James, another great article. Please confirm my understanding of the following: in a case very similar to what Linda describes below BUT the spouse who died had NOT started claiming Social Security yet, and the younger, surviving spouse is not yet claiming S.S. either: if the surviving spouse claims S.S. a bit early at 65 {while waiting for her FRA (67) to claim the higher survivor benefit}....here is the question: she can only claim her own S.S. and is NOT eligible for the potentially higher spousal benefit because the higher earning spouse has passed away. Correct?
Dan, I agree that the 6.2% rate has been too low and as Dick references evidently 6% of the workforce earn above the cap above which the tax is no longer deducted. I was "fortunate" to be in that 6% for most of my career. For years it has never made sense to me that when I reach 70 (I still have a few years to go) the stressed Social Security (S.S.) system is going to send me a "check" each month. As I have referenced in these pages before, my view of S.S. when I was young was pessimism (that I'd ever see any S.S.)- followed by indifference/mixed feelings as to why I should ever receive anything - to now as I approach 70, derision. I plan to either donate my S.S. proceeds (if I ever receive them) or use them to stuff grandchildren's 529's and or "Trump Accounts".
With all this said, while it won't entirely fix the S.S. system's many shortcomings; there ought to be a win/win path for higher income people to pay their fair share to support the system for those who NEED it then have a reasonable path to opt out of ever receiving benefits.
"Win/win" might mean that the "cap" is replaced with a "threshold" above which the 6.2% (or prevailing %) of an individuals income is contributed to a mandatory Total Market Index Fund in a de-facto IRA account of sorts. If a person participating in this program waits until 70 they would have the irrevocable option of either collecting S.S. albeit predicated on a higher level than the current "cap" since they contributed more *or* opt out of S.S. benefits entirely and revert to having access to their Total Market Index de-facto IRA which they can then invest as they see fit. They would then pay capital gain tax on any withdrawals, the proceeds of which would flow into the Social Security Administration. Note: if they for whatever reason opt to collect traditional S.S., they forfeit the IRA and the proceeds move into the Social Security Administration coffers.
In summary:
Remove the liability of the 6% of the S.S. recipients who surely don't need it (a % which I think could be grown) from the distribution/liability side of the S.S. program.
Offer a segment of the population an opportunity for more growth in retirement savings (and investment in the U.S. Equity Markets) thereby removing virtually any incentive from tapping their traditional S.S. benefit.
Arguably the "6%" group could end up paying more relatively speaking into the S.S. system than they do now while having the option of never drawing any S.S. benefit all while having the "win" of another individual retirement account awaiting them in retirement.
On a positive note, I have observed quite a few people who never had the interest, nor spent the time, truly mastering moderate- to high-level retirement planning. Their interests were in other areas. That said, they lived/do live financially conservative lives and never had outsized expectations of what Social Security was supposed to provide on a relative basis. Many, but not all, of whom I speak were old enough to have actually lived through—and were historical observers of—the period of time when Social Security was established. On average, I would say these people were/are some of the happiest people I have known. Without ever reading, or perhaps even knowing about, Bogle, they found their own version of “Enough.”
I think these people don't get enough "press," but in a way, I have always admired them.
On the less positive side, two thoughts come to mind:
I only observed one union, among the many I dealt with, that ever earned its keep when it came to assisting its members to optimize retirement benefits, etc., that were being offered by the company—and indeed beyond.
The cohort I have zero sympathy for includes those who had at least reasonably good income for years, combined with overspending during their working years (never finding their definition of “Enough” until it was too late), resulting in “Not Enough” and a downward lifestyle adjustment upon retirement... and then they argue for more Social Security, etc., and are mad at the world. I know/have known quite a few of these people too, and they are NOT among the happiest. I think these people get too much "press".
James, this well written piece provided another HD "knowledge nugget" for me. I somehow missed the "50% Rule" while researching the Social Security (S.S.) landscape for my spouse/family information document in the event of my demise or becoming incapable of navigating all this. While it would only benefit us for a short time (assuming I make it to 70 when I plan to start SS); it is very nice to have the information. My long standing general pessimism and indifference toward S.S.does not diminish my desire to understand the details. Thank You
*Are the buckets all within qualified IRA etc?: No, it's a blend of Trad. IRA, ROTH and taxable.*Are they actually in separate accounts?: Bucket #3 is separated from Buckets #1 & #2 for simplicity. *How do you deal with RMDs?: We have not reached that esteemed age yet. When we do, the RMDs will be reinvested in the taxable portion of Bucket #3.*Are you affected by taxes upon re-balancing?: Only some minor capital gains when taking some Bucket #2 "overflow" due to equity index fund growth and using the proceeds to refill Bucket #1.
