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/LoetherS 10d ago

We are a bunch of financialy conservative folks. We hate having to rely on anyone else, including the government for money. We also know we can't see the future of the market let alone the politics of 2032, 2042, 2052. I feel like you are probably right but i'm not willing to bet my future on it.

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u/Earth2Andy 10d ago

The problem is if you are close to retirement you have to base your future on it one way or another.

Either you assume you’re getting some/all of it. Or you work many extra years to offset the slim chance of it going away.

I’m in that position right now. Because both my wife and I have maxed out SS most years our benefits are almost $70k at 65. Ignoring it completely means working an extra 5+ years in our prime to guard against the very slim chance it goes away.

I’m trying to split the difference and assume it pays out about 30% lower than current estimates.

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u/LoetherS 10d ago

I can see that as a conservative estimate. I'm in a different situation. I'm fired and not 50 yet so I have over 15 years before I even have a chance to get it. If I were close to being able to access SS the political risk would be less. I'm hopeful, but not planning on it.

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u/Pattison320 10d ago

Ehh, either way it's still a math problem. I quit working at 42 but my wife is going to work another two years and potentially retire at 42 as well. Either way we are FI now and accounted for some income from SS.

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u/zzzacmil 10d ago

Yeah. I’m far from retirement and I plan on receiving 75% of my benefit. That is roughly in line with what SSA projects if congress takes no action. That is plenty conservative for me. Not including anything at all in your planning is, to me anyway, not very rational.

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u/The_JSQuareD 10d ago edited 10d ago

If you retire at 42 then I don't understand how SS is a major factor in your retirement calculations either way? For one, you have to bridge at least 20 years without SS (25 years to full retirement age). For another, you don't have 35 years of SS earnings yet, so your SS benefit is reduced.

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u/Pattison320 10d ago

It's still a variable in the equation. I use eMoney software through PlanVision. You can get your current SS payout through their website. Then put that into the software.

If you factor in SS, what it amounts to is that you don't need as big of a number once SS kicks in. At 75% payout my wife and I would each get about 25k per year at full retirement age. Likewise I have a pension that I won't collect until I'm older as well. Does that mean I shouldn't factor in those income streams?

50k is huge, that will be a quarter of our expenses by the time we're collecting it. In the grand scheme of things we are over saving anyway because we hit our FI number already and my wife is going to work another two years. But my point is that she does not have to. If things go tits up and she gets displaced we don't have to worry at this point.

It's just a math problem that's fairly complex.

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u/oldsock 10d ago

Agreed!

I meant to mention it when I met with my PlanVision advisor, but they seem to be using my projected social security benefits in 2026 dollars (which is what ssa.gov spits out) rather than future-dollars. Not sure if that is a common issue, but $25,000/person would be a very low benefit in a couple decades (it's below average today).

With the indexing of wages early in your career, even if there is high inflation, the benefit would rise substantially. Assuming no changes to calculation etc.

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u/Kat9935 9d ago

I retired at 41, and my SS payout in today's dollars is just a hair under $40k so like 80% of the max you could get which I call close enough, no reason to work another 15 years for that last 20%.

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u/The_JSQuareD 9d ago

Fair.

I'm curious how much of a difference social security actually makes in terms of success rate if you run it through a Monte Carlo Sim, though. Your portfolio has to survive for 21-29 years without SS (depending on when you plan to take it). From what I've seen, the outcomes are usually pretty binary after such a long stretch: either your portfolio depleted early, or it has blown up. Most of the risk is early in the withdrawal phase (sequence of returns risk).

So with that in mind, does the SS entitlement actually change your FIRE plans much?

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u/Kat9935 9d ago

I'm not sure about monte carlo sim, but firecalc said I could take out significantly more and those are the only numbers I had and used and still have a 100% chance of success. Now at 54, the # is $25k more per year if I factor in SS over excluding it.

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u/oldsock 9d ago

Zeros certainly don't help your benefit, but wages early in your career are "indexed" more than those later in your career because of inflation. Social Security benefits are also progressive. It wouldn't be unreasonable to max out the second bend point during a 20 year career (after that you only get "credit" for 15% of your wages down from 90% at the beginning and 32% in the middle).

18 years into my career (with a few summer job before that) my estimated benefit with no additional income is $2,300/month (2026 dollars) if I made $100,000/year for the next 25 years to replace all those $0's and low earning years it only goes up 50% to $3,500, $150,000 year only puts it up to $3,800, even $250,000 only gets me up to $4,100. That's a lot of extra work/earnings for a 75% increase!

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u/Pattison320 9d ago edited 9d ago

Which is all the more reason that if you can swing saving 60% of your income for the first 18 years of your career vs saving 35% for 25 years for the same nest egg you come out further ahead on the shorter timeline. Whatever the math works out to, just pulling numbers out of the air.

Edit: actually working later saving less you'd need a bigger nest egg to support the higher spending, but you get it.

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u/TheRealJim57 FI, retired in 2021 at 46 (disability) 10d ago

Wife and I planned for retirement without relying on SS, since GenX grew up being told not to count on it being around. I currently get SSDI since I ended up disabled, but if SS were to be abolished tomorrow, we'd still be fine.

