Planning For Retirement In 20+ Years: Social Security Uncertainty

For those of us who are 42 or younger, we have at least 20 years before we will be eligible for social security. I find it important to consider the future state of the program while I am still 20+ years away, because it impacts my financial planning. Here are some bullet points of my thoughts:

  • Social Security was never meant to be an income replacement in retirement. It was designed to keep old poor people from dying on the streets. It has grown into being a full income replacement for many and that’s unsustainable.

  • Benefits have been cut over time and will likely continue to be cut over time. The cost of living increases for social security do not actually track inflation and the age at which one can start collecting has gradually moved upward as well.

  • Life expectancies will likely continue to rise which makes the program less sustainable over time, but also more valuable to people who are older and grandfathered into certain benefits.

  • Generally, the government tends to cut benefits more for people who haven’t yet started to received them. For example, they might decide everyone born after 1990 has to wait until age 70 to start collecting but if you were born before then, you can still start at 67.

  • Means testing was first added to Social Security in the form of taxation of a portion of benefits. Such that if you have certain income levels, you pay taxes on your SS income.

  • It’s likely additional means testing will be a method to reduce benefits in the future.

Thus, my conclusion is to avoid having “means” by which can be tested in the future to reduce your SS benefits. We don’t know what those “means” will be, but some possibilities:

  • Other federal retirement plan access
  • Any state-level retirement plan access
  • Annuities
  • IRAs/401ks
  • Income in general
  • Assets in general

I hypothesize that in the future, SS will have to be pared down to only serve people who really need it, as was the original intention. My goal is to position myself into one of subjective need as defined by future legislation. Thus, I am trying to anticipate what this will look like. Let’s think about each possibility:

Republicans tend to have a voting base that is upper middle class to wealthy and work for private companies.
Democrats tend to have a voting base that is younger, minority, and also unionized workers.

Democrats would not support means testing on the basis of other pension plans because those groups are generally unionized. However, in 20+ years, there will not be many people with private pensions. All private “defined benefit” pensions have gone away in favor of defined contribution plans. So really it’s just state and federal government workers still getting a defined benefit plan and they are not all unionized, so I’m not sure which way democrats would swing.

Republicans would not support means testing based on IRAs and 401ks since that’s where most of their constituents stash away money. Annuities may also fall under this.

“Income” has already been means tested so there’s a precedent there already in place which makes it more likely this will be used in a greater extent in the future. Such as phasing out SS benefits based on income.

One possibility of means testing 401ks and IRAs would be looking at account value at the start of each calendar year, such that one must draw down all 401ks/IRAs to zero before being eligible for any SS. If this occurs, you’ll have a huge taxable implication on any tax-deferred money. Thus, this could be countered by preferentially using Roth accounts, since you could draw them all down in the first year to zero without tax consequences.

Means testing of State and Federal plans will be tricky to avoid. One possibility might be a lump sum payout, rather than taking your defined benefits, however if SS means testing becomes law, then individual states will block lump sum payouts since it would bankrupt their funds. I’ve been tracking several state retirement plans that I’ve lived in over the years and each state has changed their rules significantly over the last 15 years to block certain things. My assessment here is to avoid state or federal retirement plans if possible, and to take your lump sum payout and roll it into a privately held IRA as soon as possible before that is blocked.

Asset-based means testing seems unlikely. That’s a common tool for Medicaid and various welfare benefits, but would result in the greatest pushback and also increase overhead of the SS program significantly as everyone will have to submit annual asset documentation. It’s also relatively easy to change asset ownership as Medicaid planning shows, so my assessment is this is least likely and also easiest to circumvent should it arise.

Thus, it seems prudent to get out of retirement accounts and into hard assets if possible. Owning 3 single family homes (without a mortgage) that you rent out for monthly cash flow is better than having $1M in your 401k with respect to future SS means testing. You can always transfer the property title to a family member or a trust, and artificially reduce your means. Whereas taking $1M out of your 401k will result in a $300k+ tax bill.

I think gold and silver coins could also be good because while they are an asset, they are not listed anywhere, and if cash still exists in the future, there’s no income generated from the sale. I do foresee cash going away in the future, so I wouldn’t suggest a large percentage of your retirement fund stashed in gold coins because it might be difficult to liquidate in a way that hides the numbers from SS income-based means testing, which is the most likely form of means testing.

I’m a fan of early retirement, between the age of 40 and 50. In that case, you will have 10 to 20 years of living off your retirement accounts prior to being of SS age, and you can then draw down on your retirement funds during that time and prepare for the means testing to come.


I gave you a heart because this is such an important topic. :slight_smile:

It’s late and I really need to go to bed. My only thought for the moment is that I’ve seen what it’s like to live from Social Security check to Social Security check coming off a lifetime of low-paying non-union blue collar work (my grandfather). Between that and the risk of being means-tested out of a large chunk of Social Security, I’ll gladly take the means-test.

The only thing I’m sure of is that we’re not going to like any of the “solutions” that they eventually come up with.

