Firecalc and 75% of SS

[Chuckanut]

Out of curiousity I ran FireCalc with the assumption that my SS check would be cut to 75% of what today's estimate is at age 70. To make matters simple I assumed the cut would take place on day one of of receiving SS, though in actuality i would have a good decade before the current predicted date of a reduction in benefits.

It looks like I will have to cut spending by about about $7,000 a year (inflation adjusted) to maintain a 100% success rate.

Has anybody else played with this?

 

[Live And Learn]

I've always done that. I use an assumption that I stop work now (ie: never get a part time job and quit my job today), calculate what my SS would be at age 70 (using ssa.gov) and then I reduce that amount by 35% for my SS assumption. I do this in ALL retirement calculators.

My 65% assumptions gives me a success rate of 91%, a 100% SS assumption gives me a 97% success rate.

I just tried the 100% success rate thing and I'd only get to spend an extra 3k per year if I assume SS at 100% of what ssa.gov says.

 

[W2R]

Out of curiousity I ran FireCalc with the assumption that my SS check would be cut to 75% of what today's estimate is at age 70. To make matters simple I assumed the cut would take place on day one of of receiving SS, though in actuality i would have a good decade before the current predicted date of a reduction in benefits.

It looks like I will have to cut spending by about about $7,000 a year (inflation adjusted) to maintain a 100% success rate.

Has anybody else played with this?

Yes, and I have even tried it with zero SS. It's good to know these things! I don't worry about it much, though, now that I am retired. No longer can I delay retirement to build a bigger nestegg. I know how to be painfully frugal if I need to be. Hopefully all will work out without having to do much belt-tightening, though.

There are people out there who depend on SS for 100% of their retirement income. Now, if I was in that category I would be a lot more concerned than I am. For me, SS will be only around 28% of my income.

 

[Rowdy]

Perhaps I'm naive, but do others really feel that social security will be reduced? Social security is often referred to as the "Third Rail of Politics"; I like Wiki's quote for the Third Rail - "any politician or public official who dares to broach the subject will invariably suffer politically".

Maybe it's just wishful thinking on my part, but I personally don't believe the benefit will be reduced; perhaps we'll pay more, but reducing SS in my opinion would be a non-starter. I use 100% in my planning.

 

[W2R]

Perhaps I'm naive, but do others really feel that social security will be reduced?

Speaking for myself, no, I don't think SS will either be reduced, or not reduced. I think that anything can happen.

I also think that anybody who thinks they know what will or won't happen is either a lot smarter than me (distinctly possible), or else possibly has a better crystal ball than mine.

 

[panacea]

Perhaps I'm naive, but do others really feel that social security will be reduced? Social security is often referred to as the "Third Rail of Politics"; I like Wiki's quote for the Third Rail - "any politician or public official who dares to broach the subject will invariably suffer politically".

Maybe it's just wishful thinking on my part, but I personally don't believe the benefit will be reduced; perhaps we'll pay more, but reducing SS in my opinion would be a non-starter. I use 100% in my planning.

Sure, it's certainly possible it'll be there at 100%, but for retirement planning, I'd rather be more conservative. Changes will need to be made soon- we don't know if the changes will be similar to those made before (like increasing full retirement age or FICA Taxes) or if they'll try something new. I'd rather be conservative and be pleasantly surprised if it turns out to be more than I plan for... I currently assume 80% in my planning.

 

[Gumby]

I use 0% Social Security for planning purposes and still get a 100% success rate out of Firecalc, so if anything does show up in 9 years, it will be drinking money.

 

[Live And Learn]

Maybe it's just wishful thinking on my part, but I personally don't believe the benefit will be reduced; perhaps we'll pay more, but reducing SS in my opinion would be a non-starter. I use 100% in my planning.

I'm trying to retire at 50, so my decision will be very much a "one way decision" as I don't see alot of prosperity in any "Plan B" as far as w*rking again is concerned. I'm also not waiting for a FireCalc (or any other calculator) 100% success rate of my portfolio lasting to I am 100 yo before I pull the trigger (more like 90% to 85). My Social Security estimate of 65%, and my possible overestimate of Income Tax that I have built into my budget, makes me feel better about taking the risk.

 

[growing_older]

Predicting future political developments is pretty speculative stuff. SS is widely regarded as untouchable AND as imminently about to fail. If I had to predict, I'd suggest a combination of tax increases and benefit reductions are coming, although the benefit reductions may be masked as tax law changes, means testing or formula adjustments. For planning purposes, thinking it will 100% remain as it is currently seems unlikely. But disappearing entirely seems equally unlikely. The SS projections are 75% or so, but for cautious planning I sometimes assume 50%. In any case, any plan should include some margin of safety for unexpected adverse changes once retired. SS is just one of many things that may not turn out as well as forecast. Market returns, boom/bust real state, health issues, political unrest or any of countless other events can have significant impact. Plans should allow for contingencies.

