How much does social security factor into your retirement income?

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Tamales
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How much does social security factor into your retirement income?

Post by Tamales »

Please stick to the question; no discussing the merits of the SS system, legislation, or politics.

What prompted the question was this Gallup poll saying only 36% of not-yet-retired people expect to rely heavily on SS income in retirement. (article: http://www.gallup.com/poll/182921/nonre ... urity.aspx )

For starters, I have a hard time believing even 10% of people have calculated their expenses and savings/investments and have run numbers to be able to estimate that (i.e. most people should have answered "no idea"). Beyond that, it was a poorly-worded question.

Here's what I'm wondering:
When running a simulator like cfiresim, how are you factoring in social security income? If you take the projected annual payout from your most recent SS benefit statement, do you use the age 62 payout (regardless of when you plan to retire), or is that too conservative if you are open to working to age 67-70?

Do you scale the number down to say 75% of the projected number (a simple answer of whether you scale it, and how much, is all I'm asking for; no commentary on the SS system please)

In short I'm just wanting to figure out a reasonable set of SS benefit assumptions to use in cfiresim, without being overly conservative.
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HueyLD
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Re: How much does social security factor into your retirement income?

Post by HueyLD »

None!!
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Re: How much does social security factor into your retirement income?

Post by John3754 »

Zero.
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Re: How much does social security factor into your retirement income?

Post by Carson »

Fwiw, I am 33 and planning on delaying until I am 70. I put in my spreadsheet for 50% of what that benefit would be. Eg, so if that benefit would be $2k/mo, I put in $1k.
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Re: How much does social security factor into your retirement income?

Post by joe8d »

Retired 11 years and SS is absolutely the most important component of my retirement income.
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nisiprius
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Re: How much does social security factor into your retirement income?

Post by nisiprius »

We are relying now and expect to continue to rely heavily on Social Security as our largest single source of retirement income.

We used the estimates in our Social Security statements long ago when we first began planning for retirement.

Given our age and life expectancy, we have planned on the assumption that the estimates will be met. Under Social Security's statement about what will happen "if nothing is done," we have enough safety margin to tolerate their "X%-cut-in-year-Y" note.

I first heard that Social Security was in imminent danger of collapse in the 1960s. That's only because that's when I was first old enough and interested enough to pay much attention--they'd been saying it long before then.
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Re: How much does social security factor into your retirement income?

Post by cheesepep »

Zero. [OT comment removed by admin LadyGeek]
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Re: How much does social security factor into your retirement income?

Post by gkaplan »

I rely on it. I have enough saved in my retirement accounts, and I still live within my means now that I am retired, but it's nice to see that Social
Security check each month.
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Re: How much does social security factor into your retirement income?

Post by John3754 »

nisiprius wrote:We are relying now and expect to continue to rely heavily on Social Security as our largest single source of retirement income.

We used the estimates in our Social Security statements long ago when we first began planning for retirement.

Given our age and life expectancy, we have planned on the assumption that the estimates will be met. Under Social Security's statement about what will happen "if nothing is done," we have enough safety margin to tolerate their "X%-cut-in-year-Y" note.

I first heard that Social Security was in imminent danger of collapse in the 1960s. That's only because that's when I was first old enough and interested enough to pay much attention--they'd been saying it long before then.
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jimmyq
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Re: How much does social security factor into your retirement income?

Post by jimmyq »

I personally scale, and assume that what I collect in SS will be 75% of what is currently estimated. I'm still a couple decades away from collecting, so this is just a guess at this point, but it's what I use for rough planning purposes.
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Re: How much does social security factor into your retirement income?

