Social Security & FIRE Planning

[corn18]

I include it. Retiring in 69 days @ age 55. Planning on the full amount ($60k) starting @ age 70. We're @ 99% Ps with it, 81% Ps without it. Why the hell would I work another 5 years to mitigate a low probability risk? If you think SS is going away any time soon, then keep on working. I'll buy you a beer with my SS check if we ever meet.

 

[jollystomper]

One of my retirement criteria was to have at least a good (as opposed to very comfortable/extravagant) retirement if only 2 of our three retirement income sources (pension, SS, investments) were available. So we did model with and without SS to determine the difference in what our spending level would be.

 

[Rex]

We've been counting it as zero since we started speculating about early retirement back in the 80s. Figured that the inherent funding issues would tempt Congress to means test the program. Beginning to feel like we might get something, but not yet to the point of including our projected amounts in spending analysis.

Best case scenario is that it will pay a good chunk of education expenses for grandchildren; thereby making our estate bigger.

+1 We've counted ss as zero since the beginning of time.....Now that we are 2 years into RE and 5 years away from 62 (and the first crack at it) we view it as more of a cushion to do more and to let the principal in our portfolio continue to grow for the kids.

 

[PatrickA5]

Social Security is the third rail of American Politics. I seriously doubt there will ever be a reduction in benefits due to lack of funding. The politicians will figure something out because of Everett Dirkson's 2 rules of politics: (1) Get elected. (2) Stay elected. Cutting benefits would risk them violating Rule 2.

+1 No Congress critter will allow a huge segment of their voting base to all of a sudden take a 25% pay cut. Something will come together at the last minute.

 

[NoiseBoy]

This is just wrong. It is quite reasonable to make a conservative assumption of 75% or 80% of your earned benefit. But to suggest that FIREees zero out their SS benefit is to suggest they just keep working. That is about as anti-FIRE as one can be.

Do you also suggest assuming all pensions fail and all investments get negative returns for the rest of your life? That's pretty much the same approach as you are suggesting for SS.

+1 -- I couldn't agree more with your post.

To those who advise using "0" for their expected future Social Security payments, in what future scenario would SS go completely broke? The only way that could happen would be if Congress removes the OASI tax, right? Otherwise, the system will always have tax revenue, just perhaps not enough to pay the current promised benefits in full. Therefore, I can understand discounting it, just as I can understand using conservative future portfolio returns, but assuming nothing for Soc Sec is not logical.

FWIW - I am using 100% of my projected SS benefit in my FIRE calculations. I have two modest pensions too, one of which happens to be a civil service pension, which means my SS benefit calculation is impacted by WEP. Using 100% or 75% of my SS beneift does not materially impact my planning.

 

[sengsational]

Completely discounting SS doesn't make sense to me because I don't think that's at all likely. I prefer my models to be as accurate as possible, then adjust for risk after the calculations are complete. But I "get it", that "to be conservative", people leave out SS, their house, etc, and it doesn't hurt to run models with those assumptions. Before I pulled the plug, I ran a bunch of models with various assumptions to increase my level of confidence. Because of the ACA, which kept me reigned in, plus kind Mr. Market, I'm way ahead of those original models.

 

[Gumby]

Although it is a probably unnecessarily pessimistic, and I don't recommend it for others, my planning always assumed zero for social security, which I will actually start in two months. It also assumed that the state would stop paying our pensions. Right now, social security and pensions are more than enough to support the same lifestyle we enjoyed prior to retirement. But, should that pension/SS money stop coming in the door, we also have enough in our portfolio (at a 4% WR) to continue along in retirement with the same standard of living. But, then, I am often a belt and suspenders kind of guy. One thing I don't want is to be forced to return to work, and I figure that my plan has ensured that I won't.

Edit to add: I also never have included the (substantial) value of our house in our portfolio value.

 

[corn18]

Although it is a probably unnecessarily pessimistic, and I don't recommend it for others, my planning always assumed zero for social security, which I will actually start in two months. It also assumed that the state would stop paying our pensions. Right now, social security and pensions are more than enough to support the same lifestyle we enjoyed prior to retirement. But, should that pension/SS money stop coming in the door, we also have enough in our portfolio (at a 4% WR) to continue along in retirement with the same standard of living. But, then, I am often a belt and suspenders kind of guy. One thing I don't want is to be forced to return to work, and I figure that my plan has ensured that I won't.

Edit to add: I also never have included the (substantial) value of our house in our portfolio value.

How much sooner could you have retired had you included SS and pensions?

