Q about FIREcalc & SSI estimates...

[Cb]

...here's the deal:

Last December I submitted online requests for SSI estimates for my wife & I based on 4 more years of over SS max earnings then retiring at 47 & 48

The SSI estimates came back projecting a bit over $900/mo for my wife, and a bit over $1200/mo for me, with payments starting at age 62.

I've been reducing those numbers by 25% when using FIREcalc because I figure the paragraph on the front page titled, "About Social Security's Future" is a less than subtle hint about what the future holds.

While reading another thread here I read that SSI estimates are in current dollars - I then pulled out those December estimates and spotted the following:

"These estimates are in today's dollars. After you start receiving benefits, they will be adjusted for cost-of-living increases"

The way I read that suggests that I ought to increase the current SSI estimates of $900 & $1200 per month to reflect COLA for the next 17 - 18 years, and reduce those numbers by my 25% SSI Benefits Haircut Factor when using FIREcalc to avoid being overly conservative. Is that correct?

Thanks,

Cb

 

[Bob_Smith]

Cb, if I understand your question, the answer is no. You would NOT increase the SS amounts in FIRECalc because FIRECalc calculates SS in inflation adjusted dollars. So if you believe your SS amount will be $900 (in today's dollars) at whatever age you choose to use, you put $900 in FIRECalc. You would not want to add additional COLA our you'll get wildly optimistic projections.

When they tell you that at age 62 (or whatever) you will receive $900 in today's dollars if you retire at 47, that $900 will be adjusted for inflation between the ages of 47 and 62 by the SS system. So the amount you actually receive at age 62 will likely be significantly more than $900. In other words, the COLAs are applied to the $900 between 47 and 62 while you're waiting to collect.

 

[Cb]

I'm not so sure Bob - I think Dory intends folks to input the actual first-year annual SSI & pension adjustments and FIREcalc adjust from there.

The SSI fields in FIREcalc have a note indicating that those streams will be adjusted - the following fields for other income streams feature a checkbox allowing the user to specify whether pensions are indexed or not. I believe Dory means that the income streams will be adjusted in years following the start year. (At least I'm wildly optimistic that's the case).

I'm going to just sit here and hit Refresh until Dory comes along and clears this up for me. :-/

I spoke with the folks at Social Security this afternoon to get clarification on the SSI statement they sent me - The $1200 & $900 estimates for my wife & I are in 2004 dollars, and the rep said it would be reasonable to bump them up by CPI-W* for 18 years to get a SWAG at what they might be when they begin in 2022. (She also agreed that shaving those figures by ~25% would probably be prudent as well)

Cb

 

[Bob_Smith]

I'm not so sure Bob - I think Dory intends folks to input the actual first-year annual SSI & pension adjustments and FIREcalc adjust from there.

Cb, see the other discussion in this thread as it may relate to your question. You will want to get an earnings and benefits estimate from SSA that reflects the date you plan to stop working (not the one they send to you automatically). You input that figure into FIRECalc. You do NOT increase that number to reflect COLA for the next 17 years as stated in your original post.

 

[Cb]

Bob, the SS estimates I'm referring to were ones I'd requested via the SSI website specifying retirement at ages 47 & 48 for my wife and I, rather than the standard annual SSI mailings.

Which thread were you referring to? I haven't come across one discussing appropriate FIREcalc inputs for SSI or pensions.

On a related note - my (non-COLA'd) company pension estimate is given in future (age 60) dollars. I'd been using that figure in FIREcalc - are you suggesting that I ought to decrease that (year 2020) dollar amount before entering it into FIREcalc?

My guess is Dory intended users to input expected first year estimates for latter year income stream adjustments, and FIREcalc applies COLA from that point forward for SSI or pensions (when the checkbox is selected)

 

[Bob_Smith]

HI Cb,

In your first post you said:

"The way I read that suggests that I ought to increase the current SS estimates of $900 & $1200 per month to reflect COLA for the next 17 - 18 years..."

All I'm saying is that you should NOT increase the $900 & $1200 in FIRECalc to reflect COLAs. You just put the $900 and $1200 figures directly into FIRECalc.

Regarding the pension, it's basically the same. You simply input the pension amount you'll receive at age 60 (as a negative number), input the number of years until your pension begins, and un-check the "inflation adjusted dollars" box (because yours has no COLA).

 

[dory36]

Sorry for the late response - I missed this thread until CB pointed it out.

The SS inflation calculation (and the other adjustments as well, if inflation-adjusted) starts as of year 1 of the run, and adjusts the theoretical SS amount every year. So if you put in $10,000 for SS, Firecalc assumes it is some amount more than that by the time you start taking it.

If the year is on or after the year to start collecting SS, then the withdrawal for that year is reduced by the adjusted amount of the SS.

So, put in today's dollars.

