If SS covers expenses why invest?

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Exige
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Re: If SS covers expenses why invest?

Post by Exige »

HomerJ wrote:
fourkids wrote:most people who are living solely on SS benefits are living below the poverty line.
Do you really think SS is going to cover ALL of your expenses? maybe only if you live extremely frugally in rural Alabama or Mississippi.
A married couple who had very good jobs can pull down $5000-$6000 a month in SS...

With a paid off house, that's a ton of money.

To the OP, I have to ask... what happens when one of the spouses dies and the SS is cut in half?

That is a very good Question and honestly I did not know that if one of us died it got cut in half until I started this thread. Like I said previously we have no intentions of stopping our savings or investing it was just an interesting point we had never considered or thought about (meaning SS).
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HomerJ
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Re: If SS covers expenses why invest?

Post by HomerJ »

Exige wrote:
HomerJ wrote:
fourkids wrote:most people who are living solely on SS benefits are living below the poverty line.
Do you really think SS is going to cover ALL of your expenses? maybe only if you live extremely frugally in rural Alabama or Mississippi.
A married couple who had very good jobs can pull down $5000-$6000 a month in SS...

With a paid off house, that's a ton of money.

To the OP, I have to ask... what happens when one of the spouses dies and the SS is cut in half?

That is a very good Question and honestly I did not know that if one of us died it got cut in half until I started this thread. Like I said previously we have no intentions of stopping our savings or investing it was just an interesting point we had never considered or thought about (meaning SS).
Well, it probably won't be cut a full 50%. Check ssa.gov to see how much you get with both people alive, how much you get if one spouse dies (there may be survivor benefits), and how much you get if the other spouse dies. It will be three different numbers...
joebh
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Re: If SS covers expenses why invest?

Post by joebh »

Exige wrote:This question stemmed when we looked at our SS payout for the first time out of curiosity and what it says now would cover all of our expenses.
Will it pay all your expenses if one of you is no longer living?
Will it pay all your expenses in all healthcare situations?
How confident are you that your expenses won't change over time?
Do you want to leave any legacy when you pass?

These are all considerations beyond "it would cover all our (current) expenses".
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TxAg
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Re: If SS covers expenses why invest?

Post by TxAg »

Ron wrote:Special circumstances require special solutions.

In our case, once I/wife start our (age 70) SS in two years, we will need to draw less than 1% (actually a percentage that can hardly be measured), with the intent to have our joint investments grow over the time we still are allowed to be left on earth, for the care of our adult (child) disabled son.

We have nobody to look after him or provide for his care for his remaining days after we're gone - or in a position (mentally or physically) that we can't look out for his welfare.

His disability is such that he is expected to have a normal lifespan. It's also a case that he will need one-on-one direction most days of the week (although he can care for his own needs, with detailed direction). That "direction" will come at a very expensive hourly rate.

To assure his "parental care", we have a tri-partner solution. That is a (elder care) attorney, and investment professional, and a commercial trust who will administer the funds and report on all distributions. To put such a structure in place is not inexpensive, nor will it be cheap to continue after we've both passed.

If it was just my wife/me to worry about our own remaining lifespan, we could have just converted our assets to CD's decades ago. However, that's not the challenge we've been given. It's our responsibility to look toward to his future needs well after we're gone, and hey - he didn't ask to be born. In addition, we know that there will be "slippage" in the amount of money spent for his care, so we are planning to over-fund his estimated financial needs for the future.

That's why we continue to invest...

FWIW,

- Ron

Yall sound like great parents. Good job!
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Re: If SS covers expenses why invest?

Post by joe8d »

Toons wrote:You never now what the future holds...
The best laid plans of mice and men,,,
If nothing else ,
legacy for family or any worthwhile cause :happy
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flyingaway
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Re: If SS covers expenses why invest?

Post by flyingaway »

Diversification is a good tool for uncertainty. Investment is what makes me sleep well at night, so social security.
naha66
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Re: If SS covers expenses why invest?

