Author Topic: How do you value SS in retirement planning.  (Read 39582 times)

2Birds1Stone

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How do you value SS in retirement planning.
« on: November 08, 2014, 05:29:47 PM »
I know that SS as we know it may change drastically over the course of our lives, whether we are Retired, FIRE'd, close to FIRE, or just beginning our working lives. That being said, I think some shape or form of SS will exist for the foreseeable future.

When it comes to FIRE or traditional retirement planning how do you guys use your estimated SS benefit in estimations and different scenarios. I know many view it as potential icing on the cake, while others are relying on it heavily to subsidize their nest egg (or lack their of).

So with the general consensus here being that a 4% withdrawal rate is pretty safe, I guess we could take our annual SS benefit and multiply it by 25 to get a lump sup value that you would need in the nest egg to generate that portion of income.

I understand that theoretically its not part of net worth but someone who say gets $12,000 annually in SS benefit would need an additional $300,000 with a 4% SWR to generate that kind of income stream.

Just curious on everyone's take/ideas. 

lizzzi

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Re: How do you value SS in retirement planning.
« Reply #1 on: November 08, 2014, 05:51:39 PM »
As you said, I am one of those who sees it as "the icing on the cake."

socaso

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Re: How do you value SS in retirement planning.
« Reply #2 on: November 08, 2014, 05:55:27 PM »
As you said, I am one of those who sees it as "the icing on the cake."
+1 here. I'm assuming there will be something but since I also assume there's going to be change I just don't want to factor it in to my retirement plans.

ken

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Re: How do you value SS in retirement planning.
« Reply #3 on: November 08, 2014, 08:45:43 PM »
The 4% rule is a safe withdrawal assumption that does not deplete principle. In most case it continues to grow indefinitely. Since SS only pays out for a number of years and has no value after you die, it should not be valued at 25 times annual payout. A multiple around 15 would be more appropriate, similar to a 6-7% withdrawal that depletes after 15-20 years.

fa

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Re: How do you value SS in retirement planning.
« Reply #4 on: November 08, 2014, 10:21:29 PM »
I just don't take SS into consideration.  Whatever I receive will be icing on the cake.  I would not bank on a system that appears on its way to insolvency.  I suspect there will be means testing at some point, which would likely significantly reduce SS benefits for the FIRE community.

Monkey Uncle

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Re: How do you value SS in retirement planning.
« Reply #5 on: November 09, 2014, 04:58:18 AM »
I think it depends on your age.  The closer you are to taking your SS benefit, the more likely it is that you can count on receiving something close to the SSA's estimated benefit.  If you look at the history of congressional fixes, they tend to focus on reducing or delaying benefits for those who are farthest away from receiving them.  It is politically untenable to cut benefits for people who are a few years away from receiving them.  I'm 46 and DW is 58, so we feel pretty safe in factoring in the estimated benefits.  If I were 25, I'd probably view SS as potential icing on the cake.

Villanelle

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Re: How do you value SS in retirement planning.
« Reply #6 on: November 09, 2014, 05:21:18 AM »
I mostly look at it as icing on the cake, but I am vaguely aware of it and mentally I put it in a "extra fun money" category. 

KBecks2

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Re: How do you value SS in retirement planning.
« Reply #7 on: November 09, 2014, 09:07:27 AM »
I do not count it at all.

Calvawt

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Re: How do you value SS in retirement planning.
« Reply #8 on: November 09, 2014, 09:19:50 AM »
I count it at about 2/3 of current value.  When the system goes into the red (sometime around 2030), it will still have considerable money flowing in to it each year.  I think most of the time I have seen the estimates that benefits would be about 70% of what they are now (inflation adjusted of course).

That being said, I run my model to exclude it as well.  Politically, I believe SS will still exist in some form or another, but I don't want to depend on it.

frugalecon

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Re: How do you value SS in retirement planning.
« Reply #9 on: November 09, 2014, 10:00:47 AM »
I don't plan on taking it until 70, treating it as a way to guard against too little income when I am very old. I expect a cut of no more than 20% from scheduled benefits. The program is too popular and the problems are not severe enough to justify larger cuts. The area of greater danger is Medicare, because that is where the real money problems are. Higher income seniors will no doubt pick up a larger share of their health I durance. Of course, that is effectively not that different from a Social Security cut.

