Author Topic: 50% Savings rate means not needing a stache past 70?  (Read 3667 times)

Strick

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50% Savings rate means not needing a stache past 70?
« on: May 10, 2017, 06:12:39 AM »
I was looking at the posts and working on the US social security calculator and amazed at how little it would effect my social security benefit to stop working at 45 as opposed to 55 or even 62.  Assuming making 100k/year, my benefit PLUS SAHM's spousal benefit would be around 36k at 67, and delaying till 70 would raise it to about 45k.  Given the much reduced taxes at that level, the Net would be over 50% of working net.  So one benefit of getting to a savings rate of 50% is my stache only has to last until 70, at which point the inflation adjusted SS would serve as a pension covering all needs going forward?  I know one needs emergency funds, my situation means my spouse is not currently making income but will then be getting spousal benefit which makes this work out better, once one of us passes the survivor only gets to keep the larger benefit, not both, and SS very well may change somewhat through reduced benefits/increased retirement age, etc.  So i'm not meaning to read my Subject line quite as literally as I state, but isn't this all about right or am I missing something?

chubbybunny

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #1 on: May 10, 2017, 07:11:25 AM »
If you are under 45, I would not recommend counting on SSI to remain the same when you're 70. Heck, I wouldn't count in health insurance not putting a serious dent in my plans by next YEAR. Your plan shouldn't be too much of a stretch though, as many people live entirely off their social security checks.  Search some of the millions of posts on the 4% rule and there is a ton of discussion on planning for social security. Lots of other things to consider as you age, like long term care insurance. 

My mother lives off SSI and a very small IRA (like $40,000).  She rents a room but travels often.  Goes where she wants and does what she wants. I admire it, though I would prefer a bit more of a cushion for my retirement.  ACA allowed her to retire 5 years earlier than she would have otherwise. She was quite relieved to turn 65 this year and have that expense cut dramatically.

I've been working on saving up 5 years of living expenses outside my retirement accounts so I can do the roth ira ladder thingy.  3 down, 2 to go and then I'm ready.  I already have more than I need in my 401k to retire and live large at 59.

MacNerd13

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #2 on: May 10, 2017, 07:39:42 AM »
We decided to use social security as long-term care self-insurance.

Spicolli

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #3 on: May 11, 2017, 12:28:18 PM »
I may be wrong on this, but aren't those SS calculators assuming that you keep on working until retirement age?

rantk81

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #4 on: May 11, 2017, 12:29:42 PM »
I may be wrong on this, but aren't those SS calculators assuming that you keep on working until retirement age?

The SSA website has calculators that let you calculated based on both the assumption that you keep working until retirement age AND the assumption that you quit working at any specific date (even if it is before the date in which you begin to draw your SS retirement benefits.)

Davids

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #5 on: May 11, 2017, 12:34:49 PM »
While I believe SS will be around in some form when I turn 70 I do not factor it into my goals. If I get any SS when I reach the applicable age I will just consider that a bonus.

mxt0133

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #6 on: May 11, 2017, 12:45:32 PM »
We decided to use social security as long-term care self-insurance.

Can you elaborate on what you mean?  Considering the current max SS benefit is $2,639 per month while the average cost of staying at a long-term care facility is $220 a day = 80K a year.

Do you mean that you will use SS to pay for Long-Term insurance premiums or would you save SS funds to fund your long-term care expenses?

MacNerd13

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #7 on: May 12, 2017, 02:46:45 PM »
We decided to use social security as long-term care self-insurance.
Can you elaborate on what you mean? 
Social security payments will go into an investment fund upon receipt. If long-term care is needed for one or both, money will come from there to pay for it. After that money runs out, we have a decent stache to go through, if need be.

Mr. MacNerd claims he will NOT go to a nursing home. Mrs. MacNerd is supposed to drag him somewhere that allows assisted suicide. (Dementia runs in his family, so the possibility of him needing long-term care seems to be greater than the possibility of Mrs. MacNerd needing long-term care. But you never know.)

WhiteTrashCash

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #8 on: May 12, 2017, 02:51:49 PM »
I wouldn't count on Social Security even existing in 30 years time. With the way things are going, we'll all get 401k plans with two or three high-fee fund options from politicians' friends and zero match instead. I hate to sound cynical, but you cannot count on government in the United States helping you with anything anymore. The sunny optimism about the future from the 1990s died long ago.

sol

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #9 on: May 12, 2017, 03:09:32 PM »
I count on social security.  The notion that it is bankrupt is essentially a republican plot to support tax breaks for the rich by cutting future entitlement spending.  Just like with healthcare, their goal is to convince people SS is broken so they can stop funding it and then funnel those savings to the wealthy.  SS is fine, as long as the plutocrats don't get too much power.  In that sense, the risk is political and not financial.

