — August 17, 2017

  36. Bonnie and William – a 15% cut in benefits would put many seniors completely under water. I don’t know the answer, but suspect a combination of cuts, tax increases and higher caps will be part of it. Agree that we need to figure this out soon.

    I’d love to get 3.2% interest on my (protected) savings. How does the government manage that?

    by JCarol — August 17, 2017

  37. Nothing gets seniors more talkative then an article on SS. I remember when SS was not taxed by the Federal government. To tax SS was to assist in balancing the budget. That tax should at least go back to the fund or eliminate it once again. Of course that option is not a reality as the government is getting the benefit and that is what they want to continue in the future to make us citizens pay for their overspending. Now of course many states also tax SS benefits. You could raise the company paid portion of FICA, but I almost sure it would eliminate some people jobs to pay for it. Every action has a reaction.
    Also, raising the cap on earnings only raises the benefit for those taxed in the first place. The idea behind capping the earnings is really capping the payout. The program is based on work credits and earnings, I believe a change like that would take more then Congress to pass. The program to date was never a means tested solution, it is a trust fund.

    by Bruce — August 17, 2017

  38. JCarol… any amount of cuts is going to cripple retirees. I hate to think that working generations will be paying 15.16 % into FICA. And I know a 25% cut will mean I have to work as long as possible. Yes ma’am I would love to get 3.2% interest on my protected savings too!

    by William DeyErmand — August 17, 2017

  39. It always seems that the solution involves taking away from those who need support, while we give more to those who don’t. It is my belief that the solution is to close all those loop holes that allow rich people to avoid paying taxes. For instance, the Donald reports that he doesn’t pay taxes. Multiply that by all the rich people who find ways to not pay taxes. You get my drift? It’s time for Congress to get serious about plugging all those holes and force the rich to pay their fair share. But, I’m not holding my breath.

    by Wendell — August 17, 2017

  40. The cap on income taxed must be increased NOW.

    by gswartz — August 17, 2017

  41. I never said 15% cut. I was thinking a smaller amount and phased in very slowly so people could adjust. Most people can cut out 5% of spending, especially if it is done very gradually.

    And we already pay 15% in FICA taxes so bumping it up a notch won’t be felt much. The employer pays half of that for each employee anyhow!
    If I pay an employee $500 at payday, I also pay an extra $38.25 in FICA tax to Uncle Sam on their behalf, which is 1/2 of the 15% payroll tax. (Their wages plus the extra 7.5% tax paid on their behalf. This comes directly from the employer over and above the wage amount that the employee sees on their pay stub.) And $38.25 comes out of their paycheck, their half of the 15% FICA. The total tax paid to Uncle Sam is 15% , but the employee only has to pay 7.5% of it.
    So, unless you are self-employed, you only pay half of the 15% payroll tax anyway.

    by Bonnie — August 17, 2017

  42. I am a teacher and also under the WEP and no I will not be able to receive my husband’s SS either if something happens to him. I am in Texas and am fully vested from the first half of my 42 year teaching career and will not be able to get very much – unless I wait until I am 70 and then I will still get less than half of what I should. Lots of problems on many sides with SS.

    by Dianne Chrestopoulos — August 17, 2017

  43. Right now Social Security stops being collected at a certain wage. Why not continue it like a regular tax so the more people make the more goes into the system? It seems pretty simple to me, although I don’t like increasing taxes, you do have to increase that fund.

    by Art — August 17, 2017

  44. Why would you blame Baby Boomers? We’ve paid into the system for well over 50 years! I’d say just give me back all the money I put into the system and I’ll fund my own retirement!

    by Rich Miller — August 17, 2017

  45. Has there ever been any discussion about Social Security Lump sum payout?

    https://www.forbes.com/sites/nextavenue/2015/09/10/how-to-get-a-social-security-lump-sum-benefit/#55f8ef5d3067

    by louise — August 18, 2017

  46. Sorry, I should have put the joke flag up. It is not our fault there are too many of us baby boomers. It is a problem, but not one of our making! Blame the folks who started WWII for that one. Our GIs came back looking to start some families.