DoubleDown

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Re: How do you value SS in retirement planning.
« Reply #10 on: November 09, 2014, 10:51:02 AM »
I don't see any point in attempting to put a net $ value on expected SS benefits. I simply treat it as an income stream that will cover x% of my estimated expenses after I start taking it. Then I figure out how to draw income from other assets (401k, etc.) to use to cover the remaining expenses.

I just turned 48, and I expect benefits for me to be largely intact. If they're tweaked at all, I think it will be pretty minor (for example, changing the method for calculating the inflation rate) or won't affect me at all (e.g., removing the earnings cap at which SS taxes are taken).

Dicey

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Re: How do you value SS in retirement planning.
« Reply #11 on: November 09, 2014, 01:17:54 PM »
DH and I sat down recently and did the calculations based on our earnings history. We were quite surprised to discover that when we include SS, our annual earnings in retirement will exceed what we made per year while he was working. This has been a total paradigm shift for us. All of our saving and investing for retirement has assumed a lower income in retirement, particularly for tax purposes. Now we're wondering if we should have emphasized taxable savings while our incomes were relatively lower. A good problem to have, I'd say. Since we're in our fifties, we're fairly confident that we will receive the amounts the estimator provides.

frugalecon

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Re: How do you value SS in retirement planning.
« Reply #12 on: November 09, 2014, 02:15:00 PM »
DH and I sat down recently and did the calculations based on our earnings history. We were quite surprised to discover that when we include SS, our annual earnings in retirement will exceed what we made per year while he was working. This has been a total paradigm shift for us. All of our saving and investing for retirement has assumed a lower income in retirement, particularly for tax purposes. Now we're wondering if we should have emphasized taxable savings while our incomes were relatively lower. A good problem to have, I'd say. Since we're in our fifties, we're fairly confident that we will receive the amounts the estimator provides.

Deferring SS as long as possible creates some room to make withdrawals from tax-deferred accounts for a while. A lot of states also don't tax SS, which may affect the overall marginal tax rate you face in retirement. Figuring out the tax issues is very vexing...

rubybeth

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Re: How do you value SS in retirement planning.
« Reply #13 on: November 09, 2014, 02:59:48 PM »
I kind of look at it as icing, that will help us to continue traveling and some other fun things. I've already worked enough to qualify for benefits.

oinkette

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Re: How do you value SS in retirement planning.
« Reply #14 on: November 09, 2014, 03:09:09 PM »
Right now I'm in the category that gets full benefits at 67.  I'm absolutely sure that by the time I'm eligible it will be bumped up to well past 70 (unless they stop mooching and refill the coffers in between now and then). 

I see SS as something to pad the cushion on when I hit the end of my ER. I would be a fool to rely on it, especially if I quit the working world early and thus have fewer benefits than my current statement tells me I'll get.

seattlecyclone

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Re: How do you value SS in retirement planning.
« Reply #15 on: November 10, 2014, 11:22:58 AM »
Social Security can and will change in the 30-some years before I'm eligible for it, therefore I'm not factoring it into my plans much at all right now. During retirement, as I start to spend down my investments and get closer to the age at which Social Security will kick in, I will start to factor it into my planning more. I won't retire until success without Social Security looks likely (>95% chance), while realizing that some benefits will probably be there if things go badly with the investments and I need some extra cash in my later years.

Cheddar Stacker

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Re: How do you value SS in retirement planning.
« Reply #16 on: November 10, 2014, 11:28:57 AM »
It's just one level of safety margin for me. I don't factor it into my "plans" at all. Too many variables, particularly since I plan to FIRE 20+ years before eligibility.

