Author Topic: Social Security-Do you plan on it?  (Read 20754 times)

sol

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Re: Social Security-Do you plan on it?
« Reply #50 on: April 17, 2019, 10:33:55 AM »
I plan on receiving social security.  I can't imagine why anyone would not plan for it.

I don't intend to need social security, but those future monthly payments are definitely included in my retirement planning spreadsheets.  So is my pension, my Roth IRA rollovers, my TSP withdrawals, my future rental income, and my expenses.  Everything is only estimated, of course, but it baffles me why someone would go to all the of the trouble of trying to plan out their financial future, and then deliberately do it wrong by leaving stuff out. 

Like if you're trying to balance your checkbook this month, why would you deliberately leave out your tax refund?  You might not know exactly what it will be, but you know it's going to impact your finances and you should probably make an estimate and try to plan around that.

So I worked through the calculations.  I downloaded my history of SS taxes, I made the required assumptions and worked through the equations, and I determined my projected future monthly income at a fixed future date.  Then I added that amount to my spreadsheet as future income, in my case starting in 2042.  Ditto for my partner's social security, our pensions, our mortgages, our rental incomes, our inflated expenses, and each of our investment accounts.  I've plotted my projected checking account balance at the end of every month between now and age 100.  And if you haven't done this exercise, or something very similar, then I might suggest you're not quite ready to retire yet.

The 4% rule is a handy ballpark estimate, but we're talking turkey here.  Do the math for real before you make any irreversible decisions, and build in whatever safety margin you think think need on top of your best guess calculations.  Social security is part of that process, and it should absolutely be included.

FIREstache

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Re: Social Security-Do you plan on it?
« Reply #51 on: April 17, 2019, 06:06:03 PM »
WEP seems only fair as that lowest range before the first bend of the SS benefit ranges assumes you're not getting other retirement income and is more generous so that those only getting SS can survive on it.  WEP puts you past that bend just as higher incomes over time get you into those less generous ranges as well.

But it only applies to those with certain government pensions not private pensions or government pensions where you paid into SS. Your benefits aren't reduced if you get those. I realize it was enacted to prevent double dipping and I don't have a problem with it. However it does seem unfair to those who paid into SS for years and then changed jobs to one that didn't. It seems that you should be allowed to earn an unreduced benefit based on the years you did contribute on the first job. And earn whatever pension you'd get on the second job - no combining of years. Just like you would if getting a private pension. For me, as a low income person with a small pension who'd only get a small amount of SS at full retirement age, cutting my SS benefit by half may be more impactfulful than a person with a private pension and who gets full SS.

You are correct in your reasoning.  If someone is receiving a pension in those circumstances, I feel that they should receive a reduced SS benefit as well, just as the WEP applies in your case. 

I was recently reading a previous thread that had some discussion about reducing SS benefits for people with additional or higher income (such as a retiree receiving a nice pension) as a way to help sustain the SS system while maintaining benefit levels for those who most need those benefits.  Your example of those receiving pensions and not affected by WEP could fit into that category.  I think this is the one.

https://forum.mrmoneymustache.com/welcome-to-the-forum/social-security-will-not-be-bankrupt/
« Last Edit: April 17, 2019, 06:09:32 PM by FIREstache »

Penny Lane

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Re: Social Security-Do you plan on it?
« Reply #52 on: April 17, 2019, 06:07:15 PM »
Yep.  Probably sometime next year as I will be eligible later this year.  I'm amazed at how much it will be!  I don't need it, but will find good uses for it.

FIREstache

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Re: Social Security-Do you plan on it?
« Reply #53 on: April 18, 2019, 04:47:00 PM »
WEP seems only fair as that lowest range before the first bend of the SS benefit ranges assumes you're not getting other retirement income and is more generous so that those only getting SS can survive on it.  WEP puts you past that bend just as higher incomes over time get you into those less generous ranges as well.

But it only applies to those with certain government pensions not private pensions or government pensions where you paid into SS. Your benefits aren't reduced if you get those. I realize it was enacted to prevent double dipping and I don't have a problem with it. However it does seem unfair to those who paid into SS for years and then changed jobs to one that didn't. It seems that you should be allowed to earn an unreduced benefit based on the years you did contribute on the first job. And earn whatever pension you'd get on the second job - no combining of years. Just like you would if getting a private pension. For me, as a low income person with a small pension who'd only get a small amount of SS at full retirement age, cutting my SS benefit by half may be more impactfulful than a person with a private pension and who gets full SS.