    by Admin — August 18, 2017

  47. I can see in these blog most folks have false beliefs and untrue rumors that pollute the facts.
    Social Security has a sound base and is fully funded. Nixon in the 70’s started taking money out of SS to pay for the Viet Nam war.
    Solve the future issue by taking the cap off SS income tax. Millionaires pay the same thing working man does. Make SS mandatory for all State and Government workers.
    Stop wasteful spending on military ramp ups. Go back to the draft. Current enlistees cost of $40K per year
    Stop idiot projects like “The Wall”, legalize and tax drugs just like liquor.
    There are many ways to our future unfortunately we seem to elect the worst of us to congress!

    by ron — August 18, 2017

  48. The facts remain that Boomers paid in all them years for the older generation, and produced less children to work to pay for their own generation. Cost of Living increased fast. Jobs went out of country creating more unemployment, and welfare…way before Boomers started retiring. The FICA was raised on Boomers in 1983 when the govt seen the problem. It worked to create a surplus. FICA just wasn’t raised high enough back then… or it wouldn’t of failed! Now the upcoming generations will pay more FICA,retire later, AND take the Social Security cuts. HOW fair is that? ALL Social Security beneficiaries should take cuts, not just new retirees! That’s called being fair. Social Security was not intended to totally support us in retirement.

    by John Last — August 19, 2017

  49. These are the discussions of a resolution to the Social Security shortfalls before Politicians went on break….
    Politicians already are looking at raising the tax cap to $230K. It will reduce Social Security’s funding shortfalls by 29%. ALMOST DONE. (FAVORABLE WITH REPUBLICANS 78%)
    Raising the full retirement age only helps the shortfalls by 19%. DONE.
    Reducing benefits to those who have an income of 55K or eliminating benefits for those incomes over 110K will help the shortfalls by 20%. (FAVORABLE WITH DEMOCRATS 67%) ****
    The payroll tax being raised will pick up 76% of the shortfalls but it will be raised slowly over 10 years or it will hurt Working America. (DEBATABLE RESULTS ON THE PROJECTIONS)
    Lowering the cost of living will help with 20% of the shortfalls (FAVORABLE WITH INDEPENDENTS 100%)
    **** This one would effect those who have IRA’s, 401K, and other resources. I don’t like this one. It will effect current and new retirees. It seems those that do save for retirement get penalized all the way around! I got 8 years to go before retirement and am watching THEM closely!!

    by DeeDee — August 19, 2017

  50. John Last, the generations of today also have more options than the baby boomers for an extra pension. Most have college degrees and Mom and Dad help them out with housing, kids etc. You sound resentful. The fact is that many Seniors could not exist if SS is cut back and that is a fact. They have no family to help out and that is a fact. Do you plan on t government building SS relief housing for those who have had their social cut to the point that they cannot pay for the roof over their heads let alone the utilities and food? You are not thinking clearly. No Social Security was not intended to support us entirely in retirement but not every baby boomer made good money and was able to pay off their mortgage. May endured at 2 recessions. Many lost their pensions with Bernie and in the last recession and many simply could not afford to have a 401k and other money set aside. And did you ever think of it this way, Cannot believe the arrogance of your post. Might I ask, how old are you and what income level are you at? Yes you will have to work longer unless you are not able and have to go on disability or would you say too bad you should have taken out disability insurance?

    by LMB — August 19, 2017

  51. Thank you LMB for your post. I too was annoyed with John Last’s post. I am lucky as my hub and I have saved diligently and knew SS was never intended to be our sole source of income. It definitely helps our monthly expenses and a cut would be outrageous. Medicare Part B (doctors/tests) costs $134 monthly, Medicare Part D (prescriptions) costs $67.30 and Plan F (Medicare supplement) costs $241.50 monthly. Supplemental insurance has many cheaper choices but you get what you pay for. Once all those expenses are deducted from SS doesn’t leave a lot left over. That is just my Hubs expenses. I am not on Medicare yet. LMB brings up a good point that some of our older SS recipients never had the opportunity for 401k or IRA’s because they probably didn’t exist back then . It was mostly pensions if the company offered them and savings if it was possible. Whatever little SS check they are getting and if they have savings is all they have. Young people today do have opportunities to save thru their employer, IRA’s, even CT is coming out with a new savings plan. SS is what is helping seniors survive. It sure isn’t a million dollars a month. So let us not begrudge seniors getting a little check once a month. We paid in and now it is our time to get what we were promised. Seems like politicians answers are always to just take away instead of figuring out how to solve and fix the problems.

