I just found out that my sister doesn’t know there is a difference between youngest possible retirement age and normal or full retirement age, for purposes of Social Security benefits. Ouch. Even though I don’t spend much time talking about my font of elder law knowledge when I’m with my family, I really am surprised she doesn’t know this and I feel kind of responsible.
There are now some real head winds that will be caused by the new tax bill being contemplated right now. There is already talk of cutting SS and Medicare if the economy does not pick up because of this corporate tax cut. We will all need to redo the calculations once we get a better feel for the changes.
Much of what we expect to receive may not come to fruition.
Those of you planning independent of any government entitlement will be unaffected of course but most of us will be receiving some form of entitlement.
I agree, @MassDaD68. I’m very concerned.
Social security solvency issues aren’t new. We have known about them for decades. But rather than doing anything to actually address them, we have just kicked the can down the road. Just easier to deal with the issues tomorrow.
Social Security solvency issues are different than Congress cutting Medicare, Medicaid, and Social Security to fill the hole it might dig with the tax bill.
There have been talks of social security benefit cuts for a long time now. Medicare and social security are primary drivers of deficits/debt going forward. Anyone who is 10-15 years or more from retirement and/or expects to live 30 or more years should not be expecting to receive their full stated social security and/or medicare benefits. What is happening in DC doesn’t change that. Might change the magnitude but that is possible by any number of possible circumstances going forward that at this point cannot be predicted.
IMO, the tax bill moving through Congress is intentionally designed to accelerate the insolvency of Medicare and Social Security so they can cut the benefits. You can almost see Paul Ryan salivating over that prospect. It’s a cruel and cynical ploy: balloon the deficit so you can turn around and scream “Too much debt!” and use that as an excuse to shred the social safety net. This has been a wet dream of politicians of a certain stripe since . . . well, to be honest, since the 1930s when Social Security was enacted.
As far as I’m concerned, it’s the ultimate bad faith. I’m 65, not yet retired but with a retirement plan that has always counted on Social Security and Medicare as important pillars. And I have gladly paid into Social Security and Medicare for decades, partly because those programs were essential to my parents’ ability to age with dignity, and partly because I believed those programs would also be there for me. Stories about the long-term imbalance between revenues and obligations in those programs have been with us for decades, but instead of addressing those problems forthrightly—e.g., by tweaking the revenue side—the politicians just preferred to kick the can down down the road. Until now, when we’re facing a day of reckoning accelerated by an irresponsible tax bill that will massively increase the national debt----as the architects of the tax plan surely know, despite their public spinning… Incredibly cynical. Incredibly cruel. Incredibly destructive. This is a plan that will impoverish millions, to no good end, and for decades to come.
Paul Ryan says he’s been dreaming of cutting Medicaid since he was in college: https://www.vanityfair.com/news/2017/03/paul-ryan-medicaid. Yep, it costs a lot, but the problems must be approached from a more thoughtful, less vengeful, position, I think.
You know, my husband brought up an interesting point. I was complaining about the 1.4 trillion additional debt and he asked, “How many years is that over, is it for a ten year period? The last administration increased the debt 9 trillion over just eight years and the sky didn’t fall, so why is this so horrific?”
I didn’t have an answer, so I crankily changed the subject. But thinking about it, I realized he had a point.
Though I have not been in support of this tax bill in any way, I am trying to look at the impact with open eyes. I think that people who have money in the stock market are going to see a huge increase in their portfolio. It is likely at some point they will means test entitlements, and maybe they should. All you can do is prepare for the future accordingly. We still have about 15% of non real estate assets in high quality bonds (about 2% return), not planning on cashing out for a long time. Thinking about going all in, into the market, as it’s not make or break monies for us. What is everyone else doing?
We are sticking to our plan, a modified Liability Matching Portfolio, close to Bernstein style. Basically, put $x (basically 30x residual expenses) in Fixed Income and every other penny in Total Stock Market, Total International Stock Market, and PRIMECAP.
We will probably make a zillion dollars from the tax changes, as we have already made great returns. I am completely honest in saying that I’d gladly give back 2x our windfall if I felt today about our country like I did 2-8 years ago.
what a misanthrope! College kids are supposed to dream of writing The Great American Novel, or curing a disease, or starting a company that makes a better mousetrap. Small dreams from a small man.