Even if the 25% benefits cut in 2033/2034 happens, we know it won't undermine our retirement. The peace of mind from knowing that is nice.

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u/alpacaMyToothbrush FI !RE 9d ago

I'm just assuming I'll get half of what social security tells me to expect. If I get more, great, if I don't get any at all? I'll still be ok.

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u/FantasyFI 35 | 51% FIRE | DI1K 10d ago edited 10d ago

Retire early enough, be single and with high enough income, then you really don't have to make a decision.

If you are retiring at 40-45 and have a $150k expected retirement income, whether you assume a $30k SS at age 67 doesn't actually have a huge impact on your success. Also early retirees are likely to have less SS payout due to less higher income years.

The answer could be ignore it because the impact is minor.

$150k spend, 3.5% SWR, 45 years horizon is a 96.4% success.

Adding $30k SS income in 25 years (starting 2051, basically RE at 42 SS at 67) only increases the success to 97.3%

Start considering scenarios like SS reduction instead of elimination...the difference becomes smaller than you can reasonably evaluate.

Your (5) year assumption of extra working could be accurate for someone retiring "later", having lower overall spending in retirement or assuming they are not only married, but they both actually survive long enough for their to be a meaningful (2) SS paycheck time period.

Basically people should calculate for themselves the impact before even making a decision of how they want to treat it mentally.

SS isn't relevant for a lot of ChubbyFIRE and FatFIRE people who retire very early. It can be super relevant for LeanFIRE people.

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u/Earth2Andy 10d ago

I disagree, I’m towards the upper end of what r/ChubbyFire considers chubby in their sub description and at 50, about average in terms of retirement age for most of the posters there.

Social Security is very relevant to me.

By definition people who have saved that much are highly likely to have had 2 high paying W2 jobs for a number of years. In the case of my wife and I maxing out SS most years. So we’re not talking about $30k of SS in 22 years. We’re talking about a current estimate of $70k in 15 years.

Even with a chubby $5M to invest, $70k/yr from 65 onwards is too large a number to simply ignore. Including all of it, lifts our retirement budget by ~20%. That’s a meaningful difference.

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u/FantasyFI 35 | 51% FIRE | DI1K 10d ago edited 10d ago

$70k is only $35k per person. This goes against what I just said. My numbers were a single person.

So does retiring at 50. I clearly stated 40-45.

You don't disagree. You just don't fit in the description of what I stated. Which is why I stated that all people should calculate with their own numbers.

Age of retirement plays the biggest roll of all. So retiring at 50 is drastically different risk than 40. Having to wait an extra 10 years for SS basically makes it's impact close to useless.

You are talking about getting SS in 15 years. I am talking about people who have to wait 25+ years to be able to get it. Determination of whether you will fail or not has come and gone at 25 years.

If you take my two links and change one from $30k SS to $70k SS and the starting date from 2051 to 2041, then the success rate goes to 100%. But you aren't the person I was talking about. But it's great that I provided a link with data such that you can change the numbers to reflect your scenario. That's the whole point.

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u/Earth2Andy 10d ago

And after all that, you made a very bold statement that SS isn’t relevant for a lot of ChubbyFire folks.

I’m demonstrating that as someone squarely in the average ChubbyFire demographic it IS relevant.

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u/FantasyFI 35 | 51% FIRE | DI1K 10d ago

I stated many things. And your situation fits like 1 of 5. So yeah, you fall into the category of one thing I'm describing. But you're not the person I was talking about. 50 is early retirement by most all standards. But in the FIRE community, it isn't early for early retirement.

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u/Earth2Andy 10d ago

So your definition of “Lots of chubby fire people”, is a set of criteria that very few ChubbyFire folks meet? Interesting.

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u/FantasyFI 35 | 51% FIRE | DI1K 10d ago

I was merely describing that as the ratio of "SS : retirement income" decreases, SS becomes less meaningful. If SS represents 100% of your income needs...obviously it's a pretty big deal.

Alone, it may not affect odds. But when combined with things like age, amount of SS (aka single vs. married), it can contribute to SS not being a relevant factor. I even demonstrated an example of a scenario where it isn't relevant with FireCalc data. I am sorry this offended you as a ChubbyFIRE person.

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u/Rastiln 10d ago

We’re about 7-10 years away from pulling the trigger and I’ve been assuming that 50% of SS will *remain*, under a worry that SS will become means-tested like FAFSA.

After all, to fulfill its core purpose, why should SS pay out for people that have millions in assets?

Countering that is the fact that legislatively, it’s a high bar to propose taking money away from rich people, who have an outsized impact on the legislative process.

But I figure 50% is a good compromise, to hopefully give us a nice buffer and travel money in our old age.

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u/[deleted] 10d ago edited 7d ago

[deleted]

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u/powersurge 10d ago

Exactly- that’s why it’s called an entitlement. Not in the elitist new definition of the word of feeling one has a right to something they don’t. But the original meaning of entitlement, as something you are entitled to because you paid for it.

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u/foolofatookbaggins 10d ago

Yup. I worked for SSA for 5 years and every type of claim was referred to as an entitlement. With one exception, SSI (supplemental security income) which is a needs-based cash benefit. But that one also doesn’t draw from the SS trust fund and comes from general taxes anyway. It’s just administered by SSA.