    by louise — August 19, 2017

  52. Thanks for 5he article Louise. ….interesting concept, but don’t think its
    the best choice for most.

    by mary11 — August 19, 2017

  53. LMB First you say most parents helped out their children then you say many Seniors have no family to help them out. OK.. I am 85 and have two daughters, who worked to go to school to be teachers and yes they have options to save for retirement. I wasn’t talking a big cut for retirees , like 1-2% per income level. I am not resentful, just feel it isn’t fair to dump it all on those who are working. If you drain the workers too much they don’t have the income to save. YES, people took losses, jobs, homes, and careers should they also lose the ability to also save for retirement is my point. A college degree does not insure a job or a more favorable income. I live on VA and SS benefits and savings. Sorry you think as you do.

    by John Last — August 19, 2017

  54. John L. I don’t think any cuts should be made no matter how small as Retiree’s don’t have many options to make it up. But you are right on all the losses us workers took financially, in past years. I can’t save any more than I am. If they raise FICA all at once it will change my outcome. The company I work for did away with our pensions. At least they started 401K’s for us. It will be something but not as much as the pension would of been since I am closer retirement than others. I guess I am going to work any way I can until I am 70. I think we need more public awareness on this topic, so they younger generation will be better informed when they go to vote next time.

    by William DeyErmand — August 19, 2017

  55. Mary 11, agreed, the lump sum payout may not be for everyone but for those who have not been able to save it could present a windfall to squirrel away and if a couple both did it, they could really pump up their savings account.

    by louise — August 19, 2017

  56. William DeyErmand, I do not know how old you are but rather than work till 70 years old have you considered working a part time job? This is my thought. You say you have a 401K at your job. What if you worked part time for about two to three years. This is what I would do. Lets say you worked 20 hours a week at Home Depot (as an example) and lets say you made around $10,000 a year working part time. Let’s say you are putting 10% of your income into 401k now. You might be able to bump your 401K up to 20%. You’d have a smaller work check from your main job but you could add your part time earnings to your main check for your daily/monthly expenses.

    I also read that you found a town that you and your wife have vacationed at and love it and are considering it as a place for retirement. Have you considered an HECM mortgage? It allows you, at the same time, to sell your current house and buy another one. It is a mortgage where you only have to put about half the sale price down (depending on your age) and you NEVER have to pay the mortgage. For example you could buy a $250,000 house and only have to put approx. $125,000 down. Any extra money from the sale of your house can be put in the bank as savings! You and your wife can live in the house till you are no longer able or pass on. You can make payments if you like but the idea is that you will have no repayment of mortgage. You must pay taxes and upkeep on the house. This way you could retire early! http://www.bankrate.com/finance/mortgages/use-reverse-mortgage-to-buy-a-home.aspx

    The one Con is that if you decide to move, you lose equity in the home so you really have to make sure this is the last home you plan to purchase and live in. If not sure, you can always make mortgage payments and if you decide to move your equity won’t be a problem.

    by louise — August 19, 2017

  57. Louise, Thank you for the information. I will research it. Right now I do plan to work part time from 62-70 God willing. The wife is working part time now until 65 when she can take full spousal benefit. Yes we are staying in Ohio after hearing about a 25% cut in benefits, but at least we won’t have to work full time. Nor take a loan on the next house since houses cost less in Ohio. We will have to come up with the medical costs that are increasing which part time work income will supply. We would like to move in 2-3 yrs at the latest as I can transfer.

    by William DeyErmand — August 19, 2017

  58. William DeyErmand, Not sure what the 25% cut in benefits mean, can you elaborate?

    If you did do the HECM mortgage you would only have to part with half of the value of the cost of the house. So instead of plunking down $200,000, you’d only have to part with $100,000 and be able to bank/invest the other $100,000 if you were to sell your current house for $200,000. Just food for thought!

    Good you can transfer!

