Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Social Security & FIRE Planning
Old 01-17-2021, 04:51 PM   #1
Recycles dryer sheets
 
Join Date: Jan 2018
Posts: 186
Social Security & FIRE Planning

How much should I discount Social Security in my FIRE calculations?

I've been using about 30% the SSA estimate in my calculations and plans, is that too aggressive? Too conservative?

Me & DW both 49 years old

Annual expenses are about 4% of total savings all of which is in retirement accounts so I'm starting to consider firing my employer. Thinking best to wait and see what the incoming political climate will be for healthcare since we will need to fund our own.
KenZ71 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-17-2021, 04:57 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 12,440
Your guess is as good as mine.

I'm 59. I'm using 65% (35% discount) of the SSA estimate, and 100% taxed. If it's not that bad of a cut, good for me, or my heirs. I don't feel like I'm cutting back on anything by not using full SSA estimates.
RunningBum is offline   Reply With Quote
Old 01-17-2021, 05:01 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 11,582
Obviously only a guess, but I doubt you will see an actual discount on what you might have otherwise expected - not in dollar terms. My guess is that what will change is Full Retirement Age or some other smoke-and-mirrors plan that won't sound as bad as suddenly saying "sorry - you don't get what we promised." I have no crystal ball, so take with many grains of (margarita) salt since YMMV.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 01-17-2021, 05:11 PM   #4
Recycles dryer sheets
Morgan22's Avatar
 
Join Date: Nov 2015
Posts: 203
I use 79% of my benefit since my statement says:

* Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2035, the payroll taxes collected will be enough to pay only about 79 percent of scheduled benefits.
Morgan22 is offline   Reply With Quote
Old 01-17-2021, 05:16 PM   #5
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Location: Nashville
Posts: 2,266
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.
__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Old 01-17-2021, 05:22 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 12,440
Quote:
Originally Posted by Koolau View Post
Obviously only a guess, but I doubt you will see an actual discount on what you might have otherwise expected - not in dollar terms. My guess is that what will change is Full Retirement Age or some other smoke-and-mirrors plan that won't sound as bad as suddenly saying "sorry - you don't get what we promised."
Sure, I can see that.

Since I'm not collecting SS yet, what I do is figure out what it would cost to buy an inflation adjusted annuity equal to my SS benefit at 70, starting at age 70. Then I use 65%. So if they did something like move things 5 years back, I would recalculate the annuity to start at 75. I have no idea if that would be 79% or 65% or what. If they made such a change and it looked like enough to make SS last for my lifetime, I wouldn't discount that newly calculated number.

I add this number to my net worth that I use for my VPW calculations. Once I actually start collecting SS, I'll no longer do it that way, I'll just know I have $40K or whatever expenses already covered.
RunningBum is offline   Reply With Quote
Old 01-17-2021, 05:33 PM   #7
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 3,293
Quote:
Originally Posted by Morgan22 View Post
I use 79% of my benefit since my statement says:

* Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2035, the payroll taxes collected will be enough to pay only about 79 percent of scheduled benefits.
+1
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is offline   Reply With Quote
Old 01-17-2021, 06:02 PM   #8
Recycles dryer sheets
 
Join Date: Jan 2018
Posts: 186
This is the part that scares me & how the gap will be made up

"by 2035, the payroll taxes collected will be enough to pay only about 79 percent of scheduled benefits."

So not expecting much seems like a safe bet. This way if I'm wrong it will most likely be a pleasant surprise.

Not planning any large decisions for next 6 months but sure is tempting.
__________________
3 ish years to FIRE, mentally ready now!
KenZ71 is offline   Reply With Quote
Old 01-17-2021, 07:24 PM   #9
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 3,949
My crystal ball tells me that eventually the government will find a way to pay out what has been promised to you. But if I were planning to FIRE I would not count on any social security and then whatever you get just ends up being a nice surprise.
Ready is offline   Reply With Quote
Old 01-17-2021, 07:35 PM   #10
Recycles dryer sheets
 
Join Date: Jul 2017
Posts: 98
61 and 59 here. I've been using 75% and all as taxable in my planning based on the 79% number quoted by SSA.

Current plan is for me to wait till 70 and DW to file at 62. But will keep our options open based on what the feds come up with.
rt-texas is offline   Reply With Quote
Old 01-17-2021, 07:42 PM   #11
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,311
Quote:
Originally Posted by Ready View Post
My crystal ball tells me that eventually the government will find a way to pay out what has been promised to you. But if I were planning to FIRE I would not count on any social security and then whatever you get just ends up being a nice surprise.