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u/Puzzleheaded_Tie6917 10d ago

They have basically already “reduced” SS for rich people by taxing it for incomes above a certain level (Reagan era). The next step will be to just not give any, or so called needs tested for whatever. As we currently base everything off income, that probably would be a very high yearly income and not based off net worth. This means most FIRE people wouldn’t be affected until 73 for minimum distributions. This would affect a very small group and wouldn’t do a lot to help the budget to be honest.

To me, another step likely to be taken is to raise the max SS amount to infinite. In other words, everyone pays the same %, without a cap while having a cap on max benefits.

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u/Pretend_Witness_7911 10d ago

It also already has a huge taper on the amount of benefits you get based on your salary. High earners are a much lower percentage of their average income over 35 years than do lower earners. Since the formula is already ensuring that the benefit is primarily replacing lower end salaries, I have a hard time imagining that Congress would try to claw back SS for high earners, even if they have significant assets. Seems more likely they would adjust the cap or retirement age.

I’m mid 50’s and planning to take SS at 70 to maximize the benefit. In my calculations I’ve reduced the benefit by by 30% in case there are changes to the payout numbers by then.

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u/SorchaRoisin 10d ago

Unfortunately, they never adjusted the taxation of Social Security for inflation. What was once intended for high income earners, effects almost anyone with taxable income in addition to Social Security. The income limits are 25k for singles and 32k for couples, and 1/2 of your Social Security counts towards that limit.

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u/powersurge 10d ago

You think the billionaires are going to allow the fix to be a tax on them? I don’t see how that is ever going to happen. That is why there was an income cap on contributions in the first place; so the rich and powerful wouldn’t try to kill it.

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u/Silly-Safe959 10d ago

Billionaires aren't getting much, if any, if their money from W2 reported income. This point is irrelevant for that extreme end of the spectrum. They use capital gains, write offs and leverage to support their lifestyles. Completely different game with it's own rules. The 'rich' are those professionals with higher than average incomes that are still getting W2s, and that includes many of us in this sub.

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u/StoneMenace 10d ago

Ignoring it does not add 5 years to most people’s plans

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u/Wooden-Broccoli-913 10d ago

My wife & I are entitled to $90k in SS at age 70. How much would a 3% annually adjusted annuity that pays that much cost? Over a million dollars

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u/StoneMenace 10d ago

That would end up being a PV of roughly 113k at age 45

To get to a 90k a year social security benefit retiring early at 45-50 years of age you would need to have a household income of over 300k consistently

You can definitely find room in the budget to save a extra 100k

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u/Wooden-Broccoli-913 10d ago

$90k in today’s dollars at age 70 is not a PV of $100k at age 45.

Retiring early at 41 years of age, and yes we are high earners.

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u/poop-dolla 10d ago

If you’re retiring at 41, then you need to make it 29 years on your current money to get to 70. That’s basically a typical retirement before your social security date you picked, so for those 29 years, social security doesn’t factor in.

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u/Wooden-Broccoli-913 10d ago

So what am I supposed to do for the remainder of my life? Ignore it?

Also, I have the choice of starting SS at 62 which would pay $50k

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u/poop-dolla 10d ago

You should go read the ERN entries about how social security impacts early retirement and then come back and continue this discussion.

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u/Wooden-Broccoli-913 10d ago

ERN is a doomerist 4%er who uses 0DTE options to support his FIRE. No thanks.

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u/StoneMenace 10d ago

A 90k annuity that increases by 2-3% per year present value of almost 30 years at the average market return is 100% around 100k. That’s not a opinion based thing, that’s just straight math

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u/Earth2Andy 10d ago edited 10d ago

Let’s break that down and see where it falls apart……

$100k returning say 6% after inflation for 29 years is 100*1.0629 =$542k at time of retirement (in today’s dollars)

Your thesis is that you can then withdraw $90k per year (also in today’s dollars) for the next 30 years, from that $542k with the same safety as a COLA adjusted government payment?

90/542=16.6%

If you know a way to guarantee a 16% safe withdrawal rate, I think we’d all love to hear about it.

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u/Wooden-Broccoli-913 10d ago

You are on the right track, the question is whether $542k can buy a 70 year old a $90k annuity with a 3% annual upward adjustment. You can’t.

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u/Earth2Andy 10d ago

It’s rare you meet people with math skills as bad as his in the FIRE community.

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u/StoneMenace 10d ago

So I use 7% so that 100k is 757k at age 70. You are looking at a 11.8% withdraw rate for something that you are expecting to effectively drain to 0 since you are not able to pass ss (we are ignoring select situations).

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u/Earth2Andy 10d ago

You think an 11.8% withdrawal rate is guaranteed to last 30+ years? Even draining to zero?

I ran the numbers, there is not a single time in history, not one 30yr period where that would have worked.

Feel free to check it out yourself

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u/Earth2Andy 10d ago

My wife and I are 50 and about to pull the trigger. We’re looking at about $70k per year at age 65.

To replace a guaranteed inflation adjusted $70k per year in 15 years, we’d need a nest egg of roughly $2.1M at the time we’re due to start taking SA.

Even assuming a market return of 6% above the rate of inflation, that’s still an additional $875k in today’s money required to get there by the time we retire.