And to the OP, I essentially agree with your assessment.  The SS bend points are designed to replace a much larger fraction of your first income than your last income, so working longer gets progressively less and less helpful in increasing your SS benefit.

semiretired31

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #10 on: May 12, 2017, 03:10:37 PM »
We decided to use social security as long-term care self-insurance.
Can you elaborate on what you mean? 
Social security payments will go into an investment fund upon receipt. If long-term care is needed for one or both, money will come from there to pay for it. After that money runs out, we have a decent stache to go through, if need be.

Mr. MacNerd claims he will NOT go to a nursing home. Mrs. MacNerd is supposed to drag him somewhere that allows assisted suicide. (Dementia runs in his family, so the possibility of him needing long-term care seems to be greater than the possibility of Mrs. MacNerd needing long-term care. But you never know.)

Mrs. Semiretired31 would never go for that.  I can barely convince her to cremate me.

WhiteTrashCash

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #11 on: May 12, 2017, 05:34:49 PM »
I count on social security.  The notion that it is bankrupt is essentially a republican plot to support tax breaks for the rich by cutting future entitlement spending.  Just like with healthcare, their goal is to convince people SS is broken so they can stop funding it and then funnel those savings to the wealthy.  SS is fine, as long as the plutocrats don't get too much power.  In that sense, the risk is political and not financial.

The risk may be political and not based on any kind of reality, but as we've seen from the events of the past few years, facts don't really matter anymore. I hate to be a pessimist, but I feel like I can see really clearly how things are going to go. SS is not long for this world. At least not for anyone of Generation X or the Millennial generation.

aceyou

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #12 on: May 14, 2017, 05:11:27 AM »
I tend towards SOL's point of view. 

We are becoming more productive as a world over time...a LOT more productive.  More stuff is being produced by fewer people each year.  The rate of this trend is increasing, and not in a linear fashion. 

I believe that logically this means that

a) It will be easier as time goes by to maintain programs like SS...lots of wealth to go around.
b) it will be more and more in people best interest to have these programs, since employment will be lower as time goes on. 

Another option is that as a world we can become more run by oligarchs, and life around the globe takes on more of a 3rd world look.  This is definitely a possibility, and the current administration would seem to like this prospect.  I think it's the less likely way the story ends for our world though.  There's just so much wealth to go around.  We mainly have a distribution problem, not a production problem.  Things like SS are very good ways to help with the distribution.  I see us developing more things like this long term, not fewer. 

triangle

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #13 on: May 14, 2017, 05:40:23 AM »
I disagree a bit with @sol and @aceyou. While I agree that SS, medicare, etc. could be funded with changes in contributions levels, they are not currently solvent as too many people are living longer and taking more out of the system than was contributed. So it is not a plot, but actuary math due to the wave of baby boomers retiring which is fueling the concerns. Add insolvent local government pensions and I think the financial picture for retirees could get more painful in another 10 years if not sooner. I hope I am wrong.

MacNerd13

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #14 on: May 14, 2017, 02:20:26 PM »
We decided to use social security as long-term care self-insurance.
Can you elaborate on what you mean? 
Social security payments will go into an investment fund upon receipt. If long-term care is needed for one or both, money will come from there to pay for it. After that money runs out, we have a decent stache to go through, if need be.

Mr. MacNerd claims he will NOT go to a nursing home. Mrs. MacNerd is supposed to drag him somewhere that allows assisted suicide. (Dementia runs in his family, so the possibility of him needing long-term care seems to be greater than the possibility of Mrs. MacNerd needing long-term care. But you never know.)

Mrs. Semiretired31 would never go for that.  I can barely convince her to cremate me.
Mrs. MacNerd is hoping for help from Adult Child MacNerd if Mr. MacNerd needs hauled away to die. :)

tyort1

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #15 on: May 14, 2017, 02:41:32 PM »
I disagree a bit with @sol and @aceyou. While I agree that SS, medicare, etc. could be funded with changes in contributions levels, they are not currently solvent as too many people are living longer and taking more out of the system than was contributed. So it is not a plot, but actuary math due to the wave of baby boomers retiring which is fueling the concerns. Add insolvent local government pensions and I think the financial picture for retirees could get more painful in another 10 years if not sooner. I hope I am wrong.

