Should I include social security in my retirement planning?

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Fran K
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Should I include social security in my retirement planning?

Post by Fran K »

I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
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Re: Should I include social security in my retirement planning?

Post by sailaway »

DH is turning 38 soon and has already begun the process of downsizing. We choose not to include SS, as we have decades to get through between now and then. For us, it isn't a question of whether or not it will be there, just that it is so far off that our calculations will change several times between now and then.
reln
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Re: Should I include social security in my retirement planning?

Post by reln »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
The SS website has calcs that can answer that for your record.
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Re: Should I include social security in my retirement planning?

Post by AlohaJoe »

Fran K wrote: Wed Dec 01, 2021 8:16 pmIs it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?
That is a perfectly reasonable assumption.

Like every assumption in your retirement planning, you should revisit it every few years and make sure it is still reasonable.
Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
Type "how to estimate social security" into Google. There are plenty of calculators, including ones directly from the Social Security Administration, that allow you input all kinds of scenarios, including not having Social Security income for a full 35 years.
freeform0
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Re: Should I include social security in my retirement planning?

Post by freeform0 »

Another great site for estimating future benefits and understanding how they're calculated is https://ssa.tools/. It requires you copy/paste your data from the SSA portal mentioned above.
Doctor Rhythm
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Re: Should I include social security in my retirement planning?

Post by Doctor Rhythm »

I think that the availability of SS is as reasonable an assumption as almost anything else you enter into your model at your age. As examples, you also can’t be sure of future tax treatment of IRAs and capital gains, your future income, any job-related pensions, living expenses, etc. I’m not even mentioning market returns.

You could take the conservative strategy of not including SS into your model. But that’s no different than pretending your expenses or tax rates are going to be way higher, or that your portfolio returns will be dismal.
59Gibson
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Re: Should I include social security in my retirement planning?

Post by 59Gibson »

Difficult question to answer. For myself @ nearly 47, I estimate 60% of the #s that are on my SS acct. Doesn't mean anything, it's a way for me to plan somewhat conservatively.
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Re: Should I include social security in my retirement planning?

Post by Normchad »

I completely ignored it in my planning.

Now that I’m closer, I’m looking at it. And wow, what a pleasant surprise! It should make a huge difference for us.

Suppose you and your spouse will eventually get $60K from SS. That is probably worth 1.5M or so….
MathWizard
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Re: Should I include social security in my retirement planning?

Post by MathWizard »

Yes, you should.

I use 75% of estimated benefits in my calculations.
That based upon a typical SS governor's report estimate of
the ratio between payroll taxes inflows and outflows when
SS trust fund is exhausted sometime before 2030.
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Re: Should I include social security in my retirement planning?

Post by retire2022 »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
You need to check annually to see in “my SSA account” how many credits usually 40, the personalize report is based on your annual earnings.

https://www.ssa.gov/myaccount/

Also if you are a teacher in some states you are not required to contribute to SSA. So it depends on your job and contributions.

Additionally this report is great to reconstruct your employment history and to see if your pretax retirement accounts are worth converting to Roth.

I did one and you can see it on my profile.
Last edited by retire2022 on Wed Dec 01, 2021 10:45 pm, edited 4 times in total.
EnjoyIt
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Re: Should I include social security in my retirement planning?

Post by EnjoyIt »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
Yes you should expect it. It might be less than today, but odds are likely you will get something.
But, today, at your age, I would not calculate it into my projections for the following reasons:
1) If all goes well, you may want to retire at 50 or 55 which means that SS will be 15-20 years away. You might as well ignore it being so far out or simply consider it as a fail safe for a very poor sequence of returns during the early years of your retirement.
2) It is so far away, ignoring it will get you to save just a bit more which is a good thing as it will get you to financial security sooner
3) I'm sure there are plenty of other good reasons to ignore it right now, but something to revisit in 10-15 years to see where your at and maybe ignore it a bit longer.