For a more nuanced look at the debt, https://www.thebalance.com/national-debt-under-obama-3306293
I think (I HOPE!!!) that the inevitable cuts to Medicare and Social Security will affect younger people, ie they may raise the eligibility age but for people currently age 50 years or younger. That would give people time to plan for the changes. However, I see a huge unintended consequence of the current tax bill and the questions it raises about changes to SS: I think we will see a dramatic increase in the number and percent of people starting social security early, at age 62, rather than waiting until age 70. I know actuarily it’s not suupposed to make any difference, but in the short run it will increase federal social security payments beyond what was forecast. I am even considering starting benefits myself, vs the original plan of waiting until age 70 for my full benefit.
edit… had to research this: “Some 48 percent of women and 42 percent of men signed up for Social Security at age 62 in 2013, down from around 60 percent of women and 55 percent of men in 2005, CRR found.”
but, “However, only 4 percent of women and 2 percent of men hold out until age 70, according to CRR.”
“How many years is that over, is it for a ten year period? The last administration increased the debt 9 trillion over just eight years and the sky didn’t fall, so why is this so horrific?”
I think that is an unfair comparison for a couple reasons:
- The projected $1-1.4 trillion deficit added by this tax bill is in ADDITION to continued projected additions to the federal deficit. I've seen estimates of $10 trillion over the next decade. The $1.4T number is JUST the amount created by this specific bill not factoring in other spending contributing to a deficit.
- The Obama administration represented a period of aggressive policies and economic stimulus packages to fix a collapsing economy and extreme financial market turmoil, the likes of which our country hadn't seen since the stock market crash of 1929 - something inherited from GW by the way. Policies and spending were put in place to "right the ship" to avoid another Great Recession, which were hugely effective and which we are reaping the benefits of now. When an economy is operating well, it's not the time to add to the deficit, I'd argue.
Yes, I wonder about the filing early for social security. I’ll definitely run the online programs when it’s time, but a factor to put in that is purely guesswork, is does one think they’re even going to get it in the future? Many think it will be limited for them, and that it can change, so taking it early is a better idea. And those concerns can be impossible to quantify.
And then there’s the people say that the bill will pay for itself in additional economic activity. Who is to be believed? I don’t know, maybe those who have an accurate magic 8 ball.
The thing is, I don’t think there is much we can do about it now, but prepare to lessen the impact of cuts that affect each of us, and take advantage of the activities that will benefit us.
“And then there’s the people say that the bill will pay for itself in additional economic activity. Who is to be believed?”
Many, many knowledgable economists say it won’t, probably because it hasn’t held true in the past. Trickle down economics is a farce. It’s a tax cut for those at the top of the pyramid.
One thing I can do is save my $$ for my kids and their kids. I think, in the “every man for himself” country we are becoming, they are going to need it.
I will also contemplate encouraging them to consider making a home elsewhere.
@IxnayBob How are you defining/calculating “basically 30x residual expenses”? Just curious to understand more of the concept.
I don’t think much of the increased economic activity is attributed to individual tax cuts catering to high income individuals, but counting on business tax cuts to spur hiring, expansion, and wage increases. Whether they do that will remain to be seen. We know they will increase stock buybacks and dividends, so it seems like the stock market is the place to be right now.
They should have just done the business tax cut alone, if that was what they were going to do, and wait on the individual cuts. The tradeoffs look very bad.
@doschicos, I take projected annual expenses to live reasonably (i.e., not living small or large), and subtract after tax Social Security (ours will be 85% taxed, at least) and pensions (I count them, but they’re not COLAed). That leaves the residual expenses.
The goal is to provide around 30 years of living expenses without needing equity gains, so roughly 3-4% drawdown. It is over-the-top conservative, but that makes me happy. In real life, we should have quite a bit in the “risky” equity part of the portfolio, but I’m a belt and suspenders kind of guy 
“I don’t think much of the increased economic activity is attributed to individual tax cuts catering to high income individuals, but counting on business tax cuts to spur hiring, expansion, and wage increases. Whether they do that will remain to be seen. We know they will increase stock buybacks and dividends, so it seems like the stock market is the place to be right now.”
I put corporations at the top of the pyramid as well. There is zero proof and history of lower corporate taxes leading to increased economic activity in terms of measurable ways that will help those across all socio-economic spectrums especially job creation. Plenty of corps are sitting on significant cash already.
As far as helping the stock market and our current administration’s constant mentioning of it, that sure won’t reach down to folks at the bottom. All it will continue to do, IMO, is create a greater chasm between those at the top and the bottom half, while increasing taxes on those doing well but not 1%ers who are already feeling like they are carrying a lot of the burden. It feels like a plutocracy and a kleptocracy and that isn’t good for political, economic, or democratic stability.
@IxnayBob Thanks for the explanation, Mr. Belt and Suspenders. 
Rightly or wrongly, I’ve been taking a less conservative tack, setting aside enough to ride out a typical economic trough with zero problems, to carry us over it, and being more aggressive on the rest. Can I come sleep in your basement when the time comes? 