What percentage of your total expenses is covered by Social Security

[Ready]

I'm still about 20 years off from claiming Social Security. DH is 14 years away. Both of our monthly estimates if we claim at 70 are about $3,500 per month. So combined that gives us $84,000 annually. Our annual expenses excluding non-recurring costs like new cars and major home repairs is right around $80,000.

I've always heard that Social Security only tends to cover about 30-40% of your total expenses. I've been wondering if I'm overlooking something. It seems too good to be true. Granted I could worry about whether the funding will be there in 20 years to cover it, whether means testing will come in to play, and on and on. But ignoring all of the what ifs, it would seem like our social security should cover all of our run rate expenses.

Is this unusual? We both were high earners, so we typically earned in excess of the cap each year. And we both have over 35 years of income history. I've run the analysis if I were to stop working today, and it only drops each of our payments by $300, so not that significant.

Am I missing anything or just very fortunate?

 

[REWahoo]

Am I missing anything or just very fortunate?

Be sure both your $84K SS estimate and your $80K expense number are 'apples to apples'. My recollection is estimated future benefits from SS include an adjustment for inflation.

 

[pb4uski]

For us, about 46% if I use our planned level of expenses which has a fair amount of slack in it. If I use a more modest expense level, with less travel and frills, probably about 58%.

That is based on 1 1/2 times my FRA benefit in today's dollars... I was a high earner and maxed out most years since my 40s but DW was a SAHM.

 

[Independent]

If you're accustomed to living on noticeably less than your income, then this wouldn't be unusual. And, lots of people who post here are used to living on noticeably less than their incomes.

When I retired, I could see that if I deferred SS to 70, and my wife started at 66 (with 50% of my benefit), our SS would cover 100% of what had been our "normal" living expenses.

"Normal" included everything we were spending, including regular gifts. It didn't include "big" vacations or unusual gifts (kid's weddings).

Note that if our only income were SS, we wouldn't pay FIT. So how much FIT we should include in that comparison is debatable.

And, long term, we need to think about an upward drift in "normal" expenses due to health issues.

Of course, when I first retired, SS didn't cover any of our expenses because we were deferring SS.

 

[Independent]

Be sure both your $84K SS estimate and your $80K expense number are 'apples to apples'. My recollection is estimated future benefits from SS include an adjustment for inflation.

The SS estimate is in "current dollars". Any increases in the CPI or wage index between now and when that benefit is paid would result in a benefit of more than $84k.

 

[REWahoo]

The SS estimate is in "current dollars". Any increases in the CPI or wage index between now and when that benefit is paid would result in a benefit of more than $84k.

Mark your calendar. First time I've been wrong (today).

 

[pb4uski]

Be sure both your $84K SS estimate and your $80K expense number are 'apples to apples'. My recollection is estimated future benefits from SS include an adjustment for inflation.

True, but in this case both the numerator (SS) and the denominator (living expenses) increase for inflation so the % should be constant.

If 60% today then 60 SS in current $/100 current $ living expenses
If inflated 10 years at 2.5% then 77/128 = 60%

 

[MBSC]

I'm still about 20 years off from claiming Social Security. DH is 14 years away. Both of our monthly estimates if we claim at 70 are about $3,500 per month. So combined that gives us $84,000 annually. Our annual expenses excluding non-recurring costs like new cars and major home repairs is right around $80,000.

I've run the analysis if I were to stop working today....

It sounds like you're still working. If so, you may currently have employer-subsidized health insurance. Do your expenses include Medicare Part B premiums, Medigap premiums, Part D premiums, possible IRMAA adjustments to Parts B & D, and taxes on SS benefits?

 

[calmloki]

Social Security? The $5something/month pays some of the Medicare premium and keeps the cat fed. Guess I should have worked for employers more. Doing rental real estate generates unearned income; "unearned" quotha! Also makes it tough to know when one is retired, though I have been taking SS since turning 62 in 2011. For us, social security money is pretty inconsequential - more like a little rebate on the quarterly taxes that go out. Not turning it down, but it wouldn't be fun trying to exist on four times what I'm paid.

 

[Ready]

It sounds like you're still working. If so, you may currently have employer-subsidized health insurance. Do your expenses include Medicare Part B premiums, Medigap premiums, Part D premiums, possible IRMAA adjustments to Parts B & D, and taxes on SS benefits?

I am still working part time. I'm eligible for health care through my employer but I have declined it because I'm covered on DH's policy through his megacorp until I turn 62. The cost is minimal - around $150/month.

If I'm not working at all from 62-65 I will need to pay for medical insurance. And I have not budgeted for Medicare or Medigap. How much should I estimate for those expenses, along with taxes and any other expenses I will incur?

 

[eytonxav]

True, but in this case both the numerator (SS) and the denominator (living expenses) increase for inflation so the % should be constant.

Too bad everyone's real personal inflation isn't the same as the SS adjustment for inflation.

 

[Cobra9777]

Based on our combined age-70 benefit, SS covers 62% of planned spending. Both numbers are in today's dollars. I maxed out most years, while DW earned considerably less. Our spending tends to be on the high end for this forum. Assuming less travel, smaller house, fewer home improvements, car replacements, etc, we could easily get that figure north of 75%. We're still 15 years away, which is plenty of time for means testing, etc. So I'm not fully counting on that in my retirement planning. My SS fudge factor is currently set at 70%.

 

[W2R]

Right now I am on "divorced spousal SS", which is 1/2 as big as whatever he is getting for SS. My own SS will continue to grow until I reach 70, at which point I will switch over to my own SS and get a bigger amount.