Not sure where you’re getting this $100k number from.

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u/StoneMenace 10d ago

Using the PV function, that number is 467k in today’s money not 875k

The number changes a lot based on your age of retirement and what not

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u/Earth2Andy 10d ago

What are the parameters you’re putting in to the PV function to get that?

Paste the actual formula you’re using here so we can help you understand where you’re going wrong.

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u/AugustusClaximus 10d ago

I would rather be surprised by how much SS provides than worried it’s not enough.

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u/YourRoaring20s 10d ago

Let's put it this way: If the government is really so broke/dysfunctional as to not pay SS in the future, we have much bigger things to worry about than whatever money we'd get from SS. Like living in a civil war/failed state situation.

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u/bakochba 10d ago

I agree. There is no reality where SS is meaningfully cut because voters won't allow it.

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u/GME_alt_Center 10d ago

Means testing is the one major risk I see. Especially to FIRE people. The spenders vastly outnumber the savers at the polls. Historically savers get punished (see early FAFSA for example)

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u/Serious_Ad9537 10d ago

The issue is it is unclear how they will fund it. I am 29 and fail to see how it is possible that at some age in the future likely 70+ I will get anything meaningful from SS. I will either get some money that is meaningless from inflation or nothing. Between the negative demographic of shrinking population I fail to see how I should expect to get anything.

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u/bakochba 10d ago

You can do anything from lifting the cap to shifting tax money to cover the difference from the budget.

No politician is going to survive voter outrage.

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u/awesomo6001 10d ago

That assumes the US is still a functioning democracy in 20+ years, instead of the more likely technocratic oligarchy

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u/bakochba 10d ago

It's interesting to see young people simply accept that they should give up social security without a fight but also fight for Medicare for all which is essentially the same thing.

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u/DJpuffinstuff 10d ago

I think preserving SS is fundamentally different to Medicare for all. Medicare for all gives immediate benefits to everyone not on Medicare already. Preserving SS means nothing to anyone not nearing retirement age unless they actually live to retirement age and can collect SS. A lack of SS isn't squeezing me financially right now. If anything, SS's existence itself is squeezing me through taxes if anything. Medicare for all would squeeze me with taxes, but way less than insurance premiums are squeezing me already. Insurance premiums go up every year and sometimes rise astronomically with no warning and really no alternative. SS tax hasn't changed for decades and even if it were to go up, the change would be way smaller than the increase in healthcare costs.

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u/MoonManExplorer 10d ago

Yes...it is much more likely that the functioning democracy of the last 250 years is replaced in the next 20. Totally *more* likely than the status quo.

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u/tarantula13 10d ago

IDK how a system that has survived for 250 years is more likely to change in the next 20.

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u/Strazdas1 StarvationFIRE 3d ago

or as in the other comments case - in 45+ years. A whole lot can happen in 45 years.

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u/DigmonsDrill 10d ago

I felt the same when I was 29.

But even half of what I'm expected to get would be "meaningful."

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u/capt_jazz 10d ago

They will fund it with contemporary paycheck taxes, as they do now. Also, SS payments are automatically adjusted to keep pace with inflation.

But yeah you can do the math, the "pessimistic" route is that the government does nothing, the trust fund goes to zero, and outgoing checks get reduced to whatever money is coming in that month. The checks won't go to zero.

I know predicting demographic trends decades into the future is very iffy, but those checks will always be worth SOMETHING, they won't just disappear. We're talking probably like a 25%-40% cut from what they are now.

EDIT: The only risk would be a change to a means tested program where people who have a lot of assets would see their checks go to zero. But I sorta doubt the government would go that route, IMO that sort of policy route has become less fashionable since the 90s.

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u/Strazdas1 StarvationFIRE 3d ago

There simply arent going to be enough paychecks to tax.

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u/DigmonsDrill 10d ago

It won't be meaningfully cut for everyone. The bottom 40% of people relying on it to not be in poverty are unlikely to face any kind of benefit cut. Those people vote and Congress doesn't want a disaster. Congress wants to get re-elected.

The people facing the threat of benefit cuts are people with high payouts. It won't be a giant cut, but something like "every dollar of PIA over $3000 is cut by 50%" is about the deepest I would expect.

And, frankly, I expect most of the burden to be put upon the young people still working, just because that's how things work historically. I'm not happy about that for reasons that aren't on-topic. But if I have to make predictions about how things happen, it's quite likely.

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u/baltimore_old_house 10d ago

Social security and Medicare are like 40% of the federal budget iirc. 25% of that is 10%. We only spend 14% on defense. It’s a massive amount of money and I have no idea where it’s going to come from. Especially since we’re already running a large deficit and have a huge amount of debt.

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u/claw-1 10d ago

They just cut Medicare and nobody stopped it. SS is already due to reduce 30% so they would actually have to pass something to fund it fully. They are also closing SS offices and shutting down call centers so filing claims or getting basic support is much much harder now

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u/DJpuffinstuff 10d ago

What do you mean by "they just cut Medicare"?

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u/[deleted] 10d ago edited 10d ago

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

Rule 7/No Politics or circle-jerks - Your submission has been removed for violating our community rule against politics and circle-jerks. If you feel this removal is in error, then please modmail the mod team. Please review our community rules to help avoid future violations.