Sorry, I need to object that this is very bad advice for most people to treat SS as gravy and an optional luxury. For many people, that would mean assuming they could never be able to retire at all, which is just incorrect.

In our own example, even in the event of the projected worst case 79% of benefits for us when we plan to take SS at age 70, the program is a core, essential element to our plan. SS is for us the equivalent of a $1.8 million inflation indexed annuity! Our plan has a 0% success rate if we exclude SS. With it, we have a 97% success rate, so I need throw the flag and blow a whistle on this comment.
Markola is offline   Reply With Quote
Old 01-17-2021, 07:46 PM   #12
Thinks s/he gets paid by the post
rk911's Avatar
 
Join Date: Dec 2018
Location: DuPage County IL
Posts: 1,983
Quote:
Originally Posted by KenZ71 View Post
How much should I discount Social Security in my FIRE calculations?

I've been using about 30% the SSA estimate in my calculations and plans, is that too aggressive? Too conservative?

Me & DW both 49 years old

Annual expenses are about 4% of total savings all of which is in retirement accounts so I'm starting to consider firing my employer. Thinking best to wait and see what the incoming political climate will be for healthcare since we will need to fund our own.
my wife and i both went at 55 and planned to take SS at 62. i didn't know about FIRE at the time so for planning purposes i just used the SS estimate but when extending that out i assumed a 0% increase year-to-year.
__________________
Rich
Ham Radio, Sport Pilot, RVer
FIRE: 8/11/2005, age 55y,1d
Administrator for a regional 9-1-1 call center
rk911 is offline   Reply With Quote
Old 01-17-2021, 07:47 PM   #13
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 3,949
Quote:
Originally Posted by Markola View Post
Sorry, I need to object that this is very bad advice for most people to treat SS as gravy and an optional luxury. For many people, that would mean assuming they could never be able to retire at all, which is just incorrect.

In our own example, even in the event of the projected worst case 79% of benefits for us when we plan to take SS at age 70, the program is a core, essential element to our plan. SS is for us the equivalent of a $1.8 million inflation indexed annuity! Our plan has a 0% success rate if we exclude SS. With it, we have a 97% success rate, so I need throw the flag and blow a whistle on this comment.
My statement started with "If I were planning to FIRE..."

I'm not referring to people who work until they are 67 years old. I'm referring to people who want to Retire Early because they believe they are Financially Independent. My advice to those people specifically is not to count on social security, because you are making the decision to leave the workforce earlier than you need to, presumably because you believe you are financially solid enough that you have enough to live on for the rest of your life. If a failure to collect social security would prevent you having enough to live on I suspect you are cutting it too close.

But I agree that for the average non-FIRE individual or couple, they do need to know that social security will be there for them.
Ready is offline   Reply With Quote
Old 01-17-2021, 10:05 PM   #14
Thinks s/he gets paid by the post
USGrant1962's Avatar
 
Join Date: Dec 2016
Location: DC area
Posts: 2,111
Quote:
Originally Posted by Ready View Post
My statement started with "If I were planning to FIRE..."

I'm not referring to people who work until they are 67 years old. I'm referring to people who want to Retire Early because they believe they are Financially Independent. My advice to those people specifically is not to count on social security, because you are making the decision to leave the workforce earlier than you need to, presumably because you believe you are financially solid enough that you have enough to live on for the rest of your life. If a failure to collect social security would prevent you having enough to live on I suspect you are cutting it too close.

But I agree that for the average non-FIRE individual or couple, they do need to know that social security will be there for them.
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.
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged

"All models are wrong, some are useful." - George Box
“There is always a well-known solution to every human problem: neat, plausible, and wrong.” - H.L. Mencken
USGrant1962 is offline   Reply With Quote
Old 01-17-2021, 10:16 PM   #15
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 3,949
Quote:
Originally Posted by USGrant1962 View Post
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.
It depends on what age a person is thinking of retiring early. If you are planning on retiring at 45 I would not pull the plug if doing so required that social security be a part of your plan.

If you are thinking of retiring at 60, of course things would look different. But this forum is about retiring early. Early is a relative term. Some people consider 45 to be early, others consider 62 to be early.