Purple Economist

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Re: How do you value SS in retirement planning.
« Reply #17 on: November 10, 2014, 08:27:23 PM »
Even though I paid into SS long enough to get a benefit once I am old enough, I won't actually get any benefit at all or maybe just a tiny amount. The reason: after I worked in jobs that paid into SS for well over a decade, I started working a government job that did not pay into it and paid into a pension fund instead. I contributed 7% and my agency contributed a matching 7%. However, because I have that public pension, any SS benefit I would be entitled to from my prior work history will be reduced by 2/3rds the amount I get in my public pension. So if I was entitled to receive $900/month SS and $900/month pension, my SS benefit would be reduced by $600/month and I'd only get $300 instead. Pretty much sucks and seems unfair to me because, like other's here who have 401K's, IRA's or even private pensions or multiple pensions, their SS benefits wouldn't be reduced. So no, I don't count on it at all and don't put a financial value on it except maybe "zero".

How much do you pay for Social Security taxes out of every check at your current job?

The Windfall Elimination Provision is there to level the playing field and prevent people from unfairly benefiting from Social Security if they work at a job where they don't pay into it as a part of the job.  You may think it sucks, but it is totally fair.  These are not new rules and I imagine they existed when you took your job, so you should have known this when you accepted the position.

I am unfamiliar with your job, but you are not allowed to contribute to any type of IRA in any manner?

Also, there are a lot of people (I am not one of them) that would think it totally sucks and is unfair that you get a pension and don't have to deal with the uncertainty of a 401k, IRA, etc.

MrsCoolCat

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Re: How do you value SS in retirement planning.
« Reply #18 on: November 10, 2014, 09:41:43 PM »
Non-existent. I don't even factor it. In my mind I'm just paying for someone else that's currently retired. There won't be diddly squat left for me. That way if there is, then I'll consider it a bonus and not like I'm relying on it. I wouldn't bet my life on SS that's for sure.

hybrid

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Re: How do you value SS in retirement planning.
« Reply #19 on: November 11, 2014, 08:00:45 AM »
We value it quite a bit. We shouldn't need to take it at 62, having said that it is no small chunk of change and is definitely a big part of our retirement equation. Right now the goal is for DW to defer until 70 so she gets 132% of her benefit. If she retires at 62 according to plan she will start drawing down her 401K, probably 5-10% each year, in the years leading up to 70.

Being a letter carrier is a hard job, but the DW is getting a pretty sweet retirement package from FERS in a few years.

2ndTimer

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Re: How do you value SS in retirement planning.
« Reply #20 on: November 11, 2014, 08:17:01 AM »
We add the amount we are projected to receive into our estimate of our retirement income because, being older and this being our second FIRE trip, we plan to retire at a fairly "normal" age, and will probably receive it for a while at least.  However, we don't include any income from our savings in our projected income.



johnhenry

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Re: How do you value SS in retirement planning.
« Reply #21 on: November 11, 2014, 08:29:40 AM »
I just don't take SS into consideration.  Whatever I receive will be icing on the cake.  I would not bank on a system that appears on its way to insolvency. 

This is so silly.  Not the part about conservative planning.  I'm all for that.  The part about believing that a federal government social program is insolvent.  The federal government nor any of it's programs can ever be insolvent. 

That's like saying our federal prison system or the military are in danger of becoming insolvent.  It doesn't matter how much you want to believe it, there is no Social Security trust fund any more than there is an armed forces trust fund!!  The government can create the money it needs to pay for a heart bypass for your grandma just as easily as it can create money for a drone.  Or to tighten the analogy, print money as easily to amputate the foot of an elderly diabetes patient vs. amputate the foot of a soldier injured by an I.E.D. 


brooklynguy

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Re: How do you value SS in retirement planning.
« Reply #22 on: November 11, 2014, 03:31:03 PM »
For people who are worried that social security will disappear by the time they are ready to collect, is anyone aware of any way to monetize one's inchoate right to the future stream of payments?  Like maybe there's some company out there in the business of buying people's future social security receivables for an upfront lump sum.  Some quick googling didn't yield any results and I imagine public policy concerns might prevent this kind of business from existing (on top of the practical difficulties like figuring out what kind of discount rate to use), but the thought just popped into my mind.

Personally I don't factor social security into my planning other than to treat it as another level of safety margin.  Although I wouldn't do it, I bet a lot of people would be willing to cash in on their future social security if there were some way to do it.

