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SS forecasting questions
Old 05-11-2013, 07:15 AM   #1
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SS forecasting questions

We are about 5 years away from FIRE at 50/53.

For those of you planning to check out in the next 5-10 years - how are you treating SS for forecasting/planning purposes?
  • Are you assuming it will all be there as the SSA web site says?
  • For the duration (could be 50 years for us)?
  • Is this included for planning with regards to SWR?
I have used only 30% of what the SSA tells me in Fidelity and Firecalc calculators and things still look OK at 90% confidence.

What do you think?

Thanks,
Ray.
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Old 05-11-2013, 07:47 AM   #2
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For my situation (over age 55) I would answer yes/yes/yes. For your situation, I can understand why you would back off some on the assumed benefit payments. Even so, I would think even a 50% assumption would be very conservative. BTW, are you using the calculator that allow you to calculate the benefit based on stopping work before age 62?
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Old 05-11-2013, 08:08 AM   #3
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Originally Posted by heeyy_joe View Post
For my situation (over age 55) I would answer yes/yes/yes. For your situation, I can understand why you would back off some on the assumed benefit payments. Even so, I would think even a 50% assumption would be very conservative. BTW, are you using the calculator that allow you to calculate the benefit based on stopping work before age 62?
Yes, that's the one I used. Thank you very much for your input/wisdom!
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Old 05-11-2013, 08:25 AM   #4
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We are 51/50 - from what I've heard even 20 years from now there will be enough revenue coming in from current workers to supply 75% of current benefits so that's the number I've been using.
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Old 05-11-2013, 08:39 AM   #5
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yes, yes, yes
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Old 05-11-2013, 08:43 AM   #6
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This is all speculation of course, but my assumption is that the current trend toward means testing everything will continue. So if you have lots of assets, you probably won't get what you might otherwise expect. On the other hand, you might not need it if you have lots of assets.

Of course, the meaning of "lots of assets" might be open for debate.
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Old 05-11-2013, 08:51 AM   #7
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This is all speculation of course, but my assumption is that the current trend toward means testing everything will continue. So if you have lots of assets, you probably won't get what you might otherwise expect. On the other hand, you might not need it if you have lots of assets.

Of course, the meaning of "lots of assets" might be open for debate.
The current means testing is based on income, not assets. It's possible that could change, but I doubt it.
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Old 05-11-2013, 08:59 AM   #8
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Coming soon..new orange colored currency. It must be true 'cause I saw people holding it in a television commercial. Bonjour!
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Old 05-11-2013, 09:33 AM   #9
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Originally Posted by FIREmenow View Post
We are about 5 years away from FIRE at 50/53.

For those of you planning to check out in the next 5-10 years - how are you treating SS for forecasting/planning purposes?
  • Are you assuming it will all be there as the SSA web site says?
  • For the duration (could be 50 years for us)?
  • Is this included for planning with regards to SWR?
I have used only 30% of what the SSA tells me in Fidelity and Firecalc calculators and things still look OK at 90% confidence.

What do you think?

Thanks,
Ray.
If we don't reduce taxes, SS will have enough money to pay for about 75% of the current formula benefits 25 years from now.

OTOH, lots of people here are concerned that there will be some sort of post-retirement means testing. If I were 45, I'd chop the 75% down to allow for that possibility. 30% seems plenty conservative.

I did a poll on this a couple years ago. http://www.early-retirement.org/foru...ity-56869.html

Note that the median response for people in your age group was 75%, but the question was specifically about "best guess", recognizing that most of us would use a more conservative number for planning.
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Old 05-11-2013, 12:56 PM   #10
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Originally Posted by Independent View Post
If we don't reduce taxes, SS will have enough money to pay for about 75% of the current formula benefits 25 years from now.

OTOH, lots of people here are concerned that there will be some sort of post-retirement means testing. If I were 45, I'd chop the 75% down to allow for that possibility. 30% seems plenty conservative.

I did a poll on this a couple years ago. http://www.early-retirement.org/foru...ity-56869.html

Note that the median response for people in your age group was 75%, but the question was specifically about "best guess", recognizing that most of us would use a more conservative number for planning.
Interesting poll, Independent. Thank you for posting the link. Interesting that the majority in all age groups was 100% - not assigning any results, but do you think a lot of that particular group is "wishful thinking"?
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Old 05-11-2013, 01:02 PM   #11
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The current means testing is based on income, not assets. It's possible that could change, but I doubt it.
Actually I AM worried about asset based taxes.

Specifically regarding SS. Means testing based on income is a fairly roundabout way to assess someone's "means" - and its fairly easy enough to game the current system to some extent. I wouldn't be surprised at all to see means testing based on some sort of assets measurement being used in the future.

In certain circles, there is quite a bit of talk about taxing assets. It's not fantasy, e.g. France recently added a wealth tax on assets greater than 1,300,000.
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Old 05-11-2013, 03:01 PM   #12
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The problem with using assets as a means test is there is no system in place to report assets where income is already reported, I doubt very much thats going to change
TJ
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Old 05-11-2013, 03:10 PM   #13
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I am using 67%. I saw the 75% thing and wanted to be about 10% more conservative - 75*90% = 67

My theory is when planning ER we need to be conservative as the path we are taking is most likely a one way street.
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Old 05-11-2013, 05:05 PM   #14
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The problem with using assets as a means test is there is no system in place to report assets where income is already reported, I doubt very much thats going to change
TJ
Income based means testing will continue to be used. It is easy and possible that retirement assets (IRA, Roth, 401k, etc) in the future will need to be reported. And then means tested off of that as well?
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Old 05-11-2013, 05:14 PM   #15
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Income based means testing will continue to be used. It is easy and possible that retirement assets (IRA, Roth, 401k, etc) in the future will need to be reported. And then means tested off of that as well?
Actually a simpler way would be to increase the RMS's from retirement accounts, and add them to Roths (reported but deducted from income). Perhaps set up so the account is emptied by age 100 not 120 as it is now. Basically for everyone over 70.5 the RMD's do sort of catch the assets as they go to income. Perhaps further just plain ban new Roths. Base this on that retirement assets should be used for folks retirement, not as a way to pass money on to the next generation income tax free. (Perhaps as an alternative a 10 year average when inheriting an IRA)
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Old 05-11-2013, 06:53 PM   #16
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I use a 55% figure, rather than the current 75% estimate.

I started a new j0\o and suddenly find myself in a small group of five people that want to retire early in the 'worst' way. They are trying very hard to figure out how to get on a disability dole, and cash in early on the disability side of SS. (or hit an accident/lawsuit lottery).
I'm watching these clowns, and have to figure that eventually a small percentage will find a way to "retire". I ballparked 20% from an 80/20 rule. It seems high to the number of people that I know of integrity and mores, but it's a rule of thumb... The current SS shortfalls underestimate disability SS, IMO.

I also expect SS to be fully taxed, and chained CPI growth to slow SS payout growth.

I used to feel over taxed when I learned how little that investment earnings were taxed (ltcg) compared to wages. When I heard how China uses laborers to haul grain rather than an auger, it sunk in about a world labor over-supply and wealth being a scarce resource.
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Old 05-12-2013, 08:58 AM   #17
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I use 75% for me and 55% for my wife, but as long as they do not change the 50% rule of what my wife can collect from mine then hers will be closer to 100% - gravy for later...
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