How do you factor in SS?

[Retch The Grate]

I don't include it in my planning, I want to be safe without it. When I was younger that was because I assumed it wouldn't be around (That's what they told us Gen Xers). Nowadays I assume it will have a 50% haircut by the time I'm taking it, and with any model I do of my spending, it is basically insignificant given my goals for when I want to retire versus how many years later it comes online.

 

[audreyh1]

When we were planning retirement before I turned 40, I planned $0 for SS as it was too far out and uncertain.

Now that I am almost 20 years older, I am looking at SS in terms of tax torpedo planning, and right now assuming the full amount at $70. If it gets cut 23%, then I'll have less of a tax hit as it may keep me under some brackets.

I assume haircut on all recipients. Even if DH waits until 70, he'll be starting in 2025, me in 2029. So we would be ahead of a 2030 reduction, but not by much. If it's 2035 then I guess we would be recipients for a few years before an across the board cut.

 

[BigMoneyJim]

I'm 48, and up until 2-3 months ago I didn't factor it in to planning. But I have a non-COLA pension coming as early as age 55, and SS as early as age 62, and I recently decided to see how those fit into plans.

Wow, it makes a big difference!

And, in the worst-case scenario of blowing through all my money I have two lifetime annuities to fall back on.

So now I'm looking to ESR/downshift in the next 4-16 months and allow myself to draw up to 6% of my starting portfolio if needed (dropping to 2.8% in 6.5 years and even less in 13.5 years), but I'm really hoping to make enough to not need to.

And if things start going poorly in the first few years I can go back to full-time work, rent out rooms, eat beans and rice, etc..

The general sequences seem to indicate if you don't have poor luck early in withdrawals, then you end up with lots of "extra" money in the end, and also people tend to spend less as they age. I'm counting on being young enough to take corrective action if I retire into a big bear market.

 

[Huston55]

^^^^^ this - anyone who has another pension or money coming from the government could be dinged. I will be getting a modified Reservist pension at age 60....however, I also have had a civilian career and paid into SS with both my civilian and military earnings. Even when I was shoveling all of my Reserve income into the TSP, the US Govt took the SS deduction beforehand.

It is easy for the government to just fiddle across the board with those already getting something from the government...however, I do also have other streams of income and if push came to shove, would be able to live fairly nicely without the SS. It's just the principle of it -paying into it (double as a self-employed person) and not receiving much for it.

To the OP, I model full SS amount, reduced amount, different ages (62, 67 and 70) in FireCalc...I'm over 100% on most of my scenarios...it's when I start using 6 figure constant dollar yearly lifestyle costs that my success percentage goes below 100% - just not by much.....

BTW - love that FireCalc app....very nice.... and more conservative than many of the other calcs. I like that as it makes me realize it has a built in buffer.

I also have a Reserve pension which I’m currently collecting. So, I’m interested in knowing why you think this.

To OP: I’m 63 & DW is 61 and we plan to take SS somewhere btwn when I am 68-70 yo (was always age 70 until using Mike Piper’s SS Calculator). We include 100% of SS in our planning & retirement calculator runs because I prefer to quantify any “excess” to evaluate our confidence in our plans, instead of making an arbitrary cut on the front end. Using 100% also improves RMD planning IMO.

 

[albireo13]

If we believe there will be a SS haircut in the future, would that not favor starting SS early .. at 62 perhaps?

 

[brucethebroker]

Just so we all understand. Are people predicting a Haircut for ALL recipients, even those who already take SS? Or just new recipients who will become eligible in the next say... 5 - 10 years?

Neither.
Funny, but no one worries about welfare, SNAP food program or Medicaid recipients having to take a "haircut"-and many of those folks have paid next to nothing for their "benefits"-unlike Seniors and their employers who have paid three, four or more decades into FICA. I don't hear fed. government/military retirees worry about pension "haircuts" (perhaps they do-but I do not know of any).

Personally, I think inflation will take care of SS and the other programs. "just crank up the (treasury) printing presses, boys!"

 

[Independent]

I wouldn't have retired without some expectation of SS.

When I was 35, I assumed zero.

When I was 59, I assumed a 75% after the projected trust fund exhaustion year.

Now, when I'm 71, I'm assuming 100%.

 

[Independent]

This question lends itself to a poll. Here is the last that I know of http://www.early-retirement.org/forums/f28/poll-are-you-expecting-social-security-56869.html

There are 183 responses, sorted by age group. As expected, older people are expecting a higher percent.

