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Prediction: If You Make More Than $150,000, Your Social Security Benefits Are Slashed. It's Just Math.

Austin Smith

Published: January 25, 2025 11:15 am

24/7 Wall St. Key Points:

• With those making $500,000 possibly receiving no benefits at all, Social Security may apply a sliding scale for benefits, therefore decreasing or eliminating payouts for those earning more than $150,000 in active income.
• Although both a broad consumption tax or granting tax incentives to high-income workers who forgo benefits involve trade-offs—that is, they either increase deficits or affect consumer spending—potential solutions to Social Security’s budget problem include these paths.
• Younger generations should give investment first priority via diverse portfolios, Roth IRAs, and 401(k)s to offset possible Social Security cuts and profit from long-term market growth despite regular volatility.
• Are you ahead, or behind with your retirement plans? Take this simple quiz to get an answer.

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Transcript:

[00:00:04] Douglas McIntyre: One of the solutions to the social security problem and the social security administration says that it will be basically out of money in about 2035. Now out of money doesn’t mean you don’t get anything, but it means you probably get 73 percent of the anticipated payout. And should you live to, be getting money in 2045, it’ll probably be 64 percent of what it would have been at the full payment.

[00:00:38] Douglas McIntyre: So there are a whole bunch of solutions to this that have been recommended. Number one, Congress should fix it by funding it. I don’t know why it would happen now because every time they, you know, the Congress shows up every year, they have the opportunity to do that. And they’ve, they’ve decided not to.

[00:00:57] Douglas McIntyre: One of the other solutions is if your income is above a certain level, your active income is above a certain level. You don’t get paid at all. If you’re not super rich, but you’re upper middle class then you get some of it, but you don’t get all of it. So Lee that could be coming and if that comes what does it mean to people if social security is now just.. It drops to a percentage because you make a lot of money

[00:01:30] Lee Jackson: Well, again, I, I don’t think that anybody that’s ever paid in and regardless of how wealthy you are, you’ve paid into it and so them to arbitrarily at one point say, well, you’re not going to get as much because you make more. That’s a tough decision. That’s why it would behoove them to figure out a way to reward people that say, okay, I won’t take it, you know, in some way, shape or form. Because, you know, they just don’t want to talk about it. And it’s like they don’t want to talk about the budget. They do continuing resolutions constantly. And we, our budget, they’ll be going through this, you know, whole process again in April, May. You know, they kick the can down the road for the budget.

[00:02:16] Lee Jackson: And they’ll probably continue to do it with Social Security.

[00:02:19] Douglas McIntyre: Right, so one of the things you’re suggesting is is that people get a tax deduction If they’re not getting paid social security, I think that’s a brilliant idea. However, what it does on the other side of the house is it it lowers the the revenue that comes into the IRS to support government So it may this may partially solve the social security funding problem But what it also does is it potentially fuels the deficit problem.

[00:02:50] Lee Jackson: Well, and, you know, you know what the most likely solution is, don’t you, a social security tax that they’ll put on every product and it might be, you know, a few mills, but they’ll put it on every product and say, listen. You know, we have to do this because things have changed since 1935 and that’s the only way probably they can get away with it.

[00:03:14] Lee Jackson: It’s just such a small tax that really doesn’t affect pricing, but it builds a ton of dough to put into the Social Security coffers.

[00:03:23] Douglas McIntyre: Well, I’m going to make a guess here for everybody. If you’re making active income of over 150,000 and you become eligible for social security, not today, but say 10 years from now, your social security benefit. Will be cut. There’ll be a sliding scale. People who make 500,000 a year will get nothing.

[00:03:48] Lee Jackson: There’s scale now, but yeah, yeah,

[00:03:50] Douglas McIntyre: yeah, nothing. I mean, no, no, I, I mean, I mean, if you’ve got 500,000 a year in active income, your payout is zero. So if you’re in your fifties right now. And you’re looking forward to that big, juicy social security payment. If you’re going to have a lot of active income, when you get past the data on which you take it, believe that there is a chance that you are going to take a social security haircut.

[00:04:19] Lee Jackson: Yeah. And that’s why it’s all the more important to continue to invest, you know, if you’re, if you’re a Gen Z millennial, whatever your classification, you have to invest. To invest. And the thing is, you know, you hear the complaints like, oh, there’s horrible sell offs. And yeah, there is horrible sell offs.

[00:04:38] Lee Jackson: But the bottom line is, if you look at a chart of the S&P 500 (NYSE ARCA: VOO) going back, what, 100 years, you know, it’s at a 45 degree angle, and it’s going to end up with it has some big dips in it. But if you stick with the game, if you stay in the game, you know, and there’s no way to time the market accurately. So yeah, yeah. should invest and, and, you know, especially for younger people worth of there’s 401k matching at your company. For goodness sakes, max it out, put in the maximum and then they’ll put into three, 4%, whatever their matches. That’s like printing money for the future.