Ask Bud - Would "Means" Testing Change When to Start Social Security

  • Question
  • I agree with your assessment concerning delaying social security until at least age 66 under today's Social Security rules. Does your position change if Social Security benefits are "means" or "needs" tested. I realize that it is extremely difficult to second guess what our politicians will do.

  •  

Answer from Bud

  • Have questions for an expert?

    It's conceivable that someone could invent a means test combined with the timing of its implementation that would make delaying Social Security (SS) a mistake, but I think that's unlikely. The government could specify that a larger part of SS would be subject to income tax (0%, 50% and 85% of SS is now subject to income tax depending on your income), but they've already just about squeezed that beyond reason because a significant part of the SS payment is simply a return of what you were required to put into SS payroll tax using money that has already been taxed.

    The government can get a lot more by simply increasing the income tax rates or payroll tax rates. Some people are concerned that future gross payouts for higher income people will be reduced while those already started on SS will be grandfathered. That's the main reason to consider starting earlier for those people have both enough savings to support starting later and expect they have a good chance to live past 80. Still, the government will have long studies and public debates before being implementd so that if something like that is coming, you could start SS just before its scheduled to take effect and at least make partial gains by delaying until that point.

    There are many difficulties with means testing including the fact that SS is already making highly disproportionate SS payments to lower income people relative to their payroll taxes. Finally, if you are married, the survivor benefits for SS are so good that the higher earner still would be likely to delay the start of SS.

Related NewRetirement Content

H. K. Bud Hebeler is author of J.K. Lasser's Your Winning Retirement Plan, Getting Started in a Financially Secure Retirement, and retirement articles on www.analyzenow.com. He is often quoted in The Wall Street Journal and other financial publications.

Disclaimer: These materials are provided by Analyze Now as a service to its customers on an "as is" basis and may be used for informational purposes only. Analyze Now assumes no responsibility for error or omissions in these materials. Analyze Now makes no commitment to update the information contained herein. Analyze Now makes no, and expressly disclaims any, representations or warranties, express or implied, regarding the Analyze Now web site, including without limitation the accuracy, completeness, or reliability of text, graphics, links, and other items accessed from or via this web site. No advice or information given by Analyze Now or any other party on this web site shall create any warranty or liability.

Analyze Now does not warrant or make any representations regarding the use or the results of the use of the materials in this site or in third-party sites in terms of their correctness, accuracy, timeliness, reliability, or otherwise. Under no circumstances shall Analyze Now or any of its respective partners, officers, directors, employees, subsidiaries, agents, or parents be held liable for any damages, whether direct, incidental, indirect, special, or consequential damages, and including, but not limited to, lost revenues or lost profits arising from or in connection with the use, reliance on, or performance on the information on this web site. The situs and venue for any claims, disputes, actions, or suits regarding this disclaimer and limitation of warranties shall be King County, Washington State.