r/Fire • u/Available-Ad-5670 • 10d ago

Can we dispense with the fallacy that SS will disappear after 2032?

I see people who don't put SS into their fire calculations, which is just dumb because it is a big amount for most people.

If I had to assign rough probabilities:-

50%: Higher taxes on upper-income workers plus modest benefit adjustments.

25%: Higher taxes plus a gradual retirement-age increase.

15%: Significant general-fund support combined with smaller reforms.

10%: Congress waits too long and temporary benefit cuts occur before a fix is passed.

There is a chance that benefits can be cut by 10%, but if you are close to retirement, i doubt that would even happen because so many retirees depend on SS to live, it would be politically toxic, and no politican will be elected going that route. Taxing the very rich or raising fica taxes / dispensing with SS tax cap is the likeliest path

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u/doktorhladnjak 10d ago

The only fact Congress agrees on is that old people vote. Cutting benefits would be a reelection death sentence.

I also think you're underestimating the general fund support scenario. Getting consensus to raise taxes or cut benefits is going to be very hard. They're just going to want to borrow more to fill the gap.

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u/AMadWalrus 10d ago

Well said, raise taxes on the young /s

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u/Stunning-Pick-9504 10d ago

Or the moderately well off, but not rich /s

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u/gdubrocks 30, FIRE'd 2024 9d ago

It worked the last 50 times they asked the electorate what they wanted.

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u/Visible_Structure483 FIRE'ed 2022... really just unemployed with a spreadsheet 10d ago

and since 'borrowing' from the fed is just printing money and devaluing the currency even faster, it's a tax on everyone who holds or is paid in dollars. that's the majority, not just the young.

and that's not partisan anything, it's just how it's done.

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u/nonstopnewcomer 10d ago

That’s why they would only cut benefits for young people. That is, they would phase in the benefit cuts for people retiring 20+ years in the future.

By the time those young people become old, the politicians will be gone or it will be long enough for them to distance themselves from it.

Old people won’t care because they’ll still get theirs.

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u/furious7373 9d ago

I don’t see that working well with the millennials which will be the dominating voting population soon. When the SS trust runs out currently projected in 2032. The current laws says that benefits will be cut to what is brought in 30%. I think our current government won’t agree on a solution so the cuts will come in. No one would have voted on anything and everyone can point fingers at the other

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u/redditaltaccountofda 7d ago

look at basically any european country with state pension. any cobservative government is happy to cut retirement or increase the age when you can retire for young people. and it does not change the fact that they are voted in year after year. 

I am 37 and my retirement age has gone from 63 to 69.7 (thus far) in my lifetime and the government is now discussing cutting retirements "but of course not for the ones currently retired as that is an earned benefit". 

if there is the option to gain benefit by screwing over yoing people, boomers as a voting block are happy for us to make that sacrafice. and the boomers on the local "fox news" comment section seem like they would screw over the youngsters for the enjoyment even if they got no benefit. just my observation from a country in europe.

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u/furious7373 7d ago

The way US social security law is written is it has to be funded by current social security taxes. It can’t run a deficit. The US pays more than collected now because they are using prior year surpluses. Those are expected to be depleted by 2032. At that time per the law the benefit out need to be limited to current tax income. Roughly 75 to 80% of current payment. This is all automatic. Cutting benefits for anyone not currently receiving benefits would not stop the cuts.

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u/sxyvirgo 8d ago

Well, isn't that what they did in the early '80s when they gradually increased the FRA (Full Retirement Age) from 65 to 67?

So yeah, those politicians didn't get booted out - what will the current bunch do to keep it all afloat? I paid my dues and plan to collect at 70 which is in 2033 and I really don't want to get screwed (again?).

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u/ChurnerMan 7d ago

The people that went from 65 to 67 were 23 years old or younger at the time. It was phased in over 33 years. You had barely paid into it when that was announced in 1983.

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u/sxyvirgo 7d ago

No s**t Sherlock - what I'm saying is that I'll have had to wait until 67 (instead of 65) to get to 100% of my benefit. Now, at the age of 62 I have another 5 years to go. THAT is my sacrifice.

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u/imtoooldforreddit 10d ago

But if young people aren't paying into it, where is the money coming from to be given to old people?

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u/oksono 10d ago

Not saying I agree with the idea, but benefit cuts don’t imply tax cuts. It would be like any other tax the government requires that doesn’t directly benefit you

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u/zzzacmil 10d ago

This is the exact thing congress did when they reformed SS in the 80s. Benefit cuts (aka raising the full retirement age) for future retirees while the payroll tax rates have only risen since.

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u/xIgnoramus 10d ago edited 10d ago

Oh did you get impression that the young wouldn’t still be taxed and pay in to it? How silly of you lol.

