Are you including SS in your planning model? Are the benefits really that high?

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dbr
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by dbr » Tue Jun 12, 2018 1:42 pm

A good idea when doing planning is to vary the inputs to determine the sensitivity of the model to your assumptions. If discounting SS to zero means you retire at 70 rather than 60, you would probably want to know that.

LiterallyIronic
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by LiterallyIronic » Tue Jun 12, 2018 2:29 pm

marcopolo wrote:
Tue Jun 12, 2018 10:22 am
Soc Sec is designed to pay back a fairly high percentage for people who have contributed less (bend curve).

I kind of recall form other threads that your income now is closer to $60-$70k? If so, you could easily get into the scenario where your expected benefit is around $1600/mo., even with lots of $0 years. Just something to consider.
supersharpie wrote:
Tue Jun 12, 2018 12:26 pm
The people who pay the least into the system end up receiving an annual benefit that equals 90% of their annual taxable earnings.

Those who averaged only $895 in monthly earnings during their "High 35" will receive $805 in monthly benefits at full retirement age.

Therefore, assuming that you earned, cumulatively, at least $631,000 over the course of your "high 35" your monthly benefit will be at least $1000/month.
delamer wrote:
Tue Jun 12, 2018 12:53 pm
SS has a higher replacement factor for lower income workers. The more you earn, the smaller portion of your wages are replaced by SS.
What?! I put in 6.2% of my income and get 90% out!? How could SS possibly stay solvent? If I'm going to get handed $1000/month, then what am I doing saving 25% of gross? I could get by on saving a lot less and stop being so cheap.
JoeRetire wrote:
Tue Jun 12, 2018 10:48 am
It's not at all hard to check at ssa.gov.
Admiral wrote:
Tue Jun 12, 2018 11:06 am
You don't have to guess. Go on ssa.gov, set up an account, view your earnings records, and look at the estimate. (Estimate assumes you continue to earn at your current salary up to various ages (62, 67,70). Retiring at 50 with no other earned income will of course limit the payout if you've not earned much early in your life.
I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?

marcopolo
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by marcopolo » Tue Jun 12, 2018 2:35 pm

LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm

I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?
Frozen credit has no impact on checking SS benefits. Go to this link and create an account with the Soc Sec Administration https://www.ssa.gov/myaccount/. Maybe they use Credit check to verify identity when setting up an account? Even without an account, if you know roughly how much you have earned the last few years, and estimate future earnings, there are numerous calculators that can give you a reasonably good estimate.

As an aside, and not to be harsh, but where are you getting these "impressions"?
Once in a while you get shown the light, in the strangest of places if you look at it right.

delamer
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by delamer » Tue Jun 12, 2018 2:55 pm

marcopolo wrote:
Tue Jun 12, 2018 2:35 pm
LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm

I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?
Frozen credit has no impact on checking SS benefits. Go to this link and create an account with the Soc Sec Administration https://www.ssa.gov/myaccount/. Maybe they use Credit check to verify identity when setting up an account? Even without an account, if you know roughly how much you have earned the last few years, and estimate future earnings, there are numerous calculators that can give you a reasonably good estimate.

As an aside, and not to be harsh, but where are you getting these "impressions"?

There was a thread on the forum about SS using one of the credit bureaus to establish your identify when you set up an online account.

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MP123
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by MP123 » Tue Jun 12, 2018 3:00 pm

delamer wrote:
Tue Jun 12, 2018 2:55 pm
marcopolo wrote:
Tue Jun 12, 2018 2:35 pm
LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm

I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?
Frozen credit has no impact on checking SS benefits. Go to this link and create an account with the Soc Sec Administration https://www.ssa.gov/myaccount/. Maybe they use Credit check to verify identity when setting up an account? Even without an account, if you know roughly how much you have earned the last few years, and estimate future earnings, there are numerous calculators that can give you a reasonably good estimate.

As an aside, and not to be harsh, but where are you getting these "impressions"?

There was a thread on the forum about SS using one of the credit bureaus to establish your identify when you set up an online account.
Yes, you'll likely need to un-freeze your credit to sign up on SSA and then re-freeze it. The sign up asks you to verify personal info drawn from credit bureaus. Once that's done you can access the SSA site normally. It does provide an option for two factor authentication (2FA) too.

marcopolo
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by marcopolo » Tue Jun 12, 2018 3:02 pm

delamer wrote:
Tue Jun 12, 2018 2:55 pm
marcopolo wrote:
Tue Jun 12, 2018 2:35 pm
LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm

I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?
Frozen credit has no impact on checking SS benefits. Go to this link and create an account with the Soc Sec Administration https://www.ssa.gov/myaccount/. Maybe they use Credit check to verify identity when setting up an account? Even without an account, if you know roughly how much you have earned the last few years, and estimate future earnings, there are numerous calculators that can give you a reasonably good estimate.

As an aside, and not to be harsh, but where are you getting these "impressions"?

There was a thread on the forum about SS using one of the credit bureaus to establish your identify when you set up an online account.
Yeah, I realized that after i posted, updated my post to indicate credit may be checked to open account.
Perhaps, I was being a bit harsh. My apologies.
Once in a while you get shown the light, in the strangest of places if you look at it right.

delamer
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by delamer » Tue Jun 12, 2018 3:08 pm

LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm
marcopolo wrote:
Tue Jun 12, 2018 10:22 am
Soc Sec is designed to pay back a fairly high percentage for people who have contributed less (bend curve).