We more or less ignore social security in our planning because we are still in our 40s and suspect that a good chunk of our social security will be used to pay for medicare and cover our taxes for the RMD (required mandatory distributions) from our 401k. Or as alluded to above, we will hit a bad sequence of returns early in retirement and then SS will be a good backstop in our retirement plan. We would obviously have less RMDs and lower taxes.
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Fran K
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Re: Should I include social security in my retirement planning?

Post by Fran K »

freeform0 wrote: Wed Dec 01, 2021 8:40 pm Another great site for estimating future benefits and understanding how they're calculated is https://ssa.tools/. It requires you copy/paste your data from the SSA portal mentioned above.
Just tried this tool. Thanks for the tip.
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Re: Should I include social security in my retirement planning?

Post by CyclingDuo »

Fran K wrote: Wed Dec 01, 2021 8:16 pmI'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
Create your account at SS and have a look at what you and your employers have paid into it thus far. What age you did you start working and begin paying into it? Are you planning on retiring early as for the reason you will not pay into it the full 35 years?

If you use i-ORP, the default setting includes a 25% reduction in Social Security benefits in 2035 when the Trust Fund is depleted.

https://www.i-orp.com/Plans/index.html

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Re: Should I include social security in my retirement planning?

Post by Admiral »

All retirement planning should include a range of options and outcomes: expenses, portfolio return, savings, inflation, etc. Your results will then fall within that range. SS is no different. I believe the range for SS should be 100% of benefits, down to 75%, but no less than that. Then experiment with the inputs and make sure you'll be ok at any point within the range.

There is a major downside to assuming zero SS: You may have to work many more years than necessary. I personally have no interest in doing so.

I recommend Flexible Retirement Planner (free).
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dziuniek
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Re: Should I include social security in my retirement planning?

Post by dziuniek »

I include 100%.

I've no reason to believe it won't be there.

If it isn't there at 100% -> I am thinking the homeless population we have now is going to be 10X the amount in the future.
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Re: Should I include social security in my retirement planning?

Post by OatmealAddict »

dziuniek wrote: Thu Dec 02, 2021 6:49 am I include 100%.

I've no reason to believe it won't be there.

If it isn't there at 100% -> I am thinking the homeless population we have now is going to be 10X the amount in the future.
I include 100% as well, but it's not going to make or break us if that ends up being greatly reduced by the time we retire.
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Re: Should I include social security in my retirement planning?

Post by JoeRetire »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning.
You should include these benefits in your long-range planning. IMHO, it would be foolish to ignore a guaranteed, tax-beneficial, spouse/survivor beneficial, inflation protected income stream.
Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?
It's unreasonable to expect that anything stays exactly the same over a 32 year period.

That said, you have to use some level in your planning. Given that there is no alternative with a higher likelihood than the current levels, use those.
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Re: Should I include social security in my retirement planning?

Post by winterfan »

Normchad wrote: Wed Dec 01, 2021 9:19 pm I completely ignored it in my planning.

Now that I’m closer, I’m looking at it. And wow, what a pleasant surprise! It should make a huge difference for us.

Suppose you and your spouse will eventually get $60K from SS. That is probably worth 1.5M or so….
We never counted it either, only as bonus money. But now my spouse is only 6 years away from FRA and our expenses aren't as high as I imagined they would be. It is a nice surprise and will cover the majority of our expenses once our nest is empty. Also surprising is how fast age 38 to 50 goes. Yikes!
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Re: Should I include social security in my retirement planning?

Post by cbs2002 »

Yes, it is irrational not to. Never understood sites (such as Financial Samurai) that say to ignore it. As others have pointed out, it can easily be equivalent to $1M+ at a 4% WR for people who have worked a long professional career. I do think it's reasonable to expect that benefits will be reduced progressively at some point in the future but that's no reason to ignore a substantial source of revenue.

I think more important questions are how much you assume, and at which age you choose to include it. I just took a look at the SSA projections and it tells me that my "number" (which I assume is in 2021 dollars) depends on working at my current income level until I take SS benefits. That's not a realistic assumption.

