Politicians just voted on this bill to take money out of the hands of financially stable adults.They didn’t even flinch at doing it.
They can raise the cap. I agree, just do it.
@menloparkmom: MaximizeMySocialSecurity.com says on their website that they expect their software to be updated within one to two weeks. I’m OK waiting that long.
And shift the burden to younger generation? I believe present older generation is financially better off than what’s projected for younger generation when they get old. If so, it will be more equitable to reduce the payment to older generation than increase contributions younger generation have to make.
I see raising the cap as shifting the burden to current high earners who can afford it. I pay a smaller percentage of my total wages to SS than someone making 80K a year. That doesn’t seem fair. And, someone making 250K pays even less than I do percentage. Again, not equitable.
Interesting article about why getting rid of file and suspend isn’t a good idea. Of course, the barn door has been closed.
That Slate article says that file and suspend is “not exactly good policy” and acknowledges that it’s an unintended loophole that most people don’t know about and that is generally used by high income filers. Not a ringing endorsement.
Well they should only raise the cap if they are going to give the higher income earners more when they retire. Otherwise it’s not fair.
I have a cousin who is 63. She is a widow. She was hoping to start to collect her widow’s benefit from SS next summer, and then let her SS grow until she is 70. Will this change affect her? She is a nurse with knee problems, and is really looking forward to retiring.
Currently it would, because your benefit is based on the earnings taxed by FICA.
However, because of the way the formulas work, higher earners receive incrementally much less then the amount extra they would pay - that is, if their FICA taxes went up 10%, their benefit would go up by a much smaller amount.
Of course, the benefit could always be capped, or taxed even more (already up to 85% can be taxed - why not 100%), or lots of other things done to ‘fix’ it. But the more you break the link between the idea that your FICA taxes are contributions to a ‘pension’, and that you are entitled to a benefit, the less people will be willing to put up with the taxes. And since it is largely a pay-as-you-go system, the support of younger generations is critical.
The current benefit for a 66 year old who has worked since age 19 and earned at the income ceiling is $2626/month.
Someone who contributed exactly half as much will receive $1919/month, and someone who earned one quarter of the cap will receive $1195.
So the top earners earn benefits that are 37% higher for contributing 200% of what those who earned half the amount did. And their benefits are 120% higher than people compared to whom they contributed 400%.
The middle guy, compared to the bottom guy, also pays in twice the contributions, and but receives only 60% more in benefits.
This is even more “progressive” than it appears, considering that the top earner will pay a high rate of tax on the benefit payments, while the lower earner is likely to receive his “tax free”. Therefore the net cost to the government per dollar of benefits to lower income people is proportionately higher than it is to pay higher income people.
Yes. There is a limit to how bad a deal middle income and above taxpayers are willing to take. The weight of the boomers is going to require a lot of support. The peak birth cohorts reach 66 in another 8-10 years.
Young people will have a lot to think about in upcoming elections.
Survivor benefits remain unchanged as i understand it. Go to Boglehead. They are having a very active conversation on the topic with experts posting answers.
MichiganGeorgia- wealthier income groups live longer than poorer income groups you need to consider that in your calculation of fairness.
If you look at the actuarial tables the poor and minority groups collect for less years. That more than makes up for the % of income that ss replaces.
If you want to dig that deep you can also look at who collects more spousal and survival benefits
This is not why the payouts are set up the way they are.
The intent is to provide a minimum level of income to survive on. Poorer people to replace a larger percent of their income to survive, so they get a relatively larger benefit.
Facts: I turn 67 in about three weeks and have never filed for SS. DH turns 65 in January 2016 and has never filed for SS.
The Old Plan: When DH turns 66, in January 2017, I will file and suspend and he will get my spousal benefit while I wait until I turn 70 (November of 2018) to get my max benefit. Then, when DH turns 70 in January 2021, he will file for his max benefit.
Can we still follow this Old Plan or not?>>>>>>>>>
Amending my earlier answer because of this quote I found on the Boggleheads:
“And if the request for suspension occurs before the 180-day window ends, then it will be treated under the old rules. The request for spousal benefits based on that suspended benefit does not have to occur within the 180-day window.”
Therefore, you need to go ahead and file and suspend before the 180 days are up. Then when dh gets to FRA, he can file for spousal benefits.
notrichenough yes I know that. We could make the case that everyone should get the same amount to survive on though
^Then everyone should pay in exactly the same amount of money in total.
and they and their beneficiaries should collect the exact same amount in total.
Poor people do not do better with ss than higher income people. It is just without ss they would have nothing
If wealthier income groups collect ss for an additional 60-72 months than poorer income groups that goes a long way in offsetting the % of income ss replaces.
Well, Bogleheads says I’ll be fine, that my Old Plan still works. But I’ll feel better when MaximizeMySocialSecurity.com says so too.
@VeryHappy do you need to file and suspend within the next six months for your old plan to work?