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Author: decath Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 61309  
Subject: Re: SS & here is my plan. Date: 6/25/2007 4:50 PM
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markr33:
Don't think of it as "punishment" of savers, think instead in the following terms. Government requires revenue to fund all the programs it operates (and which are fully supported by the electorate as they repeatedly vote for their representatives after they repeatedly continue funding for such programs), and therefore must raise funds somehow.

That is a hard one to accept. I guess it depends on where you are financially. It also depends on where you define the income/wealth level that is means tested. To the very wealthy, (people with 5 mil or more), missing out on SS benefits probably will be a minor hiccup that they can will get over quickly.

However, I'll use the typical example used on intercst's REHP, the RECF board and the RELE board. That is, a one million portfolio drawing 40k per year for living expenses. I also use this because it pretty much will work out to be my situation if I RE in the 53-55 age range as I hope to in 8-10 years. DW and I could live on 40k per year right now if our home was paid off and our kids were on their own. Being as it is, when I'm 53, the home will just be paid off, the last kid will be out of college and I have inflation adjusted the 40k to 50k of living expenses at that time. So 50k for 2 people is nice and comfy in a relatively average cost-of-living state like TX. I suspect we can take at least 1 nice vacation a year on that and also be able to replace one car every 5 years.

Dollars to donuts, who ever comes up with the dividing line for means testing will look at that one 50k per year, or the 1.25 mil portfolio used to derive that amount using the 4% rule, and easily decide that DW and I are wealthy and will get nixed from receiving a penny of benefits, regardless after 2 lifetimes of accumulating SS benefits and hoping to receive that extra income stream.

Keep in mind, at least in my situation and most other people in America that I will NOT be receiving any kind of inheritance and that 1.25 portfolio was achieved after a lifetime of LBYM and personal sacrifice.

Counter that with my next door neighbor who receives outpatient care from a rich uncle, spends money like the dickens on their 3500 square foot home, boats, ATV's, SUVs, and gobs of electronic gadgets that this techie drools over every time I see them unload a new box in their driveway. He's a fire chief that makes 95k and she makes 45k as a school teacher. DW and I have never made more than 95k per year combined, pay cash for used cars and are well seasoned LBYM folk in our almost 65% paid off 2400 squ ft 3 bedroom home. However, I'm absolutely certain after the financial talks I have had with my neighbors, that they have never once contributed to any kind of investment/savings vehicle. They spend everything they make plus some, get bailed out by rich uncle, and repeat. Then they gripe to me how hard it is to get by these days. Somehow, I can easily imagine that people like that will slip through the means testing screen and receive their full SS benefits as promised.


With the very large SS liabilities, one way is to "means test" and reduce eligibility, or tax people on their benefits. An alternative way would be to tax your savings, or the earnings on your savings, even more than is currently done. A yet another alternative is to have higher taxes on earned income. Which do you prefer?

None of the above. I'm for reducing benefits across the board until you get to the point where you “pay as you go”. Everyone makes the sacrifice to cough up a portion of their expected SS benefits. To make up for it, people have to accept the fact that they will have to work longer, save more for retirement or a combo of both. It may be tough for some people but it is better than ripping off an entire generation of people that saved responsibly. Of course those who reach 70ish, can't work and are truly indigent, will be taken care of through our existing gov't safety net.

You might notice that I left out the alternative of spending less on government, and that is because it has proven time and time again to be unworkable in real life.


I agree. Both Republicans and Democrats have demonstrated over and over the willingness to avoid expense cutting at all costs. (pun intended) <g>

The alternative we have not discussed however will be the most likely one. Nothing will be done. The US will just mount larger and larger deficits as we have continued to do so since WWII. The SS payments will continue until it breaks sometime in the future. The timeframe? I know not and would not even try to speculate.

decath
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