I have been retired for 13 years. Planning for Social Security cut

I I keep reading articles about how to adjust your retirement planning to account for possible/probable SS cuts in 2034. Those articles are aimed at younger people who are still working giving them sound advice. I (F) am 78 and husband is 82.
We have adequate emergency savings. We are able to save half of our monthly income and continue to do so. Our monthly income will continue to increase every year and except for SS at least keeps up with inflation. My question is should we continue to build up cash reserves or pay off our mortgage so that in 2034 we will have no debt at all. Actually, if we divert most of our savings to the mortgage it will be paid off in about 7 years instead of the 11 years it is now.

Give us some stats about your mortgage. What is the rate and term ? Is it adjustable? What % of your overall budget is your mortgage?

2.5%. 11 years left. Pmts are 578 a month but we paid 600 a month for a couple of years and are paying 700 a month now – for about 6 months.

If we are talking 2.5% fixed for the remainder of the loan, I would not make extra payments. You can get 4.5-5.0% interest in savings accounts at the moment. If you are saving 1/2 of your income then I hope you are investing some of it. You can’t take on a lot of risk at your age, but you can take on some. Heck, you can get 30-year Treasuries at almost 5% and those are risk-free.

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Ok, thanks.

@chil1193 I think it’s extremely wise to budget for a future cut. I am doing the same. I retire in December. I don’t trust Congress to fix any of our serious issues. I expect them to just play pointless games, waste our money, and leave us without meaningful governance.

Congress will certainly not fix any of our serious issues. Their objective is to do as little as possible and get re-elected. If the SS Trust Fund will run out in 2034 then you can expect them to address it in 2033, when it will be far more expensive to fix.

Ponzi schemes always run out of money…

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SocSec is only a perceived as a Ponzi because the taxation base is outdated. By outdate I mean this:

The last few decades, we have a “K-shaped” economy. The rich get richer, the poor get poorer. The middle struggle, and some go up, some go down. Income inequality, in a word.

Well, the Social Security taxes being what they are, all of that gigantic surge of wealth which has come to the top 1% never got taxed, obviously because the taxation quits about what, $176,000 now?

If it was well-funded and inputs and outputs were more balanced, then no one would think it’s a Ponzi. Of course the 1% would always complain. Their coping mechanism was they just bought American government, because it was for sale.

Divide and conquer is the strategy - get people in the trenches to mistrust each other and fight, the use of the word “Ponzi” implies a level of stealing and cheating. and they won’t notice you making off with basically no SocSec tax burden.

“Ponzi” is a distraction. It’s not what is really happening. The cartoon below sums up what I mean, but the bubble should say, “Careful, that old person is going to gobble up your Social Security retirement cookies before you have a chance to enjoy any, because it’s an unsustainable Ponzi”.

Its perceived as a Ponzi scheme because it meets the criteria:

  • Investors are enticed (forced) to participate in the scheme
  • Profits are paid to earlier investors using money from more recent investors
  • The scheme eventually collapses due to a lack of new investors

The whole system is completely flawed…but its never going to be fixed.

According to your definition, any governmental function could be a Ponzi.

  • Townspeople are forced to pay taxes to buy fire trucks and a fire station and to staff them
  • Fire prevention services are rendered to earlier taxpayers using money from more recent taxpayers
  • Anti-government people who don’t want to pay taxes collude with private firms who want the town’s fire suppression business to chronically underfund the fire department
  • The fire department eventually collapses due to a lack of enough tax funds; the fire department is closed
  • The anti-government people go away happy
  • The private fire suppression firm get lucrative contracts from those rich enough to sign up for their services
  • There is a surge of fires in the town after the fire department is closed, especially in less wealthy neighborhoods

Is that a Ponzi, or a conspiracy against the public good?

That sounds like someone is reading some wild conspiracy stuff…and not at all relevant to the SS discussion. Since we are so off-topic from the OP…I will leave it here.

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Let me explain it… rich people don’t want to pay into SocSec above the ~$167,000 cap, and financial firms have been leaping at the chance to put the massive amounts of Social Security payroll tax money under their management (and they are often the same people), that’s why these parties want to cripple the Social Security system, make it a failure in the eyes of the public, and then rush in with a “wonderful solution”… which will benefit them.

Create a crisis
Spread disinformation
Smash and grab while everyone is panicked and distracted

That’s the playbook.

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The problem with the govt approach is that they offer compassion with little efficiency. The problem with the private sector is that they offer efficiency with little or no compassion. To solve that problem you need a team dedicated to the common good of the country.