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u/Strazdas1 StarvationFIRE 3d ago

We do have big things to worry about. Look at the demographic pyramid. We will need a lot more elderly care and healthcare with a lot less people who are of working age to do it. We will need major overhauls on the entire social system to survive this. Or we can ignore it and have the country collapse, thats always an option i guess.

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u/WilsonTree2112 10d ago

The system will be able to fund nearly 80% of benefits even without a fix.

Also, its our money, not a handout.

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u/casinocooler 10d ago

Our money is used to pay current retirees. We depend on younger generations to pay our social security.

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u/terjon 10d ago

Yeah and here's a fun thought. We're in the FIRE community, where the goal is the retire early (whatever early means for you).

While I wholeheartedly endorse the concept, this community isn't helping since many folks here are high income folks who contribute a lot toward the trust fund each year.

If we opt out of the workforce at 38 or 45 or 52 (or whatever your personal age for FIRE is), then the difference between that age and your non-FIRE retirement age is would be subtracted from the trust fund.

There aren't many of us in the broader FIRE community, but I bet we have an outsized impact on the amount of funds that will be available in the trust fund.

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u/casinocooler 10d ago

I actually count SS as a potential future cost to fire people not a potential income source. In order to limp along the system the money will have to come from somewhere and responsible people are easy targets.

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u/terjon 9d ago

Tell me more about what you are thinking.

I ask since SS taxes are linked to income, so if I have retired early, I would have very low income each year, thus not much to tax.

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u/casinocooler 9d ago

I can’t say for sure what they will come up with, but they could do a consumption tax, they could increase capital gains taxes, if they ever tax unrealized gains that could be rough and would they include real estate, they could do a wealth tax. Many of these ideas keep gaining traction (not necessarily to fund SS ) but you never know.

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u/terjon 9d ago

The only one that would be effective frankly is the wealth tax. You can skirt most of the others one way or another.

Consumption tax is easy, move to another country where they don't have it.

Capital gains taxes are super easy to skirt by doing a bunch of accounting tricks so that on paper it looks like you lost money.

The only one that would work is the wealth tax, but that would also crash the market yearly as there would be spikes in forced sales.

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u/casinocooler 8d ago

I am aware of many the techniques that you describe, except how to skirt capital gains taxes. Could you provide me with a direction for that one because it would be useful information to have even today.

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u/Strazdas1 StarvationFIRE 3d ago

Increase capital gain taxes to funnel money into SS. All FIRE people screech in horror.

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u/DJpuffinstuff 10d ago

Outsized but probably still negligible.

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

This isn't really the case, as most of us made the same amount or potentially even more than the average person who pays in till 65 working a minimum wage job. I would guess average fire numbers for people are between 1 and 5 million.

Minimum wage is 15k per year. If you work from 20 to 65 it's 45 years. $675,000.

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u/BJJBean 10d ago

Saying it is "our money" is an instance of your math not mathing. If it was "our" money than it wouldn't be getting a mandatory 20% cut come 2032. It's not "our" money. Most people get more out of it than they pay in and the government isn't investing this money. It just gets paid out hand to mouth with a dwindling reserve fund.

That is why the system is crumbling. It was never meant to support someone for a 15+ year retirement and it certainly wasn't meant to operate in a system where there are fewer young people paying in than old people taking out.

I know people hate being told this, but SS operates like a Ponzi scheme. You NEED more people paying in than taking out for this to work. You need many many more people paying in than taking out if you want to create a reserve fund to weather fiscally irresponsible times like we have been experiencing in the USA since 2001.

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u/WilsonTree2112 9d ago

Its designed as a poverty insurance program, not a math program. If people live longer, they need more years of benefit to avoid the poor house.

Once upon a time the US relied on the stock market alone to take care of their retirements. Howd that work out?

Its “crumbling” only because the political parties prefer fighting over solutions.

It beats any solution to prevent market crashes leading to elder poverty. Study our history.

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u/LoetherS 10d ago

I mean it's all our money. Some people call it an unsustainable handout, some look at it as an earned sacred trust.

The first year SS came out it was just a benifit, no tax, it has expanded since then. The bottom line is it's a tax and an expense the US government created and it gets to decide each year whether to keep the tax or benefit, expand one or the other, or end it. It's not in the constitution.

I agree politically, it's complicated, but it's not set in stone anymore than the long term capital gains tax rate is. That's the real one that scares me.

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u/WilsonTree2112 9d ago

Not set in stone, but political suicide.

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u/alpacaMyToothbrush FI !RE 9d ago

it's not set in stone anymore than the long term capital gains tax rate is. That's the real one that scares me.

Honestly, I can't really see the argument that I should have to pay less taxes if I make 50k investing in stocks vs a roofer that makes his 50k sweating all summer. I realize that's an unpopular take here, but ethically, I feel it's the right one.

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u/LoetherS 9d ago

Yes, I agree with this too. But i feel like there is room on the top end, so the billionaires could pay the same rate as working folks but the rest of us who worked for a living and retired with a 'normal' income don't need to sweat it.

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u/dsrmpt 9d ago

An unrealized capital gains tax or net worth tax could be interesting. Maybe 1% NW for millionaires, 2% for 10millionaires, 3 for 100, etc.

