Regarding raising the retirement ages, I think that we’re close to the limits of what people will accept. Possibly they could eventually move everyone’s full retirement age to 70 but according to Meep’s chart that probably would not really be a solution.
I think raising the payroll cap and means-testing payments are likely to be what’s adopted.
If/when Dems get solid control of both houses of Congress and the White House, I think you get the bump/removal of the salary cap and possibly a means test.
If/when the GOP gets solid control of both houses of Congress and the White House, I think you get an increase in retirement age, adjustments to the future growth in benefits, and trimming of survivors’ and disability benefits.
But my money is on leaders just kicking the can down the road and there being a battle royale in a few years over how much of the shortfall is covered by payroll tax increases, and how much by permitting a haircut on benefits to take effect.
i think this too.
there are a lot of ways means testing can be implemented, but it doesn’t strike me as crazy
Eh or they can just keep bumping the salary brackets up 5% every year
Means tested payments switch the whole program from being something people feel is “fair” - you contribute, you get back - to just another welfare program.
I doubt it’ll happen.
Isn’t Social Security intended as welfare? I’m not educated on the origins, but I didn’t think it was intended to keep Bezos afloat in his twilight years.
I believe the idea was “presumed” lack of income due to inability to work. But yes, they weren’t worried about Rockefeller.
There are welfare components for disableds, widows/widowers, and children who have dead parents
I’m unsure of the origins but with the 90%, 32%, and 15% bend points it acts to redistribute wealth (from wealthy to less wealthy)
It was meant to have more of an element of give-and-take than the usual welfare program. It wouldn’t be as popular if it was a traditional welfare program. I think this concept may have been covered at some point in an actuarial exam.
It was originally intended to prevent senior poverty, which there used to be a lot more of. That’s why senior labor force participation % used to be a lot higher – people had to work until they actually dropped (mainly men). The great majority of people didn’t have anything like retirement.
There is a senior welfare program that is separate from the standard OASI benefit, called SSI, for people whose standard benefit is too low. Some other people get SSI, too.
https://www.ssa.gov/ssi
Was this long-term change caused by people having more access to wealth, via 401Ks and private pensions?
I see that little increase in 2021. What caused that? Drop in wealth?
Poverty measures are generally all based on income.
Money Income: Income Used to Compute Poverty Status
The income used to compute poverty status includes (before taxes):
Earnings
Unemployment compensation
Workers’ compensation
Social Security
Supplemental Security Income
Public assistance
Veterans’ payments
Survivor benefits
Pension or retirement income
Interest
Dividends
Rents
Royalties
Income from estates
Trusts
Educational assistance
Alimony
Child support
Assistance from outside the household
Other miscellaneous sources
Money income does not include:
- Capital gains or losses
- Noncash benefits (e.g. food stamps and housing subsidies)
- Tax credits
They use lower poverty thresholds for seniors:
The poverty threshold for seniors bumped up 5% in 2021 compared to 2020. Similar to the SocSec COLA:
https://www.ssa.gov/oact/cola/colaseries.html
But of course, all the non-SocSec income would have taken a hit for those who were rather old, unless guaranteed in some way.
Speaking of that series above starting in 1975, and the SocSec COLAs – before then, any COLAs for SocSec were ad hoc.
Just noticed that above a certain income threshold, catch-up contributions will automatically have to go into a Roth account starting 2026. Does this disincentivize catch-up contributions?
Only mildly related but I think of this when i see the 401 number. The US has some 308 transfer or something (I’m making up the number) that lets you move money between annuities and universal life policies without triggering taxes. Man, I wish we had that in Canada. We can do that kind of thing between retirement savings vehicles, but there’s no facility to move money between insurance plans or insurance plans and annuities.
Seems like it necessarily would, though maybe just a little.
Definitionally, high earners will be most able to add catch-up contributions. High earners will be more often best served with Traditional.
But that is a large generalization, and catch-ups will still be advantageous.
No. There is not a better tax advantaged option for people in that position
If anything it is a good way to diversity tax advantaged status
It is still a tax advantage to never have to pay 15% capital gains on the investment earnings on said ketchup contributions. So, while it would be better for those in a high marginal tax bracket to be able to continue to use traditional 401k taxation, getting the earnings tax free is still better than nothing. The threshold for ketchup contribs being mandatory Roth contribs is >140k (i.e. within reach of many 50+ year old actuaries)