The poll is 7 years old. Maybe it's time to ask exactly the same question and see how/whether opinions have changed.

Note that the poll asks for "most likely payout", not "the conservative number that you put into software".

 

[NW-Bound]

Personally, I think inflation will take care of SS and the other programs. "just crank up the (treasury) printing presses, boys!"

Is the SS outflow limited to its funding, or is it allowed to run a deficit like the general Federal fund?

By the way, this is what the SSA has to say about the short fall. Note that the emphasis is mine. I guess we share in the blame too. We only have 2 children. My parents have 4.

Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman.

 

[audreyh1]

Is the SS outflow limited to its funding, or is it allowed to run a deficit like the general Federal fund?

By the way, this is what the SSA has to say about the short fall. Note that the emphasis is mine. I guess we share in the blame too. We only have 2 children. My parents had 4.

I believe that Social Security is currently running an annual deficit, however, it is pulling funds from the Social Security trust fund (reserves) to make up the difference. Once that trust fund goes to zero, then benefits have to be cut to match the SS payments coming in each year, so SS can't borrow to fund additional deficits.

https://www.ssa.gov/policy/trust-funds-summary.html
That indicates that 2018 is the first year for a deficit. But I guess they don't really know until after the year has ended.

 

[RunningBum]

If we believe there will be a SS haircut in the future, would that not favor starting SS early .. at 62 perhaps?

Depends. Maybe they would grandfather in anyone 62 or over, whether they have started SS or not. Maybe they would even it out, so that if you've been collecting from 62 until the cut, they give you a deeper cut than someone who has been deferring--I doubt this one, even though it seems fair.

I modified my spreadsheet to show an across the board 25% cut at age 70, the worst time possible for someone who defers to 70. Assuming 5% returns on investments on 2% inflation, it moved the breakeven from 84 (no cuts ever) to 90.

 

[NW-Bound]

I believe that Social Security is currently running an annual deficit, however, it is pulling funds from the Social Security trust fund (reserves) to make up the difference. Once that trust fund goes to zero, then benefits have to be cut to match the SS payments coming in each year, so SS can't borrow to fund additional deficits.

https://www.ssa.gov/policy/trust-funds-summary.html

That's what I thought. This means the SSA cannot print money.

 

[pb4uski]

Depends. Maybe they would grandfather in anyone 62 or over, whether they have started SS or not. Maybe they would even it out, so that if you've been collecting from 62 until the cut, they give you a deeper cut than someone who has been deferring--I doubt this one, even though it seems fair. ....

Everything that I have read indicates an across-the-board cut.. as tax revenues come in a percentage of benefits scheduled to be paid will be paid. No grandfathering.

 

[RunningBum]

Everything that I have read indicates an across-the-board cut.. as tax revenues come in a percentage of benefits scheduled to be paid will be paid. No grandfathering.

That assumes nothing is done until the trust fund runs out and something HAS to be done. It's probably the most likely scenario, but some combinations of cuts and SS tax increases could be done before then in a different way, including grandfathering, at least until/unless the trust fund runs out later.

 

[griffithee]

I also have a Reserve pension which I’m currently collecting. So, I’m interested in knowing why you think this.

To OP: I’m 63 & DW is 61 and we plan to take SS somewhere btwn when I am 68-70 yo (was always age 70 until using Mike Piper’s SS Calculator). We include 100% of SS in our planning & retirement calculator runs because I prefer to quantify any “excess” to evaluate our confidence in our plans, instead of making an arbitrary cut on the front end. Using 100% also improves RMD planning IMO.

We live off our Military pensions (X2) and our VA comps (X2). I have been retired/unemployed for 5 years and DW for 3. We also have some rental income so SS is not part of our plan and will be just be gravy when we are eligible. All of our pensions are COLA adjusted and healthcare is paid for so we don't really have concerns about inflation. There is always a little piece of the back of my mind that worries about the USG Solvency.

If legislatures decide to deleteriously mess with our military pensions or our VA compensations we could be in a world of hurt. We paid off our house and live on half of our income. We are saving the other half. We don't need it to be comfortable and would like to reinforce a nest egg if/when USG goes bankrupt.

Probably not a major issue to concern ourselves with but helps us sleep at night, regardless. We are certainly blessed.

