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Young and SS
Old 05-20-2008, 11:07 AM   #1
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Young and SS

Okay, please correct me if I'm wrong. In all my retirement planning I should just ignore any and all SS benefits in my plan because there is little or no chance the system will still exist when I retire. Then in the off chance something is still around, it's just gravy right?
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Old 05-20-2008, 11:14 AM   #2
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I think it will still exist. However, I think taxes while you're working will be higher, it might kick in later, and you will be means tested in order to qualify.

So, given my outlook, I personally don't include it in my planning. I'll re-evaluate my feelings on this when I'm ready to retire early to see if that influences my date.
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Old 05-20-2008, 11:26 AM   #3
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In one form or another, SS will exist. I think it's safer for most people under age 50 to ignore it in determining when you can FIRE safely.

As mentioned above, it's not likely to be the "deal" you're seeing now -- the retirement age may go up as high as 70, you may not have taxes capped at a certain level, you may see reduced benefits and means testing. It's highly unlikely that younger folks today will actually get the deal they are "seeing" right now (and for people paying this tax rate for life, it's already not a terribly good deal).

As I get well into my 50s, I may be more inclined to factor it in somewhat, since it's not terribly likely that folks of AARP-age are going to have to share in the pain of SS reform as much as everyone else.
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Old 05-20-2008, 11:31 AM   #4
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Not knowing how old you are makes it hard to answer. I'm 54 and my plan assumes SS at 50% of stated benefits, but SS will be a small part of my income or I might be even less optimistic than 50%. I expect my SS benefit will be close to statement when I enter into the system but far less when I finally go poof some 3010 years later. IMO the number of people working vs non-working and the associated economics make in inevitable taxes will be higher, eligibility will be later, means testing will be harsher and/or benefits will be less - most likely all of the above. Unlike most posters here, most boomers will work (much) longer than their parents whether they want to or not...
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Old 05-20-2008, 11:32 AM   #5
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Okay, please correct me if I'm wrong. In all my retirement planning I should just ignore any and all SS benefits in my plan because there is little or no chance the system will still exist when I retire. Then in the off chance something is still around, it's just gravy right?
There's no right or wrong in this decision pksublime. Assuming SS is less conservative that assuming no SS. A larger portfolio is more conservative than a smaller portfolio. Assuming you'll live longer is more conservative than assuming you'll die young. And so on...... If you make all conservative assumptions in your planning, you'll likely have to work longer and save harder. If you make all non-conservative assumptions in your planning, your chances for financial doom in retirement are greater.

Ref SS in particular, if you're young you might be conservative and assume it will not be there. As you go through life and you see how it's working out, you can tweak your plans. That's pretty much what I did and now it seems certain that when I turn 62 is less than 2 years, I'll be able to collect so spending SS is definitely written into our plans at this time!
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Old 05-20-2008, 11:53 AM   #6
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I'll be 60 in less than three weeks (gulp!), so I am certain that I will get SS. Even in my case, I would never cut things so close that I would need SS for subsistence. SS was never intended to provide all of one's retirement income.

Until recently I was planning retirement on a shoestring. Still, I was planning to have enough income to survive on without SS (barely). I planned to use SS for the extras that make life easier.

Many are saving a lot in taxable accounts, 401K's, and/or Roth IRA's in order to create a base income from these investment accounts that will be enough to live on. Others plan to work part time, and that is another option.
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Old 05-20-2008, 01:19 PM   #7
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As others have posted. I ignore it for now and will factor it in as I approach eligibility and have a clearer picture of what will be available and how best to set up withdrawals to minimize taxation.

If you want to factor it in then you could use Rick Ferri's book: "Protecting Your Wealth in Good Times and Bad" published in 03 in which his planning "guesses" were age 50's cut by 25%, age 40's cut by 50% and add 3-4 years to age of eligibility, in your 30's cut 60-70% and add 6-7 years to eligibility.

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Old 05-20-2008, 01:31 PM   #8
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okay that's a weird response ^^^

it was sort of asked, so I'll answer - I'm 24 right now

so yeah, it seams a financially savvy decision to omit it SS and just lump it into the "gravy" category of retirement planning.
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Old 05-20-2008, 02:29 PM   #9
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okay that's a weird response ^^^

it was sort of asked, so I'll answer - I'm 24 right now

so yeah, it seams a financially savvy decision to omit it SS and just lump it into the "gravy" category of retirement planning.
I wouldn't say that exactly. Most of us geezers think the so-called "gravy" part of our RE income is pretty important. At 24, you're probably too young to try to nail down some specific goal number to RE. Rather, put together an aggressive savings/investment plan and execute it, enjoy life, see what SS and the rest of the story on RE issues (taxes, medical, etc) looks like in a decade or so and fine tune your plans then.