    Nice you have a plan. We keep talking about moving but right now the hub is going thru some medical treatments, so all is on hold for now.

    Best wishes to you and your wife!

    by louise — August 19, 2017

  59. IRA accounts were available in 1998 and 401K were available in 1978.

    by William DeyErmand — August 19, 2017

  60. I wish they would decide what is going to be so those of us not retired can plan to the best of our ability. I got a 401K and a IRA and have saved half my tax returns for medical emergency for ten years now. I paid off my little house two years ago. I recently had an Aunt leave 20,000 and I don’t exactly know what to do with it as of yet. Investing is not something I know about but I am learning.

    by DeeDee — August 19, 2017

  61. As a retired boomer my husband and I paid in plenty and certainly don’t deserve to have our benefits cut. Don’t blame boomers for Congress failure to act because it’s a difficult problem. Our full retirement is 66 so we also had our retirement age increased.

    by Kathy Coaker — August 19, 2017

  62. Re HECM loans, I have been investigating since I was considering building a retirement home. I was just told by a developer’s mortgage broker that I would NOT be eligible for a HECM purchase unless I had already sold my current home, because the program does not allow you to own two properties even for a bridge period. Just another complication if you’re looking at financial options to purchase before selling.

    by Kate — August 20, 2017

  63. Here is a HECM calculator.

    http://reversemortgagewithbob.com/hecm-purchase-calculator/

    An HECM could also be a solution for those who want to sell their house but want to rent. The HECM will pay approximately half the value of a home. For example, if you bought a $300,000 house you could get a HECM mortgage for an approximate $150,000 down payment. This could be like prepaying your rent. If you were to get an apartment for $1,500 a month, the $150,000 would last 8.33 years. If you pay rent you know you never get that money back. Also, rent goes up every year. This way, you would be making no payments and there would be no increases except for taxes.

    by louise — August 20, 2017

  64. William DeyErmand, “IRA accounts were available in 1998 and 401K were available in 1978.”, not sure what your comment was in reference to, but Traditional IRA’s came in to existence well before 1998, probably back in the late 70’s. Roth IRA’s started in 1998.

    by Leonard — August 20, 2017

  65. Oh Thx Leonard had it reverse. Only pointing out the year that a person could start saving with them.

    by William DeyErmand — August 20, 2017

  66. IRA’s and 401K’s may have been available, but my employers as a nurse did not offer them until the mid nineties. That gave some of us a late start on top of the usual savings accounts we maintained.

    Jennifer

    by Jennifer — August 21, 2017

  67. I got my IRA on my own when H and R Block offered it doing my taxes one year. I did not know about 401K until my company replace our pensions with them. Told my kids about it and two of them already had them. The kids today get informed better through the internet.

    by William DeyErmand — August 21, 2017

  68. All parents should drill it into their kids heads to take advantage of 401K’s if their company offers them. Most companies that have a 401K offer a match which is FREE money! My last company offered 401K but did not match anything. I still took advantage. My other company offered 401K and I was in it for about 17 years. Those were the days you had to wait a year before joining it. Just as soon as my one year wait was up, they changed the rules so anyone could get into it immediately. GRRR!!! I started in the 401K in my late 30’s so I had some catching up to do. I had IRA’s but the 401K really is the ticket! Young people can start in their mid 20’s and save their entire working lives. However, divorce can divide proceeds.

    Some of these common sense things should be taught in school. Doesn’t seem to matter how much money you make, wise choices need to be made. I have read many articles on famous athletes, movie stars, pop stars all who have gone broke making stupid choices. Like buying many mansions, luxury vehicles, buying expensive jewelry, yachts, fashions, jets. The mansions need a whole crew of people to maintain them inside and outside. They get these financial advisers that tell them they need to invest money into this stuff but in the end it breaks the bank.

    by louise — August 21, 2017

  69. DeeDee, you present some thought-provoking statistics, many of which I haven’t seen before. You offer SS shortfall solutions and specific speculations about Congressional positions on them. Would you be willing to cite some sources?

