Here's When Trump Could Cut Social Security Benefits

motley fool ^ | July 12, 2019 | Sean Williams

[edhawk]

You do understand that your SS benefits are taxable at a federal level right? Not sure if Kentucky taxes those at a state level. At high income levels up to 85% of your SS benefit would be taxable at your current income tax rate. You can google the formula the IRS uses to determine what % will be taxable to you each year.

[cuban leaf]

Yes, but you have to earn over a certain amount of net income before it is taxable. If your only income is SS, and both you and your wife make the maximum, you “may” have to pay a little tax, but few fall into that category.

I researched this quite a bit before I decided at what age I want to start collecting.

The formula is below from here: https://smartasset.com/retirement/is-social-security-income-taxable

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According to the IRS, the quick way to see if you will pay taxes on your Social Social Security income is to take one half of your Social Security benefits and add that amount to all your other income, including tax-exempt interest. This number is known as your combined income (combined income = adjusted gross income + nontaxable interest + half of your Social Security benefits).

If your combined income is above a certain limit (the IRS calls this limit the base amount), you will need to pay at least some tax.

The limit is $25,000 if you are a single filer, head of household or qualifying widow or widower with a dependent child. The limit for joint filers is $32,000. If you are married filing separately, you will likely have to pay taxes on your Social Security income.

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So, if a couple somehow pulls in $50,000 a year in SS benefits, half of that is $25,000. The tax threshold is $32,000. So you pay no federal income tax.

[Tell It Right]

"If you allow people to opt out who’s going pay for next month’s Social Security checks?"

A) Start with the $2.9 trillion in the trust fund. B) Use taxes already collected from other places. It's not like we don't already dream up new reasons to spend tax money. Only this time it's to pay early on a debt before the debt grows even worse.

[chuckles]

Removing the cap would only raise a few hundred million and the SS fund is destined to need trillions, so it's a drop in the ocean to speak of raising enough money to "fix" SS.

Once again socialism doesn't work, ever.

I paid about $60k over 40 years in SS tax. I have already taken out twice that and am only 68. SS draws NO interest on the money I paid in, so SS is already praying for my death. Ergo, Medicare.

[minnesota_bound]

Note that no member of Congress is cutting THEIR benefits!
A county in the state of Texas and another in California back in the 1980’s invested in the stock market. They were grandfathered in and get much higher benefits before congress blocked the plan. A country in South America switched and get bigger returns.

In short we could be getting double the money but for corrupt politicians in Congress.

[Farcesensitive]

We need to begin phasing out SS, the way to do that is to means test all current recipients and all new applicants for the next five years and then stop taking new applications after five years.

End the tax and shred the bonds in the “Trust Fund” and pay for those still in the program from the general budget until they all die.

[OIFVeteran]

That’s a pipe dream when 49% of married retirees and 60% of single retirees receive 50% or more of their retirement income from social security. Those numbers will get worse with future generations because less companies offer defined benefit packages now. You’ll never get the votes to end it.
I think in a modern industrial society you need some sort of government guaranteed retirement program so that people in their old age can end their days without going around begging for hand outs.

[Freedom56v2]

That’s weird huh? Seems to be a bottomless bucket of money available for non citizens welfare and upkeep. Maybe we should renounce and move south jump the border back here and seek assylum(sic) here in the U.S.
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Mega ditto!

[OIFVeteran]

The trust fund is just IOUs the government owes itself. The government will have to borrow to pay those back. In 2018 the US had to borrow $955 billion dollars to cover its budget. We are on track to borrow over 1 trillion this year, at a time when the economy is booming. Under your plan we would have to borrow an additional 2.9 trillion.

I’ve come to realize neither party is fiscally conservative. A true fiscal conservative would want a balanced budget and the debt paid down. All conservatives seem to want is to cut taxes. All Liberals seem to want is more spending. But at least the liberals are talking about adding additional revenue to cover the new spending.

I’ve said it before, I dislike tax and spend liberals, but I really hate cut taxes and spend conservatives because they drive us into debt even faster.

[Tell It Right]

"The trust fund is just IOUs the government owes itself."

I agree with the rest of your post. And I agree that the SS trust fund is all U.S. treasuries (the only thing by law the SS trust fund is allowed to invest in). Therefore, most of the debt of the U.S. is to itself (the Treasury owes the SS fund more than it owes anybody else).

However, the SS trust fund is an asset account (owning a bunch of U.S. treasury bonds) to pay off the IOU's to Americans who've put into SS over the decades.

[OIFVeteran]

From the numbers I’ve seen raising the cap would extend SS through 2055, and it would create a surplus in the treasury therefore lowering the deficit. And that is without putting a cap on maximum benefits allowed.

[OIFVeteran]

The IOUs that social security holds is equivalent of you putting a hundred dollars in a jar for your kids college at the beginning of every month. Then you take it out at the end of every month to cover your monthly expenses and write IOU plus 5% on a piece of paper and putting that in the jar. When your kids ready to go to college you have to either borrow money, or sell some of your possessions, or work overtime, to cover the IOUs.

[central_va]

When is welfare going to be bankrupt? Or refuge funding?

[central_va]

SS retirement age should be lowered because I look at it as a tax cut and not an income device. THE GOP has made it so it looks like I will have to work until I die.

[Tell It Right]

I agree with you that the money doesn't stay in the SS fund. But it does track an IOU to each American who put into it -- hence the shortfall it'll have because the promised payments are more than the contributions, even with some interest earned from being invested in treasuries.

It's analogous to your bank account. Your bank doesn't have several drawers in the back, one for each account, and one drawer with your account number with the exact sum of cash you deposited into it. Everybody knows the bank is allowed to invest some of it as long as they keep a certain percentage on hand for the people who want to withdraw in the near future. Just cuz the money isn't in bills and coins in your account doesn't mean you don't have an account at the bank. They owe you your money back.

Likewise, your SS account is just as real. Yes, the SS fund was set up as the world's largest Ponzi scheme. Yes, it was based on a failed assumption that Americans would keep having 6 to 8 kids per family and keep feeding into the Ponzi scheme more than is being taken out.

But any solution we come up with to fix SS has to acknowledge the fact that the SS fund owes many Americans substantial money. So my solution is to allow people to opt out of it, go ahead and pay everybody off who opts out of it, and be done with it so the Ponzi scheme doesn't keep getting more and more broke in the future.

[OIFVeteran]

Excess SS funds are invested in special non-marketable securities that by law earn market rate of interest. These IOUs are not marked by what each American put into it. The Supreme Court has ruled in Fleming vs. Nestor (1960) that there is no contractual right to receive social security benefits, that it is a tax and congress can make any changes to it at anytime it likes.

The money you and I put in has been spent for current retirees and replaced with pieces of paper. This the way the program was set up and has always operated. For most of the life of social security it collected more than it paid out and those excess funds were used in the yearly budgets. One of the reasons that we didn’t have such huge deficits until Reagan.

Hate to say this but Gore’s idea of lock boxes would have been better than the current system. Though we would have had to come up with alternate revenue to cover the shortfall caused by this.