 

[Alan]

While planning for ER I used 50%.

Now that I am RE'ed I use 100%. I am only 5 years away from being able to claim and I can't see it being reduced before I start drawing it. It will be taxed at 85% for us, so taxing it at 100% is no show stopper, neither is reducing it by 25% at some point after we've started drawing it.

 

[Rowdy]

I took two scenarios; 1st assuming 100% SS and 2nd assuming 75% SS. Both the 100% SS and 75% SS give me a 100% success rate with no required change in spending. Note that with the 100% SS, I moved spending around to just achieve the 100% success rate. Strange... If I drop SS to 50%, it requires a $6,000 drop in spending to achieve the 100% success rate. This is certainly not what I expected.

I get similar results when I run the "Flexible Retirement Planner" using the sensitivity analysis option. Although, the FRP's Monte Carlo simulations require lower overall spending to achieve the 100% success rate.

Parameters: Early 50s, planned retirement at 60, SS at 67, 2 COLA'd pensions (@60 and @66), 1 small non COLA'd pension (@60), and 401k.

 

[ejman]

OK, here is the way the future of SS will unfold:

1) The political establishment will continue to get its undergarments wrapped around the axle and hence will be unable to agree on any meaningful fixes in the near to medium term (say 10 years)

2) The type of financial debt overhang that we (and most of the rest of the developed world) have been experiencing for a few years now will continue much longer than anticipated because the debt has to we worked out of the system before meaningful growth can resume.

3) This type of recessionary environment is not really amenable to quick political fixes so it doesn't matter much who promises what.

4) The economic growth assumptions that SS uses in calculating the anticipated time frame when the reserve is used up (2033) are too optimistic and hence the 2033 date will be moved forward to 2025 (13 years from now).

5) As a result of the above, benefits will be reduced by the amount of the shortage which will be greater than the 25% in 2033 currently envisioned.

6) There will be great resistance to any increase in taxes, of whatever form so that leaves the reduction in benefit payout plus latter eligibility (i.e. increase in retirement age) as the only viable options

7) There may be some measure of success in converting part of SS to a stock based system - This will additionally accelerate the reduction in future payments

8) As financial hardship increases the rest of the world will find it more and more unpalatable to buy US debt at the current very low rates so interest rates and hence inflation will increase. This will present the SS administration with a great opportunity to tweak inflation adjustments.

And thus it shall be...

So says I - but what the hell do I know As I'm sure it will be pointed out shortly...

 

[BLS53]

They just should give everyone a fixed amount when they reach a certain age, and scrap the whole SS system. Allocate it out of the budget, like DoD does with military pensions.

 

[marko]

Forty five years ago when I started working, people told me "by the time you're 65, SS will be just a memory; you'll never get a dime"....well, here I am.

But I keep hearing that "for those over 55, your benefits will stay as you had planned them". (of course, I believe every word 'they' say!!).

So, by the time they DO get around to fixing this, the "55 year old" will be 85!

For some reason, I'm not worried.

 

[rbmrtn]

I've never included SS in my planning so if I get it it's extra to use to pay health insurance and LTC.

I'm more concerned about medicare. It's almost impossible to get individual insurance now if you are over 50, let alone some 65+

 

[rodi]

OK, here is the way the future of SS will unfold:

1) The political establishment will continue to get its undergarments wrapped around the axle and hence will be unable to agree on any meaningful fixes in the near to medium term (say 10 years)

2) The type of financial debt overhang that we (and most of the rest of the developed world) have been experiencing for a few years now will continue much longer than anticipated because the debt has to we worked out of the system before meaningful growth can resume.

3) This type of recessionary environment is not really amenable to quick political fixes so it doesn't matter much who promises what.

4) The economic growth assumptions that SS uses in calculating the anticipated time frame when the reserve is used up (2033) are too optimistic and hence the 2033 date will be moved forward to 2025 (13 years from now).

5) As a result of the above, benefits will be reduced by the amount of the shortage which will be greater than the 25% in 2033 currently envisioned.

6) There will be great resistance to any increase in taxes, of whatever form so that leaves the reduction in benefit payout plus latter eligibility (i.e. increase in retirement age) as the only viable options

7) There may be some measure of success in converting part of SS to a stock based system - This will additionally accelerate the reduction in future payments

8) As financial hardship increases the rest of the world will find it more and more unpalatable to buy US debt at the current very low rates so interest rates and hence inflation will increase. This will present the SS administration with a great opportunity to tweak inflation adjustments.