You are correct in your reasoning.  If someone is receiving a pension in those circumstances, I feel that they should receive a reduced SS benefit as well, just as the WEP applies in your case. 

I was recently reading a previous thread that had some discussion about reducing SS benefits for people with additional or higher income (such as a retiree receiving a nice pension) as a way to help sustain the SS system while maintaining benefit levels for those who most need those benefits.  Your example of those receiving pensions and not affected by WEP could fit into that category.  I think this is the one.

https://forum.mrmoneymustache.com/welcome-to-the-forum/social-security-will-not-be-bankrupt/
But wouldn't that have to include those who had 401Ks and IRAs? Most pension earners have to pay. a certain percentage into their pensions just like you do with SS. It's mandatory and, like SS, you can't choose to invest it elsewhere or just pocket that money instead. So if a person invests in a 401K for years while working, then shouldn't their SS benefit be reduced too just like with the WEP by your logic? I don't think so. And I don't think any earned pension or work-related investments like a 401K you paid into (especially when there is no choice to do otherwise) should reduce you SS benefit. But I am just a teeny tiny bit biased ;-).

Yeah, I think it would have to include any taxable income from IRAs, 401Ks, capital gains, rental income, etc. that makes someone less reliant on SS, but I think the reduction should only kick in if the taxable income is higher.  But that's only if they wanted to cut benefits as part of a plan for strengthening social security, so as not to negatively affect the people most dependent on it.  I would hate to see benefit cuts or increased age requirements.

Laserjet3051

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Re: Social Security-Do you plan on it?
« Reply #54 on: April 18, 2019, 05:05:40 PM »
Yes, I plan on it.

Villanelle

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Re: Social Security-Do you plan on it?
« Reply #55 on: April 18, 2019, 05:27:52 PM »
I plan on it, in the sense that I feel confident there will be some SSI benefit for me. 

But it's not part of a specific plan because I don't know what that "some" will look like.  I suppose the way it is integrated into the plan is that I consider it an additional safety measure in case part of our main plan wobbles a bit. 

cloudsail

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Re: Social Security-Do you plan on it?
« Reply #56 on: April 18, 2019, 06:30:21 PM »

ETA: I asked this question on another thread but maybe someone here can answer it:

@ender I'm curious about the approx amount a lower income person who didn't pay much into SS would get if they had left employment at 30 and didn't pay into it again. I can't imagine it would be very much at 67. There are a few around here who didn't have high salaries but retired at 30 or earlier and use real estate or some other income for FIRE. I contributed approx 12 years into SS from 18 to 30 at a low income (very low by today's standards) and think a full benefit at 67 would be around $700/month (not counting the Windfall Elimination Provision reduction I'd be subject to of approx $450 in today's dollars). I guess that would be high for only contributing 12 low income years plus teenager jobs.

If you have a decently average income it's pretty good payout. Especially if you are making a decent income, you get a lot of payout pretty quickly - someone born in 1990 making $50k/year and retiring at 35 receives almost 23k a year at age 66. Someone making 100k and retiring at 40 will get 42k/year.

It's not going to be "FIREable" amounts alone after inflation is accounted for but it's not a small amount of money.

https://smartasset.com/retirement/social-security-calculator#tLgHJugQv6

Is this right? I checked my account recently. I was born in the eighties. I worked for exactly ten years, two of those making very little, about four or five years making low six figures. It says my full retirement age is 67 and I would get $1300/month.

sol

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Re: Social Security-Do you plan on it?
« Reply #57 on: April 18, 2019, 06:33:41 PM »

ETA: I asked this question on another thread but maybe someone here can answer it:

@ender I'm curious about the approx amount a lower income person who didn't pay much into SS would get if they had left employment at 30 and didn't pay into it again. I can't imagine it would be very much at 67. There are a few around here who didn't have high salaries but retired at 30 or earlier and use real estate or some other income for FIRE. I contributed approx 12 years into SS from 18 to 30 at a low income (very low by today's standards) and think a full benefit at 67 would be around $700/month (not counting the Windfall Elimination Provision reduction I'd be subject to of approx $450 in today's dollars). I guess that would be high for only contributing 12 low income years plus teenager jobs.