Dick, Correct on the "pools of money for specific periods"-which are invested and managed/allocated differently based on which time frame "bucket" the assets are in.
In our case (there are almost infinite versions out there): Bucket #1: Duration: 4 years + present year
Goal: stable- if it keeps pace with 3% inflation its a bonus Bucket #2: Duration: 7 years
Goal: keep pace with 3% inflation or beat it (excess when applicable goes to Bucket #1 refill). Bucket #3: Duration: indefinite/all core funding assumed to be at least 12 years from beginning to be spent at any point in time.
Goal: Beat 3% inflation over time. When over funded, bucket "overflow" is used to refill buckets 1/2. (In bad or flat years when not over funded, leave all assets invested in Bucket #3 and let the Bucket 1/2 12 year duration compress). >As noted previously, I balance within and between the "buckets" typically once per year.
>I can see shrinking the conservatively long 12 year Bucket 1/2 window as we age.
>The Bucket Strategy does not solve the under-spending dilemma. It does however give good visibility to and an annual reminder of the "problem".
We have never used nor plan to use any % spend rate in retirement.
Not that I am against it (although when people start debating to the decimal point it seems a bit pointlessly specific); I just never felt the need.
I employed a version of the "Bucket" strategy over 20 years ago which evolved over many years before retirement as the framework for our finances and establishing an inflation adjusted "salary" going forward into retirement. The "salary" is provided by the investment portfolio buckets alone-no annuities or pensions and if we ever see any Social Security $ it will be considered a bonus not an assumption.
Another benefit of the Bucket approach was it gave me a very visible glideslope into retirement. I could see very clearly when the "buckets runeth over" and I was able to retire if I wished. That was a very empowering feeling while I still worked a few more years by choice. Now in retirement, as long as our buckets line up in both present day $ and projected 3% inflation adjusted $; the "bucketized" portfolio spreadsheet is put back to sleep for another year.
The end result is basically the same as those who subscribe to the % method presumably have an annual "salary" figure too. Its just another angle of approach to the age old topic.
I’m with you David including on the taking SS at 70 for me as the higher earner and 67 for my spouse. The only point we diverge on is I’m opting for the cheapest paper tube for my ashes. If you go with the plastic one, make sure it’s reusable for the environment’s sake. 😇
While true you need a new PIN each year which as far as I know happens without any further action by you once you sign up. Unless our tax guy has been doing something annually that I’m not aware of to get us the new PINs, they have automatically been sent for years with no further action from us each year.
Comments
James, another great article. Please confirm my understanding of the following: in a case very similar to what Linda describes below BUT the spouse who died had NOT started claiming Social Security yet, and the younger, surviving spouse is not yet claiming S.S. either: if the surviving spouse claims S.S. a bit early at 65 {while waiting for her FRA (67) to claim the higher survivor benefit}....here is the question: she can only claim her own S.S. and is NOT eligible for the potentially higher spousal benefit because the higher earning spouse has passed away. Correct?
Post: Social Security Survivor Benefits for Spouses
Link to comment from April 17, 2026
Dan, I agree that the 6.2% rate has been too low and as Dick references evidently 6% of the workforce earn above the cap above which the tax is no longer deducted. I was "fortunate" to be in that 6% for most of my career. For years it has never made sense to me that when I reach 70 (I still have a few years to go) the stressed Social Security (S.S.) system is going to send me a "check" each month. As I have referenced in these pages before, my view of S.S. when I was young was pessimism (that I'd ever see any S.S.)- followed by indifference/mixed feelings as to why I should ever receive anything - to now as I approach 70, derision. I plan to either donate my S.S. proceeds (if I ever receive them) or use them to stuff grandchildren's 529's and or "Trump Accounts". With all this said, while it won't entirely fix the S.S. system's many shortcomings; there ought to be a win/win path for higher income people to pay their fair share to support the system for those who NEED it then have a reasonable path to opt out of ever receiving benefits. "Win/win" might mean that the "cap" is replaced with a "threshold" above which the 6.2% (or prevailing %) of an individuals income is contributed to a mandatory Total Market Index Fund in a de-facto IRA account of sorts. If a person participating in this program waits until 70 they would have the irrevocable option of either collecting S.S. albeit predicated on a higher level than the current "cap" since they contributed more *or* opt out of S.S. benefits entirely and revert to having access to their Total Market Index de-facto IRA which they can then invest as they see fit. They would then pay capital gain tax on any withdrawals, the proceeds of which would flow into the Social Security Administration. Note: if they for whatever reason opt to collect traditional S.S., they forfeit the IRA and the proceeds move into the Social Security Administration coffers. In summary:
Post: Fixing Social Security once and for all
Link to comment from April 16, 2026
On a positive note, I have observed quite a few people who never had the interest, nor spent the time, truly mastering moderate- to high-level retirement planning. Their interests were in other areas. That said, they lived/do live financially conservative lives and never had outsized expectations of what Social Security was supposed to provide on a relative basis. Many, but not all, of whom I speak were old enough to have actually lived through—and were historical observers of—the period of time when Social Security was established. On average, I would say these people were/are some of the happiest people I have known. Without ever reading, or perhaps even knowing about, Bogle, they found their own version of “Enough.” I think these people don't get enough "press," but in a way, I have always admired them. On the less positive side, two thoughts come to mind:
Post: “We did everything right.” Maybe not. Retirement income should not be an unpleasant surprise.