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They have already made the “deal” much worse over time as you say, from increasing the retirement age to adding taxes on SS payments for most people to most recently stripping out various valuable options in terms of how you take your SS benefits (file and suspend for spouses, repayment option if you took lower benefits early and lived to regret it). I forget the exact math, but I think I’ve seen my future SS benefits go down by $50k at least just since I’ve been paying attention and I’m not that close to retirement age, so I expect there’s more to come.

I think the most likely things within the current framework are higher retirement age, more taxes, and/or AGI-based phaseout if your benefits. As such, and like for most government benefits, you can get a lot more than you give if you can manage to “look poor”.


My plan is to not have to rely on SS benefits in retirement. It seems you are letting the benefits tail wag the asset accumulation dog.


Haven’t read any text in this thread yet, but THANK YOU @TripleB for bringing this subject up. I am always fascinated by this topic, given everyone tells me I won’t see a dime of SS money when I retire. I have about 25 (on the good side) - 35 (on the “normal” side) years until retirement.


This is mine too. However, I think it’s because I’m usually a “paranoid” individual and the hype of people saying what I said above, about how I won’t see a dime of SS money, has gotten to my head. I figure if I plan to never have it, but I do get something, it’s just gravy. It means an extra vacation per year, or more money in the grand kids’ college funds, or whatever.


I’ve always felt bad or worried for family members who have over 50% or more of their retirement income from SS. Seeing their situation and feeling like they have no power or control over what’s to come has given me the determination to not ever want to live like that.

I plan to retire self reliant and not expecting to get a dime from SS. If I do get anything it will be a nice bonus but I certainly don’t want to have to rely on it for my well being.


This is very true. Many government benefits don’t count retirement contributions against you. If you can contribute enough to your IRA/401k/etc to lower your AGI to low enough levels and live within those means, saving up to 50% of your income in qualified retirement vehicles you can still qualify for Savers Credit, free state healthcare for your family or kids, etc and get ahead in many ways.

Depending on the suspected “means” test they may develop for SS, looking poor may be a great way to still qualify for SS and other benefits.

Hope for the best, plan for the worst.



I’m going over to the stock thread too, and going to post this: “Buy low, sell high. /thread” haha


I’m 51. Time to join Aarp and bankroll lobbying/PACs to fight for the status quo.

The statistics her are pretty scary:

  • Nearly 20% of Social Security recipients have no other income
  • For 33% it accounts for at least 90% of their income
  • For 50% it accounts for at least 50% of their income


I’d say radical downsizing of lifestyle is the backup plan, but that doesn’t help the people in the WaPo article, who never had much to begin with. It seems crazy to me that someone could be a relatively competent person in life, yet not have at least 1 M in retirement assets by 65. But everyone’s circumstances are different, and most have more than just their spouse to take care of…

A lot of this IMO boils down to what risk of ruin you’ll accept. You can assume SS = 0 but then you’ll have to work longer, maybe much longer, to replace it with your own investments to be 100% sure. You have to assign some number to it. Maybe it’s nothing, maybe it’s today’s payout.

How would y’all suggest quantifying it? Go by monthly by SSA estimates? Take the NPV of it as an annuity and add it to your retirement assets? Apply a haircut based on politics?

My SS estimate is extremely generous. I am planning for 50% of that. However, I think it will be more like 75%. It will be very difficult (politically) to change SS too drastically.


Given the WaPo article, it strikes me that they cant devalue Social Security too much if not half of old people will be homeless. Admittedly, they can do means testing, but it’s hard to see how politically viable it is.


Yep. It sealed their fate when they made it an explicit tax rather than taking it from regular income taxes. If it had just been an entitlement program like welfare paid out of the general treasury, they could probably cut it at will.


I’m 49, I have been hearing that social security wont be there for me since I was 5, it will be there…


But just in case, I have a govt 401k and a pension that will equal about 35% of my pay when I retire in 2027!


Since The Wall Street Journal reported yesterday that the Republican tax proposal includes limiting pre tax deferred compensation, and maybe IRA contributions to $2400. per year (currently 18,000, and $24,000 for people over 50, you can adjust those numbers downward.


Regarding politically viable, the mere fact that they are proposing to jack up people’s taxable by tens of thousands of dollars (see my reply to your earlier post where I stated the proposal to limit deferred compensation and maybe IRA pre tax contributions to $2400, not to mention eliminating state and city taxes , medical expenses and other deductions, seems to indicate that they don’t care what anyone thinks.


According to the WaPo article which confirms other data I have seen, the average SS for a 2-person household is $27,000. If this is 50% of the median family’s income, then they must be getting another $27,000 from somewhere else. This makes a total of $54,000 for the average retired couple. I’m not saying this is a lot, but it’s not that bad. They might not be having champagne and caviar, but they aren’t eating cat food on that budget.

I don’t know where the other $27,000 is coming from, but assuming it’s from retirement savings and these families are drawing down 6% of their retirement funds each year, they must have about $450,000 saved. Once again, this is not a life of luxury, but not terribly distressing either. I know the safe number is 4-4.5%, but I’m trying to be conservative on their savings.

As for the bottom 1/3, they’re screwed.