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

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    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.

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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 He is often quoted in The Wall Street Journal and other financial publications.

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