If you have a decently average income it's pretty good payout. Especially if you are making a decent income, you get a lot of payout pretty quickly - someone born in 1990 making $50k/year and retiring at 35 receives almost 23k a year at age 66. Someone making 100k and retiring at 40 will get 42k/year.

It's not going to be "FIREable" amounts alone after inflation is accounted for but it's not a small amount of money.

https://smartasset.com/retirement/social-security-calculator#tLgHJugQv6

Is this right? I checked my account recently. I was born in the eighties. I worked for exactly ten years, two of those making very little, about four or five years making low six figures. It says my full retirement age is 67 and I would get $1300/month.

No, those numbers don't look right at all.

FIREstache

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Re: Social Security-Do you plan on it?
« Reply #58 on: April 18, 2019, 10:01:54 PM »

ETA: I asked this question on another thread but maybe someone here can answer it:

@ender I'm curious about the approx amount a lower income person who didn't pay much into SS would get if they had left employment at 30 and didn't pay into it again. I can't imagine it would be very much at 67. There are a few around here who didn't have high salaries but retired at 30 or earlier and use real estate or some other income for FIRE. I contributed approx 12 years into SS from 18 to 30 at a low income (very low by today's standards) and think a full benefit at 67 would be around $700/month (not counting the Windfall Elimination Provision reduction I'd be subject to of approx $450 in today's dollars). I guess that would be high for only contributing 12 low income years plus teenager jobs.

If you have a decently average income it's pretty good payout. Especially if you are making a decent income, you get a lot of payout pretty quickly - someone born in 1990 making $50k/year and retiring at 35 receives almost 23k a year at age 66. Someone making 100k and retiring at 40 will get 42k/year.

It's not going to be "FIREable" amounts alone after inflation is accounted for but it's not a small amount of money.

https://smartasset.com/retirement/social-security-calculator#tLgHJugQv6

Is this right? I checked my account recently. I was born in the eighties. I worked for exactly ten years, two of those making very little, about four or five years making low six figures. It says my full retirement age is 67 and I would get $1300/month.

Someone posted up thread that that calculator calculated using future dollars for when you retired.  If that's true, $1300 in 30 years from now won't go nearly as far as it would today due to inflation.

Edit: I checked it out.  There's an inflation adjustment, which didn't change my results much except in the graph.  And it doesn't give granular control, and estimating my average income (in today's dollars), it gives me a much higher figure than I get using the downloadable SS calculator from ssa.gov, although it's more complicated to use, but I trust it much more.
« Last Edit: April 18, 2019, 10:12:00 PM by FIREstache »

FiveSigmas

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Re: Social Security-Do you plan on it?
« Reply #59 on: April 18, 2019, 11:20:28 PM »
Edit: I checked it out.  There's an inflation adjustment, which didn't change my results much except in the graph.  And it doesn't give granular control, and estimating my average income (in today's dollars), it gives me a much higher figure than I get using the downloadable SS calculator from ssa.gov, although it's more complicated to use, but I trust it much more.

Yeah, I trust the SSA calculators far more than some random website’s AwesomeCalc. Unfortunately, SSA’s “official” calculator, looks like it was designed in the days of Zork (but without the nostalgia). Fortunately, they also offer a very serviceable web-based calculator, which allows year-by-year input of past/predicted earnings and can output benefits in today- or future-dollars:

https://www.ssa.gov/planners/retire/AnypiaApplet.html

robartsd

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Re: Social Security-Do you plan on it?
« Reply #60 on: April 19, 2019, 09:27:10 AM »
Is this right? I checked my account recently. I was born in the eighties. I worked for exactly ten years, two of those making very little, about four or five years making low six figures. It says my full retirement age is 67 and I would get $1300/month.