Post by naha66 »

Why do people always assume its so much cheaper to live in the rural south? If you own your house in a small to medium size city anywhere other than the top COL areas its about the same. One of the highest costs in rural areas is transportation, you almost have to have car or truck in rural areas. Also it much easier to get assistance of various types in non rural areas.
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HomerJ
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Re: If SS covers expenses why invest?

Post by HomerJ »

naha66 wrote:Why do people always assume its so much cheaper to live in the rural south?
My parents live on 110 acres in small but nice house with an amazing view of the Ozark foothills.

The land and the house cost them $80,000 20 years ago... Might be worth $200k today... Not sure.

Property taxes are $500 a year on this paid-off house and land.

Food and utilities just aren't that expensive.
Skiffy
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Re: If SS covers expenses why invest?

Post by Skiffy »

Between step-sisters, in-laws, etc We are aware of 5 households of 80 year-olds trying to live on SS. They are poor. When they all retired at 62, they thought SS would be plenty to live on. But insurance, utilities and healthcare costs have increased dramatically. Some require assistance from their children in the form of paying for utilities, phone. . . When I say poor here is what that means-can't afford to get teeth fixed, hearing aids, or "memory care" nursing home or even paid help when snow shoveling and other household chores like food prep become too much.

Seeing these struggles has made us save, save, save. And live very frugally.
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Re: If SS covers expenses why invest?

Post by Crimsontide »

naha66 wrote:Why do people always assume its so much cheaper to live in the rural south? If you own your house in a small to medium size city anywhere other than the top COL areas its about the same. One of the highest costs in rural areas is transportation, you almost have to have car or truck in rural areas. Also it much easier to get assistance of various types in non rural areas.
Plus they aren't giving away those seasons tickets at Bryant Denney either :twisted:
wolf359
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Re: If SS covers expenses why invest?

Post by wolf359 »

HomerJ wrote:
Exige wrote:
HomerJ wrote:
fourkids wrote:most people who are living solely on SS benefits are living below the poverty line.
Do you really think SS is going to cover ALL of your expenses? maybe only if you live extremely frugally in rural Alabama or Mississippi.
A married couple who had very good jobs can pull down $5000-$6000 a month in SS...

With a paid off house, that's a ton of money.

To the OP, I have to ask... what happens when one of the spouses dies and the SS is cut in half?

That is a very good Question and honestly I did not know that if one of us died it got cut in half until I started this thread. Like I said previously we have no intentions of stopping our savings or investing it was just an interesting point we had never considered or thought about (meaning SS).
Well, it probably won't be cut a full 50%. Check ssa.gov to see how much you get with both people alive, how much you get if one spouse dies (there may be survivor benefits), and how much you get if the other spouse dies. It will be three different numbers...
The survivor benefit is that you get the bigger of the two checks. The worst case is that a two-income household with equal salaries is claiming, in which the social security income cuts in half.
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mickeyd
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Re: If SS covers expenses why invest?

Post by mickeyd »

DW and I pay all of our expenses out of SS and pensions and have a nice chunk left over each month. Since we do not have a long-term care policy, the rest is stashed into savings to cover that risk and other unknowns. If we end up not needing it, we plan on having a big blow-out at our 100th BD party.
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ktd
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Re: If SS covers expenses why invest?

Post by ktd »

naha66 wrote:Why do people always assume its so much cheaper to live in the rural south? If you own your house in a small to medium size city anywhere other than the top COL areas its about the same. One of the highest costs in rural areas is transportation, you almost have to have car or truck in rural areas. Also it much easier to get assistance of various types in non rural areas.

Because it's true?
Dandy
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Re: If SS covers expenses why invest?

Post by Dandy »

When I collect SS in 2 years at age 70 I will probably have 95+% of my retirement expenses covered with that and my pension. 100% with slight belt tightening. I also have substantial financial assets. I invest with asset preservation in mind. My plan has always been to gradually increase our standard of living and to gradually increase our support of our children and charities.

So the "safe" part of our financial assets is geared to funding our retirement and the "risk" part is to fund gifts, charity, luxuries and contingencies. Overall I have about 40% allocation to equities.
Chuck107
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Re: If SS covers expenses why invest?