What I need is a calculator that allows me to input my actual historical income, future income assumptions, and age at which I take benefits and get a number in 2021 dollars. Then I'd discount that by 20% or so.
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Re: Should I include social security in my retirement planning?

Post by 260chrisb »

Normchad wrote: Wed Dec 01, 2021 9:19 pm I completely ignored it in my planning.

Now that I’m closer, I’m looking at it. And wow, what a pleasant surprise! It should make a huge difference for us.

Suppose you and your spouse will eventually get $60K from SS. That is probably worth 1.5M or so….
I did the same thing! I never doubted it would be there but instead never wanted to give myself a reason to save less so I never included it. Now just a few months away from retirement I look at it as getting a raise when I turn 70. That is if I can keep my hands off of it until then. I'm not going to ever likely need it, but instead want it after all these years!
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Re: Should I include social security in my retirement planning?

Post by dcabler »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
To your first question, I assume my full benefits when I start at age 70 and then a 24% haircut beginning in 2033 as described in the following link:
https://www.ssa.gov/oact/TRSUM/

This is the official view of the SSA trustees. If this changes (and it has in the past), I will change how I plan accordingly.

cheers
Last edited by dcabler on Thu Dec 02, 2021 7:35 am, edited 3 times in total.
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Re: Should I include social security in my retirement planning?

Post by wrongfunds »

The current estimate for a professional couple who managed to max their salaries in most of their careers is about $105K(joint) if taken at 70. If you can afford to ignore extra annual income of over 6 figures, there is no need for you to ever worry about your retirement!

We had a huge discussion on this topic which I had started few months ago.

Can you ignore social security in your calculations?
viewtopic.php?f=10&t=356835
Last edited by wrongfunds on Thu Dec 02, 2021 7:36 am, edited 1 time in total.
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Re: Should I include social security in my retirement planning?

Post by SquawkIdent »

I do include it retirement planning as one leg of the stool. I haven’t filed yet but when I do it’ll become crystal clear how big of a role it will play. Until then, it’s just an educated guess.
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Re: Should I include social security in my retirement planning?

Post by Wiggums »

I would include SS, just like I would include a pension benefit. For SS to pay less than 100%, the reduction must cut across all SS recipients. If they want to pay less SS, based on MAGI, for example, they need to change the current law.

My stance has always been to enjoy life today, while saving for tomorrow. I don’t believe that elected officials will default on US debt, not will they cut SS as the number one economy of the world. In retirement, being flexible is important.
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Re: Should I include social security in my retirement planning?

Post by AnEngineer »

JoeRetire wrote: Thu Dec 02, 2021 6:58 amIMHO, it would be foolish to ignore a guaranteed, tax-beneficial, spouse/survivor beneficial, inflation protected income stream.
If it were guaranteed, your statement would apply. However, laws change, as you noted later in your post.
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Re: Should I include social security in my retirement planning?

Post by T4REngineer »

Normchad wrote: Wed Dec 01, 2021 9:19 pm I completely ignored it in my planning.

Now that I’m closer, I’m looking at it. And wow, what a pleasant surprise! It should make a huge difference for us.

Suppose you and your spouse will eventually get $60K from SS. That is probably worth 1.5M or so….
OP,

We are taking Normchads approach - saving for our goals assuming nothing because we are in our early 30s and who knows what happens between now and then. With that said, I am not ignorant of its potential value and when we get closer I will ABOSULTLY be taking it into account. If your retiring at 35 I can understand not making that choice based on SS but if you are retiring at 55 and wondering if you have enough I think it would be foolish to not take into account SS potential that is only 7 years away.
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Re: Should I include social security in my retirement planning?

Post by trueblueky »

Will seniors suddenly stop voting?

The history of changes to Social Security tells us that any change will be designed to grandfather current recipients and those nearing retirement. So, if you're 30, you may want to discount the amount you will receive. If you're 60, almost assuredly not.

