Ages 40+ and not FIRED - what are your thoughts on Social Security payments.

[rpr]

There are many ways to fix SS.

-- Increase SS taxes
-- Increase SS Cap
-- Remove SS Cap
-- Increase FRA
-- Change benefit formula
-- Change SS taxation formula
-- Change COLA computation formula

Some combination of the above should easily fix this.

[Mr. Green]

If you already have retirement plans detailed enough to rely on social security, a hit to your pre-retirement income is the same thing as a hit to your social security (unless you are planning on living solely on SS and/or a pension).  It's definitely not as big of a percentage hit, but it still matters if you are not building a lot of flex into your plans.   

For example, lets say in ten years, my family's payroll taxes go up by the average amount that would be necessary to close the gap between SS tax revenue and benefits paid, and we work another 15 years, which would roughly be in line with our plans.  The extra taxes will cost us around $7,500 in annual income when we retire, which is I think somewhere around 20% of our projected SS benefits.  In reality, an ~33% increase in employment taxes across the board is not likely going to fly, so either I will get hit with more of a tax increase, or I will also get some reduced SS benefits due to means testing.  It would seem pretty easy to get to a 25% or 30% haircut. 

In reality, I think I'm safer than that because I assume we will first try to simply finance all or substantially all of the shortfall, and I will not have many working years left by the time they face reality and try to close the gap.  But you're talking about what might happen 20-30 years out, so it seems prudent to be on the conservative side.  It will always be easy to move retirement up or increase your lifestyle if the rosier projection comes to fruition, but it's not so easy to make up a shortfall late in your working years or during retirement if the haircut is bigger than you planned.

This would most likely be irrelevant for an early retiree looking to exercise a sane safe withdrawal rate since the odds are extremely high that the stash will never run dry. I think it would be very difficult to plan spending a portfolio down to exhaustion or to an amount where social security would exactly make up the difference at a specific age. That would be incredibly reckless. However, for someone who is retiring near "full retirement age" who doesn't have nearly enough saved, they could be impacted by a SS cut more. But at that point there's no going back to correct it by earning more, time has won that battle.

[MrsPete]

The average JOE might depend on it but those of us on this forum are not average and we are afraid that in order to pump up (or maintain) the benefits to the average Joe, the government might decide that those of us with assets are no longer eligible for the full payment. Means testing. Seems the majority of folks consider SS to be need based welfare and not the pension that it is.

Yes, this is what I'm afraid of.  The program won't end, but it'll be unavailable to those of us who have a dollar in our pocket. 

In my experience, everyone who has paid into it expects something out of it, assuming they reach withdrawal age.  I've never met anyone who felt the opposite.

Oh, I expect something out of it; after all, I've paid into it for years -- with a promise of repayment later.  Of course I expect something back ... but all my expectations have no effect on whether I'll actually get a check one day. 

[Eric]

In my experience, everyone who has paid into it expects something out of it, assuming they reach withdrawal age.  I've never met anyone who felt the opposite.

Oh, I expect something out of it; after all, I've paid into it for years -- with a promise of repayment later.  Of course I expect something back ... but all my expectations have no effect on whether I'll actually get a check one day.

And which politician (or party) do you think will want to sign their own death warrant to make it so that you and everyone else who paid into it for so many years doesn't get a check?  It's simply not politically viable.  In this case, your expectations, along with everyone else old enough to collect, are backed by a pretty powerful vote.

[desk_jockey]

I absolutely factor receiving SS into my retirement plans and don't really understand why anyone wouldn't.  The people who think that it's going to disappear must not understand how much the average Joe depends on it.  Add that to the fact that the first rule of politics is Old People Vote™, and I just don't understand all of the pessimism. 

I agree.  I'm mid 40s and I plan on receiving SS.  I do however think there will be some adjustments to keep it solvent, especially for those well above the median in retirement income from other sources.   I've read several sources that says SS is projected to be able to pay 70%+ of benefits for a timeline much longer than I care about, so simplicity I count on earning 70% of my projected benefit at 67%. 

At the moment that anticipated SS income makes the difference of a only ~3% success rate on a my cFIREsim 40-year projections so I probably won't need the SS income when I turn 67, but I will enjoy the extra cash when those checks do start coming in. 

https://www.forbes.com/sites/nextavenue/2016/06/24/the-truth-about-social-securitys-solvency-and-you/

[BFGirl]

I go back and forth about including SS.  The biggest risk I see is if SS becomes significantly more means tested than it is today.  One solution to the impending SS shortfall that could be implemented is sharp cuts for those deemed to not need it.

This is already happening with health care.  Higher education may go further in that direction as well. 

The concern is that in the future the means testing may include both income and assets.  It could be a method of providing greater equality for those who did not save for retirement.

This will irritate the heck out of me if it happens.   It would be terribly unfair if someone who earned the same as I did and spent it all got more out of SS than I did because they didn't save anything.  Just another way to punish those who made responsible choices in their life.

[MrsPete]

In my experience, everyone who has paid into it expects something out of it, assuming they reach withdrawal age.  I've never met anyone who felt the opposite.

