I'm 47 years old and eyeing age 60 as my retirement age. I have a 401k and company provided pension. My 401k contributions I have gradually increased until finally hitting the max 3 years ago, and I plan on staying at this level of contribution for next 13 years.
A friend of mine, who is in same situation and works for same place, pointed me to the social security website where you can actually project with some level of confidence what future values will be. I was pretty surprised I must say, as it lines up with pension values pretty well. At age 67, it projects about 3500 a month.
My confusion is that I've always heard "by time you retire, there will be no social security", so that's how I've thought. But if it's there, then it changes how I might plan for retirement. Maybe it won't be necessary to have paid off my mortgage first, for instance.
Right now, I think if I retire at 60, I'd defer both pension and social security until 67, for maximum benefit, and live from saved cash and 401k disbursements.
Any thoughts on any of this? Both those in my situation (planning) and those that are actually retired. What are the lessons learned?
Should social security be considered when planning for retirement?
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I'd say don't rely on it, make it such that you can be fine without the social security. But if you do have the social security, you just live a bit more comfortable and can spend more. Average monthly social security payment right now is $1500 per month. So plan on potentially not having that full amount, and if you do then you can travel a lot more and do extra things that you otherwise wouldn't.
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Puleeeeze....people have been saying "by the time you retire, there will be no social security" forever. First time I heard that one was my first year in college...1978.
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Social Security is projected to be solvent until 2032. At that time, Social Security will not disappear. It will simply have to either reduce benefits or increase the FICA 6.2% income tax withholdings or find another source of tax revenue. SS solvency can be pushed out further with reforms that centrists usually support, like pushing up the retirement age or messing with cost of living adjustments.
SS is not going to go away. It is way too big of a benefit program to dismantle and doing so would push millions of elderly people into abject poverty. A very small adjustment to the FICA tax would fix SS, but that has always been as much of a third rail as getting rid of SS. I would suspect that SS may get cut slightly to kick the can down the road on real reform. -
I am 71 and retired at 67. I did my retirement planning assuming that there was no certainty about how much, if any, SS I would collect on retirement. I figured that getting SS would be a bonus and increased margin of error on my retirement savings. Now, it's a very nice $3k+/month supplement to my retirement income. I like the security of the added income and use a lot of it for doing more fun stuff during my retirement.
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I would love to see more opinions on this topic.
I am in a similar position to OP. I am currently planning to retire in 2040. That looks pretty safe. 2035 might be possible for me depending on how things go. I have been basing everything off of no Social Security to see what changes are made in reaction to the 2032 date mentioned above. Hopefully, it is largely intact and I will be able to easily dip out in around 2035.
I have played around in my budget with 50-75% of currently estimated SS figures from the calculator you mentioned just out of curiosity. It can make a huge difference for someone with the goal of retiring as early as possible. By the way, run the numbers in Excel or something on waiting until full withdrawal versus taking it early. I had the same feeling as you to wait and spend IRA and 401k until then, but it actually came out better to take the lesser SS and keep drawing interest on the IRA and 401k. Well, it was better until like my mid 80s anyways, but... might be something to take a closer look at and weigh the options. -
If your health is good n you have enough other retirement income consider waiting until age 70 so that you can realize a guaranteed 8% return /year between your normal retirement age and 70. In my case, 4 years. Easy money. And yes, SS will be around.
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I think you will get your Social Security, but it isn't a bad idea to plan to retire comfortably without it, and then the extra is just gravy.
Some things:
1) What you actually get from SS will be based on your top 35 years of earnings, so just know that if you do stop working at age 60.
2) If you are married, and either your spouse doesn't work or made a lot less than you, he/she will get half again what you get in that first year, so if you get $3,500 per month, he/she would get another $1,750. -
Oh Please wrote:
Right now, I think if I retire at 60, I'd defer both pension and social security until 67, for maximum benefit, and live from saved cash and 401k disbursements.
Age 70 gets the maximum benefit for social security.
67 is "full" retirement" but if you defer at that age, the monthly benefit goes up each year until you reach age 70, where you must take it (and why not?)
Of course consider social security in your retirement planning.
What makes people think the stock market won't totally collapse in the next 20-30 years but social security will?
SS is funding by current wages. If people are still working in the future, then SS will be funded. -
great topic..... wrote:
I would love to see more opinions on this topic.
I am in a similar position to OP. I am currently planning to retire in 2040. That looks pretty safe. 2035 might be possible for me depending on how things go. I have been basing everything off of no Social Security to see what changes are made in reaction to the 2032 date mentioned above. Hopefully, it is largely intact and I will be able to easily dip out in around 2035.