It's fabulous you're getting tuned in at your age and my best wishes for success on your road to FIRE!
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Old 05-20-2008, 02:38 PM   #10
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I did not mean to belittle, though I see how it could be interpreted that way now - oops - the effect that SS has on CURRENT retirees. It's very much a significant portion of the plans in place today.

I was more referring to positioning myself such that I will be able to consider SS income "gravy" when I am able to retire. IE. I amass retirement assets of $5M in today's dollars so that I can live very comfortably in retirement and have enough to leave a legacy to others. At that point, it's hard to imagine that SS income will have any significant effect on my overall strategy.
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Old 05-20-2008, 02:54 PM   #11
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Considering the shape the system is in and the loooonnnggg time until you and I would be eligible to collect, I think its wise to assume you will be getting nada from SS. If it works out, great, but better to plan without it and not be surprised if it isn't there.
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Old 05-20-2008, 07:14 PM   #12
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I did not mean to belittle, though I see how it could be interpreted that way now - oops - the effect that SS has on CURRENT retirees. It's very much a significant portion of the plans in place today.

I was more referring to positioning myself such that I will be able to consider SS income "gravy" when I am able to retire. IE. I amass retirement assets of $5M in today's dollars so that I can live very comfortably in retirement and have enough to leave a legacy to others. At that point, it's hard to imagine that SS income will have any significant effect on my overall strategy.
OK, I understand what you mean now. I thought by "gravy" you meant you would be counting on SS for all or at least some of your discretionary spending. And, now RE'd, I'm finding discretionary spending isn't as optional as I thought it would be! Those fishing trips, dinners out and evenings of live music have become kind of important now that we have plenty of time to partake.......

Again, it's too early for you to know what SS will yield for you. So at 24, assume nothing, check again in a few years.... and then a few years after that. Eventually, you may find that SS, in some form, will be there for you and you can ER a little earlier.

Good luck! It's well worth the effort and I wish you success at reaching FIRE!
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Old 05-20-2008, 07:33 PM   #13
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BTW, just as a reference, this would be an example of spending the "gravy" in ER...... about 7 months of SS......
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Old 05-21-2008, 09:32 AM   #14
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Okay, please correct me if I'm wrong. In all my retirement planning I should just ignore any and all SS benefits in my plan because there is little or no chance the system will still exist when I retire. Then in the off chance something is still around, it's just gravy right?

This is the way I see it, maybe right, perhaps not. Things like SS and pensions are essentially promises that are made to you by the govt, and your company to pay you tomorrow for services rendered today. Like all promises, they can and have been broken before.

Things like a 401k are your money from the start. As such.... some really significantly bad things would have to start happening for anyone public or private to make a play for touching your personal funds. Your 401k is considered to be the same as your bank account and is always your private property. I keep reading in the news how SS is overburdened today, and how most people 50+ in america have a max of 18k saved up for retirement, and that is it!!!

So what does this mean for me, and you, and everyone else here in the forum that is looking for early retirement etc. We in this forum are all way ahead of the game. We either are affluent, or will be (by some peoples standards) at some point in the future due to our LBYM philosophy. I fear that in the next 10-15 years as all the boomers begin to retire, they will suddenly realize in what a dire financial situation they are actually in. This means that many will start panicing, and begging the govt to "save them". Even though it will be saving them from a lifetime of their own foolishness, the boomers will have one of the largest blocks of voters in the next 10-15 years. And with that many unprepared for retirement, and nothing better to do than to try to get more money from the govt, you can believe politicians will be hard pressed to say "no" to them. I would strongly suggest making all of your retirement money "yours" as soon as you can. I would not trusting pensions, or SS, as the govt can go after a promise far easier than confiscating peoples bank accounts. I will be watching for law changes very carefully over the next 10 years to see if my assets need to be moved somewhere safer.
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Old 05-21-2008, 01:59 PM   #15
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This is the way I see it, maybe right, perhaps not. Things like SS and pensions are essentially promises that are made to you by the govt, and your company to pay you tomorrow for services rendered today. Like all promises, they can and have been broken before.

Things like a 401k are your money from the start. As such.... some really significantly bad things would have to start happening for anyone public or private to make a play for touching your personal funds. Your 401k is considered to be the same as your bank account and is always your private property. I keep reading in the news how SS is overburdened today, and how most people 50+ in america have a max of 18k saved up for retirement, and that is it!!!

