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The Coming Social Security Cut Millions Don't Know About

Just about every American expects to take advantage of Social Security to help make ends meet during retirement. But Social Security is in danger of not being able to pay full benefits in the future, and many fear future cuts to the program. What millions of Americans don't know, however, is that one cut is already slated to take effect in the future.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through Social Security's coming cut. Dan notes that the cut comes in the form of an increase in the full retirement age, which will affect those born in 1955 or later. Currently, the full retirement age is 66, but for those born in 1955, the age will be 66 and two months, and every year after that, the threshold will rise another two months until reaching age 67 for those born in 1960 or later. Dan goes through the implications, noting that reductions for taking early benefits will jump from as much as 25% now to up to 30%. Benefits for delaying will fall, going from a maximum 32% now to just 24% after the new law takes effect.

Get the most you can from Social Security
Even with coming cuts to those who are currently 58 or younger, Social Security is still a valuable part of your retirement financial plan. In our brand-new free report, "Make Social Security Work Harder For You," our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.


Read/Post Comments (37) | Recommend This Article (32)

Comments from our Foolish Readers

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  • Report this Comment On November 16, 2013, at 9:46 AM, SLTom992 wrote:

    The destruction of Social Security was purposely done by the Demicrats and Obama in particular with the wanton spending of the SS funds held in the Intragovernmental Holdings of the National Debt.

    Pretending that this party did this accidentally is foolish. Each and every man that voted to spend more and more and expand the government and use SS to pay for it deserves to be charged with treason.

  • Report this Comment On November 16, 2013, at 10:11 AM, BitsofWisdom wrote:

    I'm trying to figure out how this information qualifies as "news". The changes in the full retirement age were part of the Social Security Amendments of 1983 (H.R. 1900, Public Law 98-21). Now I'm no math genius but I'm pretty sure that was 30 years ago (I believe a gentleman named Reagan was president then). Anyone that wasn't already aware of these changes hasn't been paying attention.

  • Report this Comment On November 16, 2013, at 10:46 AM, Govt4thegovt wrote:

    most knows the social security has been broke for many years and all thats in it is IOU'S the Govt. put there and took the moeny to spend as always the theives keep on taking !!! how long will the american people put up with this stupidity.

    all socail security money needs to be taken fron the politicians vacationer's and put back into social security . we don't need big govt. we need to cut it down to the size of a walnut put all working people in office and put all the ric on the streets.

    *AMAZING* trading places!!!!!!!!!!!!!!!!!!!

  • Report this Comment On November 16, 2013, at 11:10 AM, altha2008 wrote:

    I had to get my social security at 52 due to Parkinson. Now I worked sense I was 17 a lot of time two jobs and farmed on the side.

    between my Social Security and state retirement which I had to retire early I get 85% of my income.

    right at my total net income

  • Report this Comment On November 16, 2013, at 11:13 AM, syzygysyzygy wrote:

    what do you expect from this country? it has ALWAYS been owned lock stock and barrel by capitalists -- even the revolution was a minority one engendered by capitalists--- all about $$ not principle

    compare senior benefits of all kinds in this backward place with say north europe-------- no comparison!!

  • Report this Comment On November 16, 2013, at 11:30 AM, wgdempsey wrote:

    This is a false headline. Everyone knows the full retirement age is going up from 66 to 67.

  • Report this Comment On November 16, 2013, at 11:35 AM, scatha wrote:

    Instead of Congress cutting our Social Security, why don't they stop sending billions to countries that HATE us???

  • Report this Comment On November 16, 2013, at 11:52 AM, sfasku wrote:

    I am 38 and I would gladly not take a dime of social security if they would stop taking that communist tax out of my paycheck. I can make way more money investing on my own and all the extra money I earned would be mine and not someone who does not want to work or and illegal aliens to share. I would love to have a fair tax where I would be paying less taxes.

  • Report this Comment On November 16, 2013, at 12:18 PM, luckyagain wrote:

    Without Social Security and Medicare almost no one would be able to retire. When Social Security was first proposed, the Republicans hated and fought against it. When Medicare was first proposed, Ronald Reagan and the Republicans hated and fought against it.

    So vote Republican and they will certainly do their best to gut it. What is really strange is to see Republicans rant and rave against both Social Security and Medicare but they definitely apply for it when they get a chance. Both Medicare and Social Security would never go broke, if the Republicans would never apply for it.

    Republicans are hypocrites. I know they whine about paying for it but I pay for all sorts of government programs that I do not want either like the endless Drug War.