Post by Chuck107 »

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Sandtrap
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Re: If SS covers expenses why invest?

Post by Sandtrap »

Chuck107 wrote: Fri Jun 05, 2020 7:15 am Being already retired 16 yrs and collecting SS, Our SS covers our yearly expenses.
However I keep invested at 30/70 AA.
Why?
Expenses come up... Murphy's law and all.
It's nice to know that I have enough savings to buy stuff whenever I wish.
More is better.
A new car. or two.
Vacation.
Stuff.
Inflation.

I needed a new roof a couple of years ago, I had no issues or concerns where the money was coming from.
Last year I had all the windows replaced, again no issues.
Those expenses have already been replaced from the investments.
Why let it all collect dust, being reduced by inflation?
It may as well be working even if I'm not.
We never know what the future will hold, so be prepared.
+1
Great points!
Well said!

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Chuck107
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Re: If SS covers expenses why invest?

Post by Chuck107 »

.....
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dziuniek
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Re: If SS covers expenses why invest?

Post by dziuniek »

I simply chose to get rich slowly the boglehead way. (though at my savings rate, I might kick the bucket first)

SS will not cover our expenses is the primary reason for saving. if it did, I would still save for a rainy day or.... a boat.

I mean, I'd rather be a silver fox with a ferrari than a prius. That's a personal decision though.
macher
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Re: If SS covers expenses why invest?

Post by macher »

Exige wrote: Thu Feb 04, 2016 3:40 pm This is an honest question my wife and I have been talking about a lot lately and came up in another thread I was just reading and decided I would start my own topic instead of taking the thread off topic anymore. This question stemmed when we looked at our SS payout for the first time out of curiosity and what it says now would cover all of our expenses.

many are saying that SS can cover most or all of the expenses they have in retirement so my question is why the huge focus on investments and returns. such as saying we finally could retire after hitting 1.5 million and can now do a 4% withdraw etc.

I assume its either

1) to retire early before SS such as 50 years old and cover that gap healthcare, expenses etc.
2) have a bunch of extra fun money in retirement do anything and everything you have always wanted while expenses are already covered by SS.

I am not asking why we save or LBYM, that is obvious being able to sleep at night with a savings, E-fund etc makes sense and financially secure to cover unexpected things, but lets face it that doesn't need to be millions of dollars for most.

(FYI I have always followed the Boglehead way I love it and always will was just a question we were asking when we stress about not saving enough haha)
Ok SS does cover our expenses but that’s for 2 SS. The likely hood of only one living is almost always the case that’s why it’s better to save and ‘insure’ the lesser of the 2 SS.

For instance if I get $24k SS and my wife gets $20K that easily covers our expenses plus some for discretionary spending. What happens if one of us dies? Then you’re only left with one SS which would be $24k which isn’t enough to cover expenses. So In this case I would be comfortable having $500k in retirement savings because that would generate $20k a year in case one of us dies which unfortunately is most likely to happen.
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unclescrooge
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Re: If SS covers expenses why invest?

Post by unclescrooge »

BTDT wrote: Thu Feb 04, 2016 5:00 pm
fourkids wrote: Do you really think SS is going to cover ALL of your expenses? maybe only if you live extremely frugally in rural Alabama or Mississippi.
A two income couple can receive over $75,000 in yearly SS benefits. I don't think most people would consider $75K/year just to cover "expenses" as extreme frugality?

Edit- oops....My bad! 3504PIR beat my post by a minute
Doesn't that hey cut in half when one spouse dies?
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geerhardusvos
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Re: If SS covers expenses why invest?

Post by geerhardusvos »

KlangFool wrote: Thu Feb 04, 2016 4:29 pm OP,

I do not see any possibility that I would be fully employed until my social security full retirement age (FRA). So, given that, I either have money to survive until my FRA or I don't.

Now, as to why others are so optimistic that they can be fully employed until FRA, I have no idea?