So what does this mean for me, and you, and everyone else here in the forum that is looking for early retirement etc. We in this forum are all way ahead of the game. We either are affluent, or will be (by some peoples standards) at some point in the future due to our LBYM philosophy. I fear that in the next 10-15 years as all the boomers begin to retire, they will suddenly realize in what a dire financial situation they are actually in. This means that many will start panicing, and begging the govt to "save them". Even though it will be saving them from a lifetime of their own foolishness, the boomers will have one of the largest blocks of voters in the next 10-15 years. And with that many unprepared for retirement, and nothing better to do than to try to get more money from the govt, you can believe politicians will be hard pressed to say "no" to them. I would strongly suggest making all of your retirement money "yours" as soon as you can. I would not trusting pensions, or SS, as the govt can go after a promise far easier than confiscating peoples bank accounts. I will be watching for law changes very carefully over the next 10 years to see if my assets need to be moved somewhere safer.
Yes this is something that definitely bothers me. Warning: this post is going to be loaded with lots of broad generalizations:

Human nature seems to lead many people (myself included) to blame others for their own failure to prepare, or be informed, or get insured, etc.

Did your house get destroyed in an earthquake or hurricane, but you have no insurance and no savings? Demand money from the government and a FEMA trailer. And be sure to complain a lot if your FEMA trailer isn't comfortable enough.

Did your ARM adjust upward at the same time you lost your job and real estate values tanked? Blame the mortgage broker for failing to adequately inform you about the risks of your mortgage.

Have a gas guzzler and a 2 hour commute at a time of relatively high gas prices? Demand a gas tax holiday.

I'm a lawyer and I see this all the time in my work: when something goes wrong, nobody will blame themselves for their own mistakes or lack of preparation. They'll have excuses and try to put others on the defensive. And it's actually not a bad strategy. Especially if you're powerful. Big industries with clout and bargaining power extract concessions from the government all the time. Taxpayers pay the price.

I live in Utah where there's a pretty high likelihood of a catastrophic earthquake in the next 50-100 years. The funny thing is, hardly anyone has earthquake insurance. When it hits, there are going to be a million people in Utah demanding relief from the federal government, and we'll probably get it.

When there are tens of millions of people of retirement age who can't pay for retirement, you can bet that government will bend over backwards to help, even if it means the national debt balloons even further. Our government will just find some other country to blame for our budget problems. It'll be Iran's fault or OPEC's fault. We'll probably need to invade some countries in the middle east.

Okay, my rant's over. Anyone else agree with me?
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Old 05-21-2008, 03:44 PM   #16
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The sad part is that you're not that outlandish with any of those statements.
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Old 05-21-2008, 04:24 PM   #17
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When there are tens of millions of people of retirement age who can't pay for retirement, you can bet that government will bend over backwards to help, even if it means the national debt balloons even further.
What will the government do to help the tens of millions of people who can't pay for retirement? Increase SS payments? Mail cash in plain brown envelopes? Many millions live on only SS today, so you must mean when there are many millions more, then they'll have voting clout and all will get more $$$?
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Old 05-21-2008, 07:46 PM   #18
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Such is the danger of lack of personal responsibility. I think that maybe here in the forum we tend to forget what a very small minority of people we are. We are responsible, understand finances, and probably a bit better than most understand human nature and how that works.
I firmly believe that most people in the course of their lives seek to take the "easy way out" in most situations. Why should retirement funding be any different? I cannot stop it, stave it off, or change the minds of thousands of folks out there. But I CAN control what I do with my finances. And you can believe that if I start to hear rumblings of.... "Tax the (not so rich).... I want my retirement... and I want it now!!!" Then I will move assets offhore if I have to.
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Old 05-21-2008, 08:26 PM   #19
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How right the previous poster is. If you want to get a glimpse of how the masses understand finance, all you have to do is listen to the Dave Ramsey show a few times. People with huge amounts of debt; the other day a guy had a car loan at 25% interest. twenty-five percent !!

Anyway you get the impression that if they hadn't found Dave Ramsey, they couldn't possibly have come up with the idea of 'get out of debt' on their own.

I'd probably blow my head off if I were in some of their situations, or at least be severely depressed.

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Old 05-21-2008, 11:42 PM   #20
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I'm working with professionals about 10-15 years younger than I. Some, but by no means most, participate in the 401k - of those most only contribute up to the match 5%. Plenty of debt and payments, but no other savings in most cases. Now there's a bunch on them jumping into the housing market and planning on taking out new loans generally for $450,000 to $580,000 and hoping that house values don't drop any more. Who makes these crazy jumbo loans to regular workign people? These are technical folks who should be good with numbers. But with these savings and debts, it seems like there'll be no way they'll have savings for retirement without relying on SS. I don't know about the political clout they'll have, but there certainly seem to be a lot of them. If the boomers are planning on these folks to help finance their retirement, they aren't even taking care of themselves.
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