Link to comment from April 12, 2026
James, this well written piece provided another HD "knowledge nugget" for me. I somehow missed the "50% Rule" while researching the Social Security (S.S.) landscape for my spouse/family information document in the event of my demise or becoming incapable of navigating all this. While it would only benefit us for a short time (assuming I make it to 70 when I plan to start SS); it is very nice to have the information. My long standing general pessimism and indifference toward S.S.does not diminish my desire to understand the details. Thank You
Post: Social Security Spousal Benefits
Link to comment from March 30, 2026
Thank goodness the Continental Army was not represented by a labor union.
Post: America Doesn’t Just Do Layoffs. It’s Fallen in Love With Them
Link to comment from March 24, 2026
*Are the buckets all within qualified IRA etc?: No, it's a blend of Trad. IRA, ROTH and taxable. *Are they actually in separate accounts?: Bucket #3 is separated from Buckets #1 & #2 for simplicity. *How do you deal with RMDs?: We have not reached that esteemed age yet. When we do, the RMDs will be reinvested in the taxable portion of Bucket #3. *Are you affected by taxes upon re-balancing?: Only some minor capital gains when taking some Bucket #2 "overflow" due to equity index fund growth and using the proceeds to refill Bucket #1.
Post: Forget the 4% rule.
Link to comment from March 7, 2026
Dick, Correct on the "pools of money for specific periods"-which are invested and managed/allocated differently based on which time frame "bucket" the assets are in. In our case (there are almost infinite versions out there): Bucket #1: Duration: 4 years + present year Goal: stable- if it keeps pace with 3% inflation its a bonus Bucket #2: Duration: 7 years Goal: keep pace with 3% inflation or beat it (excess when applicable goes to Bucket #1 refill). Bucket #3: Duration: indefinite/all core funding assumed to be at least 12 years from beginning to be spent at any point in time. Goal: Beat 3% inflation over time. When over funded, bucket "overflow" is used to refill buckets 1/2. (In bad or flat years when not over funded, leave all assets invested in Bucket #3 and let the Bucket 1/2 12 year duration compress). >As noted previously, I balance within and between the "buckets" typically once per year. >I can see shrinking the conservatively long 12 year Bucket 1/2 window as we age. >The Bucket Strategy does not solve the under-spending dilemma. It does however give good visibility to and an annual reminder of the "problem".
Post: Forget the 4% rule.
Link to comment from March 7, 2026
We have never used nor plan to use any % spend rate in retirement. Not that I am against it (although when people start debating to the decimal point it seems a bit pointlessly specific); I just never felt the need. I employed a version of the "Bucket" strategy over 20 years ago which evolved over many years before retirement as the framework for our finances and establishing an inflation adjusted "salary" going forward into retirement. The "salary" is provided by the investment portfolio buckets alone-no annuities or pensions and if we ever see any Social Security $ it will be considered a bonus not an assumption. Another benefit of the Bucket approach was it gave me a very visible glideslope into retirement. I could see very clearly when the "buckets runeth over" and I was able to retire if I wished. That was a very empowering feeling while I still worked a few more years by choice. Now in retirement, as long as our buckets line up in both present day $ and projected 3% inflation adjusted $; the "bucketized" portfolio spreadsheet is put back to sleep for another year. The end result is basically the same as those who subscribe to the % method presumably have an annual "salary" figure too. Its just another angle of approach to the age old topic.
Post: Forget the 4% rule.
Link to comment from March 6, 2026
I’m with you David including on the taking SS at 70 for me as the higher earner and 67 for my spouse. The only point we diverge on is I’m opting for the cheapest paper tube for my ashes. If you go with the plastic one, make sure it’s reusable for the environment’s sake. 😇
Post: The $9.95 scam…
Link to comment from February 28, 2026
While true you need a new PIN each year which as far as I know happens without any further action by you once you sign up. Unless our tax guy has been doing something annually that I’m not aware of to get us the new PINs, they have automatically been sent for years with no further action from us each year.
Post: A PIN to protect your tax return
Link to comment from February 28, 2026