KlangFool
That’s exactly right, not only could the market change for the field you working and make it unbearable to work or impossible, or your desires could change, your health could change, anything really. There is 0.0% chance I can work until my FRA. So early retirement is actually an imperative for me, I don’t have a lot of options with my personal situation. And people who do think they can make it to the end, well good on them, but they should also be planning for the scenario where they won’t make it.

On a related note to the OP, I have multiple family members that worked into their 60s and now live pretty comfortable retirements almost solely on their SS. So it’s possible, but they probably do a little travel or other things here and there with whatever savings they have. My parents get $6000 a month in SS which covers more than their essentials.
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houseofnine
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Re: If SS covers expenses why invest?

Post by houseofnine »

Meeting Expenses = Surviving
Exceeding Expenses = Living
macher
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Re: If SS covers expenses why invest?

Post by macher »

houseofnine wrote: Fri Jun 05, 2020 8:48 pm Meeting Expenses = Surviving
Exceeding Expenses = Living
Right if 2 are collecting SS then you can meet expenses and exceed expenses. Let’s say both get $24k a year SS that’s $48k. If you are debt free which you should be that means meeting expenses could be $30k - $35k a year. So that’s $18k exceeding expenses as long as both don’t outlive each other.

BUT the chances of having 2 SS are highly unlikely which is why you need to savings to cover 1 SS.

So the moral of the story can’t rely on 2 SS but 2 SS could cover meeting expenses + exceeding expenses. So you really need retirement savings to cover 1 SS.
mptfan
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Re: If SS covers expenses why invest?

Post by mptfan »

I have several responses.

1) You can retire early at 55 or 60, not just 50.

2) Some people determine that it is in their best interest to defer taking social security until their Full Retirement Age (FRA) which is usually 66 or 67, and others determine that it's best to defer taking social security until 70. So if you retire before those ages you need another source of income.

3) Social security will probably cover my basic living expenses when I start taking social security but I did not work and save all of my life so that I can retire and limit my spending to basic expenses, I want to somewhat spoil myself after a lifetime of going to school and hard work and not have to live within a tight budget.

4) Having a nice nest egg and living with little or no debt gives me options and I avoid financial stress during my working years.

5) There is a chance I may not be gainfully employed at my current earnings level all the way until I am ready to retire, so it's good to be financially prepared.
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Re: If SS covers expenses why invest?

Post by MathIsMyWayr »

unclescrooge wrote: Fri Jun 05, 2020 8:28 pm
BTDT wrote: Thu Feb 04, 2016 5:00 pm
fourkids wrote: Do you really think SS is going to cover ALL of your expenses? maybe only if you live extremely frugally in rural Alabama or Mississippi.
A two income couple can receive over $75,000 in yearly SS benefits. I don't think most people would consider $75K/year just to cover "expenses" as extreme frugality?

Edit- oops....My bad! 3504PIR beat my post by a minute
Doesn't that hey cut in half when one spouse dies?
How do you know that you want to live all the remaining years of your life in the way you imagine in rural Alabama or Mississippi? If "want to" changes to "have to", you will realize that you threw the key to the locked door away.
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Re: If SS covers expenses why invest?

Post by bertilak »

  • Provide a legacy, including gifting today.
  • Emergencies (medical, other, mine, family).
  • Belt (SS+Pension) and suspenders (investments).
  • Chance to upgrade lifestyle when desired. (My next car may be more luxurious.)
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sd323232
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Re: If SS covers expenses why invest?

Post by sd323232 »

i dont think ss will be there when reach the age, so thats why my retirement is my responsibility and no one elses.
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Tejfyy
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Re: If SS covers expenses why invest?

Post by Tejfyy »

Angst wrote: Thu Feb 04, 2016 3:55 pm C'mon! Is not one of the most important items on most people's list Uncertainty about the future?

It's important to plan, but it's also important to be realistic about the potential inaccuracy of one's assumptions about the future.
Being prepared is more useful mindset I believe. The future is by definition uncertain, and no more so now than it was last year. What this moment has evidenced to me is that having big future plans is risky risky if one is not prepared for the bottom to fall out of everything.
macher
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Re: If SS covers expenses why invest?