I pulled the plug at 46. There is no way I would have done that if social security was an absolute must for me to survive.
Ready is offline   Reply With Quote
Old 01-17-2021, 10:33 PM   #16
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,311
Quote:
Originally Posted by Ready View Post
My statement started with "If I were planning to FIRE..."



I'm not referring to people who work until they are 67 years old. I'm referring to people who want to Retire Early because they believe they are Financially Independent. My advice to those people specifically is not to count on social security, because you are making the decision to leave the workforce earlier than you need to, presumably because you believe you are financially solid enough that you have enough to live on for the rest of your life. If a failure to collect social security would prevent you having enough to live on I suspect you are cutting it too close.



But I agree that for the average non-FIRE individual or couple, they do need to know that social security will be there for them.


DW and I FIREd at 54, which is still pretty darned early. The calculators I trust showed that success was very likely, (90%+) with SS coming online in 16 years at age 70 or less. Removing SS, no way, unless we sell our house at age 70 or later and live in something much more modest. YMMV.
Markola is offline   Reply With Quote
Old 01-17-2021, 10:49 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 6,890
I'm 51, single, FIREd for 5 years. I use 60% of my age 70 benefit since I plan on waiting to age 70 to start SS, which I then appropriate discount for the 19 year gap between now and then.

Healthcare is a dangerous and tricky topic, but I personally think status quo / gridlock or some tinkering around the edges is the most likely outcome over the next few years.

I don't need SS, but if I included its NPV in my calculations, it would be about 18% of that version of my FIRE stash. I think if someone wants to rely on it, that's their business. But if they asked my opinion I would recommend they take into account the various solvency concerns and look at how much their plan relies on SS being there.

I think the government will continue to do what it's done in the past with SS shortfalls: They'll raise the FICA taxes moderately and simultaneously add new benefits to the program. These new benefits will help some people but will of course not help the solvency of the program. But my magic 8-ball is broken on all this, so YMMV.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 01-17-2021, 11:06 PM   #18
Thinks s/he gets paid by the post
rk911's Avatar
 
Join Date: Dec 2018
Location: DuPage County IL
Posts: 1,983
Quote:
Originally Posted by Ready View Post
It depends on what age a person is thinking of retiring early. If you are planning on retiring at 45 I would not pull the plug if doing so required that social security be a part of your plan.

If you are thinking of retiring at 60, of course things would look different. But this forum is about retiring early. Early is a relative term. Some people consider 45 to be early, others consider 62 to be early.

I pulled the plug at 46. There is no way I would have done that if social security was an absolute must for me to survive.
we started thinking seriously about RE in the mid to late 80's...about 12-15 years before it happened. i would've been somewhere around 35, +/-. SS was always part of the plan but only as a cushion. it still is just a cushion today.
__________________
Rich
Ham Radio, Sport Pilot, RVer
FIRE: 8/11/2005, age 55y,1d
Administrator for a regional 9-1-1 call center
rk911 is offline   Reply With Quote
Old 01-18-2021, 06:12 AM   #19
Thinks s/he gets paid by the post
grasshopper's Avatar
 
Join Date: Oct 2010
Posts: 2,341
I use a 75% haircut starting in 2034 at the present time. I have collected SS for 8 years, Ms G is FRA but waiting until age 70. I bump SWR to 4% to adjust for the loss the same year, that is if I am not pushing up roses.
__________________
For me experiences are not good or bad, just different
grasshopper is offline   Reply With Quote
Old 01-18-2021, 06:19 AM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 9,969
I still believe that the SS program will be shored up in the end. Perhaps they will raise the tax rates on the various portions.
Not to include SS at all in a retirement calculation appears to be too severe.
__________________
TGIM
Dtail is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
ACA income planning Social Security first year Born2Fish FIRE and Money 1 10-23-2020 09:15 AM
Started Social Social Security at age 62 but my break even date is well into my 80s Retired and Restless FIRE and Money 96 12-24-2016 12:49 PM
Noticed more people holding signs "need work or food" rayinpenn Other topics 3 05-03-2015 02:51 PM
Social Security statements after FIRE Nords FIRE and Money 13 08-09-2005 12:38 PM
Planning on Social Security? patnbj FIRE and Money 27 03-31-2004 06:28 PM

» Quick Links

 
All times are GMT -6. The time now is 10:44 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.