Calculating Deferred vs SS vs Cash vs Pension vs Nest Egg Income.

[target2019]

Some folks here seem to love to overcomplicate things, or introduce factors that simply do not apply to the original question or post.

As mentioned before it was just a fun question purely for curiosities sake to compare with our own. Not to find out how much anyone needed vs anyone else. In fact the number is completely irrelevant, as is the SS number any individual gets. That was covered in another post/poll.

To refresh memories this was the original title of the post which I thought was self explanatory.

"Calculating Deferred vs SS vs Cash vs Pension vs Nest Egg Income."

Bearing in mind the limitation of Title Text, I went on to explain in the first post that I was simply asking what percentage of one's retirement income SS represented. Not what one's retirement income from all sources was, although it is interesting what percentage each source represents.

I was assuming the total would include as it does in our case all expenses in any average given year. Living expenses, accommodation, utilities, gifts, vacations, food, car, transportation, leisure expenses etc. are all examples of what we may spend in a year.

We all have different amounts that we like to spend per year to maintain our desired level of retirement bliss. It was not intended to be a percentage of the minimum, but the average. Some folks do not like to share actual numbers and that is all good, again that was not the intention. I have no issue with sharing basic numbers.

The simple answer is based on this hypothetical example.

SS=$50k
Pension=$25k
Income taken from Nest Egg=$50k
Annuity Income: $25k
Other Income: $10k

Total = $160k - $50k / $160k x 100 = 31.25%

So, SS= 31.25% of one's annual overall expenses for this given year. One could go on to summarize all other sources of income.

I hope that clarifies any confusion that may be apparent in the Title and first post.

You have a right to make any calculation that puts your mind at ease.

 

[AirOps]

I love threads that goes way out in the weeds.

 

[timeismine]

Re: Calculating SS as a pseudo account balance generating interest payments?

Lots of good answers-one may have covered this and I missed it.

Not sure if this is correct, so I will toss this out there:

I value Social Security as if it is an account paying 4% per year:
* Take your projected monthly amount and multiply by 12 to come up with an annual amount.
* Then calculate how much you would need to have in an account to generate this as interest income at 4% (or whatever you'd like to use) .

This comes out to between $400K and $900K, depending on how much you contributed during your working life.

Does this make sense? As I said, not sure if this is correct thinking.

 

[jazz4cash]

I just want to know how many angels can dance on the head of a pin.

Uh, 42?

 

[jazz4cash]

This is all for fun by the way as we all do or classify this stuff differently.

Maybe a better or an additional question may be what percentage of one's income is SS (Not External Pensions, annuities, stash withdrawal etc.)

.

In my master spreadsheet I have high, medium, and low expense estimates in the liability section. For income I track SS and pension estimates plus 4% of nest egg. While accumulating each of these 3 components generally fell in a 30-35% range which felt good. Now in ER the nest egg component is over 40% due to lack of withdrawals.

 

[aja8888]

Just figured it out for next year.

$80 K spending, $49.8 K in SS. So SS is about 62% of our annual spend.

 

[jazz4cash]

Lots of good answers-one may have covered this and I missed it.



Not sure if this is correct, so I will toss this out there:



I value Social Security as if it is an account paying 4% per year:

* Take your projected monthly amount and multiply by 12 to come up with an annual amount.

* Then calculate how much you would need to have in an account to generate this as interest income at 4% (or whatever you'd like to use) .



This comes out to between $400K and $900K, depending on how much you contributed during your working life.



Does this make sense? As I said, not sure if this is correct thinking.

So just for fun, the 400k figure would put a 65-69 age range house hold in the 70th %ile of net worth in the US. 900k is 83rd %ile.

 

[Exchme]

Expenses are inherently lumpy. ACA subsidies plus taxes on Roth conversions and RMDs make the lumpier and of course major expenses like LTC are unpredictable. Also, we will assuredly spend more if markets do well (at the least we'll give more gifts) and cut back some if things go poorly.

SS doesn't arrive for several years. If we die first, our percentage SS will be zero, so we need lifespan assumptions too, plus we have to make assumptions about Congress funding SS when the trust fund runs out or otherwise meddling with tax laws.

I think the point of folks talking about using a PV calculation is that it is a convenient way of valuing uneven cash flows that occur at different times. I believe one of pb4uski’s points is that the most sensible discount rate to compare expenses to SS is the inflation rate. But since SS is inflation adjusted in a way to approximate inflation's effect on expenses, the need for a PV function disappears for this question of a proportion of SS to total expenses.

Then “all” we need to do is sum up our projected expenses over our projected lifespan and compare to the sum of our projected SS benefits. Simple right?