Post by macher »

Castanea_d. wrote: Fri Feb 05, 2016 11:52 am For the OP and other people who are decades away from SocSec benefits, invest because of the uncertainty. As many have said in this thread, one never knows what might happen. Also, it is a great lifelong habit to live within your means and put some money aside every month. Even if you never need it, it gives you the ability to help people who do need some help and helps keep your spending habits in a range that you will be able to afford.

For those who are (like me) just a few years from that age, the uncertainty decreases somewhat -- you have a better idea as to your retirement expenses and what your SocSec benefits will be (at least for the short term -- again, one never knows what might happen in the longer term).

I get nervous when some of the "experts" counsel that your expenses during retirement will probably be less than while you are working, and I compare that with what I have seen in the lives of friends and family, especially in terms of medical expenses, assisted living/nursing care, etc.

Another factor is the possibility of a period of high inflation. While it looks unlikely for now, over a twenty or thirty year retirement the chances increase that it could happen at some point. Even though SocSec is indexed to inflation, I suspect that the manner in which this is done could be one of the ways that the government tinkers with the program, possibly in a way that makes the SocSec benefits decline in real terms, perhaps significantly if we have double-digit inflation. Your investments would probably take a hit during such times as well, but having them as a backstop is better than not having them.

I am grateful that it looks like my wife and I will be among those who can live comfortably off SocSec benefits alone, if the person with the higher benefit (me) waits until 70 to start collecting. To get us that far, we have laddered CD's and other low-risk money (plus disability insurance) in case I don't make it -- I love my job and hope to keep doing it, but (again) one never knows.
What I’ve noticed in retirement from family that are in their mid 70’s plus is that manndatory living expenses don’t go up that much and discretionary spending goes down as you get older in retirement ages. You don’t travel as much etc.

My aunt who is 75 (we make sure she’s alright financially) her SS easily covers her living expenses of $2k a month. I notice that living expenses don’t go up much anyway not even with the rate of inflation.

Discretionary spending is another story. Depends how much discretionary spending you want.

The way I see it is that living expenses can go up 2% a year or 2-3% every 2-3 years but like I said discretionary spending decreases. I’ll use maybe 1% a year decease in discretionary spending.

So inflation isn’t the ‘evil’ like everyone says it is in my opinion because in this case SS will get a COLA anyway. So my aunts $2k a month SS that covers her living expenses is protected against inflation per se because of the COLA.

Now hyper inflation is a different story.
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Re: If SS covers expenses why invest?

Post by macher »

Chuck107 wrote: Fri Jun 05, 2020 7:15 am Being already retired 16 yrs and collecting SS, Our SS covers our yearly expenses.
However I keep invested at 30/70 AA.
Why?
Expenses come up... Murphy's law and all.
It's nice to know that I have enough savings to buy stuff whenever I wish.
More is better.
A new car. or two.
Vacation.
Stuff.
Inflation.

I needed a new roof a couple of years ago, I had no issues or concerns where the money was coming from.
Last year I had all the windows replaced, again no issues.
Those expenses have already been replaced from the investments.
Why let it all collect dust, being reduced by inflation?
It may as well be working even if I'm not.
We never know what the future will hold, so be prepared.
Well yea that’s why I include house maintenance in my retirement planning for living expenses of $100 a month. Our house has been completely renovated and won’t need any repairs for many years. So $100 a month or $1200 a year after many years of no repairs will add up when the house needs a new roof in 25-30 years. Same with car maintenance I use $100 a month as part of living expenses.

Vacations etc aren’t part of living expenses how I plan for retirement. That’s a separate income stream the way I do it.

SS plus pension covers must be paid every month expenses. I include house maintenance and car maintenance in this because it’s inevitable that repairs will happen.

What is in a liquid fund maybe a 30/70 or whatever is used for discretionary spending like vacations, eating out, going to movies etc and whatever is left over is left to heirs.
MathWizard
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Re: If SS covers expenses why invest?

Post by MathWizard »

My extended family falls into 3 camps.

1) Made $20K /yr on average in today's dollars.
2) Made $70K /yr on average in today's dollars
3) Made $150k/yr on average in today's dollars or more.