The most oft-mentioned proposals are: raising retirement age again (phased in, as the last increase was), raising the amount of salary subject to Social Security, raising the rate from 6.2% to something more, or a combination of the above.
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Re: Should I include social security in my retirement planning?

Post by Watty »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect social security to be paying at the same levels as it is now by the time I am 70?
At 38 there are so many unknows that possible changes to Social Security should be the least of your concerns. You also do not know how your career with go, how long you will work, or what sort of investment returns you will get.

It was not just about Social Security but with all the other unknowns when I was doing my retirement planning I planned to be financially able to retire when I was 55 or 60 so that I could work longer if I needed to if my finances were not as good as I was hoping for. A change to Social Security would be just one of many possible setbacks for you.

Some people ignore it entirely which is excessive. I can't see that happening unless there is some major economic collapse but in that case your investments would likely be in trouble too. At most you might want to reduce your expected amount some.

People sometimes mention concerns that Social Security might be means tested someday but they are ignoring that it already is means tested in a stealthy way. The way that it works is that the amount of your Social Security payment is calculated is based on a complicated calculation using income "bend points" based on your income.

https://www.fool.com/retirement/social- ... -they.aspx

It is grossly over simplified but very low income people get something like a 90%, factor on their history, middle income people with an earning history up to about $70K get a 32% factor, and higher income people only get a 15% factor.

The way that Social Security is taxed is also very complicated. The low and middle income people likely pay little or no taxes on their Social Security but high income people likely pay taxes on 85% of their Social Security.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

In effect Social Security is already means tested since higher income people only get that 15% factor in the calculation then they will be taxed on that and have to pay a couple of percent back in taxes.
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Re: Should I include social security in my retirement planning?

Post by wolf359 »

cbs2002 wrote: Thu Dec 02, 2021 7:15 am Yes, it is irrational not to. Never understood sites (such as Financial Samurai) that say to ignore it. As others have pointed out, it can easily be equivalent to $1M+ at a 4% WR for people who have worked a long professional career. I do think it's reasonable to expect that benefits will be reduced progressively at some point in the future but that's no reason to ignore a substantial source of revenue.

I think more important questions are how much you assume, and at which age you choose to include it. I just took a look at the SSA projections and it tells me that my "number" (which I assume is in 2021 dollars) depends on working at my current income level until I take SS benefits. That's not a realistic assumption.

What I need is a calculator that allows me to input my actual historical income, future income assumptions, and age at which I take benefits and get a number in 2021 dollars. Then I'd discount that by 20% or so.
I treat social security as longevity insurance. It's intent is in the official name "Old Age, Survivors, and Disability Insurance program." It's a backstop to regular retirement savings.

- I intend to take it at age 70, or the latest I can.
- I anticipate that it will have at least a 25% reduction in benefits as stated in the Trustees report (if Congress doesn't act.) I anticipate that if Congress DOES act, they'd still have to reduce benefits or increase taxes that reflect or account for that shortfall. They'd just distribute the pain in a way that it doesn't affect current pensioners. In plain English, since I intend to claim after that shortfall occurs, I should plan on getting hit with that reduction. Claiming at 70 increases the benefit, and helps offset that reduction.
- I created a sinking fund for a QLAC annuity to act as a non-inflation adjusted longevity insurance. That helps offset the anticipated reduction.

Essentially, by planning to push off Social Security as long as possible, I have to exclude it from retirement planning until I hit 70. As a margin of safety, I consider it a backup plan, and exclude it when projecting retirement savings targets.

I'm not really ignoring it. I know it's there. But if I have to rely on it to meet my numbers, then I'm not ready to retire early (because it won't be available until I hit ages 62-70 anyways.) And I can always change my mind.

I would rather have an oversaving problem than an undersaving problem. I can deal with being in the workforce longer than I have to, having RMDs that are too large and paying unnecessary taxes. It's much harder to deal with not having enough money after I'm too old or too unhealthy to want to work.

