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The United States is 26 thousand billion dollars in debt. The United States spends two thousand billion dollars a year more than its revenue.
If we generate any real, sustainable, savings many people are calling for them to be spent … on seniors and veterans. Congress is trying to cut taxes and limit the increase in the deficit to only a few more trillion dollars over the next ten years.
The Social Security Trust is heading for insolvency as is the Medicare Part A Trust.
Part of the proposed tax plan is to not tax Social Security benefits, but those taxes add $50 billion a year to the SS trust plus $35 billion to Medicare trust.
How is anyone planning to retire going to make assumptions about these variables? I’m still convinced taxes must go up at some point, but when. Next four years seem unlikely and IMO that makes things worse.
Will the ultimate burden fixing Social Security fall on current workers and employers or will those us who got a free pass while working share it? Free pass because FICA taxes should have been raised years ago.
Looks like I should be planning what I will do with the $700 a month now coming from my SS for income tax withholding.
I’m one of those guys in a cartoon with his head spinning in all directions.
Interesting article in my local newspaper from a writer named Kathryn Anne Edwards. She originally wrote the article for Bloomberg News. Citing results of a survey from the National Academy of Social Insurance, she writes: “the findings are clear; no cuts and no big changes to how the program works. Just fund it.” The most-favored approach to doing so? Increase the taxable earnings cap. Later on, she notes that approach is favored by 74% of republicans, 79% of those with incomes above $150,000, and 81% of those aged 21-34.
Perhaps a concerted effort of contacting our representatives and senators is needed so this issue isn’t simply kicked further down the road?
Increasing the taxable cap sounds easy, but it does not make the trust sustainable and unless we want SS to become pure welfare contrary to the original design, those additional taxed earnings must also be used to calculate benefits albeit using a lower bend point percentage.
Everyone likes a solution that only affects someone else. This idea is appealing to some as soaking the rich, but it really attacks the upper middle class. Last time I looked Warren Buffets salary was $100,000. 🤑
Agreed, Richard. I didn’t intend to imply that 1 approach should be the only approach. That was simply what the author wrote as the most favored approach among those surveyed. There are other things that can be done to sustain the Social Security trust. I believe I have seen other articles you’ve written on that very topic.
It remains to be seen if Congress will do anything about this. There are a range of proposed solutions, including slightly reduced benefits and higher taxes. To spread the pain fairly, the solution might affect everyone, although reducing benefits of current retirees is something I find difficult to imagine, but possible by our dysfunctional congress.
This is a very old, identified problem. One way to deal with it is to include a reduction in SS benefits when considering one’s retirement income. That’s what I decided to do. After all, one thing I don’t want to do is run out of money in retirement or outlive my savings. When I was in my final retirement planning steps I plugged in a 20% SS retirement benefit reduction. I decided on a phased retirement which allowed me to work longer and save more, while enjoying many of the benefits of a retirement.
In retrospect, this was a very good approach for me. But not necessarily for others.
There are several combinations of changes involving workers, employers and current retirees or some of them. For example, raise the FICA, but add an extra 1/2% on employer portion, suspend any future COLA for current retirees who are collected the maximum benefit at their FRA. Begin taxing Section 125 cafeteria plans for FICA, just like 401ks, require all future state workers to be part of SS. Adjust the FICA taxes automatically based on actuarial projections to retain solvency target – possible to decrease at times.
Reducing any current retiree’s SS is political suicide. That includes suspending future COLA (cost of living adjustment). Retirees vote and politicians are aware.
That’s what I always thought, but these days I’m not so sure.
Thank you R Quinn for taking a multifaceted approach to solving the SS shortfall. It will take several changes in both taxes, actuarial changes, inflation adjustments, and maximum payments to solve the current problems with the system. The cure is fairly simple, but getting it done is hard considering the posturing of our politicians.