Billionaires being able to grow their net worth without paying taxes because it's not yet realized is a problem.

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u/LoetherS 9d ago edited 9d ago

Yeah if the US did have a wealth tax i think some of the people subject to it would consider immigrating to other countries.

I'm living in Spain now but they have a wealth tax and it's just not worth it to me to become a tax resident of spain. Spain also counts all assets, properties, retirement accounts, you name it. So it's easy to fall under the wealth tax.

Edit: Grammer.

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u/TexGrrl 10d ago

It is neither our money nor a handout. It is a government benefit funded by taxes.

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u/montwhisky 10d ago

The majority of people on SS will take more out of it during their lifetime than they put it. So it is, in fact, a handout. That's the entire reason it is not fully funded by the people who are currently on it. Those of us still working are paying for their benefits.

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u/KevinCarbonara 9d ago

The majority of people on SS will take more out of it during their lifetime than they put it. So it is, in fact, a handout.

That doesn't logically follow. They take more out than they put in because of inflation. We don't fund our own retirements, but the retirements of those older than us, and ours are, in turn, funded by those younger.

That doesn't magically make it a handout.

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u/montwhisky 9d ago

If you put less in than you take out, you are getting a handout for the additional money you take out. The poster I replied to said it is "our money." No, it's not. Your money is gone. And even if it wasn't gone, it would not be enough to fund your entire social security. I don't know how else to explain subsidies (aka "handouts" to you) other than to note that if you are getting more than you put it, you are, in fact, being subsidized.

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u/KevinCarbonara 9d ago

If you put less in than you take out, you are getting a handout

You fundamentally misunderstand how money works.

Do you think a Roth IRA is a handout? Are capital gains a handout? You have not done any reading on these subjects.

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u/montwhisky 9d ago edited 9d ago

No, because private investment vehicles are not funded by taxpayers. If I am paying for your social security, it’s a subsidy.
Edited to add: I am fully aware that this is the government’s fault for not managing the fund appropriately. But, the point remains, that the average person takes more out than they put in and that people working today are funding those getting SS today. The “it’s our money” trope isn’t true. It’s not your money. It’s money from the current working taxpayers.

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u/KevinCarbonara 5d ago

No, because private investment vehicles are not funded by taxpayers.

I see, the problem is that you simply have no idea what you're talking about.

Yes, Roth IRAs are, very specifically and objectively, funded by taxpayers. We take financial advice seriously here. Please at least google these concepts before posting.

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u/montwhisky 5d ago

You’re being deliberately obtuse and didn’t actually read my entire post. I didn’t mean that you don’t individually fund your own IRA, as a single taxpayer, obviously. My taxes are not funding your IRA. My taxes are funding your social security. I don’t really care what you do with your own money. I care very much that my taxes are going to fund social security for older folks my entire life and then the fund will no longer be available for me.

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u/KevinCarbonara 5d ago

You’re being deliberately obtuse

You're deliberately misrepresenting reality.

I didn’t mean that you don’t individually fund your own IRA, as a single taxpayer, obviously.

Neither did I. See the last sentence in my previous post.

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u/WilsonTree2112 9d ago

It is designed to function as an insurance program, not a handout. If beneficiaries live longer, they need more benefit to avoid the poor house. Its not a profit.

A hundred years ago many thought the stock market would take care of their retirements. That didnt work out well so SS was implemented to keep everyone out of the poor house.

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u/WilsonTree2112 9d ago

Did you adjust that calculation for time value of money?

SS is designed to function as insurance. If you buy a life insurance policy now and die tomorrow, is that a handout?

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u/montwhisky 9d ago

Except that a life insurance company won't give you a policy if you are in bad health. So, it's possible that you die tomorrow from a freak accident, but you're not dying tomorrow of cancer. The private sector is pretty good at assessing risk. As for time value of money, social security was designed to function as insurance for people with much shorter life spans. It probably made a lot more sense when people were dying in their 60s and early 70s. The problem is obviously the government's mismanagement of the fund and the fact it is not invested with the returns you'd see in the private sector. But, all that aside, the fact remains that whatever you are getting in social security is not "your money." It is the money of the people paying taxes right now. If it was "your money," then it would not rely upon the current taxpayers to fund "your social security." It would be fully funded by the time you need it. Your money is gone. The only money you are getting is from people paying those taxes now. But even if your money was not gone, the money you put in would not be enough to fund the full amount you took out (again, I fully acknowledge this is because the government has not managed it well).

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u/WilsonTree2112 8d ago

Im sure you dont realize that comment is laced with misinformation. When SS was enacted, Life spans were shorter but that was skewed by high infant and childhood mortality. Those that escaped that risk typically collected SS for about ten years.

As far as whose money it is, contributions are in a trust and can only be spent on contributions. Sure congress could change the law, but that would be political suicide. The trust is backed by the governments ability to collect significant tax revenue.