  • Report this Comment On November 16, 2013, at 12:41 PM, yooperintx wrote:

    I know this is a lost cause, but will try to educate some people anyway. The tax money that SS takes in every year is used first to pay current retirees. The money left over is replaced in the trust fund by special interest bearing US Treasury Bonds. That interest is paid to the trust fund every year, usually by additional bonds. During years that tax revenue is not sufficient to pay current benefits, which has happened at least three times, enough of those bonds are redeemed to make the payments. That has been going on since SS was established. I simply don't understand people who say that Congress should just replace the money they borrowed. What do they think should be done with that money, keep it in a vault where it doesn't earn any interest? At least in the current system, that money earns many billions in interest each year and will for quite a few years to come.

  • Report this Comment On November 16, 2013, at 12:55 PM, gringovejo wrote:

    As usual, some bad information posted here. The SSA was set up by FDR, based upon folks at about 25 with 3 children who would each follow suit adinfinitum, by time 1st group to retire. During Nixon's Presidency, after some prodding, Trusts were established for both SSA and Medicare, but remained unfunded. Meaning that the trillions, sent into the Federal Government to pay for SSA and Medicare, went directly into the General Fund, where they were spent, frequently on Pork Projects. Causing the stupid Congress to have to appropriate funds to pay for those benefits as they are due, which allows some to utter stupid remarks, see these 'welfare' plans don't work.

    Contrast that with a more intelligent society, like

    Norway. Has the highest per capita income in the world. Free Education, almost no unemployment,

    free High Quality Medical care, and over 600 Billion it is Social Security System. Which, BTW pays according to the amounts you received during your working life, not a flat, one size fits all

    like we do.

    Norway has less than 5 million population, meaning that we, had we used their model, could likely have 66 times as much in ours and all the

    stupid comments would have never come about.

  • Report this Comment On November 16, 2013, at 12:56 PM, TMFGalagan wrote:

    @bitsofwisdom, @wgdempsey -

    I'm glad you were already aware of the coming rise in the retirement age, and yes, it has been on the books for years. But as surprising and disappointing as it might be to you that people aren't up-to-date on Social Security, the headline isn't false - many people have no idea this is coming, and it'll take them by surprise if they don't hear about it.

    best,

    dan (TMF Galagan)

  • Report this Comment On November 16, 2013, at 12:57 PM, FUGOV wrote:

    democrats, l. b. johnson, raided the SS program and spent it on the vietnam war and a whole lot of peeve projects.

  • Report this Comment On November 16, 2013, at 1:08 PM, coralspg wrote:

    The worst part about this article, you need a job to work to 66 or 67. My job record includes Outsourced job, then the plant was sold, lost job, could only find contract work, had to compete against H1B jobs in the computer field, jobs sent to India - worked for a company that was even on Lou Dobb's list on CNN that OffShored jobs to India.

    I'm looking for work, Really hard when 55+. All you are left with a jobs like McDonalds, Burger King or a Call Center.

    The USA devalues it's USA workers and wants to hire cheap H1B workers.

    SSN, don't have a choice and we sure don't have a say.

  • Report this Comment On November 16, 2013, at 2:29 PM, starfish36 wrote:

    Some of these comments are absurd. The changes in SS that are referred to in the video are not ness. They were mandated by congress in 1983 when Ronald Reagan was president, not by "the Democrats." The SS administration has no power to make any such changes as a matter of law, though one might get the opposite impressions from listening to the video.

  • Report this Comment On November 16, 2013, at 3:25 PM, MsAbby wrote:

    So if I did this to my employees I would be in jail. It's a TRUST FUND and the people that paid into in deserve their money back out of it.

    If LBJ had not transferred it into the general fund to pay for Medicare/Medicaid so they would appear to be revenue neutral, we would not have this problem today. There would be plenty of money.

    GOVERNMENT! DO THE RIGHT THING AND give back the money you pilfered from all you citizens. You should be ashamed…...

  • Report this Comment On November 16, 2013, at 3:32 PM, MsAbby wrote:

    starfish36 - LBJ was the first to STEAL from the Trust Fund to support his social engineering programs. When Nixon became President the Great Society programs and Medicare and Medicaid were eating up so much money that we had to go off the gold standard.

    Obama has said loads of times that they need to refigure cost of living and take out necessities like food and gas…. what kind of equation is that when most older people can't even afford food and gas on what they get?

    Then during the Clinton administration Gore cast the deciding vote to TAX the recipients. Clinton was also able to declare a budget surplus by counting income from the SS system, which by the way, the US Treasury is legally obligated to pay to recipients. Clinton actually left a deficit of $133.4 BILLION because the 1st full year of Bush's presidency he was under a Clinton signed budget.

    Now we have massive borrowing and spending and a huge ponzie scheme between government and the Federal Reserve and banks. But hey if you want to be a slave to the banks and the government have at it.

    If I had all the money I have paid into the system I would be retired and living really well…….

  • Report this Comment On November 16, 2013, at 3:48 PM, sagehopper wrote:

    And toss in the 716 BILLION Obama ripped off from the fund to get his ill-born plan started. THAT money could have been spent MUCH better. Could have been spent on the care of the folks that paid for it from every paycheck they drew...