As a percentage of my average annual spending, SS equals:

37% before age 70 with divorced spousal SS
54% after age 70 with my own SS.

I don't spend all that I could because so far I haven't wanted to. If I did, then of course the percentages would be lower.

 

[Earl E Retyre]

The SS estimate is in "current dollars". Any increases in the CPI or wage index between now and when that benefit is paid would result in a benefit of more than $84k.

Mark your calendar. First time I've been wrong (today).

I thought the online SS calculator allowed you to choose whether to see the expected benefit in current or future dollars. So it depends what OP selected when using the calculator. I am still not 100% convinced whether OP's numbers are in current dollars or future.

 

[RobbieB]

My little SS income of $1300/mo covers all my "overhead"

Health insurance, smart phone, high speed internet, deluxe TV package, land line, gas, electric, water/sewer, garbage/recycle and property tax.

This is about 20% of total expenses.

 

[daylatedollarshort]

One thing I realized later in life was that by living in a high cost of living area and having two incomes during most of our working years, we're also on the higher end of the contributions / benefits SS scale. Plus we have several pensions between us (none of them huge) but the combined income steams all add up.

I don't think you are missing anything. If you are I'm missing it, too.

 

[Ready]

I thought the online SS calculator allowed you to choose whether to see the expected benefit in current or future dollars. So it depends what OP selected when using the calculator. I am still not 100% convinced whether OP's numbers are in current dollars or future.

To calculate the benefit in future dollars wouldn't it have to be able to predict what inflation will be for the next 20 years?


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[Dawg52]

I plan to take mine early next year and it should cover about 1/2 my budget.

 

[Katsmeow]

I've always heard that Social Security only tends to cover about 30-40% of your total expenses. I've been wondering if I'm overlooking something. It seems too good to be true. Granted I could worry about whether the funding will be there in 20 years to cover it, whether means testing will come in to play, and on and on. But ignoring all of the what ifs, it would seem like our

I guess it depends on what you mean by "your total expenses." For 65% of recipients (elderly) SS provides the majority of their cash income. For 36% it provides 90% or more.

http://www.cbpp.org/research/social-security/policy-basics-top-ten-facts-about-social-security

Of course, a lot of that depends on expenses and to a certain extent the percentage of my income that is SS depends upon my spending that year.

DH is on SS and I am not (I just became eligible and have not taken). For this year, his SS income will cover a relatively small part of our expenses as our son is in his last year of college and we have expenses related to that and we have some one time expenses this year that are sizable.

On the other hand, on my projected budget for a few years from now our combined SS will cover anywhere from 70% of our projected annual expenses to 83% depending on some variation based upon discretionary expenses.

Of course, that is for both of us collecting SS. Bear in mind, that usually one member of the couples dies first. In our case, we have very similar SS benefits (mine is slightly higher) so almost half of the SS income would be lost when the first of us goes. But, half of the expenses would probably not go away. So need to factor that in.

 

[jabbahop]

@ 70 for both of us; SS covers 60% of expected expenses (not current) before tax - 46% after tax (with substantial RMD's).


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[ESRwannabe]

It still a long way off (I'm 40), but my guess is SS will cover around 86% (guessing I will get around $2k per month) of my living expenses (I spend 28k per year). I'll also have a government pension which will cover over 100% of my living expenses (should get over $30k)...

I live off less than half of my w-2 income ($60k). My brokerage account investments could cover around 75% ($21k) of my current living expenses.

 

[Totoro]

But ignoring all of the what ifs, it would seem like our social security should cover all of our run rate expenses.

Is this unusual?

In at least three countries I am a bit familiar with, the SS equivalent covers about 50% of typical household expenses.

Belgium: 13k roughly. Netherlands: 12k or so. NZ superannuation about 10k.

 

[Earl E Retyre]

To calculate the benefit in future dollars wouldn't it have to be able to predict what inflation will be for the next 20 years?

Yes, I just went to the SS on-line calculator and did a screen shot of where it asks you and how it says it computes future inflation.

 

[NW-Bound]

I'm still about 20 years off from claiming Social Security. DH is 14 years away. Both of our monthly estimates if we claim at 70 are about $3,500 per month. So combined that gives us $84,000 annually. Our annual expenses excluding non-recurring costs like new cars and major home repairs is right around $80,000.

I've always heard that Social Security only tends to cover about 30-40% of your total expenses. I've been wondering if I'm overlooking something. It seems too good to be true. Granted I could worry about whether the funding will be there in 20 years to cover it, whether means testing will come in to play, and on and on. But ignoring all of the what ifs, it would seem like our social security should cover all of our run rate expenses.

Is this unusual? We both were high earners, so we typically earned in excess of the cap each year. And we both have over 35 years of income history. I've run the analysis if I were to stop working today, and it only drops each of our payments by $300, so not that significant.

Am I missing anything or just very fortunate?

My wife retired at 50, and I stopped work at 55. If we both wait till 70 to claim SS, it will cover about 80% of our current expenses. It is likely we will not spend as much at that age, and it can cover 100%. I maxed out contribution most years while working, so that helps. It is true that quitting early will not hurt one's SS benefit much.

However, there may be cut back in the future, as there is a shortfall. On top of that, if I croak before my wife, she will get mine but lose hers. So, we still need some personal savings to supplement SS.

 

[Independent]

I thought the online SS calculator allowed you to choose whether to see the expected benefit in current or future dollars. So it depends what OP selected when using the calculator. I am still not 100% convinced whether OP's numbers are in current dollars or future.

Thanks. Shows me that I should have checked instead of recalling what it did back when I was using it.