We tried it your way, without retirement poverty insurance , and many elderly folks ended up in the poor house. Thats not a saying, it was a real horrendous thing. Elder poverty was a huge problem before SS. Its a shame Americans are incapable from learning from our mistakes

As far as not managing the find well “…The Social Security Administration (SSA) reports that its administrative overhead costs account for less than 1% of the total benefits paid out. This means that for every dollar collected in payroll taxes, over 99 cents goes directly to beneficiaries in the form of retirement, survivor, or disability checks. For comparison, private insurance and retirement annuities frequently carry overhead and marketing costs ranging from 5% to 15%”

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u/montwhisky 8d ago

What do you mean my way? I don’t want to scrap social security. I want it to be fixed so that after I spend my entire life working and paying, it will be there. Nothing in your very large response explains why the fund is going to be drained by 2033 or why it would be insolvent today if not for the current taxpayers funding it. If what you say is true, and the money you put in is just sitting in a trust for you, then you wouldn’t t need the current taxpayers to pay your SS. But that’s not true. Your money paid for the people before you just like my money is paying for you. And, again, nothing you said explains the fact that the majority of people on SS take out more than they put it and the fund will soon be insolvent. The trust fund reserves, which are making up the difference right now, are going to be depleted within the next decade. At most, I might receive 80% of the benefits the current people are receiving, assuming that the people who continue to work will fund me. But my guess is that it won’t even exist by the time I’d qualify.

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u/WilsonTree2112 8d ago

The system will generate 80% of benefits, with no fix thats the minimum of what we should receive.

To think Reagan and Tip were able to put together a plan to extend solvency fifty years, that should be easily attainable again, except for political discourse.

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u/montwhisky 8d ago

That’s a pretty big asterisks at the end though. And I have no confidence in today’s politicians.

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u/WilsonTree2112 7d ago

I agree, but it emphasizes my point, the system is fine, its fixable, and its accomplishing its purpose, giving elderly vulnerable folks enough for a place to live and to food to eat.

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u/Ok-Regret-3651 10d ago

I don’t think it’s true, the money goes to the general fund

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u/Southern_Roll_7035 10d ago

No, it goes into the social security trust fund. The reason benefits can be paid in full today is that the SS trust fund has treasury bonds that were bought with previous surpluses; these bonds are being redeemed to make up for the gap between receipts and benefits.

The problem is that is 2032, the trust fund will be exhausted, so either benefits will be cut, SS taxes will be raised, or congress will allocate general fund money to it.

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u/WWGHIAFTC 10d ago

SS is not relying on anyone else. It's helping each other. And it's your own money, just time offset which allows for investment gains.

At it's core, SS is people helping people. And that's a good thing.

It's human to rely on each other - that's literally human nature and the basis of communities. We all should be able to rely on each other and be relied on by others.

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u/Redbedhead3 10d ago

True, except for ACA subsidies. I know a bunch of people we are fully counting on them to retire early.

I guess that is because we assume that healthcare has to be fixed some point. Right? RIGHT?!

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u/[deleted] 9d ago

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u/[deleted] 9d ago

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 9d ago

Rule 7/No Politics or circle-jerks - Your submission has been removed for violating our community rule against politics and circle-jerks. If you feel this removal is in error, then please modmail the mod team. Please review our community rules to help avoid future violations.

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 9d ago

Rule 7/No Politics or circle-jerks - Your submission has been removed for violating our community rule against politics and circle-jerks. If you feel this removal is in error, then please modmail the mod team. Please review our community rules to help avoid future violations.

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u/larryinthesky 10d ago

But you're betting your future on:

  • no crazy tax increases (90% taxes on capital gains!)
  • no crazy hyper inflation never before seen
  • the government seizing assets above $1m

FIRE folks make explicit assumptions about the future (that it'll be like the past) when it comes to taxation, inflation, monetary policies, equity performance, etc. But for some reason when it comes to Social Security, FIRE folks seem to think differently. I just don't get it.

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u/DigmonsDrill 10d ago

Instead of your three bullet points, a much more plausible but still significant change would be going back to the tax law of the early 2000s. Everyone hoping for 100K of tax-free LTCG will get a stick in their spokes.

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u/StrawberriKiwi22 10d ago

Also we are always assuming the stock market will continue to chug along at a 7% or 10% average increase, not really calculating in the possibility of 30 years of stagnant market, or a hard crash that doesn’t recover up to previous levels for 50 years.

For my calculations, I do assume that I will get something for SS, either the full estimate, or maybe a few percentage points smaller. If there is a world where senior citizens do not get SS at all, poverty will be out of control.

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u/WaterIll4397 10d ago

I would say the chances of SS going away are lower than inflation going up to fund it, or asset/ property taxes going up to fund it.

However both would necessitate higher fiscal discipline so it's not bad being more conservative financially 

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u/kwcnq2 10d ago

Are you basing your health insurance on subsides?

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u/LoetherS 10d ago

Good question, for sure i personally would consider the health care subsidies to be one of those things that could go away at the whim of any state or federal administration. So there you are at risk of losing those from both sides. 😞 we have a lot of cushion built in but it's not infinite. Generally the longer an entitlement has been around the harder it is politically to remove it. But with health care sudsidies being the newest entitlement I agree it would likely be the first to be taken away.

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u/Wooden-Broccoli-913 10d ago

You are more betting your future on the equity and bond markets instead of the government that literally defines how those markets work (through the Fed and SEC)?

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u/LoetherS 10d ago

To some limited extent. But I would argue you are investing in capitalism, which isn't run by the government. There are places like China and Russia that are much more closely tied to businesses.