Except that Millennials now outnumber Boomers.  So the base paying into the system is now larger than the (swell of) people taking money out of the system.  Good thing us GenX'ers had a lot of kids! 
Frugalite in training.

Classical_Liberal

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #16 on: May 14, 2017, 03:08:02 PM »
I count SS.  Even in a worst case, it will be able to fund about 75% of current benefits.  I would bet it wont be worst case, but that's what I use in my planning. 

As others have mentioned, be careful how you calculate your SS, as the annual statements always assume you will earn last years wage until the benefits.  Use this calculator instead to estimate based on real projected contributions, or make your own spreadsheet (it took me about 5 minutes and I'm not overly excel savvy).

I essentially plan for two retirement periods, one to age 67 and one age 67+ with the added benefit of 75% of my expected SS.  Obviously the details of my plan will change based on circumstances at the ages of 62-70.

Those who have contributed to at least the first bend point, have reasonable Mustachian budgets, and don't plan on any SS will over-save. If SS disappears completely, we will have much more to worry about than the loss of it.

fuzzy math

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #17 on: May 14, 2017, 08:31:51 PM »
We decided to use social security as long-term care self-insurance.
Can you elaborate on what you mean? 
Social security payments will go into an investment fund upon receipt. If long-term care is needed for one or both, money will come from there to pay for it. After that money runs out, we have a decent stache to go through, if need be.

Mr. MacNerd claims he will NOT go to a nursing home. Mrs. MacNerd is supposed to drag him somewhere that allows assisted suicide. (Dementia runs in his family, so the possibility of him needing long-term care seems to be greater than the possibility of Mrs. MacNerd needing long-term care. But you never know.)

Mrs. Semiretired31 would never go for that.  I can barely convince her to cremate me.

I consider it very kind that she hasn't already cremated you...

Hargrove

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #18 on: May 14, 2017, 09:38:47 PM »
SS will be around. It's just going to be a hissing grenade until something absolutely has to be done about it immediately. Then the party that does the thing will have "saved" it by "courageously" making the cuts everyone knew it always needed, or raising taxes, or whatever. Retirement age is going to go up, would be my guess.

I find it overwhelmingly more likely that it would be political suicide NOT to save Social Security, than that it will just, uh, get declared bankrupt or something.

Strick

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #19 on: May 18, 2017, 02:02:20 PM »
I may be wrong on this, but aren't those SS calculators assuming that you keep on working until retirement age?

Yeah, I did have to watch out for that but I made sure I got the right results by trying some different numbers.  Whether I retired at 45 or 50 or 55 I kept seeing my benefit go up, but by remarkably little.

I really am surprised by how many people on the site count on their pensions, or that stocks will return 4% post inflation, and how few on social security.  I don't think any of them are certain, and I don't really understand how counting on SS is like counting on something out of your control but counting on your pension or the stock market is something that is in your control.  Just like I'm not gonna let the chance the stock market will stop returning 4% keep me from retiring, I'm not gonna let the thought that SS night go away do it as well.  Maybe because people just keep saying its "insolvent" (which you fix the same way pensions do, you lower the benefits slightly or raise the full retirement age slightly. 

BTDretire

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #20 on: May 18, 2017, 03:04:36 PM »
 I just did a little research yesterday about my SS.
 A few details, wife and I have a small business, earn
$75k to $80k. We have split the income for tax and SS purposes.
Also we are just above and below 60y/o. so not long before we collect.
 I found out that, if we continue earning as we have, I won't gain any
in my benefit amount. I would already have my highest 35 years on record.
  After a little more research, I think I will find it beneficial to split
our income differently, giving my wife a bigger share. She has not
earned as much over our lifetime so that would bump her SS benefit
considerably.

Mr. Green

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #21 on: May 18, 2017, 03:20:17 PM »
After the trust fund runs out in the 2030's, Social Security is solvent until the 2080's paying 70-75% of current benefits. That's right now with no future adjustments. I consider it going away to be a flat impossibility. 0% chance. In my lifetime anyway.

Scortius

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #22 on: May 18, 2017, 03:50:11 PM »
There is absolutely 0% chance that SS goes away in the foreseeable future.  Millions of Americans depend on it for their complete livelihood.  Hundreds of millions of Americans have paid into it over their careers.  Old people simply vote, and politicians know it would be suicide to touch it.  That won't change.  Plus, it's fully funded for 30 years, 70% funded pretty much forever, and it's fully funded forever if they do away with or at least significantly raise the income cap on SS taxes.  Further, even if politicians wanted to get rid of SS and Medicare, they would have to come up with a new way to keep the millions of bankrupt seniors off the streets.  That's a situation any politician would love to avoid, especially because ... old people vote!