    In defense of Boomers: It often takes a full generation to revise our thinking. Most Boomers’ children have heard lifelong messages emphasizing the importance of early, diligent retirement savings. Our generation was less strongly encouraged along those lines. Likewise our government has learned along with us, refining retirement saving rules over the years.

    Many Boomers saved, particularly as retirement years loomed closer, but let’s be honest about the 1970s & 80s. IRA caps were relatively low ($1500 per person per year) and early tapping of those funds for any reason resulted in a punishing 10% forfeiture (plus income taxes). Boomers had to be dead certain that we wouldn’t need to touch our IRAs earlier than age 59-1/2. As a result, a lot of us set up numerous savings accounts and more heavily funded some than others. Saving for a 20% home down payment and setting aside funds for children’s college came ahead of retirement funds simply because they were hitting earlier on life’s timeline.

    Safety nets of company-sponsored pensions were disappearing quickly and generous 401Ks were not widespread during most of our earning years. The rules surrounding early retirement withdrawals have been relaxed so people can withdraw funds in many cases for medical expenses, medical insurance, higher education expenses for themselves, their children or grandchildren, first-time home purchases, and more.

    Recessions, stock market crashes and corporate debacles abounded during our earning years (Enron was not the only company to ultimately cheat its employees out of their 401Ks). New laws prevent that from happening again – at least in the same way. Like I said, the government learned along with us.

    Fixing SS is going to be complicated, that’s for sure, but let’s not lose sight of the truth that the emphasis on retirement savings and the regulations surrounding it have come a long way, Baby! Our children’s retirement will likely look considerably different from our own.

    by JCarol — August 22, 2017

  70. JCarol, I got it from an article I read this month, on another retirement site. I will attached it when I find it. I know it wasn’t easy for my parents, and I was an only child. I seen medical bills over and over that they had. And the cuts involved with the 401K was harsh on us all. All I ever heard was save, save, save growing up.

    by DeeDee — August 23, 2017

  71. As a retired SSA employee, the misinformation displayed in these comments is astounding! All members of Congress, the President, and the Supreme Court have been paying FICA taxes since 1984 – over 30 years – as have Federal employees hired from 1984 on. Yet people still say things would get fixed if only Congress paid into Social Security. WEP, the Windfall Elimination Provision, went into effect in the 1980s, too, yet people still whine about it. WEP removed the higher return meant for people with low earnings such as janitors and cleaning ladies who rarely get pensions. The higher return was never intended for people whose social security earnings appear low because they also had noncovered work and get a pension based on it. People who worked in all covered employment get a 32% return on the majority of their lifetime earnings. Someone subject to WEP gets a 40% return at the first bend point rather than the 90% return meant for people with truly low wages. There is too much misinformation here to address it all, but there’s great, correct info on social security.gov.

    by Jean — August 24, 2017

  72. Jean what you say seems very confusing to me. T

    The higher return was never intended for people whose social security earnings appear low because they also had non covered work and get a pension based on it. So those who had a pension are to get a lower SS benefit? Is that correct?

    by Jennifer — August 24, 2017

  73. Jennifer – The Windfall Elimination Provision applies only to people who get a pension based on non-covered work. Noncovered work means the person and employer did not pay FICA taxes on that work. The reference to people in “only” 14 states being affected by WEP just means that in those states, the teachers and/or other public employees do not pay FICA taxes so their pension is based on noncovered work. If these people also work at least 10 years in covered work, they will get a social security benefit based on that work, it just won’t be computed as generously. SSA has a very good factsheet on WEP: https://www.ssa.gov/planners/retire/wep.html

    by Jean — August 24, 2017

  74. Technically true, Jean, but when most people comment that gov’t officials need to be on SS in order to fully understand it, they’re implying that Congress and others should do so WITHOUT those generous government pensions that they’ve arranged for themselves. You know, the pensions I mean. The ones that the rest of us don’t get.