Post by novicemoney »

We are 10 years out from retirement. If we accept the SS projected income we project the following:
1. DW takes SS at 62, I take it at 67. With DW's small pension and annuity plan this will require a 1% withdrawal rate from nest egg.
2. DW takes SS at 62, I take it at 70. All our expenses will be covered by SS and DW's small pension and annuity plan.
3. If I elect to retire early (DW is already retired), out SWR will be about 4% until SS kicks in at either 67 or 70 for me.
This is based on our current expenditures which is about 42% of our income. So this works for us because we don't spend that much. We have a pretty healthy nest egg (low 7 figures), but intend to save as much as possible to build the nest egg further. Who knows what the future will bring? DS is independent and doing well. We have no mortgage. If you have a bigger expenditure rate I think that SS will not be enough to live on. We are lucky , the numbers for us project SS as being a big deal.
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TxAg
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Re: How much does social security factor into your retirement income?

Post by TxAg »

Early 30's here. I'm not sure what we'll get but I will consider it icing on the cake. We're working on the cake part right now and off to a good start (fingers crossed).
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JDCarpenter
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Re: How much does social security factor into your retirement income?

Post by JDCarpenter »

Zero, as it has for 30 years.

I am 55; Dw is 54. We have always assumed that we would be means-tested out of it. Continue to do so. If we are pleasantly surprised, the monies will be transferred to our three 20something kids, who will b paying for our welfare.
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celia
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Re: How much does social security factor into your retirement income?

Post by celia »

Tamales wrote:What prompted the question was this Gallup poll saying only 36% of not-yet-retired people expect to rely heavily on SS income in retirement. (article: http://www.gallup.com/poll/182921/nonre ... urity.aspx )

For starters, I have a hard time believing even 10% of people have calculated their expenses and savings/investments and have run numbers to be able to estimate that (i.e. most people should have answered "no idea"). Beyond that, it was a poorly-worded question.
You don't have to "run the numbers" to estimate if you should rely on it. Those who are much younger generally don't expect the program to be there for them, so why should they do any calculations that take SS into account?
Here's what I'm wondering:
When running a simulator like cfiresim, how are you factoring in social security income? If you take the projected annual payout from your most recent SS benefit statement, do you use the age 62 payout (regardless of when you plan to retire), or is that too conservative if you are open to working to age 67-70?
If you are going to do any calculations, it greatly depends on you age. Someone who is age 25 vs someone who is age 45 vs someone who is age 65 will have completely different ways of estimating how SS will help them. In addition it is hard to predict how your career will progress and the salary each year. What if you get sick or marry or move to another place with different cost of living? Who knows if you will be out of work for some of those years or want to stay home with small children, or volunteer to do something that pays very little?

It's impossible for one answer to fit everyone.
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22twain
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Re: How much does social security factor into your retirement income?

Post by 22twain »

I'm in my early 60s, and will retire within the next couple of years. I plan to wait till I'm 70 to start collecting SS. At that point, assuming the rules are the same as now, it will more than cover my current normal expenses, so I will not need to withdraw from my portfolio afterwards, unless my expenses increase significantly for whatever reason (new car, major repairs, major medical expenses, etc.)

Of course I'll have to take RMDs from my tax-deferred accounts, but that's just moving money from one bucket to another and paying taxes on it, if I don't actually spend them.
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Re: How much does social security factor into your retirement income?

Post by Midwest Marc »

We are 30+ years away, use age 67 figures, scale down to 70% of projected. I feel this is reasonable without being too conservative.
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Re: How much does social security factor into your retirement income?

Post by Lazysundays »

I put zero, but am expecting 30-50% of what is projected for me 30 years from now. To stay on the safe side of savings, I prefer to just pretend it will not exist.
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Re: How much does social security factor into your retirement income?

Post by carolinaman »

Began taking SS at FRA 4 years ago. DW and I live on my pension and SS. SS is about 35%. At present, RMDs are not needed for living expenses so I excluded them from calculation. I expect some form of means testing in future which could reduce my SS income.
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obgyn65
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Re: How much does social security factor into your retirement income?

Post by obgyn65 »

Turning 50 this year. SS income is about 20% of my planned annual retirement income.
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Re: How much does social security factor into your retirement income?

Post by mikeast »

We're 60 and 53 now. If there is no deterioration of our expected benefits, we wont need to tap into our savings and the kids will get a
meaningful inheritance. If they ever means test it, I may regret saving so much.
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Re: How much does social security factor into your retirement income?