MoneyCat

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Re: How do you value SS in retirement planning.
« Reply #23 on: November 11, 2014, 03:35:56 PM »
I don't expect Social Security to exist when I will be old enough to receive the benefits.  I also don't expect my state's teacher pension system to survive to regular retirement.  Hence, I decided to create my own retirement program and forget about all that stuff.  If it still exists then, that will be nice.  But I am not counting on any of it.

Cpa Cat

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Re: How do you value SS in retirement planning.
« Reply #24 on: November 11, 2014, 03:45:09 PM »
I don't really think about it. It's at least 30 years away, and I can't reasonably predict how much it will be or what form it will take.

If I were within 5-10 years of being able to claim it, I would consider it.

But by then, I expect to be a couple of decades into ER. So whatever comes my way will probably just be given away to charity or used for conspicuous consumption. Totally irrelevant in my retirement planning.

Franklin

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Re: How do you value SS in retirement planning.
« Reply #25 on: November 11, 2014, 03:49:03 PM »
I think SS is going to be fine.  It's a social contract with a political backstop.  I'm not worried.  I view it as the bond component of my portfolio allocation, with everything else going into equities.   

Chuck

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Re: How do you value SS in retirement planning.
« Reply #26 on: November 11, 2014, 05:14:01 PM »
I intend to fire almost 30 years before I am eligible for reduced benefits, and I expect the retirement age to increase once or twice before my time comes, so I don't consider it whatsoever.

Maybe, subconciously, I view it as a margin of safety padding... but even relying upon it that existential way makes me uncomfortable.

If anything comes my way, put me in the "icing" catagory.

Mr. Frugalwoods

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Re: How do you value SS in retirement planning.
« Reply #27 on: November 11, 2014, 06:03:37 PM »
I include it in my long term projections but I don't think it will matter.

Put another way: if Social Security is non-existent or severely degraded by the time I reach 67... then I'm probably f'd anyway since that would mean a wholescale breakdown of american society.  CFIREsim can't model complete collapse of your home government :-)

Workinghard

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Re: How do you value SS in retirement planning.
« Reply #28 on: November 12, 2014, 06:46:39 AM »
I am totally counting on Social Security – three years out. However I am not including it with our net worth or counting it as a part of our 4% SWR. Because of Social Security, we will be able to withdraw less.

LalsConstant

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Re: How do you value SS in retirement planning.
« Reply #29 on: November 12, 2014, 07:48:05 AM »
I am pleasantly surprised by how reasonable all these responses are.  Most discussions about the future benefits of Social Security seem to go "You dare question if you will get the same level of benefits in the future?   Are you some nut Job? "

Most likely,  and I say this as someone who is very critical of SS, there will still be some level of benefit.  I just think it will be less, and less available to people who otherwise have retirement savings.

But who knows, someone could get a bug up their butt and actually fix it somehow.  Crazier things have happened.

Safest and most logical assumption for most people is to assume the npv is zero.  If I were over 50 in 2014 I would probably arbitrarily count it at 2 thirds or half the estimated benefit for a safety margin.

Terrestrial

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Re: How do you value SS in retirement planning.
« Reply #30 on: November 12, 2014, 07:59:03 AM »
I'm 30...wouldn't draw for over 3 decades even if the ages stay the same.    I value it as possible golf/vacation/spoil grandkids money.  I prefer to save enough for my needs on my own accord and not need to rely on the government.  That isn't to say I wont cash the check if I am sent one in 35 years, just that I'm not going to rely on it because I have sufficient time to plan not to.

For people much closer I think it's reasonable to include some portion (or all, depending on your level of confidence) of your expected draw, it's unlikely there will be massive overhaul or that the system will be eliminated in the short term, and I think there will not be much political stomach to drastically modify benefits for people who are already retired even when we do get modification/overhaul.
« Last Edit: November 12, 2014, 08:02:05 AM by Terrestrial »

nereo

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Re: How do you value SS in retirement planning.
« Reply #31 on: November 12, 2014, 08:32:58 AM »
Personally, I am not counting SS in my calculations, but for mathematical reasons. 