SS per yr for them at FRA would be about

1). 15.7K. replacing 78.5% of previous gross income
2). 26.5K. replacing 37.8% of previous gross income
3). 39.8K. replacing 26.5% of previous gross income

1) has no taxes, and can replace early 80% of prev income, and will pay no tax if all they draw is SS.

2) To get to 78% of gross would need to draw another 28K . I'd this is from tax deferred, then this would make some of SS benefits subject to taxes, and would incur some taxes, maybe $1K, which would also have to be drawn for tax advantaged inviting more taxes

3). Need to draw $80K from investments,likely tax deferred, making 85% of the SS benefits subject to taxes,meaning taxable income of about $114 taxable, which pushes the person into the 22/25% federal tax bracket,meaning quite a bit more needs to be withdrawn to pay the taxes

Taxes assume MFJ


Of these, I can only see case 1 not needing to invest.

1 may want to at least get some CDs for emergencies and for health care .
smitcat
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Re: If SS covers expenses why invest?

Post by smitcat »

MathWizard wrote: Sat Jun 06, 2020 2:59 pm My extended family falls into 3 camps.

1) Made $20K /yr on average in today's dollars.
2) Made $70K /yr on average in today's dollars
3) Made $150k/yr on average in today's dollars or more.

SS per yr for them at FRA would be about

1). 15.7K. replacing 78.5% of previous gross income
2). 26.5K. replacing 37.8% of previous gross income
3). 39.8K. replacing 26.5% of previous gross income

1) has no taxes, and can replace early 80% of prev income, and will pay no tax if all they draw is SS.

2) To get to 78% of gross would need to draw another 28K . I'd this is from tax deferred, then this would make some of SS benefits subject to taxes, and would incur some taxes, maybe $1K, which would also have to be drawn for tax advantaged inviting more taxes

3). Need to draw $80K from investments,likely tax deferred, making 85% of the SS benefits subject to taxes,meaning taxable income of about $114 taxable, which pushes the person into the 22/25% federal tax bracket,meaning quite a bit more needs to be withdrawn to pay the taxes

Taxes assume MFJ


Of these, I can only see case 1 not needing to invest.

1 may want to at least get some CDs for emergencies and for health care .

I would say that #1 needs no real investments.
But #2 could take say $700K and get an SPIA which will yield $35k+ per year and also need no investments.
Just one more option to get the job done.
MathWizard
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Re: If SS covers expenses why invest?

Post by MathWizard »

smitcat wrote: Sat Jun 06, 2020 3:30 pm
MathWizard wrote: Sat Jun 06, 2020 2:59 pm My extended family falls into 3 camps.

1) Made $20K /yr on average in today's dollars.
2) Made $70K /yr on average in today's dollars
3) Made $150k/yr on average in today's dollars or more.

SS per yr for them at FRA would be about

1). 15.7K. replacing 78.5% of previous gross income
2). 26.5K. replacing 37.8% of previous gross income
3). 39.8K. replacing 26.5% of previous gross income

1) has no taxes, and can replace early 80% of prev income, and will pay no tax if all they draw is SS.

2) To get to 78% of gross would need to draw another 28K . I'd this is from tax deferred, then this would make some of SS benefits subject to taxes, and would incur some taxes, maybe $1K, which would also have to be drawn for tax advantaged inviting more taxes

3). Need to draw $80K from investments,likely tax deferred, making 85% of the SS benefits subject to taxes,meaning taxable income of about $114 taxable, which pushes the person into the 22/25% federal tax bracket,meaning quite a bit more needs to be withdrawn to pay the taxes

Taxes assume MFJ


Of these, I can only see case 1 not needing to invest.

1 may want to at least get some CDs for emergencies and for health care .

I would say that #1 needs no real investments.
But #2 could take say $700K and get an SPIA which will yield $35k+ per year and also need no investments.
Just one more option to get the job done.
But where did the $700K come from? Investing, I assume.

The SPIA does get rid of investing in retirement, but I read the question as meaning no investment at all .

Also, is the SPIA inflation adjusted?
JackoC
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Re: If SS covers expenses why invest?

