Conservative but reasonable estimate of Social Security

[Skeptic]

In playing with retirement calculators, what do you use as a conservative but realistic estimate of Social Security? Social Security is 4 to 12 years in the future for me: $0 is certainly conservative, but perhaps not reasonable. Would, say, 60% of estimated benefits be a more realistically conservative assumption to make?

- Skeptic

 

[harley]

I'm currently 61, but was 50 when I FIREd. I had no doubt even then that I would get SS in some form, but because it was not directly in my control I decided to not consider it in my FI calculations. By not considering it I pushed back my RE date a bit, but I was holding on for employer sponsored health care anyway, so it wasn't a real sacrifice. So I guess for me it was 0%. I wouldn't necessarily recommend that, so maybe 60% is as good a number as any.

 

[RunningBum]

I use 75%, based on this blog post from the acting commissioner of SS last year:

https://blog.ssa.gov/social-securit...y-options-to-address-the-long-term-shortfall/

Today’s report shows that, as a whole, Social Security is fully funded until 2034, and after that it is about three-quarters financed.

 

[braumeister]

I just use the full amount I'm due until 2034 and then cut it by 25%.

 

[OnTheBeach]

I am 47 and do not include SS in my calculations

 

[razztazz]

I didn't include SS for many years. Now that I am 60 and things haven't changed dramatically and I am probably going to take it at 62, the past few years I have been including it.

I am at the very low end of SS. I suspect I won't be affected or affected much by any shaving. I use 100% but also run alternate scenarios with SS as a non-inflation adjusted pension.

 

[Skeptic]

I use 75%, based on this blog post from the acting commissioner of SS last year:

https://blog.ssa.gov/social-securit...y-options-to-address-the-long-term-shortfall/

That’s good info, @RunningBum, but my guess would be that that 75% will be combined with some sort of differentiation based on means testing. So presuming that I’ll be on the north side of any such measure (and I’ll bet a lot of ER types are), my rough guesstimate of 60% is maybe not that far off.

- Skeptic

 

[Midpack]

I’ve always used 70% because “they” have said for years SS would only be able to pay out 70-75% if nothing was done. I don’t know a better estimate.

The concepts of solvency, sustainability, and budget impact are common in discussions of Social Security, but are not well understood. Currently, the 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. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits.

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

 

[brucethebroker]

Use your current estimate from SS. The 4 year time frame should be right on. The 12 year, possibly not, but remember you will be earning money during that time and continuing to contribute (possibly replacing low earning years with higher ones). Also, COLA updates will help benefits grow.

I began studying SS retirement benefits as a young life insurance salesperson in the early 1980's. People were convinced it would be bankrupt shortly even back then. Much ado about nothing in retrospect.

It is much easier for the pols to raise FICA taxes (what's another 1/2%??) and earnings ceilings (the RICH can afford it!!) than to cut benefits for seniors and near seniors. They will proclaim "we have saved SS for another 50 years!!" That is what I see happening.

Will it change in the future? Who knows. But they have seemed to grandfather people in their mid-50's and older to the old rules in past changes.

 

[brucethebroker]

That’s good info, @RunningBum, but my guess would be that that 75% will be combined with some sort of differentiation based on means testing. So presuming that I’ll be on the north side of any such measure (and I’ll bet a lot of ER types are), my rough guesstimate of 60% is maybe not that far off.

- Skeptic

What? The pols are not reading all the media proclaiming today's seniors cannot afford to retire? Why, seniors cannot afford cuts to SS. No sense in means testing!! Just read the news!!

 

[scrabbler1]

Use your current estimate from SS. The 4 year time frame should be right on. The 12 year, possibly not, but remember you will be earning money during that time and continuing to contribute (possibly replacing low earning years with higher ones). Also, COLA updates will help benefits grow.

I began studying SS retirement benefits as a young life insurance salesperson in the early 1980's. People were convinced it would be bankrupt shortly even back then. Much ado about nothing in retrospect.

It is much easier for the pols to raise FICA taxes (what's another 1/2%??) and earnings ceilings (the RICH can afford it!!) than to cut benefits for seniors and near seniors. They will proclaim "we have saved SS for another 50 years!!" That is what I see happening.

Will it change in the future? Who knows. But they have seemed to grandfather people in their mid-50's and older to the old rules in past changes.

You covered it quite well. As for me, because I stopped working at the end of 2008, my SS benefit has been pretty much frozen because my earnings history has not changed. Only the wage indexing factors change slightly every year, so my projected monthly benefit moves a dollar or two.

 

[Red Badger]

Use your current estimate from SS. The 4 year time frame should be right on. The 12 year, possibly not, but remember you will be earning money during that time and continuing to contribute (possibly replacing low earning years with higher ones). Also, COLA updates will help benefits grow.

I began studying SS retirement benefits as a young life insurance salesperson in the early 1980's. People were convinced it would be bankrupt shortly even back then. Much ado about nothing in retrospect.

It is much easier for the pols to raise FICA taxes (what's another 1/2%??) and earnings ceilings (the RICH can afford it!!) than to cut benefits for seniors and near seniors. They will proclaim "we have saved SS for another 50 years!!" That is what I see happening.

Will it change in the future? Who knows. But they have seemed to grandfather people in their mid-50's and older to the old rules in past changes.