BTDretire

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #23 on: May 18, 2017, 05:24:59 PM »
 They could 'means test' those rich people with a NW above $750,000
and reduce or take away their SS benefit. :-/
 The 90% will not worry about the few percent that have $750,000.

Strategic choice of $750,000 :-)

Mr. Green

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #24 on: May 18, 2017, 05:44:03 PM »
They could 'means test' those rich people with a NW above $750,000
and reduce or take away their SS benefit. :-/
 The 90% will not worry about the few percent that have $750,000.

Strategic choice of $750,000 :-)
After it's already been means tested our entire lives via the income cap and diminishing returns as the "highest 35" years of earnings increases? I just don't see it.

surfhb

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #25 on: May 19, 2017, 01:54:19 AM »
70% of retirees depend on SS To feed themselves and put a roof over their heads.   

Of course SS will be around.  What's the other choice?   Dump millions of old people in tent cities?   Lol


« Last Edit: May 19, 2017, 01:58:20 AM by surfhb »

Ichabod

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #26 on: May 19, 2017, 09:13:26 AM »
The earlier you plan to retire the less SS matters. If you retire at 30 like MM you already need to fund a 30-year-plus retirement without SS. Factoring in SS for 30 years from now won't help you much. Also, SS's future looks less certain if you're decades out. If you're ten years away from SS, it probably will look like it does now, so go ahead and figure it in. In-between is tricky. They could raise contributions, which would mean you could still rely on it. They could raise the retirement age; they could add more means-testing; increase the minimum amount of credits you need to collect; or they could cut the payout.

SS isn't going away completely. Adding the payroll tax, so people see the SS contribution on their paycheck is political genius. But the idea of a fully-funded trust fund isn't quite right either. It's an accounting fiction full of IOU's from the general treasury. Of course, there will be ongoing revenue from whatever generation is working at the time, and there's no reason SS can't be run on a deficit like the rest of the government. It could be partially financed out of the general treasury from those IOUs, and that will either increase the government deficit or income taxes will need to be raised.

Like global warming, it's a problem hard to solve politically. The consequences are further off than the next election cycle, and any solution will be costly. The longer we wait, the more expensive it will be.

Bicycle_B

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #27 on: May 19, 2017, 12:57:32 PM »
I agree with the posters who feel that nothing is certain several decades out, but that SS is likely to exist, that it might or might not be reduced.  My personal guess is that it will play out between 60% and 100% of currently expected benefits over the next half century.

So I follow MMM's method:  4% withdrawal rate on investments, SS as a safety layer. 

Except that I'm closer to The End of My Days, so when I don't feel like looking a job, I add in a fraction of my SS payment on top of the 4%.  This happens because I keep recalculating my numbers, due to being wishy washy on whether to work again.  When I calculate other numbers pessimistically, sometimes I need a fraction of SS (like a quarter, third, or half) to put me over the line of minimal FI.  The variance in the other numbers is based on differing projections of lifestyle costs.  Maybe I should find a more rational approach.

Classical_Liberal

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Re: 50% Savings rate means not needing a stache past 70?
« Reply #28 on: May 19, 2017, 05:53:18 PM »
I'm on record throughout this forum stating most of us are ridiculously over cautious in our FIRE calculations.  People in their 30's assuming they will never earn income again, people in their 40-50's assuming no social security (something like half of all retires rely on this income alone), less than 4% WR, etc.   Assuming anyone of these things gives you a ridiculous amount of safefty margin that will never be needed.  That being said... 
Except that I'm closer to The End of My Days, so when I don't feel like looking a job, I add in a fraction of my SS payment on top of the 4%.  This happens because I keep recalculating my numbers, due to being wishy washy on whether to work again.  When I calculate other numbers pessimistically, sometimes I need a fraction of SS (like a quarter, third, or half) to put me over the line of minimal FI.  The variance in the other numbers is based on differing projections of lifestyle costs.  Maybe I should find a more rational approach.
This is one thing I would be cautious about.  Refining inputs to "make the numbers work" is probably a bad idea.  Make some well researched, realistic assumptions and stick to them unless the information changes (and even then don't over-react vis-a-vis the lack of ACA is death to ER folks). 

My opinion is a well researched budget, a 4% WR along with including 50-75% of SS/pension are about as conservative as one should get.  More than that assures over-work.  If someone wants to over-work, good on them, its their life.  Just dont tell the rest of us it's needed for FI purposes.