Post by JackoC »

MathWizard wrote: Sat Jun 06, 2020 4:32 pm But where did the $700K come from? Investing, I assume.
The SPIA does get rid of investing in retirement, but I read the question as meaning no investment at all .
Also, is the SPIA inflation adjusted?
Likewise, I take the question to be whether you need to save (simpler meaning than 'investing') for retirement if you feel SS will cover your financial needs, not to classify whether buying an SPIA in retirement is 'investing' (which I would say it is anyway). It's just hands off investing, farming out your investing, with an insurance component (pooling the risk of very long life with others via an insurance co).

In the US market true inflation adjusted annuities are almost extinct. A fixed 2%/yr increase is a convenience, it's not inflation protection. Which is a significant drawback to SPIA's as *the* answer to deploy the whole $700k. Credit risk would be another reason not for it to be *one* annuity but that's nitpicking. Generally IMO SPIA's are a tool worth considering, for people with relatively aggressive spending goals relative to their assets (eg. people who need to use the old 4% rule to reach their goal), if they don't have a situation, health conditions, background etc. which strongly suggest a shorter than average life expectancy. In relatively few situations I think would just an SPIA plus SS be the answer though.

But like you say, nothing much to do with where that money came from. Unless somebody gives it to you as gift or inheritance, you have to save/invest to build it up. The problem with deciding not to save when decades from retirement is, as other posts have said, lots of uncertainty how your earnings (including possible unemployability well short of 65) and taste for consumption will develop over your lifetime. But I can see situations where people in later working years would put the brakes on their saving because otherwise they are headed toward having lots more money than it takes to support the style of life they now pretty well know will satisfy them, and have no particular goal to leave a particular size inheritance. In that case why not spend a little more now rather than having enough saved to spend fare more later, but which you might not be in any position to spend (declining health, or you're just not around), nor have any desire to.
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Re: If SS covers expenses why invest?

Post by LadyGeek »

I removed an off-topic post regarding the viability of Social Security. The post was from 2016. I also removed a reply from today which quoted the 2016 post.
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Re: If SS covers expenses why invest?

Post by BrownEyedGirl_27 »

Because I don’t expect to have SS when I retire (it won’t exist).
For leaving a legacy.
Giving wealth away.
Having the freedom to buy something nice or fancy because I can afford the finer things.
Savings in case I end up in poor health or a serious accident happens.
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smitcat
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Re: If SS covers expenses why invest?

Post by smitcat »

MathWizard wrote: Sat Jun 06, 2020 4:32 pm
smitcat wrote: Sat Jun 06, 2020 3:30 pm
MathWizard wrote: Sat Jun 06, 2020 2:59 pm My extended family falls into 3 camps.

1) Made $20K /yr on average in today's dollars.
2) Made $70K /yr on average in today's dollars
3) Made $150k/yr on average in today's dollars or more.

SS per yr for them at FRA would be about

1). 15.7K. replacing 78.5% of previous gross income
2). 26.5K. replacing 37.8% of previous gross income
3). 39.8K. replacing 26.5% of previous gross income

1) has no taxes, and can replace early 80% of prev income, and will pay no tax if all they draw is SS.

2) To get to 78% of gross would need to draw another 28K . I'd this is from tax deferred, then this would make some of SS benefits subject to taxes, and would incur some taxes, maybe $1K, which would also have to be drawn for tax advantaged inviting more taxes

3). Need to draw $80K from investments,likely tax deferred, making 85% of the SS benefits subject to taxes,meaning taxable income of about $114 taxable, which pushes the person into the 22/25% federal tax bracket,meaning quite a bit more needs to be withdrawn to pay the taxes

Taxes assume MFJ


Of these, I can only see case 1 not needing to invest.

1 may want to at least get some CDs for emergencies and for health care .

I would say that #1 needs no real investments.
But #2 could take say $700K and get an SPIA which will yield $35k+ per year and also need no investments.
Just one more option to get the job done.
But where did the $700K come from? Investing, I assume.