It’s very difficult to make an effective and cohesive team out of members of two teams with polar opposite positions. Especially when the fans (read voting public) participate in the melee with a football-fan mentality.

The problem with that scenario is that half the fans are always disappointed and waiting for the next opportunity for revenge.

There shouldn’t be a cap on income that pays into social security, and the age for full retirement probably needs to be indexed to life expectancy with full cognitive ability. Allowing not paying into social security if you work for a government entity should probably be rethought.

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Food for thought.
I saw a bumper sticker a few weeks ago that said "you always hear about SS running out of money but you never hear about welfare running out of money "… Sure SS is a federal thing and welfare handouts are generally at the state and local level, but still makes you wonder…As far as that cartoon on this post goes I would say the old guy with all the “cookies” probably worked hard and invested for decades to get those “cookies” the young American worker with one “cookie” can have more working and investing for decades just like the old guy…as far as the foreigner goes we owe him nothing, in fact we over the last 4 years have had 12 million of them break into our country, thankfully after Monday (Jan 20) most of them will be going home.

The SS system is already crippled & on life support. There is no “surplus”, there’s nothing left in the trust funds but a pile of IOU’s. The surpluses built up after payroll taxes were increased in the 1980’s to cover the coming spike of Boomer retirees were raided in the 1990’s to “balance the budget”. SSN checks to Boomers like me are paid out of the general fund, put there by younger Americans who will never see a dime of SSN “benefits”.

The national debt is $36 trillion and climbing. If you factor in Uncle Sam’s other unfunded liabilities (Medicare and Medicaid), the national debt is 10 times the published figure.

When the first beneficiary started collecting SSN, there was a 300-to-1 ratio of workers to retirees. The number of workers paying in versus retirees taking out has steadily declined in the intervening decades. Soon it will go negative.

The government is not going to deal with the problem. It’s known about it for more than half a century. It has systematically ignored the problem and kicked the can for 30 years. This is how all government schemes built on leprechaun economics end. Statistically a great default is inevitable.

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The “IOUs” are US Treasury securities… it’s a wee bit more formal than a scrap of paper! They underpin the entire world financial system, since we are the world reserve currency.

I don’t think Treasury will default in nominal terms, but in real terms. They will pay the debt back in Dollars which can buy less and less. If they do default in nominal terms… just stiff the bond holders outright… that’s pretty much the prelude to a long, deep, worldwide depression. I don’t put it past them. It’s very dysfunctional now.

That’s why I have what Clark would consider an imprudent amount of gold, silver, and miners. 17% of the portfolio. Because I don’t think it will end well.

If 17% of the portfolio goes up 5x while 83% of the portfolio goes down by 81% then I preserve my standard of living. And I will have dry powder for buying assets cheaply. Crises may last for years, but not forever.

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They’re still just promises to pay, obligations of the federal government. Here’s a 2021 article that addresses the $2.6 trillion trust fund myth (if you Enable Reader Mode in your browser, you bypass the site limit on free articles).

Uncle Sam has to turn those promises to pay (in other words, IOU’s) into money to pay its obligations. Here’s another Forbes article on the accounting trick Uncle Sam uses when it tries to explain away the system’s insolvency. Even though written in 2009, its predictions are even more timely in 2025.

As a Boomer still in the workforce, I don’t exempt myself from the coming default. My “benefits” are already being taxed as regular “income”, even though FICA withholdings over my entire career came from earnings already taxed once. To avoid the 81% tax increase needed to cover the shortfall the 2009 article refers to, Washington is going to have to shaft some segment of the population. Even if we gave D.C. literally 100% of our net worth, it would be squandered by the spendthrifts on the Potomac.

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That is a wise allocation. Gold and silver will always have inherent value that Federal Reserve Note’s never will. It’s not that gold and silver “cost more” than they used to, it’s that the greenbacks you buy them with become worth less.

I remember those gigantic 50 cent JFK silver Half Dollars from when I was five years old. They seemed so HUGE to a Kindergartener. So… turns out the purchasing power of the face value of that coin is down 90% from 1966. That is shocking. That is inflation.

The MELT value of the metal, on the other hand, of those coins (which were 40% silver, 60% copper) is currently $5.40. So the value has been preserved, it has held pace with inflation.

And Bitcoin? I honestly don’t know if it’s speculative asset or a safe haven. I really am not confident expressing an opinion one way or another. I was a whole coiner at one time, I wish I had held it! I’d be $100k richer! But would I sell now and claim the profits, or would I hold too long and lose the profits? It’s a tough asset to own, because of the volatility, that is for sure.