I have played around in my budget with 50-75% of currently estimated SS figures from the calculator you mentioned just out of curiosity. It can make a huge difference for someone with the goal of retiring as early as possible. By the way, run the numbers in Excel or something on waiting until full withdrawal versus taking it early. I had the same feeling as you to wait and spend IRA and 401k until then, but it actually came out better to take the lesser SS and keep drawing interest on the IRA and 401k. Well, it was better until like my mid 80s anyways, but... might be something to take a closer look at and weigh the options.
Whether to take Social Security as soon as possible is a personal decision. Here are things to consider:
1) One you die, SS is done. So, if you want to leave as much as you can to children, it's not a bad idea to use SS as soon as you can for your expenses and then let your retirement money continue to grow.
2) If you are 60 and have some sort of health issue that suggests you might live only 10-15 more years, then you might want to take SS as soon as you can (62 for most people). You might also consider this if everyone in your family dies before age 75.
3) If you are simply a person who hates working OR has a physical situation (like arthritis) that makes working difficult, you might want to take SS early just to be done with it. For many married couples, if you retire with a paid-for house, you CAN make it on Social Security alone. You won't be living the great life, but if the goal is to be done with working, you can make that happen. There is lots of information on this topic online for people who want/need to do this. Usually there is a disclaimer that says it's not recommended but it is possible. -
X-Runner wrote:
Oh Please wrote:
Right now, I think if I retire at 60, I'd defer both pension and social security until 67, for maximum benefit, and live from saved cash and 401k disbursements.
Age 70 gets the maximum benefit for social security.
67 is "full" retirement" but if you defer at that age, the monthly benefit goes up each year until you reach age 70, where you must take it (and why not?)
Of course consider social security in your retirement planning.
What makes people think the stock market won't totally collapse in the next 20-30 years but social security will?
SS is funding by current wages. If people are still working in the future, then SS will be funded.
They should just call 70 "full" retirement. -
I'm 46 and plan to retire this year.
I believe social security will be around when it's time to for us to collect, but I do think there will be reductions in some form by the time we are eligible, either to a reduction in benefit amounts or adjusting the ages that it can be collected (e.g. 62 becomes 64, 67 becomes 69, 70 becomes 72) or perhaps both.
For planning purposes, I have always adjusted my projected benefit down to 75%. I think this is a reasonable assumption.
As for when to collect, there are a variety of factors (single, married, high earner/low earner spouse, etc.). I highly recommend taking a look the following calculator to give you an idea of when you should collect:
https://opensocialsecurity.com/ -
Assume social security will not exist in 30 years and that your savings is your life. While SS may still exist, your payment will likely be wiped out by inflation.
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The fear of SS or even savings not being available or the fear of future inflation is all the more reason to buy a house.
Once you have that, you are locked in for any P&I you will need to pay that will not go up.
You don't know what any future rent may cost. -
What we need wrote:
I'm 46 and plan to retire this year.
I believe social security will be around when it's time to for us to collect, but I do think there will be reductions in some form by the time we are eligible, either to a reduction in benefit amounts or adjusting the ages that it can be collected (e.g. 62 becomes 64, 67 becomes 69, 70 becomes 72) or perhaps both.
For planning purposes, I have always adjusted my projected benefit down to 75%. I think this is a reasonable assumption.
As for when to collect, there are a variety of factors (single, married, high earner/low earner spouse, etc.). I highly recommend taking a look the following calculator to give you an idea of when you should collect:
https://opensocialsecurity.com/
what do you plan to do with your time in retirement? will you completely replace your current earnings with retirement savings, or do you plan to cut back? if you don't mind answering... -
Precious Roy wrote:
Social Security is projected to be solvent until 2032. At that time, Social Security will not disappear. It will simply have to either reduce benefits or increase the FICA 6.2% income tax withholdings or find another source of tax revenue. SS solvency can be pushed out further with reforms that centrists usually support, like pushing up the retirement age or messing with cost of living adjustments.
SS is not going to go away. It is way too big of a benefit program to dismantle and doing so would push millions of elderly people into abject poverty. A very small adjustment to the FICA tax would fix SS, but that has always been as much of a third rail as getting rid of SS. I would suspect that SS may get cut slightly to kick the can down the road on real reform.
As much as I hate SS I mostly agree with this. The only thing I would hold back on saying is if we do enter a currency crisis the fund goes insolvent much quicker because there is no fund. The fund is a construct presidents from the 80 to early 2000's used to spend taxpayer money without the taxpayers realizing it. It was the Us government moving money from one pocket to the other. In order for the fund to be spent, it involves pushing US treasuries out into the market which is a problem considering no one is buying them now. Meaning the only way the government may actually be able to use the fund at anything close to face value the FED may have to buy up the treasuries which would increase the money supply.