Oh, I expect something out of it; after all, I've paid into it for years -- with a promise of repayment later.  Of course I expect something back ... but all my expectations have no effect on whether I'll actually get a check one day.

And which politician (or party) do you think will want to sign their own death warrant to make it so that you and everyone else who paid into it for so many years doesn't get a check?  It's simply not politically viable.  In this case, your expectations, along with everyone else old enough to collect, are backed by a pretty powerful vote.

Oh, I expect to get something, and I agree that no politician wants to touch this program.  But I worry that they may "downsize" the program for those of us who wouldn't actually be eating cat food without help. 

My point is that whatever I expect has no bearing on what may actually happen. 

[Jrr85]

I go back and forth about including SS.  The biggest risk I see is if SS becomes significantly more means tested than it is today.  One solution to the impending SS shortfall that could be implemented is sharp cuts for those deemed to not need it.

This is already happening with health care.  Higher education may go further in that direction as well. 

The concern is that in the future the means testing may include both income and assets.  It could be a method of providing greater equality for those who did not save for retirement.

This will irritate the heck out of me if it happens.   It would be terribly unfair if someone who earned the same as I did and spent it all got more out of SS than I did because they didn't save anything.  Just another way to punish those who made responsible choices in their life.

There's already plenty to irritate about social security.  Why the huge penalty for couples with both spouses worked?  Why give people who quit working to retire early a more favorable return than those who work for a full 30 years? 

This will just be one more thing. 

[jlcnuke]

40 here and I plan for getting 75% of the calculated amount per SSA with $0 in earnings after I turn 47 (when I currently plan to retire). That, I feel, is plenty conservative given the currently known information.

[Goldendog777]

40 here and I plan for getting 75% of the calculated amount per SSA with $0 in earnings after I turn 47 (when I currently plan to retire). That, I feel, is plenty conservative given the currently known information.

+1

[Spork]

I'm low-to-mid 50s.  I'm FIRE'd, but fairly recently.  I've been tracking towards fire since I was about 40ish... maybe even a few years before.

I never counted SS.  I am not doom-n-gloom.  I am just conservative.  I strongly suspected something would change with SS... and wasn't sure if it would be big changes or little changes.  It was just safer to ignore it and move on... and that made me feel better.  (FWIW, I did the same thing with inheritance.  I knew there would be some.  I knew ballpark what it would possibly be.  But it was money not under my control and I wanted to create a conservative FIRE estimate that did not include it.)

[Rife]

I am 45, and in the past I didn't but as a risk mitigation mostly. I wanted to make sure my investments covered all of my retirement and the rest (SS and small pension) were there as buffer. Now I account for risk in other ways that I think are more useful. I feel that my 401K is far more volatile than SS. If my return is lower than I project then that has a huge ripple effect.

On the political side, adjustments will be made as needed but the senior voting block getting bigger doesn't lead to SS going away. I also don't think they want to do anything that further discourages people from saving for retirement such as punishing people with high retirement income sine that seems like it would just backfire. 

[sisto]

I go back and forth about including SS.  The biggest risk I see is if SS becomes significantly more means tested than it is today.  One solution to the impending SS shortfall that could be implemented is sharp cuts for those deemed to not need it.

This is already happening with health care.  Higher education may go further in that direction as well. 

The concern is that in the future the means testing may include both income and assets.  It could be a method of providing greater equality for those who did not save for retirement.

This will irritate the heck out of me if it happens.   It would be terribly unfair if someone who earned the same as I did and spent it all got more out of SS than I did because they didn't save anything.  Just another way to punish those who made responsible choices in their life.

I totally agree with you and feel the same way about the mortgage crises. I was pissed that people that made poor choices and bought banking on the fact that the market would go up should not have been bailed out. Who in their right mind would get an interest only loan, I remember having that discussion with people and they just seemed to not care and expect it was no big deal. If you can't afford a payment that includes principal you can't afford the property.

[Altons Bobs]

Didn't read all the posts. When I first graduated from college, I think someone at work told me not to expect it. 20+ years later now, I don't include it into my planning. If I get it, it's a bonus, if not, no big deal.

[Saving4Fire]

I'm 40 and personally I think it's unreasonable to expect nothing.   The younger you are the less you should estimate however.   For example, I estimate I'll receive around 70% of what SS estimates for me.   If I were in my early 30's I'd do 50%.   

Those are conservative estimates, but I think they are reasonable.

[sisto]

I'm 40 and personally I think it's unreasonable to expect nothing.   The younger you are the less you should estimate however.   For example, I estimate I'll receive around 70% of what SS estimates for me.   If I were in my early 30's I'd do 50%.   

Those are conservative estimates, but I think they are reasonable.

You do realize that what SSA estimates for is based on the fact that you will continue working until you are FRA currently 67 yrs for me and that you will earn exactly what you are earning right not until FRA. Most here plan to retire far before that so you need to run your calculations (some tools on SSA and others already mentioned in the thread) to determine what you would expect to get and then factor your % you expect of it.