Post by MnD »

We use her estimate for age 62 in our planning which will provide around 12% of our income.
I have some post-employment income of a similar amount that runs from our planned mid-50's retirement till around then, so her SS fills in nicely for income smoothing. (SWR+pension+my post employment income (replaced by her SS at age 62)) is our baseline available income assumption for at least the first 15 years of retirement.

I plan to wait until age 70 which is 18 years from now and 15 years after our planned retirement and I really haven't planned that far out.
We haven't even decided where we'll be living and who knows what our overall situation will be.
Like all other types of money I'm sure we'll find something useful to do with it when the time comes. :mrgreen:
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Re: How much does social security factor into your retirement income?

Post by Tycoon »

Zero.
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Re: How much does social security factor into your retirement income?

Post by S&L1940 »

joe8d wrote:Retired 11 years and SS is absolutely the most important component of my retirement income.
yep, also 11 years into SS and we depend on the monthly infusion into our account for half of our budget spend. Extras and special needs come out of our asset buckets. Good thing we are not doing polls anymore...
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Re: How much does social security factor into your retirement income?

Post by cheese_breath »

Age 74, retired 18 years. Estimate this year SS will be about 55% of income, scaling down to about 25% in 20 years. May not be an issue for me, but wife will still be in her 80s then.

edit: It occurred to me after posting this that the answer depends on how we define income. For my purposes I'm considering withdrawals from investments as income. Perhaps some might not though(?).
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Re: How much does social security factor into your retirement income?

Post by MnD »

I don't understand the zero assumptions for SS but then again i don't get 2% SWR's, 0% real returns, sharply discounting vested pensions........

If I chained together a bunch of negative assumptions I'd be very disappointed in when we could retire and what our lifestyle would be and in how much more we would have had to cut back on our lifestyle when younger and working. I'm also virtually certain we would end up leaving millions of dollars on the table because in real life positives and negatives tend to balance out and real "doom and gloom" deals rarely comes to pass.
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Re: How much does social security factor into your retirement income?

Post by ubermax »

Retired 6 years , 60% Social Security and 40% Savings
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Re: How much does social security factor into your retirement income?

Post by dbr »

I put in the SS we are actually collecting, and it is a significant fraction of income.
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Re: How much does social security factor into your retirement income?

Post by cadreamer2015 »

0 to 3 years from retirement. I've calculated my social security benefit at age 63 (when I may retire), even though I plan on waiting until FRA or even 70 to claim, depending on how things go. SS is projected to be between 20 and 25% of our retirement income.
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Re: How much does social security factor into your retirement income?

Post by The Wizard »

Nothing presently at age 65 since I'm delaying until 70 if all goes well. But that's nothing in present dollar amounts; it does add some confidence to my retirement situation knowing that it's there if I need it early.

At 70, current projections show SS making up around 30% of my taxable income...
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Re: How much does social security factor into your retirement income?

Post by midareff »

Retired three years... SS is between 20 and 21% of our annual income, pension 44%, portfolio 35%.
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TheTimeLord
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Re: How much does social security factor into your retirement income?

Post by TheTimeLord »

Let's say I have a cool $2 million in my investment portfolio and I am assuming a SWR of 3.3% or $66,000 a year. Now also assume my SS benefit is $25,000 a year. So my total annual income is $91,000 of which SS is 27.5%. To me 27.5% is significant. So I would imagine unless you have a sizable pension SS will be a significant part of your retirement income, depending on your threshold for the word significant.

Or am I missing something?
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Re: How much does social security factor into your retirement income?

Post by fh2000 »

I am 59, and plan to leave w*rk anytime now. I ran some numbers in FireCal.
If I am not counting SS, we can have 100% success rate for 25 years. If both of us start taking SS at 70, we will get more than 35 years. So, SS to us, is our longevity insurance
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Re: How much does social security factor into your retirement income?