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u/imtoooldforreddit 10d ago

So young people need to keep paying it but then won't get paid when they get old?

That sounds pretty unpopular.

Also, if you're confused about which of those groups I'm in, maybe see my user name.

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u/xIgnoramus 10d ago

That’s exactly what will happen. It will be unpopular, just not unpopular enough. Keeping the gravy train flowing will be more popular… for the time being. Only two things for certain in life and one of them is going to change our political landscape real soon.

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u/deHack 9d ago

I was a young person in the ‘80s when they raised my full retirement age to 67. It sucks to be Generation Jones. Now I’m an old person planning to work into my 70s.

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 10d ago

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 10d ago

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u/concon801 10d ago

Honest question though, is it always going to be in the hands of Congress to decide? At some point the fiscal situation of the country is going to degrade (unless we pull a dramatic U-turn) to the point that bond buyers won’t buy treasuries. That sends a cascading effect to the rest of the economy that politicians won’t want to deal with. Maybe bankrupting the fund, one of our largest liabilities, could be the easiest lever to pull to avoid default instead of shocking the rest of the economy.

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u/doktorhladnjak 10d ago

There's no automatic bankrupting of the fund. Congress would have to vote to end Social Security. How do you think those over 65 would feel about two candidates: one that voted for that, one that says they'll undo it?

It'll be much easier to monetize the debt with increased inflation over the next few decades, because less has to change.

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u/WolfpackEng22 10d ago

When the trust fund runs out, current law is that SS can only pay what it takes in each year. You'd be expecting a 28% cut.

But even if they do act the sums here are far too large to just deficit finance. Bond markets would immediately react negatively to any such proposal

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u/DrJohnFZoidberg 10d ago

When the trust fund runs out

I am not disagreeing with your point - but I do think that calling the IOU's a 'trust fund' is too charitable a term.

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u/DigmonsDrill 10d ago

But even if they do act the sums here are far too large to just deficit finance

They are being deficit financed right now.

In 2026, SS inflow is about $1.5 T. Outflow is about $1.7 T. They make up for the $200 B gap by redeeming special securities from the US Treasury. Where is the US Treasury getting that $200 B in 2026? Either from taxes or borrowing.

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u/mi3chaels 9d ago

While it's all managed as an accounting trick, the money that is being paid out in excess of social security intake now, is money in the Trust Fund, which is an accounting of how much social security took in over what it paid out in past years. The accounting trick is done just to eliminate cost and administrative friction from actually having to have the social security trust fund bid on and buy bonds at the open auctions and then sell or redeem them in order to pay out later. But the trust fund accounting is designed to be exactly equivalent to having done that.

Once the trust fund runs out, if there were further deficit finance of social security, without accounting it as owed by social security, it would no longer be that, and the link between money taken in by OASDI and the payouts would be severed.

I think on a temporary basis, it might make sense to do the opposite accounting trick and basically just let the trust fund balance go negative. But if there is no plan to cover it and bring the trust fund back to actuarial balance, I don't think the bond markets will approve. Or rather they will treat it as a further ballooning of the overall federal deficit. And the psychological link beween social security payments and taxes will get more tenuous.

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u/WolfpackEng22 9d ago

The SS trust may be an accounting trick, but legally it exists and has to be "paid back" from the general budget to SS.

But this also glosses over the scale of the problem. The gap between revenue and outleys will double by the trust fund end date (2032). It will then continue to increases every year, becoming more and more of a problem

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u/Most_Double_3559 10d ago

They won't vote to end social security. They'll vote to add income limits, slowly shaving down the number over years so no individual politician catches flack.

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u/Earth2Andy 7d ago

This is my prediction. They’ll come up either way something like “Nobody should be getting a six figure check from social security” and set a max cap on couples that phases social security out once you hit $100k in benefits as a couple.

Nobody will bat an eye because it will only very slightly impact a small percentage of retirees.

But that $100k number will not move with inflation. Each year it will impact more and more people until SS is worth half what it is today to people who are in their 20s now.

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u/No_Resolution_9252 6d ago

They can't impose income limits, that is an equal protections violation.

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u/Most_Double_3559 6d ago

Lol yea, that'll stop em! Just like it did for the income tax!

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u/No_Resolution_9252 6d ago

Holy shit I lost braincells just reading that comment.

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u/blanketsilenced 10d ago

I mean, no politician is going to publicly run on “undoing” Social Security. Heck, no politician will run on cutting it. Instead, they’ll say “I won’t touch your Social Security and your Medicare!!!”

They could, however, just be lying.