To explain, I am planning on reaching FI ~25 years before i am eligible for SS benefits, and my projected monthly benefits (which the government has made the unfortunate mistake of calling "guaranteed benefits", a misnomer) will be slightly less than half of my projected spending.  Ergo, I need a 'stach large enough to last 25 years and not decrease more than 30-40% over that time frame.  Every FireCalc, Monte Carlo or other retirement calculator I run reaches the same conclusion - when a 'stach has to survive 25 years there is a negligible difference between having SS income after that 25 year period or not. It's a cushion/safety-net/buffer when I get closer, but it doesn't change my FI number at all.


mjs111

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Re: How do you value SS in retirement planning.
« Reply #32 on: November 12, 2014, 08:46:45 AM »
I don't count it at all and will treat it as a nice extra if it happens.

Also keep in mind that your Social Security benefits are based on your 35 highest inflation-indexed earnings years, and the Social Security statement you get that estimates your benefits assumes that you will be making what you are making now until the various relevant retirement age cutoff points to calculate your estimated benefits.  For early retirees who may only put in 10-20 or so years, zeroes will be used to pad out the 35 year span, lowering your payment from the estimate that assumed you'd be making what you are making now going forward.

More info:
http://www.ssa.gov/OACT/ProgData/retirebenefit1.html
http://socialsecurityretirementguide.com/social-security-benefits-the-35-year-advantage/

Mike

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Re: How do you value SS in retirement planning.
« Reply #33 on: November 12, 2014, 08:53:19 AM »
I don't count it at all and will treat it as a nice extra if it happens.

Also keep in mind that your Social Security benefits are based on your 35 highest inflation-indexed earnings years, and the Social Security statement you get that estimates your benefits assumes that you will be making what you are making now until the various relevant retirement age cutoff points to calculate your estimated benefits.  For early retirees who may only put in 10-20 or so years, zeroes will be used to pad out the 35 year span, lowering your payment from the estimate that assumed you'd be making what you are making now going forward.

More info:
http://www.ssa.gov/OACT/ProgData/retirebenefit1.html
http://socialsecurityretirementguide.com/social-security-benefits-the-35-year-advantage/

Mike

Thanks a good point Mike, and worth considering. Counterpoint from Jeremy @ GoCurryCracker:

http://www.gocurrycracker.com/social-security-and-early-retirement/

mjs111

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Re: How do you value SS in retirement planning.
« Reply #34 on: November 12, 2014, 09:30:16 AM »
I don't count it at all and will treat it as a nice extra if it happens.

Also keep in mind that your Social Security benefits are based on your 35 highest inflation-indexed earnings years, and the Social Security statement you get that estimates your benefits assumes that you will be making what you are making now until the various relevant retirement age cutoff points to calculate your estimated benefits.  For early retirees who may only put in 10-20 or so years, zeroes will be used to pad out the 35 year span, lowering your payment from the estimate that assumed you'd be making what you are making now going forward.

More info:
http://www.ssa.gov/OACT/ProgData/retirebenefit1.html
http://socialsecurityretirementguide.com/social-security-benefits-the-35-year-advantage/

Mike

Thanks a good point Mike, and worth considering. Counterpoint from Jeremy @ GoCurryCracker:

http://www.gocurrycracker.com/social-security-and-early-retirement/

Yep, I'm on the side of Mr. CurryCracker myself.  :) I wouldn't toil away for another 10 years JUST to make a bit more in Social Security.  Just want to make sure people don't count an asset twice: i.e. the asset of 10 years extra free time AND the Social Security payout that assumes they'd be working during that time.

Mike

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Re: How do you value SS in retirement planning.
« Reply #35 on: November 12, 2014, 11:09:17 AM »
The only thing I know about SS is that it's slowing down my FIRE plan significantly.  A 12.4% raise sure would be nice.

Iron Mike Sharpe

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Re: How do you value SS in retirement planning.
« Reply #36 on: November 12, 2014, 12:22:28 PM »
The statements that the SSA send out assume you will continue working and making the same amount you are now.

If you want a better estimate of what you will make, you can go to this calculator:

http://www.ssa.gov/retire2/AnypiaApplet.html


You will need to fill out your detailed yearly earnings, you can get those from the SSA itself online, create an account here:

https://secure.ssa.gov/RIL/SiView.do


There are still limitations using this calculator.  You have the option of setting your retirement date, and then you fill out what you will make every year from now until that retirement date.  But it doesn't allow you to fill in pay increases / decreases. 