OP is 20-30 years off from claiming. I'd suggest running projections with and without it. If you intend to retire early, wait to claim Social Security for as long as possible because that will give you the most affordable inflation adjusted income stream (annuity) that you can "buy."
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Re: Should I include social security in my retirement planning?

Post by nisiprius »

I personally think the most neutral and rational planning assumption is to use the current official statement about what will need to happen to benefits if Congress takes no action:

Actuarial Status of the Social Security Trust Funds

I'm having a little trouble deciphering it all the details, but the broad outlines are clear and about the same as they've been for a long time. If Congress takes no action, full benefits can be paid until 2034, at which point they will only be able to pay 78% of scheduled benefits.

In other words, assume a 22% cut in 2034.

Assuming zero Social Security is an extreme position. Anything is possible. Assuming it will be eliminated is storytelling, not planning.
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Re: Should I include social security in my retirement planning?

Post by tetractys »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
Your present statement assumes you will be working till 62-8, so you would have to compensate. But since your planning on retiring so early and the future is so unknown, it would be prudent to plan your retirement without SS.
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Re: Should I include social security in my retirement planning?

Post by ruralavalon »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

. . . . .
That's a reasonable planning assumption in my opinion.

At age 38 you may be 3 decades from retirement. Almost everything of any importance can change in 3 decades (tax brackets, tax treatment of every type of account, inflation, stock returns, bond returns, pension availability, etc.). Such very important planning assumptions are all outside your control.

Revisit your planning assumptions every few years.

It's best if you concentrate on important investment decisions you can control like establishing a high rate of contributions and a reasonable asset allocation forum discussion, and using very diversified funds (to reduce risk) with low expense ratios (to increase your net returns).
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Re: Should I include social security in my retirement planning?

Post by EnjoyIt »

cbs2002 wrote: Thu Dec 02, 2021 7:15 am Yes, it is irrational not to. Never understood sites (such as Financial Samurai) that say to ignore it. As others have pointed out, it can easily be equivalent to $1M+ at a 4% WR for people who have worked a long professional career. I do think it's reasonable to expect that benefits will be reduced progressively at some point in the future but that's no reason to ignore a substantial source of revenue.

I think more important questions are how much you assume, and at which age you choose to include it. I just took a look at the SSA projections and it tells me that my "number" (which I assume is in 2021 dollars) depends on working at my current income level until I take SS benefits. That's not a realistic assumption.

What I need is a calculator that allows me to input my actual historical income, future income assumptions, and age at which I take benefits and get a number in 2021 dollars. Then I'd discount that by 20% or so.
It shouldn’t be ignored, but when it is 30+ years away taking it into account can be difficult. Also, if one plans to retire early such as 50 years old. Again, taking SS into account 20 years in the future adds very little.

On the other hand if one is 50 years old, still planing to work another decade, then yeah, without a doubt SS should and easily could be taken into account.

We are in our mid 40s and work part time. I expect SS, but today I do not take it into account because it adds nothing to my picture for another ~25 years. I see it as a backstop if we suffer a poor sequence of returns or as a means to pay my Medicare and my taxes on RMDs plus a small bonus.

TLDR, it will be there, expect it, but don’t worry about it if your still decades away from collecting it.
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Re: Should I include social security in my retirement planning?

Post by adamthesmythe »

ANY attempt to project retirement income 35 years in the future is subject to huge error bars.

It is extremely likely that there will be some form of social security because (1) old people vote, in fact more than young people and (2) it is embarrassing for a first-world country if a substantial portion of the elder population becomes street beggars. And maintaining broad support for SS income for the poor makes it desirable to offer income to the moderate-income retirees. (cf. bend points).

Best is to live below your means and save a reasonable amount for retirement. Enough to be significant, not so much as to require living under a bridge.

And evaluate your situation every 10 years or so.
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Re: Should I include social security in my retirement planning?

Post by JoeRetire »

AnEngineer wrote: Thu Dec 02, 2021 8:04 am
JoeRetire wrote: Thu Dec 02, 2021 6:58 amIMHO, it would be foolish to ignore a guaranteed, tax-beneficial, spouse/survivor beneficial, inflation protected income stream.
If it were guaranteed, your statement would apply. However, laws change, as you noted later in your post.
If you go with "Laws change", that means you cannot including anything in any planning.