The SPIA does get rid of investing in retirement, but I read the question as meaning no investment at all .

Also, is the SPIA inflation adjusted?
"But where did the $700K come from? Investing, I assume."
I drew the $700K to be the calculated source of the quoted $28K in needed retirement income for person #2.
Most folks would have this sourced from a company 401K and many would have that 'managed' by the company fiduciary prior to retirement.

"Also, is the SPIA inflation adjusted?"
The $700K would produce a $35.5K yearly income for a couple at 66 for life with no inflation.
The need is $28K so the inflation protection will likely not be required.
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Re: If SS covers expenses why invest?

Post by vested1 »

I would say to the OP, or anyone who is not nearing retirement, that planning for or counting on income from SS is not in your best interest. I ignored the impact of SS income until late in my career and it served me well, causing me to save more. By the time I actually retired at 63.5 I had done my homework on SS and considered it an unneeded bonus that I would continue to defer for longevity insurance purposes. I will file for my own benefits in two years at age 70. Our fixed income already pays all expenses and most discretionary spending, with an additional 30k a year coming when I switch from a restricted application to my own benefit.

Planning for the worst often leads to better than expected results, and creating additional sources of income is always the best policy. For that reason, and to answer the OP's question, absolutely continue to invest as much as is reasonable. You never know when that additional source of income will come in handy.
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Re: If SS covers expenses why invest?

Post by macher »

vested1 wrote: Sun Jun 07, 2020 6:35 am I would say to the OP, or anyone who is not nearing retirement, that planning for or counting on income from SS is not in your best interest. I ignored the impact of SS income until late in my career and it served me well, causing me to save more. By the time I actually retired at 63.5 I had done my homework on SS and considered it an unneeded bonus that I would continue to defer for longevity insurance purposes. I will file for my own benefits in two years at age 70. Our fixed income already pays all expenses and most discretionary spending, with an additional 30k a year coming when I switch from a restricted application to my own benefit.

Planning for the worst often leads to better than expected results, and creating additional sources of income is always the best policy. For that reason, and to answer the OP's question, absolutely continue to invest as much as is reasonable. You never know when that additional source of income will come in handy.
I get what you’re saying and don’t want to get into a political discussion but SS isn’t going anywhere. However for people in my tax brackets and salaries SS is going to be 30-40% of our retirement income.
JackoC
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Re: If SS covers expenses why invest?

Post by JackoC »

macher wrote: Sun Jun 07, 2020 9:28 am
vested1 wrote: Sun Jun 07, 2020 6:35 am I would say to the OP, or anyone who is not nearing retirement, that planning for or counting on income from SS is not in your best interest. I ignored the impact of SS income until late in my career and it served me well, causing me to save more. By the time I actually retired at 63.5 I had done my homework on SS and considered it an unneeded bonus that I would continue to defer for longevity insurance purposes. I will file for my own benefits in two years at age 70. Our fixed income already pays all expenses and most discretionary spending, with an additional 30k a year coming when I switch from a restricted application to my own benefit.

Planning for the worst often leads to better than expected results, and creating additional sources of income is always the best policy. For that reason, and to answer the OP's question, absolutely continue to invest as much as is reasonable. You never know when that additional source of income will come in handy.
I get what you’re saying and don’t want to get into a political discussion but SS isn’t going anywhere. However for people in my tax brackets and salaries SS is going to be 30-40% of our retirement income.
One of those questions where there is no way around 'politics' (in the extremely broad definition used here) unless you just ignore an issue central to the question. If you were to rely on SS alone, or nearly so, it matters enormously how much risk there is of benefit cuts.

If you really think there's a serious risk of people relying wholly on SS having it significantly cut from current promises, you have to plan for that. If you think that's far fetched, there you go. The likelihood that SS may be partly or wholly denied eventually to people who do have significant investment assets could be very different than the risk for people who have nothing else, but that's not directly the issue here.

It's virtually always better to have more money. It's not as simple to judge though when it's current you that has to consume less to provide future you with 'nice to have' amount of savings past what they really need. Planning for the 'worst' (according to one person) is not the easy solution for everyone else.
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