Assuming the 3-4 years you didn't indicate your income level for were near median income, I expect that your benefit at full retirement would be in the $1100-1200 range in today's dollars. If you had 8 years of 6 figure earnings, $1300/month at full retirement age in today's dollars is very likely. There is a cap on the earnings subject to Social Security (currently still below 130k), and 8 years with earnings above the cap combined with two years just making the minimum to qualify 4 quarters does come out about $1300/month in today's dollars.

sol

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Re: Social Security-Do you plan on it?
« Reply #61 on: April 19, 2019, 09:40:25 AM »
Is this right? I checked my account recently. I was born in the eighties. I worked for exactly ten years, two of those making very little, about four or five years making low six figures. It says my full retirement age is 67 and I would get $1300/month.

Assuming the 3-4 years you didn't indicate your income level for were near median income, I expect that your benefit at full retirement would be in the $1100-1200 range in today's dollars. If you had 8 years of 6 figure earnings, $1300/month at full retirement age in today's dollars is very likely. There is a cap on the earnings subject to Social Security (currently still below 130k), and 8 years with earnings above the cap combined with two years just making the minimum to qualify 4 quarters does come out about $1300/month in today's dollars.

I worked approximately 10.5 years at well above median income, and my projected SS benefit is about $1100/month starting in 2042.

My partner worked closer to 25 years at a very similar wage progression, and hers is only about $1600/month.

robartsd

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Re: Social Security-Do you plan on it?
« Reply #62 on: April 19, 2019, 11:17:39 AM »
I worked approximately 10.5 years at well above median income, and my projected SS benefit is about $1100/month starting in 2042.

My partner worked closer to 25 years at a very similar wage progression, and hers is only about $1600/month.
A $500 difference in benefit at full retirement age equates to about $650k difference in lifetime earnings subject to SS between the two bend points in the formula.

The progressive nature of the benefits formula means you earn the first ~$830 in monthly benefit relatively quickly. It only takes ~$390k lifetime earnings subject to SS to fill that first bend point (35 years at $926/month). The second bend point is reached with about $2M more subject to SS and adds ~$1490 in monthly benefit. After the second bend point, about $710 more in monthly benefit is possible, but that would require earning about $10,000/month for 35 years (over $4.2M lifetime earnings subject to SS).

arebelspy

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Re: Social Security-Do you plan on it?
« Reply #63 on: April 19, 2019, 01:58:41 PM »
Alright, the recent discussion on this thread got me curious, so I went to the SSA website.

Looking at my earnings record, seems like when I FIRE'd in 2015 I had 6 social security credits and a total lifetime taxed SS earnings of $10,529 (teachers not paying into SS, that was just some random side gig money along the way I believe).

But post-FIRE side-gigs have brought me up to 18 credits (4 each in 2016, 2017, 2018)!

I guess that puts me almost halfway to some benefits eventually. That may apparently be reduced by the pension I was paying into instead of SS during my working years, based on the above conversation.

It's not something I worry about, but neat to know I'm slowly heading towards those 40 credits. 5-6 more years of side-gig money sometime in the next three decades seems doable.

According to the calculator linked above, if I side-giged another 5 years at current rates then stop, I can eventually get $325/mo (though it might reduced by pension?). Neat.

The more important thing to me is that I was still a tad short on credits to qualify for Medicare (which I did pay into, but not for long enough) at 65 when I FIRE'd, but now have solidly crossed that threshold.
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FIREstache

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Re: Social Security-Do you plan on it?
« Reply #64 on: April 19, 2019, 03:48:02 PM »
Edit: I checked it out.  There's an inflation adjustment, which didn't change my results much except in the graph.  And it doesn't give granular control, and estimating my average income (in today's dollars), it gives me a much higher figure than I get using the downloadable SS calculator from ssa.gov, although it's more complicated to use, but I trust it much more.

Yeah, I trust the SSA calculators far more than some random website’s AwesomeCalc. Unfortunately, SSA’s “official” calculator, looks like it was designed in the days of Zork (but without the nostalgia). Fortunately, they also offer a very serviceable web-based calculator, which allows year-by-year input of past/predicted earnings and can output benefits in today- or future-dollars:

https://www.ssa.gov/planners/retire/AnypiaApplet.html

I've checked that one out before, but the problem is this:

"If the age you enter is less than 62, we estimate your benefit at age 62."

While I plan to stop working in my mid 50's within a few years, I am planning to start drawing SS no earlier than 65 and possibly as late as 70  (my full RTA is 67).