Savings account? Laws change - your account could be taken over by the government.
Pension? Laws change - pensions might no longer be protected in future laws.
401k? Laws change - laws regarding tax deferred assets could change so that the deferral no longer exists
Equity in your home? Laws change - new laws might tax home equity at 85%
Estate? Laws change - estate taxes of 90% might be imposed

Today, your social security benefits are guaranteed. If you want to make plans based on all future possible law changes, your plans will be useless.
If you don't want to plan at all, okay - whatever will be will be.
If you want to do any planning at all - go with "what is". Review your plans periodically as "what is" changes.
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Re: Should I include social security in my retirement planning?

Post by bobcat2 »

Doctor Rhythm wrote: Wed Dec 01, 2021 8:47 pm I think that the availability of SS is as reasonable an assumption as almost anything else you enter into your model at your age. ... You could take the conservative strategy of not including SS into your model. But that’s no different than pretending your expenses or tax rates are going to be way higher, or that your portfolio returns will be dismal.
:thumbsup :thumbsup

You can also pretend that Medicare won't be available when you retire. And why not asssume Medicare will go away, since it's in much worse financial shape than Social Security. :shock: :shock: To get around Medicare going away just add $500,000 to the retirement account of every adult member of your household. Ezy pyzy. :wink: Remember that by the time you retire your Medicare benefit will be worth more than your Social Security benefit unless you are a very high income individual.

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Re: Should I include social security in my retirement planning?

Post by willthrill81 »

You may not get 100% of your 'promised' benefits. In fact, under current law, SS benefits across the board will be cut by around 20% by 2034. But 80% is a lot more than 0%, and ignoring it in your planning can, at a minimum, result in you paying more in taxes than otherwise.
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Re: Should I include social security in my retirement planning?

Post by AnEngineer »

JoeRetire wrote: Thu Dec 02, 2021 11:07 am Today, your social security benefits are guaranteed. If you want to make plans based on all future possible law changes, your plans will be useless.
I was just saying that the word "guaranteed" is inappropriate for something likely to change.
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Re: Should I include social security in my retirement planning?

Post by bobcat2 »

nisiprius wrote: Thu Dec 02, 2021 9:00 amI'm having a little trouble deciphering it all the details, but the broad outlines are clear and about the same as they've been for a long time. If Congress takes no action, full benefits can be paid until 2034, at which point they will only be able to pay 78% of scheduled benefits.

In other words, assume a 22% cut in 2034.
I think the 22% cut is the extreme position. For it to be worse than that the payroll tax would have to be cut. The reasonable forecast at this point IMO would be to assume no change in SS payouts. After all, there are several bills in Congress now to increase future Social Security benefits.

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Re: Should I include social security in my retirement planning?

Post by chassis »

Fran K wrote: Wed Dec 01, 2021 8:16 pm I'm 38 and am wondering what your thoughts are around including social security in my retirement planning. Is it unreasonable to expect socal security to be paying at the same levels as it is now by the time I am 70?

Tangential question: what's the best way to estimate ss benefits if I'm likely to not have ss income for a full 35 years before I take ss?
@Fran K should SS be included in retirement planning? Yes, without a doubt.

Calculating expected benefits under varying scenarios can be done using a variety of online tools. Google will find them.
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Re: Should I include social security in my retirement planning?

Post by JoeRetire »

AnEngineer wrote: Thu Dec 02, 2021 11:31 am
JoeRetire wrote: Thu Dec 02, 2021 11:07 am Today, your social security benefits are guaranteed. If you want to make plans based on all future possible law changes, your plans will be useless.
I was just saying that the word "guaranteed" is inappropriate for something likely to change.
I guarantee almost everything will change to some extent in the course of 32 years. I guarantee some of that change is completely unpredictable.