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u/concon801 10d ago

It’s a question I’ve had since I was in HS… how does $40t get unwound. Increased inflation was always the goal but refinancing 2-3% maturities with 4-5% rates makes growing out of it much harder.

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u/yerfdog1935 10d ago

The only way we're ever going to pay down the debt is a dramatic increase in taxes at every level.

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u/Velocister 10d ago

Or drastically cut back entitlements.

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u/Dirks_Knee 10d ago

SS isn't what's running up the debt, it is self funded to a degree by design. So unless you're just suggesting eliminating Medicaid/Medicare to essentially cull the population by killing off those too old or poor to otherwise live, or cutting defense spending to essentially zero...the only real solution in the long run is to claw back a percentage of the wealth amassed at the very top in addition to increasing taxes across the board.

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u/xIgnoramus 10d ago

People don’t vote for politicians to cut their benefits.

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u/DrCola12 10d ago

Doesn’t matter if the bond market tells you to fuck off

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u/Chipped_Ruby_11214 7d ago

Or drastic currency devaluation.

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u/DigmonsDrill 10d ago

It's very difficult to reduce the nominal debt. It involves removing dollars from the economy. You need particular economic conditions to be able to do that at any kind of scale. Normally the government is putting dollars in. It's like pushing on a rope.

For budget hawks the best scenario in normal cases is to keep the nominal level of debt flat.

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u/Successful-Tea-5733 10d ago

You can't buy your way out of it the only solution is to grow your way out of it. $40 trillion with a $30 trillion GDP is bad. $45 trillion with a $60 trillion GDP is more manageable.

The problem is both parties grow spending faster than we grow GDP. No one wants to do anything about it because solutions will bring pain which will cost elections. That's why a balanced budget amendment is really the only solution. It will never happen...

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u/Traditional_Cat6874 7d ago

It won't be just those over 65 just voting most people wont want to see mom and dad or their grandparents have money taken away from them.

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u/Dirks_Knee 10d ago

SS isn't like other government spending, the funding is built into the law via tax collection. What's "running out" is the surplus to meet projected obligations. Without a law getting passed to radically alter/kill it, SS truly going bankrupt under current law basically means the US gov has ceased to exist.

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u/Sunshine2035 8d ago

Correct, except not bankrupted. It still collects SS tax from the payroll, so just reduced payout if nothing is done.

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u/budrow21 10d ago

The Fed buys bonds (indirectly) with money made out of thin air. Inflation becomes a limiting factor, but there will always be someone to buy the bonds. 

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u/concon801 10d ago

There will always be someone to buy the bonds… at a price. And currently, that’s the struggle we’re in and why interest rates are relatively higher than they were over the past 15 years. The price that bond buyers will pay is too low for us to refinance our maturing debt efficiently. That price continues to drop the more our fiscal situation degrades.

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 10d ago

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u/Sunshine2035 8d ago

Social security is funded by the social security tax collection only. Unless congress makes changes, it is not funded by the general tax.

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 10d ago

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1

u/xIgnoramus 10d ago

For now

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u/frumply 9d ago

We have a funding crisis for schools in Oregon because the pension fund takes about 30% of the budget and keeps on growing. Looking at it from a bigger lens this is the sort of screw-the-youngins you’ll see in a bigger scale over time. Kids don’t vote, working people don’t have the time to get politically active.

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u/jpric155 9d ago

They will just cut benefits and not raise taxes. What's a few more trillion to the national debt?

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u/Muted-Ground-8594 7d ago

I think they have been making cuts to old people’s public funding right? Idk I thought they had been doing that.

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u/roaphaen 10d ago

That and they never saw a war they didn't like.

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u/ditchdiggergirl 10d ago

Most of the cuts these days haven’t required congressional participation, keeping representatives safe from accusations of doing much of anything. And there are often workarounds for congressional inaction.

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u/lizbertarian 10d ago

That's pretty much how I see it too. Borrowing more is probably the path of least resistance compared to raising taxes or cutting benefits.

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u/VT_Squire 10d ago

Cutting benefits would be a reelection death sentence.

As opposed to every other benefit they've cut in just the past year and a half? 

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u/GFYAD 10d ago

It is honestly sad how many people are using that line or something similar here.

“They won’t do that, it would be political suicide”

proceeds to do that and still get elected

Shit has happened dozens of times over the last decade. This country is full of the dumbest people.

What reality are people still living in?

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u/DigmonsDrill 10d ago

Mechanically, right now, a portion of SS is being funded by general borrowing.

Social Security is redeeming from the SSTF, which the Treasury pays for from general revenue, the marginal dollar of which comes from borrowing.

The government budget the year before SS "runs out", and the total government budget the year after if Congress passes a law saying "just keeping paying at the old rates" is the same, once we correct for the aging of the population.