So, I use the downloadable one, which allows me to adjust when I start taking the benefit.  It also saves all the info I entered, and I can save different scenarios to call up in the application at anytime without having to re-enter all of the earnings.
« Last Edit: April 20, 2019, 06:38:22 AM by FIREstache »

cloudsail

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Re: Social Security-Do you plan on it?
« Reply #65 on: April 19, 2019, 11:47:55 PM »
Another thing that may be an issue for early retirees - especially those who are Coast FI or lean FIRE but plan to take a very long work break  - is that you have to have worked in the past 10 years to get SS disability even if you have reached your 40 quarters and earn a benefit.  So if, like me, you've been unemployed and not paying into SS during that time and you become injured or disabled you cannot get SS disability. So for the 30 and 40 and even early 50s early retiree you might want to occasionally do a side gig that pays into SS so that is available to you if ever needed.

"When Will SSDI Coverage Lapse?
You must meet the "recent work" test and the "duration of work" test in order to qualify for SSDI. Here's the recent work test:  Typically, if you are 31 or older, you must have worked at least 5 of the last 10 years to keep up your SSD coverage. Put another way, you will need to have earned 20 credits (one quarter of work equals one credit) in the 10 years immediately before you became disabled."

Ooh, I didn't know that. Thank you for pointing it out.
What about survivor benefits?

FIREstache

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Re: Social Security-Do you plan on it?
« Reply #66 on: April 20, 2019, 06:40:59 AM »
Another thing that may be an issue for early retirees - especially those who are Coast FI or lean FIRE but plan to take a very long work break  - is that you have to have worked in the past 10 years to get SS disability even if you have reached your 40 quarters and earn a benefit.  So if, like me, you've been unemployed and not paying into SS during that time and you become injured or disabled you cannot get SS disability. So for the 30 and 40 and even early 50s early retiree you might want to occasionally do a side gig that pays into SS so that is available to you if ever needed.

"When Will SSDI Coverage Lapse?
You must meet the "recent work" test and the "duration of work" test in order to qualify for SSDI. Here's the recent work test:  Typically, if you are 31 or older, you must have worked at least 5 of the last 10 years to keep up your SSD coverage. Put another way, you will need to have earned 20 credits (one quarter of work equals one credit) in the 10 years immediately before you became disabled."

Also, there are minimum income requirements to receive those credits:
https://www.ssa.gov/oact/cola/QC.html

Could be an issue with some low income side gigs.
« Last Edit: April 20, 2019, 06:43:01 AM by FIREstache »

robartsd

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Re: Social Security-Do you plan on it?
« Reply #67 on: April 23, 2019, 09:28:44 AM »
Another thing that may be an issue for early retirees - especially those who are Coast FI or lean FIRE but plan to take a very long work break  - is that you have to have worked in the past 10 years to get SS disability even if you have reached your 40 quarters and earn a benefit.  So if, like me, you've been unemployed and not paying into SS during that time and you become injured or disabled you cannot get SS disability. So for the 30 and 40 and even early 50s early retiree you might want to occasionally do a side gig that pays into SS so that is available to you if ever needed.

"When Will SSDI Coverage Lapse?
You must meet the "recent work" test and the "duration of work" test in order to qualify for SSDI. Here's the recent work test:  Typically, if you are 31 or older, you must have worked at least 5 of the last 10 years to keep up your SSD coverage. Put another way, you will need to have earned 20 credits (one quarter of work equals one credit) in the 10 years immediately before you became disabled."
As I understand it, this ten year rule applies to disability coverage, not retirement benefits. Important for someone who chooses to take a long break, but knows that they will need to earn more later - though most people who take breaks don't extend as far as ten years.

HeadedWest2029

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Re: Social Security-Do you plan on it?
« Reply #68 on: April 23, 2019, 01:03:57 PM »
Relevant: Just released by the SSA yesterday
https://www.ssa.gov/OACT/TR/2019/tr2019.pdf

The fund will be depleted in 2035 (was 2034) based on current projections.  Starting in 2035 it would be able to meet 80% of the obligation if no action is taken and then 75% of the obligation by 2093. 

Another write-up on the latest findings
https://www.marketwatch.com/story/dont-believe-this-myth-about-social-security-2019-04-23?mod=mw_theo_homepage