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July 2024 net worth update & Social Security considerations

5 Responses to “July 2024 net worth update & Social Security considerations”

1. LivingAlmostLarge Says:
   July 31st, 2024 at 11:43 pm 1722469384
   1722469384
   Me too. I haven't ever calculated SS into my retirement calculations and we're similar in age. I just don't know how to calculate it so instead I just leave it by the wayside. I mean I know I should I just figure I'm like 20 years give or take away so a lot can happen in that time.

2. Dido Says:
   August 1st, 2024 at 12:49 am 1722473370
   1722473370
   Good realization to count at least partial Social Security in. While there WILL have to be changes, there are a LOT of things they could do to shore up the system.
   
   When you hear that Social Security may run out of money, it's the Social Security Trust Fund or excess that built up in the 1990s and earlier when the cohort of younger working people was larger than the cohort of retirees.
   
   There will ALWAYS be people working and paying into the system so there will always be funds to pay at least some benefits.
   
   The latest estimate is a 21% reduction in benefits in 2035.
   
   BUT, cutting benefits to those who are claiming is a real political hot potato; I doubt it would come to that. Instead, there will be some combination of:
   -imposing Social Security taxes on wages over the current wage cap of $168,600 (particularly on wages over $400,000--there may be a "donut hole" for wages from the current wage cap up to $400k);
   -raising the retirement age for younger people; currently Full Retirement Age is 67 with the possibility to receive "delayed retirement credits" of up to 8% per year if you delay until age 70; for people who are younger, that could change over time to Full Retirement Age at 70 with delayed credits up until age 73 or something like that;
   -there are also inflation factors that they use in calculating the annual adjustments OR the equation that they use for calculating the "break points" in benefit calculations that could be changed. Basically, your Primary Insurance Amount is calculated using an equation that first of all calculates your lifetime inflation-adjusted wages for the top 35 years that you earned (if you have a working record longer than 35 years, they inflation-adjust everything to the same year and then lop off the lowest wage years until they are left with 35; if you have fewer than 35 working years, they add in zeroes for those years); the equation then does something like weigh the first $15k of your wages really heavily, the next $30k a little less heavily, and so on, so that people in low-paying jobs receive a higher *proportion* of their average lifetime wages as a benefit than higher earners do.
   
   There are a lot of fixes; there just needs to be the political will to do so. As long as we have split governance, the changes will get delayed until we get way too close to needing to make a cut, probably around the end of this decade.
   
   As a financial planner, I don't factor in a cut to benefits for clients who are already claiming; for those who have yet to retire, I factor in the latest projection of the SSA Trustees. Sometimes for clients in their 30s and 40s who are very Leary about SS, we factor in 50% of their projected benefit.

3. Dido Says:
   August 2nd, 2024 at 02:23 pm 1722608625
   1722608625
   Agree; the growing national debt is a concern.
   
   It's Medicare that is the harder fix than Social Security. Their Hospital Insurance (Medicare Part A) fund is currently slated to run out in 2036, a year after SS.
   
   However, the fix is harder. Currently, you pay for Part A with every paycheck you earn at 1.45%. And, unlike SS, where there is a cap at $168,600 in income, for Medicare, there is no cap--AND there is a 3.9% surcharge for higher wage earners. So they've already started instituting some changes, and it's still not enough for the projected needs.
   
   Increasing the payroll tax would be the easiest fix in terms of shoring up the system, but politically difficult.
   
   [Note that Medicare Parts B and D don't face the same problems because they are paid for differently.
   
   Part B is federal insurance but you pay a premium monthly (automatically withdrawn from SS once you start SS; if you are on Medicare before you start SS, you will pay your premiums quarterly). 2024 base premium is $174.70 and higher earners pay a surcharge known as IRMAA (income-related monthly adjustment amount), based on your modified Adjusted Gross Income from two years prior (AGI + tax-exempt income).
   
   Part D is private insurance. So is your Medicare Supplement (also known as Medigap), and Medicare Advantage (also known as Part C) is private insurance as well. They don't face the same funding problems.

4. Dido Says:
   August 5th, 2024 at 12:26 am 1722817562
   1722817562
   LB, glad to be of service!
   
   I really enjoy feeling useful to others :^).

5. rob62521 Says:
   August 25th, 2024 at 06:49 pm 1724611778
   1724611778
   Dido, you rock!
   
   Being a teacher I'm not eligible for Social Security, but sure hope it is around for those of you who are eligible.

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