Fire and ss and medicare

We retired this year, both at 55 though I still work PT at my own business from home. We budgeted a 25% cut in SS at 62. In reality, I think we will not see any cuts, and we really do not plan to draw until age 70. We will have a higher SWR from savings and taxable accounts until age 59.5, but every calculator we have used (all we can find plus firecalc, and 2 financial planners say we are 95%-100% until age 94, so are comfortable with our plan. We too have saved for this since our 20's, and can't figure out why others who can retire, don't! :)
 
Do not forget medicare alone will not cover your health care needs . You still need a supplement and coverage for medications . So budget at least $250 a month for these options .
 
I think all this worry about SS and Medicare reflects our futile wish for a 100% guarantee. There are no serious proposals to drastically cut either program, let alone do away with them entirely. We will undoubtedly tweak them a bit to make them more sustainable but something like the basic core will remain absent a complete collapse of the US. But in the event of the later what difference would a few years delay on your retirement date make anyway?
 
dancinmama said:
We will both be 55 this year and DH is planning to FIRE probably before the end of the year. What are people in their mid-to-late 50s doing with SS and Medicare when determining their SWR? We want to do some traveling sooner rather than later in retirement, but the extent of it is obviously tied to our SWR which changes based on whether we will receive SS and Medicare.....or not, and the difference is HUGE.
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We're close to the same age, I'm 56 and DW is 56 and I just ER'd. I'm assuming that SS will be as indicated for me based on my earnings record from ssa.gov and that Medicare will be the same. My base case assumes drawing SS at 70.

Our initial WR will be about 3.5% and will decrease to about 1% when I begin taking SS at age 70.

I believe that there will be tweaks to SS and Medicare but that the impact on current and near-to retirees will be modest. If the changes are dramatic, then some mid-course corrections would be required and it would simply come out of our heirs inheritance.
 
dancinmama said:
It is so frustrating having saved for early retirement for all of these years (since DH was 24) and FINALLY getting here and not knowing which way is up.
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Indeed! I can take good news, bad news or anything in between - wish Congress would do something to give us a clue what to plan on, but I'm not holding my breath. :(
 
I am a little younger (52) but I still expect that SS will be there in some form for me. When I run my numbers in Firecalc, I have experimented with putting in expected SS of between 50 and 70 percent of my currently projected numbers. Those numbers have worked for me, so I'm content with that.

If SS/Medicare were to go away completely, that would probably indicate that our economy had broken down, and I can't really prepare for that anyway. So I go with what I think is reasonable based on my age.
 
dancinmama said:
We will both be 55 this year and DH is planning to FIRE probably before the end of the year. What are people in their mid-to-late 50s doing with SS and Medicare when determining their SWR? We want to do some traveling sooner rather than later in retirement, but the extent of it is obviously tied to our SWR which changes based on whether we will receive SS and Medicare.....or not, and the difference is HUGE.
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We did not plan for a level withdrawal rate, if that's your question.

One approach is to earmark certain investments as "SS bridge income". If you're planning to get $20k of SS starting 7 years from now, put $140k in CDs, short bonds, etc. Then withdraw $20k per year from this fund, in addition to whatever your SWR plan has for withdrawals from longer term investments. (From an earlier poll, I think about 1/3 of responders said they had explicit funds for SS bridge income.)

Similarly, if you want to spend $100k traveling in the next 5 years, or whatever, carve that out of your long term plan.

A different approach is to put all the data into FireCalc or your own planning software and let it run a consolidated plan.

Your guess on whether you'll get the current SS benefit formula is as good as anybody's. I'd say that 55+ are grandfathered in most SS proposals I've seen, so a "cautious" plan might be for 80% of the current benefit formula.
 
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Independent said:
We did not plan for a level withdrawal rate, if that's your question.

One approach is to earmark certain investments as "SS bridge income". If you're planning to get $20k of SS starting 7 years from now, put $140k in CDs, short bonds, etc. Then withdraw $20k per year from this fund, in addition to whatever your SWR plan has for withdrawals from longer term investments. (From an earlier poll, I think about 1/3 of responders said they had explicit funds for SS bridge income.)

Similarly, if you want to spend $100k traveling in the next 5 years, or whatever, carve that out of your long term plan.

A different approach is to put all the data into FireCalc or your own planning software and let it run a consolidated plan.

Your guess on whether you'll get the current SS benefit formula is as good as anybody's. I'd say that 55+ are grandfathered in most SS proposals I've seen, so a "cautious" plan might be for 80% of the current benefit formula.
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I just read an article on the internet about doing this and I think it's a good idea. I'm also reading Jim Otar's book, Unveiling the Retirement Myth and am finding it very interesting. I'm still slogging through it and am studying it carefully.

To tell you the truth, in our early 30s we decided not to include SS in our retirement plan at all. From time to time an article or commentary would include predictions that the system would not be healthy long-term. We had decided that DH would retire early and we did not want to rely on anyone but us to make it happen. We decided that IF SS was there, it would just be icing on the cake. Unfortunately, we did not predict the exponential increased costs in health care and no one elsewas predicting it at the time, so we believed that retiree medical and Medicare would be there when we needed it.

Our portion of retiree medical premiums have increased 1500% over the last 10 years. As a result, we are now hoping for SS to help cover the cost of health care so that we can use what we have worked to accumulate for what we had originally envisioned our retirement would be which has always included international travel. Regardless, we are still going to have to fork over AT LEAST $140K in retiree medical premiums over the next 10 years that we could never have planned on way back when. AND the company could drop the benefit should they decide to do so, which would increase the cost to us even more.