 

[gregable]

https://www.ssa.gov/OACT/solvency/provisions/index.html shows some of the solvency suggestions that the SSA advises. One of the most likely ones that I would guess would be to remove the annual cap on taxable earnings to raise more money. This would not be sufficient by itself but would go a long way.

Another point is that social security is structured as more of an anti-poverty program than a retirement savings program. I would take that to mean that if one's benefit is likely to be a very large part of one's income in retirement, it seems more likely that most or all of it will be there. If the benefit would be a small additional part of one's retirement income, it may be less assured. So it seems reasonable for some folks to rely on it while others discount or ignore it.

 

[Gumby]

How much sooner could you have retired had you included SS and pensions?

Not much. We waited to be pension eligible and to qualify for retiree healthcare, primarily the latter, which is worth about $30k per year based on quotes for equivalent ACA plans (we would not qualify for a subsidy). The healthcare is a lot more valuable than my actual pension.

 

[Aerides]

Me & DW both 49 years old

That's the most important factor, IMO. And any fire plan that has you financially sound from 50-65(ish) would probably last you well past that. If you had a plan that had you running on fumes in the last year or so before SS kicks in, you had a weak plan to start with.

The further away you are from starting SS, the lower the expectation should be. We RE'd in our mid-40s and never included anything in our FIRECalc. It will be a bonus if/when, and I've no doubt I'll find ways to increase my spending for whatever is there.

Totally different answer if you were 61.

 

[jldavid47]

Although it is a probably unnecessarily pessimistic, and I don't recommend it for others, my planning always assumed zero for social security, which I will actually start in two months. It also assumed that the state would stop paying our pensions. Right now, social security and pensions are more than enough to support the same lifestyle we enjoyed prior to retirement. But, should that pension/SS money stop coming in the door, we also have enough in our portfolio (at a 4% WR) to continue along in retirement with the same standard of living. But, then, I am often a belt and suspenders kind of guy. One thing I don't want is to be forced to return to work, and I figure that my plan has ensured that I won't.

That seems a bit draconian, but if it works for you, great. You should also realize that if the feds stop paying Social Security and the state stops paying your pension then the the economy has completely crashed and market has probably dropped by 80%+ so your assumed income from your 4% withdrawals would become a pittance.

Edit to add: I also never have included the (substantial) value of our house in our portfolio value.

Me either. Our home is something to live in, not dollars to be used in retirement. If we sell and move into some sort of rental situation, then and only then will I include it.

 

[2017ish]

...
Another point is that social security is structured as more of an anti-poverty program than a retirement savings program. I would take that to mean that if one's benefit is likely to be a very large part of one's income in retirement, it seems more likely that most or all of it will be there. If the benefit would be a small additional part of one's retirement income, it may be less assured. So it seems reasonable for some folks to rely on it while others discount or ignore it.

Agree with this. My siblings and their spouses are counting on it. Given that our projected socials are more than they've ever made, it is quite important to them, and in my opinion, they should be pretty safe. OTOH, if means testing is implemented as part of a fix, we are likely to be on the cutting floor. But, who knows...

 

[H2ODude]

Oh for goodness sake. The conservative assumptions layered on top of conservative assumptions can prevent people from landing on perfectly adequate retirements. I just deleted several paragraphs detailing how (very engineer like) I made such calculations. While my goal was FI, not necessarily ER, when the BS bucket got full I left and now have solid pension I never expected, SS taken at 70, bunch of money because kids got scholarships didn't expect, and IRA/457 that will cost as much in MRD taxes as a frugal couple could retire on. And I'm still looking at the FIDO calculator assuming worst case with a portfolio almost twice when I retired in 2011.

My point is, in retrospect for me and in a lot of posts on this board, I see so much nail biting and conservative assumptions that it can get in the way of achieving goals such as a a pleasant retirement. Which is damn funny coming from me, who has generally followed a pessimistic and financially conservative path. Now I'm trying damn hard to join Robbie and blow some of the bountiful dough that such a philosophy built up. Don't be like me. FWIW, if I were to make a prediction on SS I'd guess FRA might be adjusted and they'd tax it all. As far as I"m concerned...meh.

 

[finnski1]

Oh for goodness sake. The conservative assumptions layered on top of conservative assumptions can prevent people from landing on perfectly adequate retirements. I just deleted several paragraphs detailing how (very engineer like) I made such calculations. While my goal was FI, not necessarily ER, when the BS bucket got full I left and now have solid pension I never expected, SS taken at 70, bunch of money because kids got scholarships didn't expect, and IRA/457 that will cost as much in MRD taxes as a frugal couple could retire on. And I'm still looking at the FIDO calculator assuming worst case with a portfolio almost twice when I retired in 2011.