    Of course, when people say that about Congress they’re also forgetting the old axiom that many a politician takes office as a poor man but virtually none leaves office in that same condition. Pension or no pension, the end result is that politicians and government employees manage to take far better financial care of themselves than they do John Q. Public.

    by JCarol — August 26, 2017

  75. JCarol, I have no doubt that many people think Congess would “fix” social security if only they received it because they don’t know that Congress has paid FICA taxes since 1984. If that weren’t true, they’d leave social security out of it and directly attack the generous pensions members of Congress receive. I’ve had to explain this many times over the years. They’re not suggesting members of Congress should live on social security alone. Social security benefits were never meant to be anyone’s sole support in retirement, but when I used to interview people who reached retirement age without savings, a pension, or owning a home (often because of circumstances, not because they didn’t work hard), I’d think thank goodness, they’ll at least get benefits.

    by Jean — August 27, 2017

  76. You’re correct, Jean, SS wasn’t intended to be one’s sole support in retirement. Agreed that a lot of people in poverty were victims of life’s circumstances. When I hear stories of the challenges that some people face, I’m awed by their continuing strength to put one foot in front of the other each day.

    I’m glad to know that some SS employees are compassionate about their situations and do their best to help some seniors who are financially struggling.

    by JCarol — August 27, 2017

  77. Hello Jean and J Carol:

    When it is said that SS was not to be the sole support of retirees, that was before pensions were allowed to be dissolved and people were encouraged to save huge amounts of money on their own or invest in IRA’s and 401 K plans–many that have not earned that much money over the years in annual returns and have been somewhat depleted by fees. Those lucky enough to have pensions and social security plus savings are living in retirement the way it was intended to be. FDR did not that people would be on their own. Social Security is all that some people will have, not because they aren’t educated or did not work hard, but because they are not financial wizards or did not earn enough to save money. It is easy to have hundreds of thousands of dollars when one makes a large salary, but not everyone does.

    by Jennifer — August 27, 2017

  78. re: To the people that think the problem is that the federal government stole the SS funds and used it to balance the budget – that is just not factual. “Yes, the reserves in the SS trust funds are in the Treasury. But SS is being paid interest on those funds and they will come back to SS recipients as the reserve is depleted leading up to 2035.” See CBS News debunking this myth http://www.cbsnews.com/news/lets-debunk-this-social-security-myth/

    by Fred — August 16, 2017

    That modus operandi may have worked in the distant past, but for nearly the entire last decade, the interest rates on bank savings accounts and the Libor rates have produced little more than nothing. Even the government money funds began to “break the buck” in value before the government was forced to frantically intervene. And, any senior who has been afraid of the markets and who has kept their nest eggs in a bank deposit account can attest to how much income they have garnered from interest on those accounts. They have been forced to eat off their principal. Why should the realities and effects of an unbalanced budget change just because of the greed and stupidity of those we have foolishly “hired” to make these decisions for our citizens? And how many of us have make foolish choices in installing these incompetents into office in the first place? Maybe strict term limits would increase our chances of Congress actually working for the good of the people instead of for the velvet linings in their deep pockets.

    by Khem — August 31, 2017

  79. An advocacy group for Social Security and Medicare with lots of good information including legislation affecting Social Security and Medicare. http://www.ncpssm.org

    by Mike — September 2, 2017

  80. ” Social Security will play a critical role in the lives of 62 million beneficiaries and 173 million covered workers and their families in 2017. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”

    Wonderful that someone actually is aware that there is really a problem with Social Security future planning.
    Not so wonderful that our do-nothing Congress has shown no creative thinking capacity, no legislative action–timely or otherwise–and “informed” discussion showing no incentive to action, putting much doubt that any discussion–informed or otherwise–is taking place as the can keeps rolling down the road, its only impetus granted by the directions of the local breezes.

    Why not consider using taxes on sugar-laden foods, pot, other sin taxes and have national lotteries to come up with the needed differences? People might as well fork over some extra pennies to feed their not-so-healthy habits to pay for the privilege of having a funded safety net in a health care and retirement program when they reap the results of their choices.

    by Kmem — September 18, 2017

  81. Admin – is there any way to move this subject back to your first blog page? It continues to be a topic of great interest and would surely draw even more if it were easier to locate.

    Thanks!

    Editor’s Comment: Thanks for the suggestion. We moved a string of Comments about file and suspend etc. to our Blog where we discuss those tactics, https://www.topretirements.com/blog/financial/social-security-2017-update-part-2.html/#comment-306820

    by JCarol — October 1, 2017

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