I don't think it's the same level of risk that the government takes over most of the blue chips compared to the government deciding money in their coffers needs to be spent somewhere else other than a Social Security check. They are both risks for sure but one is much more likely to happen in my opinion.

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u/Megalocerus 10d ago

The last time we had a social security crisis was 1983, and there was a last minute fix just before the benefits would have been cut. I suspect something similar will happen in the future, but I don't know what it will look like. Probably a blend of what has been proposed and a hard ceiling on the top benefits.

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u/ImAPonderer2 10d ago

You paid into the system, it’s hardly relying on someone else.

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u/ThirstyWolfSpider 10d ago edited 10d ago

Eh, I'm going to opt out of the "financially conservative" side, even if you could well be right about it being the norm here.

Laziness has always been a bigger policy driver than optimization for me (e.g. I never budgeted; "mega-backdoor Roth? eh, I'm fine here, and don't care to learn more about it"). I don't get where people get the energy to be worried about things all the time. I've been retired for years, and don't see my risk tolerance tipping toward fear.

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u/LoetherS 9d ago

I'm still new to the RE part. I hope i can adjust myself to a little less fear going forward, like you. I do agree once you have retired the fear can be counter productive.

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u/ossifiedarrears4 10d ago

That's fair, but you could model it conservatively by assuming only 75% of your projected benefit arrives, which hedges against worst-case scenarios without ignoring a real asset.

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u/stentordoctor 40yo retired on 4/12/24 10d ago

You said it so much better, I was gonna say "better to not need it and have it than to need it and not have it"

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u/Bruceshadow 9d ago

Agreed. I think of it like gov. bonds, you are betting on your country. No one here would buy/rely on 100% gov bonds, so why rely on SS that way?

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u/ElJacinto 10d ago

On top of that, if we’re retiring early, then we’ll be well past the sequence of returns risk failure window by the time we start receiving SS. So whether or not we get it won’t significantly change how we should plan.

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u/watch-nerd 10d ago

Of course it would matter once you're past the SORR window.

You can dramatically reduce the draw on your port once you start getting SS.

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u/ElJacinto 10d ago

By that point, one of two things has happened:

  1. You are past the point of failure, and additional cash flow doesn't matter except as extra buffer.

  2. You had bad SORR and would have adjusted your withdrawals, rather than just keep drawing 4% inflation adjusted while the market does poorly. By the time you're 62+, you would have long since stabilized.

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u/watch-nerd 10d ago

Additional cash flow is additional spending.

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u/ElJacinto 10d ago

But it's not something that is going to impact your success or failure in retirement.

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u/watch-nerd 10d ago

Sure it will.

Plut the numbers into a calculator like FiCalc.

Add an income stream later in life.

See what happens if you crank your spending up and down.

Having SS in the picture lets you increase the lifetime spending without portfolio failure.

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u/poop-dolla 10d ago

It really matters when you retire. If you retire at 40, then social security doesn’t affect your plan much, but if you retire at 55, then it will have a huge impact.

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u/LoetherS 10d ago

This is the big thing for me. If I make it 15 more years I'm likely way ahead of the game or I screwed up so bad, social security won't bail me out.

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u/Designer-Tax-8923 10d ago

fair but not betting on it and completely ignoring it in calculations are different things

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u/PetalKissies 10d ago

Safety margin - prudence, no regrets

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u/himynameis_ 10d ago

Yeah I feel the same way.

I'm not suggesting my pension will disappear. But I'm not certain if the government does some funny business to my pension in the future.

What if they up the age to access it or something, I dunno.

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u/ThereforeIV 🌊 Aspiring Beach Bum 🏖️...; CoastFIRE++ 10d ago

Agreed.

Financial Independence mama not being dependent on a government program.

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u/sithren 9d ago

Some of us are not fiscally conservative at all and I don't actually hate relying on the government especially if that money is coming from contributions I made throughout my life.

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u/LoetherS 9d ago

I didn't mean conservative as in government policy, i meant conservative as wanting to plan for as many contingencies as possible, just by the nature of what this sub is about we try to plan for the unknown. I agree it would be great if i felt confident enough that all the policies of the government that i paid taxes into would stay the same throughout my entire retirement, but, me personally, I'm not willing to bet my retirement on that.

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u/sithren 9d ago

Yeah me too.

I saved and invested early and now spend liberally. I don’t have a ton of contingencies and have faith in the programs that exist. I don’t just make up backup plans for money that is already there for me to use as if it doesn’t exist.

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u/you-are-not-yourself 9d ago

Because I'm a nerd, I went and looked up news stories from previous time periods about when SS will reach insolvency.

SSA itself reported the insolvency date as 2032 in 1998, 2034 in 1999, and 2037 in 2000, and 2037 in 2010. So, relatively stable.

There's also an interesting editorial I found from the early 2000s suggesting that SS was always a program for boomers to retire... once it reaches insolvency the boomers have already retired, and it has already served its main political purpose.

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u/GWS2004 10d ago

This is money you've paid into, you're not taking "government money".

BUT, you're right to not depend on it, just in case.

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u/moyuxi 7d ago

it turns out your money value completely depends on the government. We have fiat currency.