Post by Herekittykitty »

At age 66 (am 64 now): Will collect social security on late husband's record at age 66 and will also have a pension if I quit working at my current job then, which I may and may not (am not expecting to, but who knows). After tax investing is currently minimal. Social Security will be 20-25% of the total if I just consider it and pension income at 66.

At age 70: Switch to mine at age 70 (mine will be the higher of the two at that time). Will also have the pension. Also will also have to take minimum required withdrawals from 401k. Social security will still be 20-25% of the total at age 70 if I just consider it and pension income and required withdrawals from 401k (since my social security will be higher and thus remains the same percentage of an income increased by required withdrawals.) It could be a lower percentage if as is likely I am able to increase after tax investing.

If I am able to continue working either full time or part time, as I hope to do (I like it but realize working isn't as easy as time goes on and anyway I could change my mind), social security will of course be a lower percentage of the total.

I am one who is grateful that social security will likely be available for me. I am a widow and rely only on myself for my support, and realize anything could go wrong even with the reasonably but not wildly optimistic scenario for my future that I see.
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Re: How much does social security factor into your retirement income?

Post by The Wizard »

TheTimeLord wrote:Let's say I have a cool $2 million in my investment portfolio and I am assuming a SWR of 3.3% or $66,000 a year. Now also assume my SS benefit is $25,000 a year. So my total annual income is $91,000 of which SS is 27.5%. To me 27.5% is significant. So I would imagine unless you have a sizable pension SS will be a significant part of your retirement income, depending on your threshold for the word significant.

Or am I missing something?
If you're missing anything, its the critical nature (or not) of additional income.
Money is fungible as they say, and some people have enough income from other sources that the additional income from SS just gets invested in a taxable account.
Similar with RMDs.

So it's dollar amounts, not percentages.
Example: you need $6000 a month to float your boat. You presently have $7000 a month coming in, a modest buffer. SS starts and adds $2000 a month more.
But it's true that most consumers can find SOMETHING to spend the excess income on...
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TheTimeLord
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Re: How much does social security factor into your retirement income?

Post by TheTimeLord »

I sometimes wonder if those who plan to retire in their late 40s to mid 50s understand the effect they will have on their SS benefit and the long term effect that can have on their retirement. It is very easy to look at your SS statement and think "Wow, I have a great benefit I don't need to contribute anymore" without realizing that estimated benefit is calculated assuming you will continue to make the same salary every year from then until retirement. For people retiring in their late 40s to mid 50s it is very hard to have a full 35 years of high contributions so when they stop working those assumed years of continued salary are replaced by likely lower income years from their past or even zero income years.

Is this something people who are looking to retire early are fully considering?
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Re: How much does social security factor into your retirement income?

Post by Ron »

As of this moment very little, since most of our retirement income (both age 67) comes from our respective investment portfolios and the only current SS benefit received is a spousal benefit by my wife, based upon 50% of my FRA benefit.

In less than three years (when we both turn 70), SS will cover 70% of our expenses. Since we're both old pharts, we don't plan for any reduction in benefits. We're close enough in age to get the maximum, and old enough not to worry about a time (if ever) that benefits may be cut.

The remaining 30% will be more than covered by two small pensions, an SPIA, and my VA disability. Our joint retirement portfolio will be just there to (hopefully) increase in value for the future benefit of our (disabled) son. RMD's will be withdrawn and reinvested in taxable accounts, when needed.

Could we get along without SS? Sure, but it's a benefit we already contributed to so we might as well take advantage of the income.

- Ron
Last edited by Ron on Sun May 17, 2015 7:47 am, edited 1 time in total.
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Re: How much does social security factor into your retirement income?

Post by Sidney »

I include it in my projections assuming wife takes spousal benefit at FRA and then we both take full benefit at 70. For simplicity I assume it is all taxable -- I suppose I could do it at .85 but my planning isn't that precise. However, in stress testing our plan, it is very survivable if SS is zero.
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Re: How much does social security factor into your retirement income?