I plan based on what is, without any expectation that everything remains exactly the same as today. And I look at those plans periodically, and adjust them as needed.

When I first started planning retirement, the file-and-suspend tactic for social security benefits was viable. So I developed my projections based on that. When the laws changed, I changed my projections. They ended up with about $40k less in lifetime benefits.Not a huge deal.

For today, social security benefits are a guaranteed income stream. Perhaps the laws will change, such that they are no longer guaranteed at all, or only guaranteed for some. But it makes no sense to me to create long-range plans based on something imaginary, rather than the laws of today.
Last edited by JoeRetire on Thu Dec 02, 2021 11:59 am, edited 1 time in total.
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Re: Should I include social security in my retirement planning?

Post by AnEngineer »

JoeRetire wrote: Thu Dec 02, 2021 11:55 am
AnEngineer wrote: Thu Dec 02, 2021 11:31 am
JoeRetire wrote: Thu Dec 02, 2021 11:07 am Today, your social security benefits are guaranteed. If you want to make plans based on all future possible law changes, your plans will be useless.
I was just saying that the word "guaranteed" is inappropriate for something likely to change.
I guarantee almost everything will change to some extent in the course of 32 years. I guarantee some of that change is completely unpredictable.

I plan based on what is, without any expectation that everything remains exactly the same as today.

For today, social security benefits are a guaranteed income stream. Perhaps the laws will change, such that they are no longer guaranteed at all, or only guaranteed for some. But it makes no sense to me to create long-range plans based on something imaginary, rather than the laws of today.
I think you're under the mistaken impression that I'm saying that you should ignore SS completely. Is there another explanation for your responses?
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Re: Should I include social security in my retirement planning?

Post by JoeRetire »

AnEngineer wrote: Thu Dec 02, 2021 11:59 am
JoeRetire wrote: Thu Dec 02, 2021 11:55 am
AnEngineer wrote: Thu Dec 02, 2021 11:31 am
JoeRetire wrote: Thu Dec 02, 2021 11:07 am Today, your social security benefits are guaranteed. If you want to make plans based on all future possible law changes, your plans will be useless.
I was just saying that the word "guaranteed" is inappropriate for something likely to change.
I guarantee almost everything will change to some extent in the course of 32 years. I guarantee some of that change is completely unpredictable.

I plan based on what is, without any expectation that everything remains exactly the same as today.

For today, social security benefits are a guaranteed income stream. Perhaps the laws will change, such that they are no longer guaranteed at all, or only guaranteed for some. But it makes no sense to me to create long-range plans based on something imaginary, rather than the laws of today.
I think you're under the mistaken impression that I'm saying that you should ignore SS completely. Is there another explanation for your responses?
You wrote "If it were guaranteed, your statement would apply. However, laws change, as you noted later in your post."
That's what I was responding to.

I have no way to know your feelings about ignoring or not ignoring ss completely. So I can't respond to that.
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Re: Should I include social security in my retirement planning?

Post by MillennialFinance19 »

34 year old here. I use my current social security estimate as it doesn’t account for inflation. By doing this, I assume that my estimate (Per SSA website) will be of higher fidelity the older I get.

Example - my estimate this year is $1900 a month at 62. After the 5.9% COLA gets put in, my estimate next year should be $2012. This is the number I’ll use going forward until I retire.
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Re: Should I include social security in my retirement planning?

Post by AnEngineer »

JoeRetire wrote: Thu Dec 02, 2021 12:01 pm
AnEngineer wrote: Thu Dec 02, 2021 11:59 amI think you're under the mistaken impression that I'm saying that you should ignore SS completely. Is there another explanation for your responses?
You wrote "If it were guaranteed, your statement would apply. However, laws change, as you noted later in your post."
That's what I was responding to.
Which, in turn, was responding to your argument that because it's guaranteed, it would be foolish to ignore. It's not guaranteed, therefore that particular argument is irrelevant.
IMHO, it would be foolish to ignore a guaranteed, tax-beneficial, spouse/survivor beneficial, inflation protected income stream.
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Re: Should I include social security in my retirement planning?