Dory36

 

[Cb]

Thanks for the reply, Dory.

Back to the coal mines...

Cb

 

[Bob_Smith]

Sorry for the late response - I missed this thread until CB pointed it out.

The SS inflation calculation (and the other adjustments as well, if inflation-adjusted) starts as of year 1 of the run, and adjusts the theoretical SS amount every year. So if you put in $10,000 for SS, Firecalc assumes it is some amount more than that by the time you start taking it.

If the year is on or after the year to start collecting SS, then the withdrawal for that year is reduced by the adjusted amount of the SS.

So, put in today's dollars.

Dory36

So Dory, you are assuming that if (for example) someone retires and earns zero $ beginning at age 50, the amount they receive at age 62 (12 years later) is not frozen during that 12 years, correct? In other words, you're assuming their benefit will keep pace with inflation between age 50 and age 62, even though there are no additional earnings after age 50 - is that right? There was some disagreement about that in another thread. Thanks.

 

[Cut-Throat]

In other words, you're assuming their benefit will keep pace with inflation between age 50 and age 62, even though there are no additional earning after age 50 - is that right? There was some disagreement about that in another thread. Thanks.

Excellent Question Bob ! - This is what I have being trying trying to find out also !

 

[Bob_Smith]

Cut-Throat, I'm almost certain I know the answer is yes - that the anticipated monthly benefit will keep pace with average wage increases (which is actually better than being pegged to CPI COLAs). But others are insisting this is wrong; they're saying the benefit will be frozen and eaten away by inflation between the ER date and age 62.

If they're right, someone who ER'd at age 42 in 1975, for example, would have ended up with only about one-third of their purchasing power intact by the time they started collecting 20 years later in 1995. Even those who ER'd in 1975 at age 52 would have had seen inflation slash their benefit by more than half in only 10 years. So it's an important issue, especially for those of us who are a long way from 62 and retired.

 

[dory36]

So Dory, you are assuming that if (for example) someone retires and earns zero $ beginning at age 50, the amount they receive at age 62 (12 years later) is not frozen during that 12 years, correct? In other words, you're assuming their benefit will keep pace with inflation between age 50 and age 62, even though there are no additional earnings after age 50 - is that right? There was some disagreement about that in another thread. Thanks.

Yes - that is the way I understand SS works, and that is the way Firecalc does it.

 

[Bob_Smith]

Hey Jarhead, thanks for confirming the SS inflation protection. MJ reported in another thread that two SS reps told him the amount would be frozen until 62 unless there were earnings. For a brief moment I thought maybe I had made a huge mistake in my ER calculations. So after grabbing my chest when my heart just about gave out, I dug into the fine print buried deep within the web pages of SSA's site and found what seemed to be the answer. Then Mikey confirmed, then Nords, then Dory, and now you. I do count on SS being there and believe it will be, although perhaps reduced some.

I came from humble beginnings too. Raised on a small farm, large family, etc. I've never earned huge money - we pulled in around $65,000/yr just before I retired last month, for example. We raised three kids. I never worked more than 40 hours a week except when writing on the side, but that was more like a hobby. So it is possible for folks who don't earn six/seven figures, own businesses, or work long hours to ER too.

 

[John Galt]

I too came from humble beginnings. Then, I worked like
hell (40 hour weeks, what is that??) and with some luck
made it into the UMC. But, I didn't have a plan or save
or even seriously budget, or really anything until I decided to retire. So, I kind of feel like I was in the same boat
as the guy who made an average salary, worked
normal hours, etc. when it came to ER. I had a couple
of advantages though. Lots of business/financial
experience was a big help. Willingness to jettison
my first wife helped a lot. If you are relentless and
have some brains, almost anyone can ER. I really
believe that.

John Galt

 

[Telly]

I was actually amazed at the amount that I received at age 62, beings I was out of work force, and did not contribute for age 49 to 62.  It is obviously indexed, and will go a long ways toward your future security.

I was wrong.

That's OK, I can take being wrong (especially if it means more $$ for me )

Glad to see some of the folks who fit the particular situation relating their SSA info, I was really lacking that before, as I haven't gotten 2 years worth of requested statements yet.

Too bad the SSA phone people were giving out the wrong info, as I got the same story late last year as MJ did. Maybe it's like the official IRS tax helpline... if they tell you the wrong info, it's your tough luck :-/

I'm off on a trip again, don't let the SSA change it while I'm gone

 

[MJ]

Guys, thanks for the positive confirmation regarding the SSA benefit index increases upto age 62.

Hope I didn't upset some of you with the misinformation.

As I stated in a previous posting, I'm more than happy to be wrong when it will get us more ER money.

MJ

 

[Bob_Smith]

Hope I didn't upset some of you with the misinformation.

MJ, I'm glad you brought it up. It was the prodding I needed to verify it for my own use.