Likely any reform will be kicked down the road because it is a political poison pill and there are more pressing issues in the next few years. But eventually, there will need to be one of 3 things or a combo. Increased SS tax, decreased benefits, or a means test. I just can't see the government scrapping the program even under dire circumstances because there are elderly with no other means of survival, but if I was in your place and middle income on up I would be extremely conservative in making my retirement planning dependent on SS being close to what it is today 30 years from now. -
Primo Numero Uno wrote:
As much as I hate SS I mostly agree with this. The only thing I would hold back on saying is if we do enter a currency crisis the fund goes insolvent much quicker because there is no fund. The fund is a construct presidents from the 80 to early 2000's used to spend taxpayer money without the taxpayers realizing it. It was the Us government moving money from one pocket to the other. In order for the fund to be spent, it involves pushing US treasuries out into the market which is a problem considering no one is buying them now. Meaning the only way the government may actually be able to use the fund at anything close to face value the FED may have to buy up the treasuries which would increase the money supply.
You're over thinking this.
There is no fund.
There is a payroll tax that takes money in. And there are benefits that pay money out.
Since it's inception, it has taken in more than it has paid out. That's the fund you are talking about but it's just a line item on a ledger.
Sure, the excess money goes to the general fund. And if it went negative, it could borrow from the general fund.
It's taking USD and paying USD so I don't know why you are throwing in a potential currency crisis. Any federal debt issues over currency will have widespread economic impact, nothing special about SS.
If things go bad, they will be bad all over. -
The age will be raised and there will be income tests. Ten years from now, the minimum age will be 67 and nobody making $50k in retirement will be eligible.
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Charlie Stache wrote:
What we need wrote:
I'm 46 and plan to retire this year.
I believe social security will be around when it's time to for us to collect, but I do think there will be reductions in some form by the time we are eligible, either to a reduction in benefit amounts or adjusting the ages that it can be collected (e.g. 62 becomes 64, 67 becomes 69, 70 becomes 72) or perhaps both.
For planning purposes, I have always adjusted my projected benefit down to 75%. I think this is a reasonable assumption.
As for when to collect, there are a variety of factors (single, married, high earner/low earner spouse, etc.). I highly recommend taking a look the following calculator to give you an idea of when you should collect:
https://opensocialsecurity.com/
what do you plan to do with your time in retirement? will you completely replace your current earnings with retirement savings, or do you plan to cut back? if you don't mind answering...
I've already cut back to part-time so that there's not much more for me to cut back as far as work goes. However, I wouldn't rule out additional part-time gigs.
My wife will continue to work, at least for the foreseeable future which will provide us health insurance. I've been planning for early retirement since I was 21. About 10-15 years ago, I targeted retirement around age 49, but I think I can pull it off now at 46-47. It's just a matter of how much more s&# I can take at work.
I know this is hard for some people to comprehend, but I don't have any big plans for what to do in retirement. I am never bored when I'm not at work. I don't get any personal satisfaction from work and I wish that weren't the case.
Psychologically, for me the hardest part will be making the switch from accumulating wealth to making regular withdrawals. Every calculator I've used says I can pull it off, but it's hard for me to go from saving for decades to all of a sudden withdrawing. I assume it gets easier with time. -
I'm 60 and because of a job loss had to seriously consider retiring now so I've run the numbers. I think you should "count on" social security but if it were the sole pillar of your retirement plan there is some degree of long term instability that you don't have with a 401K or most company pension plans.
The decision as to when to retire is an important one. What I would suggest you do is to create a simple Excel spreadsheet with what your annual income would be making appropriate assumptions about when your mortgage is paid off, the rate at which you pull money from your 401K, and how much your company pension (if you have one) and Social Security would pay depending on when you begin taking them. This is fairly simple to model and highly informative
If you are like me and many others you may have "enough" to retire at 60 but choose to work longer because (a) out of pocket costs for COBRA or some form of medical insurance are prohibitive, and (b) every year you keep working increases pension / Social Security payout. If I were to sign up for Obamacare right now with a reasonable plan and coverage just for me and 2 kids, it would cost $1800/month. My advice for someone planning to retire at 60 would be to fully understand how you are going to cover medical costs until Medicare kicks in
One number you will need to arrive at will be the family income which is "enough" for you in retirement as this might influence how much you should be saving now or how long you work. This number might drop significantly if your mortgage is fully paid off and you may need to estimate your federal/state tax obligation as your effective tax rate should be lower