But you can get a decent estimate.

johnhenry

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Re: How do you value SS in retirement planning.
« Reply #37 on: November 12, 2014, 12:38:02 PM »
I think SS is going to be fine.  It's a social contract with a political backstop.

Amen, brotha.  That's a great way to put it.

The same could be said of our money in general.  It's a social contract.

I'm baffled by those who think SS is going down the toilet because the "trust fund" will run out of money, or the US dollar is destined to crumble because our national debt (national savings) continues to increase, but don't have the same worry about the US armed forces, which last time I checked, spent more than it collected.

Eric

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Re: How do you value SS in retirement planning.
« Reply #38 on: November 12, 2014, 01:18:19 PM »
In summary, the closer you are to drawing benefits, the more you should count on it.  The further, the less you should.  The earlier you're planning on quitting, the less you should count on it as well, not only because 20-30 years is a long time and payouts and retirement ages could change, but you'll have so many fewer periods of earnings that your payouts will be small.  That $900/mo that I'm scheduled to receive in 25 years isn't going to buy much then.

DoubleDown

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Re: How do you value SS in retirement planning.
« Reply #39 on: November 12, 2014, 01:27:01 PM »
That $900/mo that I'm scheduled to receive in 25 years isn't going to buy much then.

But that $900/month actually is indexed to inflation, which is a tremendous feature of SS. So, that $900/month actually could be quite significant 25 years from now, because it will have the buying power of 2014 dollars. Or, putting it another way, when you start collecting it in the year 2039, it could be something like $3600/month.

If $900 would cover 25% of your living expenses now, it will do the same in 25 years.

CCCA

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Re: How do you value SS in retirement planning.
« Reply #40 on: November 12, 2014, 01:36:32 PM »
I have an estimate of SS benefits built into my spreadsheet but it's not essential one way or the other. 

Around 65 (25 years from now) is when our kids will be out of college/out of the house and we'll have paid off the mortgages on our primary residence and a rental property so our expenses will go way down and our net income will go way up.  It's probably a plus $50,000 swing, within a couple of years.  If SS is added to this we'd get another $30k/yr.    Cashflow shouldn't be a problem at that time.  We just have to get through hopefully 20 years of ER to get to the point where this happens.

MrFancypants

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Re: How do you value SS in retirement planning.
« Reply #41 on: November 12, 2014, 01:39:39 PM »
It's the money I'm going to use to buy a new Porsche when I'm old enough to draw it.  Because all my other expenses will have been covered already.

Beric01

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Re: How do you value SS in retirement planning.
« Reply #42 on: November 12, 2014, 01:44:15 PM »
The only thing I know about SS is that it's slowing down my FIRE plan significantly.  A 12.4% raise sure would be nice.

This, all the way.

I'm paying an incredible sum for a program I'll most likely never receive benefits from, and also don't need. I'd sure love my SS deductions in cash instead each paycheck, as that would really accelerate FIRE. Wish I could opt out from this horrible program...

DoubleDown

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Re: How do you value SS in retirement planning.
« Reply #43 on: November 12, 2014, 01:50:45 PM »
I think SS is going to be fine.  It's a social contract with a political backstop.


+2

I think anyone worried about wholesale changes to SS are really doing themselves a disservice. Even if you're young, the idea that you won't receive benefits (or drastically reduced benefits) is almost impossible. Folks should remember some important points that make it unlikely there will ever be any dramatic changes to it in our own lifetimes:

- Inertia: It will be exceedingly difficult to ever cut SS benefits. It's not even ever discussed as an option by anyone with any legitimate input. All the proposed methods of making SS more viable in the very long term have almost nothing to do with any significant cutting to benefits; instead, they're about increasing payroll contributions from today's workers, making slight changes to inflation calculations, and other small tweaks. I have not even seen potentially deferring benefits (upping the age when you can take it) discussed by anyone.