Post by Charon »

AnEngineer wrote: Thu Dec 02, 2021 12:34 pm Which, in turn, was responding to your argument that because it's guaranteed, it would be foolish to ignore. It's not guaranteed, therefore that particular argument is irrelevant.
Just, no. Nothing in financial planning is guaranteed by the laws of physics, so either we can never used the word guaranteed at all, or you need to accept that it means guaranteed to a high degree of confidence (which Social Security is, given what's happened in the past with it).
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Re: Should I include social security in my retirement planning?

Post by BrandonBogle »

I am in my 30s. When you go to the SSA.gov site to view your statement, after you log in there is a customized estimator. One of the options it has is to project future benefits with zero future contributions to social security after today.

I use that value in my tax planning for taking it at age 70. I will likely get more, but the conservative numbers will hopefully offset the huge unknown of healthcare costs from early retirement until Medicare.

As I get older, my plan is to switch to a better projected benefit calculation and take 25% - 50% off that as a margin for error in payout changes or unexpected medical costs.
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Re: Should I include social security in my retirement planning?

Post by EnjoyIt »

willthrill81 wrote: Thu Dec 02, 2021 11:22 am You may not get 100% of your 'promised' benefits. In fact, under current law, SS benefits across the board will be cut by around 20% by 2034. But 80% is a lot more than 0%, and ignoring it in your planning can, at a minimum, result in you paying more in taxes than otherwise.
If my memory serves me right, you plan to retire early. Not sure what age that means, but if it is 50 for example, how do you account for SS in you plan today?

I agree that SS will be there, but today knowing that information does not change the fact that I will need $X every year for 20+ years and SS won’t help me today. Sure using an ABW or VPW can take it into account but still 20+ years away is a long time.
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Re: Should I include social security in my retirement planning?

Post by EnjoyIt »

MillennialFinance19 wrote: Thu Dec 02, 2021 12:02 pm 34 year old here. I use my current social security estimate as it doesn’t account for inflation. By doing this, I assume that my estimate (Per SSA website) will be of higher fidelity the older I get.

Example - my estimate this year is $1900 a month at 62. After the 5.9% COLA gets put in, my estimate next year should be $2012. This is the number I’ll use going forward until I retire.
I think you may be mistaken (sorry if your not.) $2,012 is what you will get if you work till full retirement age (FRA.). That means you need to have uninterrupted work at your current income for over 30 years. Run what you have now using ssa.tools that website will tell you what you have today if you stop working now which is a more accurate representation.
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Re: Should I include social security in my retirement planning?

Post by nisiprius »

AnEngineer wrote: Thu Dec 02, 2021 11:31 am
JoeRetire wrote: Thu Dec 02, 2021 11:07 am Today, your social security benefits are guaranteed. If you want to make plans based on all future possible law changes, your plans will be useless.
I was just saying that the word "guaranteed" is inappropriate for something likely to change.
This is playing on the meanings of the polysemic word "guarantee." Relevant material from American Heritage Dictionary, "guarantee:"
1. Something that assures a particular outcome or condition: Lack of interest is a guarantee of failure.
2. a. A promise or assurance, especially one given in writing, that attests to the quality or durability of a product or service.
b. A pledge that something will be performed in a specified manner.
Social Security, or a bond, or a guarantee card in the product box, is a guarantee in meaning #2b.

There's a difference between someone saying, say, "just wait and see, you're in for a treat if things go well" and "we will pay you $1,234 plus accumulated CPI-W inflation adjustments on the second Wednesday in August of 2026." You would rationally take these into account in different ways in your planning.

If you have a probability estimate for the pledge being kept you might use it. For example, I imagine that the market value of a BBB-rated bond is less than that of an AAA-rated bond with the same term and coupon.

But the fact that a pledge may not be kept doesn't mean you can't call it "a pledge."
Last edited by nisiprius on Thu Dec 02, 2021 1:06 pm, edited 2 times in total.
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