A colleague who is 64 remarried a few years ago to a woman in her thirties (maybe late 20s, not sure). They had a kid a year ago and he set up a separate segregate account for the support his son gets from Social Security. He did his research on how to do it and if I recall correctly he was encouraged to save all or most of the money for his kid later by folks at SS. He has been successful in life and remains fairly highly compensated so that he can cover and current expenses for him and his family without the SS distribution, so he wants to create a real nest egg for his son.
While I recognize that this is legal, and I’m sure I would be collecting every dollar that I and my family are legally entitled to, this situation just feels wrong to me. Why does this kid need a government payout? The kid obviously hasn’t done anything to earn it, other than having an old parent.
Other than means-testing or asset-testing, I don’t know what the solution is though. I’m sure there are lots of cases where that payment is really needed by the family.
Regardless, I’m thinking he should “spend” the money to support the kid, and put an equal amount into a 529 plan. 18 years of tax-free growth and it’s counted as a parent asset at college time. Or once the kid gets a job, funnel some money to fund a Roth IRA.
Having an older parent increases the risk that said child may be without a parent sooner or have to provide care for the parent as well. If it is legal, then it’s better than folks who do illegal schemes. I’m sure the dad has paid a lot into SS over the years.
I’m not sure I’d do it, even if we could have.
I was told the exact opposite on a phone call with SS. They told me the money was to support the child, not to build up a nest egg for the child. I used it to pay private HS tuition. It didn’t put a dent into the bills.
As for whether my accepting this money was legit, I initially thought that it wasn’t what it was intended for, but now I have ZERO qualms about it.
“I used it to pay private HS tuition. It didn’t put a dent into the bills.” - I don’t blame you for taking the payment leaglly due to you - I would have done the same. But…that probably was not the kind of situation envisioned when the benefit was designed. In general I am selfishly against SS overhaul, especially since we’ve all payed so much into it. But perhaps there are some areas that need revisiting.
@colorado_mom, I don’t disagree that it might not have been envisioned that way, but the fix would have been simple: means testing. The fact that the simple fix wasn’t put in place makes me wonder.
I know how you feel; it’s how I feel when I know that a good friend of mine is taxed at carried interest rates (20%) while my wife is taxed at 39.6% plus state rate of 9% plus various other nickels and dimes. But, its legal, and he’s entitled to it.
Means testing sounds good and fair to me, tho it will mean I and many who contributed will likely get nothing back. It just seems wrong (even if legal) to be taking benefits when it is needed to keep others housed. I volunteer and help many people who struggle to pay for their medications and other basic needs.
There is already some means testing, in the form of taxation of your benefits at ridiculously low income levels. That can easily cost you 25% or more of your benefit.
We had this same conversation 500 pages ago! Child support should not be part of SS benefit imo. SS is for retirement not for child rearing. If a child is young enough to need child support and parents are old enough to file a SS benefit, parents had kids over 40. I would hope most of them had a plan for child support in old age. We also had a child late. We didn’t know that we could get child support from SS. Our SS agent pushed us to take it. It still felt wrong. What would be the problem to drop child support from SS benefit instead of mean testing that probably hurts many in middle-class?
Well, many do not. Means testing would have the advantage of not providing child support to those who don’t need it (guilty as charged), while providing a safety net for those who do. The disadvantage is that it wouldn’t help kids whose parents are younger but also incapable of planning.
Fwiw, to clear my name a bit: the difference between filing early at reduced personal benefit but some benefit for kids versus waiting for FRA required a spreadsheet to figure out; it wasn’t close to a windfall. The total kids’ benefit over the years was less than what we pay in income taxes in a month.
Even the best plans can go astray as well. An older parent could have a plan, but due to unexpected job loss (harder to replace at a certain age) or illness, circumstances can change. Just because they are older, it doesn’t make them immune from life’s uncertainties.
I do think a means test is more fair and it could be set to avoid impacting those who are middle income. Of course, one could argue that middle income folks don’t need that safety net either. Actually, I’d raise the SS wage base cap.
There you go! Change one of the most regressive taxes to one a bit less so. It’s a start.
If you raise wage base cap, do you also raise SS benefit cap? Where does means testing start? Is it high enough to leave many in middle class alone? Do many people have kids over 40-45? What income level are they in? Do many low to middle class have kids over 40?
You can’t help people who won’t help themselves. Having a child is not a natural disaster. It is not an unforseen event. What would be inevitable circumstances for people having kids at over 40 without preparation?
@Iglooo, older people have less time to make up for their poor planning, and also fewer opportunities.
Increasingly people are waiting longer to have kids, which could put more burden on SS given the current structure.
Of the folks who I know who do have kids at an older age, some of them are “oops” babies and totally unexpected. That can happen to people at any income bracket.
I am certain that older parents are far more financially prepared to have a child than younger ones. I wonder if the point was actually to help grandparents out who were raising their grandchildren, not wealthier older parents. But I’m good with means testing social security, however there should be no pretense if it’s used as a welfare program, as that is what it would be.
Can grandparents and grandkids take SS? If so, it changes the picture. SS is already means tested. They could expand that to include more income brackets. What we need is stats on who benefits from SS child care support provision and who will be paying SS tax if means testing expands. Do we want to include people who mainly rely on SS for their retirement?
I don’t know about others but in my case, we’ve done well by SS. We could get by SS benefits alone if we lost everything. Not luxuriously of course but we can feed and house ourselves modestly on SS. Looking at my case, I don’t know why anyone would infer welfare in connection with SS. We had this discussion before. I had compared buying a house pretending to pay mortgage with the amount of max SS tax for 30 years. Sell that house at the end of 30 years and buy an annuity with the proceeds, inflation adjusted and suvivor benefits included. If I lost out, it wasn’t by much. Not to mention the greater certainty that comes with SS. People have a mythical notion that they could have done better. Maybe a tiny few in a short period but not the great majority or over the long run like lifetime long.
The SS benefit I am scheduled to receive at FRA is quite modest and would not be enough for me to easily live on, tho it ahould be enough to pay my Medicare B premiums unless they greatly increase.
Fortunately we have other assets that we are living on comfortably. If my SS vanishes due to means testing, it won’t affect us much as we have not counted on receiving it.
If we do get my SS, we will likely use it to support our D who still has chronic medical issues which make it extremely difficult for her to hold any job. We have always supported her 100% and suspect it may be a lifetime obligation we are ready to continue shouldering.
I would not imply that anyone on this thread is getting welfare by taking social security. But if they ever decided to means test it, that would be welfare. Raise the cap and make people who have higher income pay for it (which is what they do every year anyways), and then limit or disallow them to get the benefits=welfare. Not saying I’m against that, but that would be welfare, not any sort of retirement program.