  • Report this Comment On November 16, 2013, at 4:16 PM, patrickhenry wrote:

    We allow politicians to rip us off. SS money paid into the system should be run as an insurance program, like they tell you it is. Novel idea - let those who pay into the system identify beneficiaries so our children and grandchildren get something out of the thousands we pay into the system.

    BTW-stop taking from those 55 and younger and let us invest in our own way. This prevents government from stealing our money and encourages those who suck on the system to get their owe job and invest. Oops, it would never work, politicians refuse to give up what they take over, regardless of party. Go back to the Constitution and defund departments and agencies not clearly identified in that document. God help us all!!

  • Report this Comment On November 16, 2013, at 4:45 PM, mymoneymymoney wrote:

    As usual like back in the early 90's when social security had an excess up into the trillions and our government stuck their hands into it to help pay some of their debts promising to pay it back by issuing bonds to cash in. This money in social security is paid in by the working people and their employers. Where does the government think that just because there is an excess in the funds they can help themselves to it when they do not pay in one red dime to it. They have their own very expensive retirement that is again (guess who?) paid in by the people, oh not them! While we the people try to survive on just a few thousand dollars a year, when the president, congress and senators retire they get one's of thousands of dollars to retire on! People please we need to get together by the millions and march on Washington D.C. and demand they stop this and stop all the other frivolous spending they do! Please let's get enough people to do this. It is not our job as retirees to help pay the debt down with our hard earned money we paid in to social security. Please let's ban together or our government is going to control us completely instead of working for the people and doing as they want.

  • Report this Comment On November 16, 2013, at 5:42 PM, airjackie wrote:

    Since 1935 the Republicans have tried to dismantle Social Security. With no success the next move over the many years was to borrow from Social Security as the funding was great. Well remember the recession of the 80's again President dipped in the Social Security. Much like a piggy back to lawmakers. One bright idea by President Bush after dipping in the funds was to privatize the program for companies to change current seniors and yes in a few years have another Bear Stearns/Leman Bros. for a total lost. But young people know not to only depend on SSI or US Banks as we are Global now and pick a honest bank to save and a stock not controlled by the USA. The young people will do fine if they learn from how their parents trusted the USA government.

  • Report this Comment On November 16, 2013, at 6:18 PM, spiritof78 wrote:

    Alot of political virtriol in the response section of comments trying to figure out who is to blame (or more to blame) for the problems with Social Security...glad we as a nation are in mid-election form already.

    The simply truth is when you break down the budget numbers based on changing demographics(A large generation living longer and having fewer working age children) you see that eventually the system either needs to pay less benefits or have more taxes paid into it.

  • Report this Comment On November 16, 2013, at 6:36 PM, JHK1944 wrote:

    This is an alarming headline that reflects the fact that a large proportion of the population is not and has not been paying attention for a long time. We have the Congress we deserve.

    Motley Fool is doing a disservice to readers if they approved the headline.

  • Report this Comment On November 16, 2013, at 6:38 PM, JohnnyTalks wrote:

    Now wait a bit.

    Do people really think that Employers are hiring people 55+?? Seems more early retirement packages being offered and less hiring.

    The business environment is top heavy, they can afford those 401Ks, Stock investments, IRAs, but the 12 per hour group have no such privilege, otherwise they will be working for 9 or 8 an hour or less to do that.

    This same group that offers much but gets recognized less is now told work some extra years at the same stressful level!!!

    This country needs to show the world that our form of Government takes care of their Seniors not work them unit they expire and will not be able to Enjoy retirement for all their efforts.

    Makes one wonder who is this country is looking out for???

  • Report this Comment On November 16, 2013, at 6:59 PM, ceh4702 wrote:

    It is not really Social Security that is the problem it is Medicare. Medicare costs more than social security.

  • Report this Comment On November 16, 2013, at 7:20 PM, dtinbc wrote:

    SLTom992 I am neither Republican or Democrat but I find your comments to be purposefully misleading. The Republican party opposed Social Security as a socialist program when it was started. The Tea Party by it's "small government" and "keep government out of our lives" has to be opposed also.

    Conservatives try to have it both ways at times. Underfund social programs while giving them positive lip service and hope they wither on the vine. You'd be blaming Obama if the stock market was at 700 today. We will in time GROW out of this mess.

    ( I'll save my complaints about Democrats for later)

  • Report this Comment On November 16, 2013, at 7:23 PM, ceh4702 wrote:

    We could have higher incomes in the USA if cut down on immigration and started purchasing more products made in the USA. Just slowly cutting back on imports and favoring products financially that are made in the USA could make a big difference. Take just automobiles and start limiting imports. I think we also need to look at products that we use that are no longer made in the USA like Computer Products. We could force computer companies to open some factories in the USA if they want to do business here like we did in the auto industry.