Yup. The pols know a few things for certain...
They want to stay in DC until hell freezes over.
Gray haired folks turn out to vote like no other demographic.
Raising FICA and the FRA on young folks is the way to go (and they did it to us years ago.)
While the 2034 (ish) haircut is possible, I consider it to be remote at best.

About means testing. The @ssholes did not means test my FICA taxes when I was struggling on minimum wage, and raising a family after getting laid off in my 30's. I'll have my slice of apple pie now - thank you.

 

[gauss]

I plan to receive about 2/3 of what I have accrued under current law. I base this on the 70-75% available perpetually as described above

Originally I planned 0, but when things fell into place to make ER a reality, adding in some SS definitely got me over the hump.

By holding off drawing SS until age 70 and assuming that I will live to 100, the value of the SS is quite significant.

-gauss

 

[Shanky]

It is always a trade off. If you assume SS at zero and because of that you work two or three extra years to accumulate the $500K or so to cover for no SS. You may have given up 10% of your retired years, including the "best" years. On the other hand, you may spend the last couple of years of your life with less than you planned. Different folks will approach that trade-off differently.

 

[Senator]

I count 100% of my SS, and always have. Worse case, I will pick up part time work, doing something.

There are many more things likely to happen. Means testing would kill off SS in it's entirety and change the program from it's original intention.

 

[Car-Guy]

Never thought I get a dime so I never counted it in my calculations. Well I was wrong,,,,,, again. Been collecting it since I turned 62. I still don't count it until it appears in my checking account each month.

 

[HadEnuff]

When I was in my 30s and 40s I penciled in "0", but as my 50s sped by and RE loomed more closely ahead, I realized I was going get something.

So, I'd suggest something less pessimistic than my view, but less than 100%, and recognize that SS, along with many other factors influencing your retirement, is going to be subject to change as the decades pass.

 

[PatrickA5]

As others have said, if and when, our Congress gets enough guts to work on SS and Medicare, I think most of the fallout will be limited to younger workers by increasing the retirement age and upping the FICA maximum for SS. I got caught in the last "fix" as my Full Retirement Age is 66 and 8 months. My guess is they raise the current 67 for FRA to 70.

Us old people vote. AARP is a pretty powerful lobby. If they want to stay in office, they probably won't take away any of our earned SS benefits. I plan on 100%.

 

[Niuatoputapu]

Good question!

Currently age 60. I currently forecast DW is start benefits in 2021 (age 65) and me to start in 2027 (age 70), both at 100% of calculated benefits. Then I forecast a 23% haircut in 2034. I do not think the haircut will happen (for those of us past age 55), but my conservative approach is to forecast it.

I do think means testing (similar to Medicare) is a more likely scenario than straight-forward SS benefit cuts. For that reason, I plan Roth conversions from now through 2026. Income tax hit is probably neutral, but I will pay more now to lower my future RMDs. Those RMDs could impact SS means testing.

 

[SecondCor521]

I am 48, and currently plan on receiving 40% of my SS benefit. I plan to take it at 70.

If you asked me to predict, I would estimate that I would receive more than 40%, but my plan is more conservative than that because stuff can happen in the next 22 years.

Since both main parties want to fix Social Security and both have put forth reasonable (but different) plans to do so, I am confident that the program will continue to be solvent.

 

[Pilot2013]

Now that I am getting closer, I have plugged SS in to my calculations at 80%. In a few more years, I will use 100%. I agree that it will be a difficult item to tackle, other than what they are doing now (raising the cap). I don't think they will means test, as it would likely merit a pretty strong toll on re-election for the career Pols. I have said many times, I am good with them raising the cap, or maybe making a "donut hole" for middle class. I've been over the cap for many years now, and am already there this year.

DW will start at 62, since even her @70 benefit is less than what her Survivor benefit would be, and will help with ER. I will wait and see based on portfolio performance for my start.

 

[racy]

I plan on getting 100% of my projected SS. The numbers the SS Commissioner projects states what will happen if congress does not act. Congress tends to delay action until there's a crisis but I personally believe they will not allow benefits to be cut. They like being re-elected!

 

[Cobra9777]

In my 40s, when I was dreaming about ER and building spreadsheets, I never included SS. It never really crossed my mind. It was way out in the future and I was more concerned with how to survive without a paycheck... now. I also assumed that by the time I got there, it would be heavily watered down with additional taxes, means-testing, FRA increases, etc. So I didn't want my decision to be dependent on something which was so far away and outside my control.

Then about a year before I retired at 52, my numbers were looking good, but I wanted validation. I started running lots of retirement calculators in addition to my own spreadsheets. They all wanted me to input SS. So I looked up the amount (for the first time) and plugged it in, along with various what-if haircuts. I probably would have pulled the trigger anyway, but this definitely helped. I'm still pessimistic, but I started believing that "something" might actually be there.

When I made the decision to retire, SS was set at 50%. Last time I updated my numbers, I had it set to 70%. Our actual spending equates to zero SS with FIRECalc at 95%. So I guess I'm enough of a believer that I'm willing to put it in the models, but not so much that I'm spending it yet.

DW is 57; I'm 56. Current plan is that she starts at 62 and me at FRA or 70. But I still have 5 years of reading SS threads here before an actual decision has to be made. So that could change.

 

[tmm99]

I am sure we will get more than 70%. Personally, I am treating SS as fully taxable income. I intend to keep my WR low, until SS kicks in in about 8 years at my FRA, just in case.