Post by MnD »

TheTimeLord wrote:I sometimes wonder if those who plan to retire in their late 40s to mid 50s understand the effect they will have on their SS benefit and the long term effect that can have on their retirement. It is very easy to look at your SS statement and think "Wow, I have a great benefit I don't need to contribute anymore" without realizing that estimated benefit is calculated assuming you will continue to make the same salary every year from then until retirement. For people retiring in their late 40s to mid 50s it is very hard to have a full 35 years of high contributions so when they stop working those assumed years of continued salary are replaced by likely lower income years from their past or even zero income years.

Is this something people who are looking to retire early are fully considering?
I went the SS calculator and plugged in $0 for age 57-70 versus their assumption of above wage cap earnings (max) earnings and the benefit hardly changed. The SS bend point benefit formula is heavily favorable to low and moderate income with wages above $50K/yr adding very little.
I have wages every year since age 16 so at age 56 I still have 40 years to pick from to get a high 35.

For my wife, same age but with a 12 year gap in wages for child-rearing, the issue you raise is more significant.
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Re: How much does social security factor into your retirement income?

Post by DFrank »

I am about to turn 60, and plan to retire next year. The simple answer is I use our projected SS benefits at the age we plan to take SS in cFIREsim projections that I intend to be baseline scenarios.

I do run "what-if" scenarios with a SS benefit of 75% of projected benefits in order to get a handle on how much we would need to reduce discretionary spending to hold similar probability of success.
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Re: How much does social security factor into your retirement income?

Post by John3754 »

TheTimeLord wrote:I sometimes wonder if those who plan to retire in their late 40s to mid 50s understand the effect they will have on their SS benefit and the long term effect that can have on their retirement. It is very easy to look at your SS statement and think "Wow, I have a great benefit I don't need to contribute anymore" without realizing that estimated benefit is calculated assuming you will continue to make the same salary every year from then until retirement. For people retiring in their late 40s to mid 50s it is very hard to have a full 35 years of high contributions so when they stop working those assumed years of continued salary are replaced by likely lower income years from their past or even zero income years.

Is this something people who are looking to retire early are fully considering?
This is one of the reasons why I ignore the presence of SS completely in my planning.
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burt
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Re: How much does social security factor into your retirement income?

Post by burt »

How much does social security factor into your retirement income ?

A lot.
1/3 of my retirement income when I start drawing in a few years.

For those who say SS factor is zero.......... better step up your saving.
You'll probably need an extra cool million to replace it.

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Re: How much does social security factor into your retirement income?

Post by mhc »

TheTimeLord wrote:I sometimes wonder if those who plan to retire in their late 40s to mid 50s understand the effect they will have on their SS benefit and the long term effect that can have on their retirement. It is very easy to look at your SS statement and think "Wow, I have a great benefit I don't need to contribute anymore" without realizing that estimated benefit is calculated assuming you will continue to make the same salary every year from then until retirement. For people retiring in their late 40s to mid 50s it is very hard to have a full 35 years of high contributions so when they stop working those assumed years of continued salary are replaced by likely lower income years from their past or even zero income years.

Is this something people who are looking to retire early are fully considering?
I consider it. One should also look at how SS benefits are tiered. There are breakpoints. The SS website lets you manually put in earnings per year, so it is easy to see the effects of no income years.
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Re: How much does social security factor into your retirement income?

Post by TheTimeLord »

MnD wrote:
TheTimeLord wrote:I sometimes wonder if those who plan to retire in their late 40s to mid 50s understand the effect they will have on their SS benefit and the long term effect that can have on their retirement. It is very easy to look at your SS statement and think "Wow, I have a great benefit I don't need to contribute anymore" without realizing that estimated benefit is calculated assuming you will continue to make the same salary every year from then until retirement. For people retiring in their late 40s to mid 50s it is very hard to have a full 35 years of high contributions so when they stop working those assumed years of continued salary are replaced by likely lower income years from their past or even zero income years.