My point is, in retrospect for me and in a lot of posts on this board, I see so much nail biting and conservative assumptions that it can get in the way of achieving goals such as a a pleasant retirement. Which is damn funny coming from me, who has generally followed a pessimistic and financially conservative path. Now I'm trying damn hard to join Robbie and blow some of the bountiful dough that such a philosophy built up. Don't be like me. FWIW, if I were to make a prediction on SS I'd guess FRA might be adjusted and they'd tax it all. As far as I"m concerned...meh.

 

[Gumby]

I guess a lot depends on how much you hate your job. I never did. Another consideration is how spartan you need to live prior to retirement. For me, the answer was not at all. I enjoyed a high standard of living before retirement and I still enjoy a high standard of living.

 

[MarieIG]

Hmmm, I guess I factored it in to the extent that I believed it would cover my Medicare costs; and I had hoped it would give me an additional monthly stipend after taxes were withheld.

And yes, I did consider that an additional year's work, would be an additional contribution to SS; especially since I entered the work force late due to having children.

And I had factored-in that there would be a cut due to the statements that SS has been sending for years.

What I did not factor -in was that my SS would take yet another haircut simply based upon me turning 60 in 2020.

Am I going to work longer due to that - no. There are/ will be other income sources.

 

[jldavid47]

Oh for goodness sake. The conservative assumptions layered on top of conservative assumptions can prevent people from landing on perfectly adequate retirements. I just deleted several paragraphs detailing how (very engineer like) I made such calculations. While my goal was FI, not necessarily ER, when the BS bucket got full I left and now have solid pension I never expected, SS taken at 70, bunch of money because kids got scholarships didn't expect, and IRA/457 that will cost as much in MRD taxes as a frugal couple could retire on. And I'm still looking at the FIDO calculator assuming worst case with a portfolio almost twice when I retired in 2011.

My point is, in retrospect for me and in a lot of posts on this board, I see so much nail biting and conservative assumptions that it can get in the way of achieving goals such as a a pleasant retirement. Which is damn funny coming from me, who has generally followed a pessimistic and financially conservative path. Now I'm trying damn hard to join Robbie and blow some of the bountiful dough that such a philosophy built up. Don't be like me. FWIW, if I were to make a prediction on SS I'd guess FRA might be adjusted and they'd tax it all. As far as I"m concerned...meh.

+1


The only conservative assumption I make is my rate of return on my retirement assets. I was going to wait until age 70 to take my social security then my wife got an unexpected retirement offer from her company. I did the math and realized we could live off of our combined social security (Me at 66.5 and her at 63.5) and use retirement funds for extras (like vacations) or let it grow for the really small probability that our benefits will be cut in the future.

Her (and thus my) happiness has improved tremendously by her retiring early (the BS bucket was overflowing...) which is worth a hell of a lot more than the extra money we would get had she kept working and I waited to 70. Money was never going to be the sole consideration. Our health and happiness (which can't be whittled down to a number) was always a part of the equation.

Our goal has never been more for the sake of more. Our goal has always been "enough" (plus a cushion). What is enough? It depends on your lifestyle and your propensity to spend. Our lifestyle is modest and our propensity to spend is on the lower end of the spectrum so our combined social security payments are enough. For some people there is no upper bound on enough. YMMV.

 

[Koolau]

Those who might think Congress will allow any significant cuts in SS benefits (even for those YET to receive it) might ask some of us who lived through the time(s) when SS was "saved" (forever!). I guess "forever" is a few election cycles but YMMV.

 

[Theo]

Allowing social security benefits to be cut is a political decision, not an economic one.

 

[ncbill]

I don't discount our SS benefits...they will be low for both of us in any case.

 

[corn18]

Allowing social security benefits to be cut is a political decision, not an economic one.

Very true. But if you want to get elected, you won't want to F with the old people.

 

[RobbieB]

I don't consider any changes to SS. I'll deal with them after they happen. If they happen.

 

[Markola]

For those who plan to FIRE:
1) Some are wealthy enough to do it with only their portfolios.
2) Some have generous pensions, too.
3) Some have generous pensions instead of portfolios.
4) Some need to factor in the federal government’s most popular program, SS, to make the numbers work.
5) Some will continue to do a little work for a while, because the income makes the numbers work and they enjoy it more than their prior full time job.
6) Some might choose to include a future home downsize in their plan, realizing their some of their home equity, or renting out their paid off house.
7) Etc., etc., etc.

For those who plan to FIRE, there are many paths to Rome, many levers to pull and Your Mileage May Vary from others’ preferences.

 

[KenZ71]

Appreciate the insight.

My biggest hold up currently is cost of healthcare if paying privately.