 

[Dtail]

Depends. Maybe they would grandfather in anyone 62 or over, whether they have started SS or not. Maybe they would even it out, so that if you've been collecting from 62 until the cut, they give you a deeper cut than someone who has been deferring--I doubt this one, even though it seems fair.

I modified my spreadsheet to show an across the board 25% cut at age 70, the worst time possible for someone who defers to 70. Assuming 5% returns on investments on 2% inflation, it moved the breakeven from 84 (no cuts ever) to 90.

That's the issue in that many of us will turn 62 before 2034 and won't be able to make a more informed decision on taking it earlier due to a much later breakeven point. That is if one uses that analysis as part of the decision making process.

 

[Independent]

Is the SS outflow limited to its funding, or is it allowed to run a deficit like the general Federal fund?

By the way, this is what the SSA has to say about the short fall. Note that the emphasis is mine. I guess we share in the blame too. We only have 2 children. My parents have 4.

Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman.

Thanks for the quote. I've believed that for a long time, but never saw anything from the SSA.

The WWII generation had about 3 kids per couple, the Boomers had 2. If everything else had been equal, the Boomers would get a 1/3 cut in benefits, or the Boomers' kids would get a 50% increase in taxes.

I think the principal offset to that is that the higher rates of female employment cut the cost of spousal and survivor benefits. But, I'm not sure.

 

[SAtoUS]

Just so we all understand. Are people predicting a Haircut for ALL recipients, even those who already take SS? Or just new recipients who will become eligible in the next say... 5 - 10 years?

My $0,02 is that it will all come to a screeching halt one day.

 

[pb4uski]

My $0,02 is that it will all come to a screeching halt one day.

The worst case scenario if nothing is done is that benefits will be haircut ~25% beginning in 2034... if by "screeching halt" you mean that NO benefits will be paid then you are ignorant about the facts of the situation.

 

[Beer-man]

We have made close to or over the SS max earnings since we started working and are used to living on about 45-55k. With that sort of math we don’t fret too much about SS longevity, it will inevitably provide above and beyond as long as we prevent lifestyle inflation.

 

[gauss]

Everything that I have read indicates an across-the-board cut.. as tax revenues come in a percentage of benefits scheduled to be paid will be paid. No grandfathering.

pb4uski - I agree that under current law, if nothing is done, the benefits will be scaled back in a uniform fashion.

Do you mean by your comment, that this is also the most likely result even if Congress takes action on this and makes "reforms" to address this situation?

If so, that is encouraging to hear.

-gauss

 

[pb4uski]

If Congress does nothing... which seems likely as there will inevitably be winners and losers and I have zero confidence in those bozos ability to get the courage to do something sensible.

 

[Offgrid Organic Farmer]

I've been running Firecalc, and others, using my full SS benefit.
I got to thinking about the Feds trimming that back someday.

What do other folks do?

I've heard that SS should be solvent through 2035.
I was was thinking that at 2035, start using 75% of my SS.

As the next SS crisis approaches, a future administration will address it, and they will tweak it, yet again, to push its collapse off to 2135.

I get messages every year from SS asking me to log-on and to review my policy.

I do not review it every year, but I have reviewed it a couple times.

I have enough cash flow from my military pension such that I am able to support my family. My investments have continued to grow and I am not sure if I will ever 'need' my SS benefit.

 

[ShokWaveRider]

I count it as we are already retired. But only for future calculations as we have not taken it yet. In a couple of years when DW takes hers and when I plan to take mine, I will include it at whatever face value it is. If it gets depleted or goes away we will adjust accordingly.

 

[Walt34]

As the next SS crisis approaches, a future administration will address it, and they will tweak it, yet again, to push its collapse off to 2135.

I think this is the most likely scenario. IIRC last time (1983?) congress didn't act until about three months before they absolutely had to. As for an across-the-board haircut, that would be political suicide for any politician dumb enough to vote for it. Not only would that be throwing Grandma under the bus, but then Grandma's kids and maybe grandkids would not want to have to make up the difference. So then you have two or maybe even three generations of people voting against that dumb politician. Politicians are generally not regarded for high intelligence but I doubt any of them are that stupid.

So I think we'll see something similar to the last adjustment, perhaps raising FRA again, raising the payroll tax, maybe even means testing but if that happens it'll be a pretty high bar so it'll only be affecting those with incomes well into six figures, more for show than having any real effect.

But hey, my crystal ball is just as cloudy as the next guy's.