I predict a combination of raising the amount of income subject to SS tax; raising the retirement age for future recipients; capping benefits for those earning the max payout; means testing based on Adjusted Gross Income; and reducing benefits for people with healthy retirements savings.
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That last part would send my blood pressure through the roof. We gave up a lot through the years to save for retirement.
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Any tax or reduction in benefits based upon my retirement savings really bothers me. It is like forgiving student loan debt. I saved and paid for my tuition without a loan, and I saved for my retirement by being frugal. I don’t like to punish people for being financially responsible.
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These are the bend points:
90% of the first $1,286 of AIME.
32% of AIME over $1,286 up to $7,749.
15% of AIME over $7,749.
Definitely results in higher % of income replacement for lower wage earners.
I was having a hard time believing a couple could earn $100K/year in SS. But per Google/AI, it is possible (in rare cases) to get to $126k total/couple - “The highest possible Social Security retirement benefit in 2026 is $5,181 per month****. To qualify for this maximum, you must delay claiming benefits until age 70, have at least 35 years of earnings, and earn the maximum taxable income for every one of those years”
But of course claiming earlier could reduce the annual amount.
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Hopefully they are getting as much as they can into Roth IRAs or Roth 401k. My DDs have these work options which are wonderful.
Agree with all the rest you have said.
We only had some funds moved into Roth IRAs - the years we were able to do that. The younger generations have the ability to have Roth funds at the get-go at least for at least some of their retirement savings - depending how aggressive they are with it.
DDs have very different lives. DD1/SIL have 5 children, now ages 1 - 7. Neither DDs are homeowners, but both are in good rent homes and with good careers. Home ownership will come in time, at the right time. They will have to be willing to make the sacrifices but also are saving for it. DD1/SIL are making sacrifices now with their young children; very busy lives.
100% agree that doing a great job saving for retirement early has big benefits - the time value of money saved.
Having the financial savings was good for us - the planning had DDs graduate from college with no debt. We had DDs after 15 years of marriage (and moving to 4 cities between 3 states and in our fourth owned home), we had DDs the years DH and I turned 38 and 40 (DDs are 25 months apart in age). During cancer years for me and DH’s lack of the needle moving on the financial stall on his earnings, we could cut on the retirement funding (always kept the employer match). I was able to return to work for an almost 5 year ‘sunset career’ which helped the cash flow and also carried our health insurance for the last 11 months when DH retired at age 64 1/2 (I worked until age 65 and we both could then switch onto Medicare).
Always good to live below what your earnings could have you capable of living, so in your later years you can live (as much as is possible) w/o financial worry/strain. Having good retirement investments.
DH and I both have LTC insurance policies, but not a 100% guarantee that both of us will not run out of money if having skilled care needs/dementia - mind and or body decline using up financial resources. DH and I have been married 47 years and ‘joined at the hip’ so to speak.
I was thinking that 100K sounded high at FRA for a couple, then I realized that the max benefit at age 67 is $49,824 (if I got my math right), so after a year of COLA increases, it will be over 100K for two people at the maximum.
Both me and my husband will get the max, so I do wonder if being limited actually is a possibility. I keep thinking about one of us taking it, but since we have the same benefit, I can’t decide.
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At first we were a little on the fence about taking SS at age 70 or at FRA, but a couple of the tipping point thoughts were filling the income gap between retirement and IRA RMDs and also the thought that SS may not be fully funded in the future. So full retirement age it is.
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From the article:
“The upside of delaying your Social Security until at least your full retirement age — if you don’t need money to live on right now — is that the larger benefit you get by waiting is guaranteed, risk-free from market drops, and comes with an automatic annual inflation adjustment.”
Except that the larger benefit isn’t really guaranteed, for a few reasons:
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As the trust fund is depleted, benefits might be scaled back.
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There’s currently no means testing, but that could change.
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In the event of future means testing, those already receiving benefits might be grandfathered, while those who waited could get hosed.
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One cannot project out ‘that far’ - current folks getting close to 62 can see what their life circumstances are like. What I disliked is a ‘penalty’ which was between age 62 and 65 when FRA was 65, and it was/is a certain percent per month. I did take SS at age 65 when my FRA was 66 and 4 months (as I was born in 1956) but my SS check was relatively low so before FRA was not that big. I wanted that extra bit of cash flow - DH took his SS later and we also turned on cash flow from annuities a little later (neither of us had pensions).
It’s the COLA that could be an issue especially years later for those getting a maximum benefit each…as a married couple.
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I am 58 and my SSA projected monthly benefit at 70 is about $5200. My wife’s is about the same and every year the projection goes up due to COLA. Combined, we’ll be much higher than $100,000 if we wait until 70. I’d be pretty upset if a $100,000 cap were implemented. We paid that money into the system. I think a fairer change would be to raise the income cap and collect more from high wage earners while not increasing the benefit payout.
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This risk might be a good new reason to NOT have both spouses defer. (On top of the other currently valid reasons that some couples who could afford to both defer SS opt instead to only defer one SS. In our case, it’s because my husband had higher benefit and is 7 years older. He deferred to age 70 so that whichever of us outlives the other is ensured the higher benefit.)
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My spouse and I are both the same age and have always had similar incomes. Neither of us have glaring health issues that portend an early demise. So we never had the obvious reasons for one to elect SS benefits earlier than the other. But yes, I agree that substantial changes in SS could be a good reason.
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The problem with social security is that we don’t have a crystal ball so we don’t know if funding will change. Or how long we will live.
All we can do is work with the information we have and hope that it comes out in our favor. And that we don’t run out of money.
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A you approach age 62 and each get your benefit statements (I have described it on this thread I believe, but you can see it now by looking at each of your SS details online) and get an idea of what is going on legislatively, you can make a determination on when to start drawing SS for each of you.
Between now and then, one of you can have health issues, have a significant accident - one doesn’t know. Things are not ‘frozen’ at this time, and your decisions can change based on circumstances in addition to substantial changes in SS.
People need to get involved with AARP and other organizations to not get a $100,000 cap implemented - retirees are an active voting population and deserve to get full benefits.
I agree about the raising of the income cap and collecting more from high wage earners while not increasing the benefit payout.
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I’m over $50K but ShawWife is comfortably under so as long as it is joint, we will be OK.
But, if you look at the size of the country’s debt and its rate of growth, we can expect lots of hidden tax increases.
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I am so irritated with this HELOC process. I feel like I’m working with stupid, stupid people.
They tell me they can only give us a line of XX unless I send in two years of tax returns to verify Delaware Statutory Trust income, then they can make it higher. I tell them that the income isn’t enough to give them the ratios they need for the higher line. They are aware of how much the income is, send it anyways.
They call and nope, the numbers don’t change the ratio enough. Duh. But now they want me to do a bunch of paperwork to verify the tax returns from the IRS, that they didn’t need in the first place for the lower line anyways. And they still refuse to consider 401K income, though they have full proof of it.
When I say, this makes no sense, but it sounds like you guys are trying to get this information purely so you can sell the loan. Silence.
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Very frustrating. I have wondered if I’d even be accepted for a new credit card if I applied these days (and I have lots of money in 401K like account). I was frustrated when I processed something like $25K through my credit card in a month (and I paid a big amount mid-month, but then forgot to do so right after the second big transaction) - I started getting notices that my credit score went down. I haven’t had a credit card balance carry over for decades, but I used to much of available credit or whatever.
I’ve also wondered if we wanted a new home, how much we’d actually qualify for since we are mostly retired. Most of our money is in 401K like accounts. Are you saying they won’t “count” your 401K money?