2. Politics: Neither side has any appetite for killing or heavily modifying SS. Our population is graying, and the older population has tremendous political clout. No one wants to piss them off. Saying you want to cut benefits would 100% guarantee defeat for a politician. Besides, even the population at large does not want any wholesale changes to the program. Every poll confirms this. If you've paid anything into the program at this point, you're not likely to suffer any significant change.

3. The retirement part of the program is not bad off. It's still viable, and forecast to be viable for a long time even with no changes. It's the death and disability part of the program that has issues, and that is separate. Only very small tweaks are needed to keep the current SS retirement program completely healthy for the foreseeable future, and there are several to choose from. For example, raising the limit on payroll caps for contributions would, by itself, completely fix SS retirement forever (the foreseeable future). Right now, earnings over $117,000 are exempt from SS taxes. If that limit was raised or eliminated, it would completely fix SS on its own. Probably 95% of voters would support that change, because very few people earn more than that. Your expected benefits would still be the same 30 years from now.

johnhenry

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Re: How do you value SS in retirement planning.
« Reply #44 on: November 12, 2014, 02:50:00 PM »
The only thing I know about SS is that it's slowing down my FIRE plan significantly.  A 12.4% raise sure would be nice.

This, all the way.

I'm paying an incredible sum for a program I'll most likely never receive benefits from, and also don't need. I'd sure love my SS deductions in cash instead each paycheck, as that would really accelerate FIRE. Wish I could opt out from this horrible program...

That's what taxes are all about.  We all have to be burdened with an obligation to the group to enjoy the benefits of government.  Some people wish they could not pay any tax that goes towards upkeep of National Parks because they never use them.  Others would like to pay half as much in tax that goes towards military spending, because they think that portion of our budget is bloated and overkill.  And there are plenty like yourself who don't want to pay "social security" tax because they are afraid they "won't get back what they put in". 

Your politicians are doing you a disservice when they talk about SS as if it, as a government social welfare program, has different funding/spending restrictions than National Parks program or the military.  And you are doing yourself a disservice if you believe it.

The national debt (national savings) continues to grow because there's a national deficit year after year.  But that doesn't jeopardize the military or the national parks programs any more than SS is jeopardized by a waning "trust fund".  If you are worried about one, program going away because it's "underfunded" then you need to be worried about them all, right?  The SS trust fund being underfunded should be the least of your worries if you believe that every other item in the federal budget is underfunded!!  Why aren't you worried about a complete collapse of America and the US dollar?

Truth is, your taxes to federal government measure your obligation to the group (our government), whether you pay it as FICA taxes each payroll or income tax when you file.  It all goes to the same pot, which isn't a pot at all.  It's a shredder.  Money is destroyed when you pay it back in taxes and wipes out your obligation for that year.  It doesn't sit in government coffers for decades until it needs to be paid out as SS to you and me when we draw SS.  To cut those SS checks the money creation process is the EXACT same as Uncle Sam cutting a check to a soldier for his active duty pay.  Do you really think SS checks draw on some SS "trust fund" that is really at risk of depletion? while that's not the case for checks written to soldiers?

For the SS program to be "sound", we don't need to increase the size of the trust fund.  We just need an agreement among us that taking care of elderly and disabled citizens is something we do, just as maintaining a strong military is something we do.

One Noisy Cat

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Re: How do you value SS in retirement planning.
« Reply #45 on: November 12, 2014, 03:18:53 PM »
   In my case, I recently retired at age 60.  I used to think I'd take it when I was 62 just to make I got something after 45 years of contributing at gunpoint.  But I talked to a financial planner at Fidelity and he said something I hadn't realized.  Every year that you delay taking SS until you reach 70 is a guaranteed 8% increase.  There is no financial product anywhere that pays a guaranteed 8%
increase.  Perhaps the  Mustachians here knew that already but for me it was a revelation.
   Right now with pensions from my job, military reserve service and some withdrawals from 33 years of IRAs,etc when I take SS is not even in my thinking. Perhaps that will change, but it's nice to know there is a minimum of $1200 a month option available in 2016