Obviously, we are planners and feel that we have done the most that we could have done.
 
I've been assuming 100% of our SS will be subject to income taxes (we're probably well above the income level where it is 85% taxed anyway.) SS has said that payments are good until 2036 or so and then drop to 75% IIRC. So that's my worst case. Of course that assumes that Congress makes good on those SS bonds. DW is only 52, so she could be at risk of some benefit reductions.

For Medicare I just assumed the amount I budgeted for private health insurance prior to hitting age 65 continued throughout retirement. No additional strain on spending, but it should be conservative enough for planning.
 
Nords said:
Humans, however, will almost always cut back their spending during a recession to help preserve their portfolio.
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+1
And there are times that your 'vacation' to Canada or Europe is canceled doe to unexpected circumstances, like a birth of grandchild. So the money is not spent this year...:dance:
 
It seems there are many posts about ER in the 50's. That is great, but consider that SS calculations are based on your highest earnings over a 35 year period. If you RE after only working 30 years, you will have 5 years of zero, which will hurt your benefits. Or, if you worked part time, say while in college, you might have a number of years of earnings in the $1500 range (Back when we earned less than $1 an hour!). DW's are vunerable if they stayed home to raise children, then went into the workforce.

But, if you RE and still work part time (when not traveling), your earnings might be enough to replace some of low earning early years, or zero years, which will lead to higher monthly SS checks. Substitute teaching, and seasonal work are two good ways to fight this.

.
 
True. So if you didn't go to college then you would have 35 years in by the time you are 53 or so, and 57 if you went for four years (and back in the day it was usually four consecutive years, not the 5 or 6 year plan).

I know that I and other my age have looked into the effect of this and for me RE had a very modest effect on SS compared to working to 62 or FRA; about $100/month in my case IIRC. A small price for 6 additional years of freedom.
 
brucethebroker said:
It seems there are many posts about ER in the 50's. That is great, but consider that SS calculations are based on your highest earnings over a 35 year period. If you RE after only working 30 years, you will have 5 years of zero, which will hurt your benefits. Or, if you worked part time, say while in college, you might have a number of years of earnings in the $1500 range (Back when we earned less than $1 an hour!). DW's are vunerable if they stayed home to raise children, then went into the workforce.

But, if you RE and still work part time (when not traveling), your earnings might be enough to replace some of low earning early years, or zero years, which will lead to higher monthly SS checks. Substitute teaching, and seasonal work are two good ways to fight this.

.
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you need to work the numbers. RE doesnt have that large of an effect on SS if you have paid into SS your whole working life. part time work, for the sole purpose of padding your SS is absolutely not necessary and a waste of retirement time. if you have other reasons to work (need the income, cant live happily w/o the structure of work, are a type A that has to be doing something, etc) then by all means do so but not to pad your SS if you have been paying into it for your whole working life.


pb4uski said:
True. So if you didn't go to college then you would have 35 years in by the time you are 53 or so, and 57 if you went for four years (and back in the day it was usually four consecutive years, not the 5 or 6 year plan).

I know that I and other my age have looked into the effect of this and for me RE had a very modest effect on SS compared to working to 62 or FRA; about $100/month in my case IIRC. A small price for 6 additional years of freedom.
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+1
 
brucethebroker said:
It seems there are many posts about ER in the 50's. That is great, but consider that SS calculations are based on your highest earnings over a 35 year period. If you RE after only working 30 years, you will have 5 years of zero, which will hurt your benefits. Or, if you worked part time, say while in college, you might have a number of years of earnings in the $1500 range (Back when we earned less than $1 an hour!). DW's are vunerable if they stayed home to raise children, then went into the workforce.

But, if you RE and still work part time (when not traveling), your earnings might be enough to replace some of low earning early years, or zero years, which will lead to higher monthly SS checks. Substitute teaching, and seasonal work are two good ways to fight this.
Click to expand...

I'd suggest each individual needs to run the numbers for SS benefits using the online calculator available on the SSA.gov website. SS is front loaded so having a few years of low or zero income at the end (IOW, retiring early) usually has a very minor impact on benefit amounts.

For that same reason, working part time to try to increase your SS benefits will likely be an effort with little reward. Once again, the SS calculator will allow you to see what part time work would do for your individual situation.
 
REWahoo said:
I'd suggest each individual needs to run the numbers for SS benefits using the online calculator available on the SSA.gov website. SS is front loaded so having a few years of low or zero income at the end (IOW, retiring early) usually has a very minor impact on benefit amounts.

For that same reason, working part time to try to increase your SS benefits will likely be an effort with little reward. Once again, the SS calculator will allow you to see what part time work would do for your individual situation.
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I agree - you need to run the numbers on the calculator.

I didn't start working in the USA until I was well over 32 years old and RE'd
less than 23 years later. As I approached 55 I experimented with working an extra couple of years, at max FICA contributions, and it made very little difference, which was surprising as I had over 12 years of zero earnings.
 
Sirka said:
+1
And there are times that your 'vacation' to Canada or Europe is canceled doe to unexpected circumstances, like a birth of grandchild. So the money is not spent this year...:dance:
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I'd have to defer to REWahoo's experience, but in the long run I suspect that the Canada/Europe vacation is cheaper than a grandchild...
 
Once your 35 year average gets above the second bend point on the formula, then the effect of future earnings becomes small. Recall that past the second bend point the addition is 15% of the amount added. For example assume the limit on earnings for 2012 of 110100 and you earn that, you divide and get 9175 per month, then divide by 35 and you get 262 and multiply by 15% and get an addition of $39.32/month.
 
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