And thus it shall be...

So says I - but what the hell do I know As I'm sure it will be pointed out shortly...

#6 may not be so true.

AP-GfK poll: Narrow majority supports raising taxes, retirement age to save Social Security - The Washington Post

Social Security is facing serious long-term financial problems. When given a choice on how to fix them, 53 percent of adults said they would rather raise taxes than cut benefits for future generations, according to the poll. Just 36 percent said they would cut benefits instead.

 

[timeasterday]

#6 may not be so true.

AP-GfK poll: Narrow majority supports raising taxes, retirement age to save Social Security - The Washington Post

Sure, when they have to make a choice the poll comes out in favor of taxes. Ask people if they want to do nothing or raise taxes and guess what the result will be. I agree with #6, nobody wants to touch the issue of raising taxes with a ten foot pole. Personally I would fully support higher taxes before a reduction in benefits.

 

[Chuckanut]

I really didn't mean to trigger another discussion on what might happen to SS. However, since the current 'official' line is a cut in benefits to about 75% sometime in the 30's, I though it would be interesting to run FireCalc using 75% of the anticipated SS benefit. It's nice to know I can survive well 75%.

 

[Rustward]

<snip>However, since the current 'official' line is a cut in benefits to about 75% sometime in the 30's, <snip>

Would you mind posting a reference or link to your source of this information?

 

[ksr]

Whenever I play with Firecalc, I run multiple scenarios: best case, worst case, and what I think is the most likely case. For whatever reason, I had it in my head that the SS reduction would result in 70% of benefits, so that's what I've used for my "most likely" scenarios. I suspect that there will be a reduction of some sort, although it may not be as blatant as a reduction in benefits. It might be more taxes and/or a means-tested medicare cost, but either way I expect to see somewhat less than 100% of my projected SS.

 

[Chuckanut]

Would you mind posting a reference or link to your source of this information?

Sure. Here it is. Note the 1st paragraph in the Introduction. It mentions being able to pay only 76% of the estimated benefits. What will actually happen is, of course, something we will know in the fullness of time.

https://www.socialsecurity.gov/policy/docs/ssb/v70n3/v70n3p111.html

 

[Cut-Throat]

Sure. Here it is. Note the 1st paragraph in the Introduction. It mentions being able to pay only 76% of the estimated benefits. What will actually happen is, of course, something we will know in the fullness of time.

https://www.socialsecurity.gov/policy/docs/ssb/v70n3/v70n3p111.html

What everyone has to understand is that the statement "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.."...... That doesn't mean that benefits will be cut at all. This is a political football in its entirety.

Military pensions have even less taxes coming in to pay for benefits currently. Heck, the whole Defense Dept. doesn't have enough to pay for its expenses either.

That's what treasury Bonds are for...To finance government excess expenditures. However, if you are against Social Security on a ideologue basis, you first have to convince the masses that it's in trouble, then you can fix it (Which means eliminate it!) The reality is that Social Security is still running a surplus, and is the ONLY Government Program that is.

 

[Rustward]

Sure. Here it is. Note the 1st paragraph in the Introduction. It mentions being able to pay only 76% of the estimated benefits. What will actually happen is, of course, something we will know in the fullness of time.

https://www.socialsecurity.gov/policy/docs/ssb/v70n3/v70n3p111.html

I kinda get that you may believe there will be a 75% across the board cut in all benefits. But it just does not say that at all. 75% cut in total benefits paid out, maybe, "If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits."

 

[Cut-Throat]

75% cut in total benefits paid out, maybe, "If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits."

Nope, doesn't even say that !.... It says nothing at all about cutting benefits!

All, it says is that the program will be running a 25% deficit. Which is still less than the rest of the Government!

 

[meierlde]

Whenever I play with Firecalc, I run multiple scenarios: best case, worst case, and what I think is the most likely case. For whatever reason, I had it in my head that the SS reduction would result in 70% of benefits, so that's what I've used for my "most likely" scenarios. I suspect that there will be a reduction of some sort, although it may not be as blatant as a reduction in benefits. It might be more taxes and/or a means-tested medicare cost, but either way I expect to see somewhat less than 100% of my projected SS.

Note that medicare is already means tested for part B all be it at fairly high income levels. above 85 k for singles and double it for married you pay $40 /month more, above 107k you pay $100/month more and above 106k you pay $160/month more. So what you may mean is that the trigger levels will be adjusted downwards. Part D is also means tested as well.