CCCA

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Re: How do you value SS in retirement planning.
« Reply #46 on: November 12, 2014, 03:22:58 PM »
   In my case, I recently retired at age 60.  I used to think I'd take it when I was 62 just to make I got something after 45 years of contributing at gunpoint.  But I talked to a financial planner at Fidelity and he said something I hadn't realized.  Every year that you delay taking SS until you reach 70 is a guaranteed 8% increase.  There is no financial product anywhere that pays a guaranteed 8%
increase.  Perhaps the  Mustachians here knew that already but for me it was a revelation.
   Right now with pensions from my job, military reserve service and some withdrawals from 33 years of IRAs,etc when I take SS is not even in my thinking. Perhaps that will change, but it's nice to know there is a minimum of $1200 a month option available in 2016

Yes, I ran the calculation for my mother to decide which year to take it and we determined based upon her expected longevity (she's very healthy) that she should wait until 70 to take SS. 

Beric01

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Re: How do you value SS in retirement planning.
« Reply #47 on: November 12, 2014, 03:36:31 PM »
The only thing I know about SS is that it's slowing down my FIRE plan significantly.  A 12.4% raise sure would be nice.

This, all the way.

I'm paying an incredible sum for a program I'll most likely never receive benefits from, and also don't need. I'd sure love my SS deductions in cash instead each paycheck, as that would really accelerate FIRE. Wish I could opt out from this horrible program...

That's what taxes are all about.  We all have to be burdened with an obligation to the group to enjoy the benefits of government.  Some people wish they could not pay any tax that goes towards upkeep of National Parks because they never use them.  Others would like to pay half as much in tax that goes towards military spending, because they think that portion of our budget is bloated and overkill.  And there are plenty like yourself who don't want to pay "social security" tax because they are afraid they "won't get back what they put in". 

Your politicians are doing you a disservice when they talk about SS as if it, as a government social welfare program, has different funding/spending restrictions than National Parks program or the military.  And you are doing yourself a disservice if you believe it.

The national debt (national savings) continues to grow because there's a national deficit year after year.  But that doesn't jeopardize the military or the national parks programs any more than SS is jeopardized by a waning "trust fund".  If you are worried about one, program going away because it's "underfunded" then you need to be worried about them all, right?  The SS trust fund being underfunded should be the least of your worries if you believe that every other item in the federal budget is underfunded!!  Why aren't you worried about a complete collapse of America and the US dollar?

Truth is, your taxes to federal government measure your obligation to the group (our government), whether you pay it as FICA taxes each payroll or income tax when you file.  It all goes to the same pot, which isn't a pot at all.  It's a shredder.  Money is destroyed when you pay it back in taxes and wipes out your obligation for that year.  It doesn't sit in government coffers for decades until it needs to be paid out as SS to you and me when we draw SS.  To cut those SS checks the money creation process is the EXACT same as Uncle Sam cutting a check to a soldier for his active duty pay.  Do you really think SS checks draw on some SS "trust fund" that is really at risk of depletion? while that's not the case for checks written to soldiers?

For the SS program to be "sound", we don't need to increase the size of the trust fund.  We just need an agreement among us that taking care of elderly and disabled citizens is something we do, just as maintaining a strong military is something we do.

I think we're going to have to agree to disagree. I'd like to see Social Security an option only. And IMO the elderly and disabled should be cared for via voluntary contributions, not through the use of force and coercion. Philosophically I find Social Security immoral, regardless of its sustainability as a program. It's also profoundly anti-Mustachian, as it discourages personal responsibility with one's money and believes Americans utterly incapable of saving for their own retirement - as such it's a self-fulfilling prophecy.

beltim

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Re: How do you value SS in retirement planning.
« Reply #48 on: November 12, 2014, 03:43:35 PM »
Every year that you delay taking SS until you reach 70 is a guaranteed 8% increase.  There is no financial product anywhere that pays a guaranteed 8% increase.  Perhaps the  Mustachians here knew that already but for me it was a revelation.

We need a sticky or something for this.  An 8% increase in your Social Security benefit is not equivalent to an 8% return, because you're giving up a year's worth of benefits in exchange.

MrFancypants

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Re: How do you value SS in retirement planning.
« Reply #49 on: November 12, 2014, 06:28:50 PM »
We just need an agreement among us that taking care of elderly and disabled citizens is something we do, just as maintaining a strong military is something we do.

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