  • Report this Comment On November 16, 2013, at 8:17 PM, BitsofWisdom wrote:

    @dan (TMF Galagan)

    While it may be true that there are those who are unaware of the change in full retirement age, the headline of the article and the wording in the first paragraph are clearly misleading. The headline calls it the "Coming" Social Security cut. And the last sentence of the first paragraph states, "one cut is already slated to take effect in the future". The "cut" already arrived and took effect as much as 13 years ago when those born in 1938 (the first age group to see a change in their full retirement date) turned 62. And, with all due respect, anyone that wasn't aware of the changes probably doesn't read financial articles on Motley Fool .... or anywhere else for that matter.

  • Report this Comment On November 17, 2013, at 2:32 AM, agwisreal wrote:

    Social security payments are going to have to be cut more, at least for those who have other resources. The government, at all levels, has overpromised. The promises made, even after the delay to 67 goes into effect, are wildly out of line with what can be delivered.

    An orderly default will be better than default by inflation and tricks and simple chaos.

  • Report this Comment On November 17, 2013, at 4:32 AM, SamAl2 wrote:

    I would hardly call the change in full retirement dates a 'cut'. The age at which one hits full retirement are provisions that have been in the law since they made the changes back in the 80's when mine also got changed from 65 to 66. The age of full retirement isn't a 'cut' and it's hardly something that's coming - it's been there for decades.

  • Report this Comment On November 17, 2013, at 4:05 PM, EricMJohnson wrote:

    Our financial and economic system is built upon the idea that people are property of government, and their income first belongs to government and then to the people who earn it. Naturally, such a system enables waste and fraud, and punishes the producers and rewards laziness and irresponsibility. That is what millions of people don't know about, and refuse to acknowledge about Social Security. SS is a big Ponzi scheme; the first people in were rewarded greatly while the last people in are ripped off. Since SS is a government run Ponzi scheme, it hasn't collapsed yet because taxes for it have been raised many times over the years, and now payouts are being reduced as this article explains. The Federal Reserve will create money out of thin air to make future payments, causing inflation. Previous and current generations have accepted this system built on fraud and dishonesty; eventually economic repercussions will become very painful. Hopefully enough people are enlightened to why, otherwise our future looks very bleak.

  • Report this Comment On November 17, 2013, at 7:58 PM, faver61 wrote:

    There are a number of countries where one's social security will go much further. Several in Central and South America. You can live very well on $1000 per month or less. I am a retired Vietnam vet, and I am looking into it quite seriously. These are not typical "third world" countries. Infrastructure and services abound. I love my country and served it with honor, but now it seems veterans are just not welcome anymore. Benefits are deteriorating at an alarming rate. With health insurance at about $800 per year down south, why even pay for part "B" ?

  • Report this Comment On November 18, 2013, at 5:22 AM, VikingBear wrote:

    The example of Norway was cited above. It is not valid; the percent per capita of North Sea Oil revenues going into the economy of Norway as a net oil exporter is much higher than the comparable share of American energy production revenues. We are a net importer.

    Norway is set for a long future of relative wealth because their government--responsively--has set aside massive reserves and funded enviable social programs.

    Taxes in Norway are higher than in the USA, but the Norwegian government delivers on its promises and obligations. True poverty is rare.

    (I am 3rd-generation Norwegian-American, and love both.)

  • Report this Comment On November 18, 2013, at 7:59 AM, ironjoe444 wrote:

    I LOVE IT WHEN SO MANY PEOPLE ARE SO SMART

  • Report this Comment On November 18, 2013, at 9:39 AM, JRP wrote:

    For SLT992: Ike was the first President too balance the budget, using S.S. and the others followed.

  • Report this Comment On November 20, 2013, at 12:30 PM, Sczandi wrote:

    What corrupt US Government officials (our “employees – not GODS”) authorized the US Postal Service to waste millions of our tax dollars supporting a 2-week sports event on TV (the 2013 US TENNIS OPEN in NY ) while they cry broke & cut back OUR services & lay off workers? Lots of pork barrel gets given to individuals and stolen from our tax dollars. Like death benefits to Congresspeople – Isn’t their own insurance supposed to do that instead of OUR TAXES? – we certainly pay them enough for them to afford insurance.

    How can we find out who and what and how many – then get the people with guts enough to do something about it ?

  • Report this Comment On November 20, 2013, at 7:32 PM, BillFromNY wrote:

    As someone born in 1951, I can assure you that I already know about this "cut" as the full retirement age has been increased from 65 to 66 for me.

    And, you know, it is really not such a terrible or unfair change to Social Security given the great increase in life expectancy since the program was originally enacted.

    As someone else posted, it is more of a problem keeping people in their 60s fully employed until they reach the full retirement age.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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