Is this something people who are looking to retire early are fully considering?
I went the SS calculator and plugged in $0 for age 57-70 versus their assumption of above wage cap earnings (max) earnings and the benefit hardly changed. The SS bend point benefit formula is heavily favorable to low and moderate income with wages above $50K/yr adding very little.
I have wages every year since age 16 so at age 56 I still have 40 years to pick from to get a high 35.

For my wife, same age but with a 12 year gap in wages for child-rearing, the issue you raise is more significant.
Yes, I would assume the situation would be most pronounced for mid to lower wage earners and those who have breaks in their employment or possibly had extended years in school seeking an advance degree or training. Even though I have an almost 40 year employment history my projected benefit changed by $289/month (almost $3,500/year) from 2014 to 2015 because of a change in salary as I transitioned into contracting. I would assume I might have seen a dip of similar magnitude in benefits if I had retired and gone to zero annual contributions.
Last edited by TheTimeLord on Sat May 16, 2015 9:54 am, edited 2 times in total.
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Re: How much does social security factor into your retirement income?

Post by 4ransom »

The old 3 legged stool, income is about one third each-investments, pensions, and SS.
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Re: How much does social security factor into your retirement income?

Post by Blender »

TheTimeLord wrote:I sometimes wonder if those who plan to retire in their late 40s to mid 50s understand the effect they will have on their SS benefit and the long term effect that can have on their retirement. It is very easy to look at your SS statement and think "Wow, I have a great benefit I don't need to contribute anymore" without realizing that estimated benefit is calculated assuming you will continue to make the same salary every year from then until retirement. For people retiring in their late 40s to mid 50s it is very hard to have a full 35 years of high contributions so when they stop working those assumed years of continued salary are replaced by likely lower income years from their past or even zero income years.

Is this something people who are looking to retire early are fully considering?
This is a very good point. We plan to early retire in the next 8-10 years, well, to have the ability to do so if we wish, and have yet to do any number crunching on the decreased SS benefits. That being said we're planning on SS being the gravy, not the meat, and we could hopefully survive on just the meat alone. But more gravy is always good....
likegarden
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Re: How much does social security factor into your retirement income?

Post by likegarden »

We are retired for 13 years and depend on 45% of our income coming from SS, 45% from a pension, and 10% from our portfolio. Our savings are there for security, could live without it.
We paid into SS and pension over our working life and expect that payments to us will continue.
montanagirl
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Re: How much does social security factor into your retirement income?

Post by montanagirl »

Right now spousal SS is about half of what I need. If I collected my own it would provide about 90% of my needs. What I have in my IRA is there for emergencies and stuff like prop tax, homeowners insurance and uncovered medical.

So yeah I count on it in the here and now.
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Sheepdog
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Re: How much does social security factor into your retirement income?

Post by Sheepdog »

in 2013 and 2014 our Social Security receipts covered 43% of our expenses, so it has provided and continues to provide a significant portion of needs in my retirement, now in its 17th year. The remaining 57% came from our savings and investments. (Our investment total did increase slightly during that period, however.)
Last edited by Sheepdog on Sat May 16, 2015 10:31 am, edited 1 time in total.
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songman52
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Re: How much does social security factor into your retirement income?

Post by songman52 »

cheesepep wrote:Zero. I wish that I didn't have to pay social security taxes for something I have no use for.
Thank you for helping others. My father was killed while on active duty in the Air Force. My widowed mother relied on SS survivor benefits for her and her children (6 years old and younger at the time) for several years. Once we were all in school full-time she was able to re-join the workforce. Social Security is more than just retirement benefits.
For this reason I've never begrudged contributing to the system. All three of us (the children) grew up, were graduated from college, and now contribute by paying taxes, etc. In the few years immediately following my dad's death the SS income represented about 50% of the household income. Who knows where we would have been without it?
And I hope you nor any of your loved ones ever need to use these benefits.

Sorry that this was not directly addressing the topic. Our SS should be about 20% of our income once I reach 70.
Grt2bOutdoors
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Re: How much does social security factor into your retirement income?

Post by Grt2bOutdoors »

Significantly, I'm estimating 75% of benefit will be received.
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