I kind of recall form other threads that your income now is closer to $60-$70k? If so, you could easily get into the scenario where your expected benefit is around $1600/mo., even with lots of $0 years. Just something to consider.
supersharpie wrote:
Tue Jun 12, 2018 12:26 pm
The people who pay the least into the system end up receiving an annual benefit that equals 90% of their annual taxable earnings.

Those who averaged only $895 in monthly earnings during their "High 35" will receive $805 in monthly benefits at full retirement age.

Therefore, assuming that you earned, cumulatively, at least $631,000 over the course of your "high 35" your monthly benefit will be at least $1000/month.
delamer wrote:
Tue Jun 12, 2018 12:53 pm
SS has a higher replacement factor for lower income workers. The more you earn, the smaller portion of your wages are replaced by SS.
What?! I put in 6.2% of my income and get 90% out!? How could SS possibly stay solvent? If I'm going to get handed $1000/month, then what am I doing saving 25% of gross? I could get by on saving a lot less and stop being so cheap.
JoeRetire wrote:
Tue Jun 12, 2018 10:48 am
It's not at all hard to check at ssa.gov.
Admiral wrote:
Tue Jun 12, 2018 11:06 am
You don't have to guess. Go on ssa.gov, set up an account, view your earnings records, and look at the estimate. (Estimate assumes you continue to earn at your current salary up to various ages (62, 67,70). Retiring at 50 with no other earned income will of course limit the payout if you've not earned much early in your life.
I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?

Did you average $895 a month in earnings? If not, your replacement rate won’t be 90%.

On average, the replacement rate is around 40%. Higher for lower income; lower for higher income.

JoeRetire
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by JoeRetire » Tue Jun 12, 2018 3:49 pm

LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm
JoeRetire wrote:
Tue Jun 12, 2018 10:48 am
It's not at all hard to check at ssa.gov.
I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?
Thaw your credit, create an account at SSA.gov, then re-freeze.

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telemark
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by telemark » Wed Jun 13, 2018 12:37 am

JoeRetire wrote:
Tue Jun 12, 2018 3:49 pm
LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm
JoeRetire wrote:
Tue Jun 12, 2018 10:48 am
It's not at all hard to check at ssa.gov.
I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?
Thaw your credit, create an account at SSA.gov, then re-freeze.
Or you can walk into any SSA office, show a picture ID, and be issued a code you can use to create an account.

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Sandtrap
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by Sandtrap » Wed Jun 13, 2018 12:43 am

Are you including SS in your planning model?
Nope.
Are the benefits really that high?
On the low side. Which is why I don't include it. Consider it a safety margin at best.
j

AlohaJoe
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by AlohaJoe » Wed Jun 13, 2018 2:47 am

LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm
delamer wrote:
Tue Jun 12, 2018 12:53 pm
SS has a higher replacement factor for lower income workers. The more you earn, the smaller portion of your wages are replaced by SS.
What?! I put in 6.2% of my income and get 90% out!? How could SS possibly stay solvent?
You're not putting in 6.2% of your income. You're putting in 12.4% of your income. And you pay in for (on average) 62-20 = 42 years and get paid out for (on average) 20 years.

But Social Security is not pre-funded, it is pay-as-you-go, so thinking about it in terms of "I paid in X, I should get Y back" are not really the right way to think about it.

JoeRetire
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by JoeRetire » Wed Jun 13, 2018 6:53 am

telemark wrote:
Wed Jun 13, 2018 12:37 am
JoeRetire wrote:
Tue Jun 12, 2018 3:49 pm
LiterallyIronic wrote:
Tue Jun 12, 2018 2:29 pm
JoeRetire wrote:
Tue Jun 12, 2018 10:48 am
It's not at all hard to check at ssa.gov.
I'm under the impression that it won't be that easy to check. I don't think I can check it with my credit being frozen, which I froze after the Experian leak. Can I get the information at my local SS office?
Thaw your credit, create an account at SSA.gov, then re-freeze.
Or you can walk into any SSA office, show a picture ID, and be issued a code you can use to create an account.
Yup. That's another easy way.

craimund
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by craimund » Wed Jun 13, 2018 7:08 am

investingdad wrote:
Sat Jun 09, 2018 7:40 am
I have not used social security in any retirement planing model since I began modeling back in my 20s. Just today I tried an SSA calculator to estimate my benefits. I told it I would stop earning at 54 and entered my yearly earnings up to this year. I'm 44.

The result was a monthly benefit of $1600 in today's dollars starting at 62.

First, can that possibly be correct? Am I really going to get 20k a year in benefits? My wife has higher earnings and we are the same age. 40k a year in benefits?

Like I said, I hadn't spent much time looking at SS and I never include it in my planing. Because, holy crap, if we really do get those types of benefits in 18 years it radically alters my model.
I am including SS. I am calculating a present value of the future expected payments and adding this amount to my assets to calculate a withdrawal rate which includes SS. The trick is what discount rate to use.

SS benefits are actually quite good especially considering they are inflation adjusted. Benefits may be reduced somewhat in the future due to shortfalls. However, my thinking is the shortfall will be addressed by tax increases on earned income and increasing the retirement age for younger people which will not affect me. Also, I am 53 so it would be political suicide for Congress to mess with benefits for my age group.
"When you ain't got nothing, you got nothing to lose"-Bob Dylan 1965. "When you think that you've lost everything, you find out you can always lose a little more"-Dylan 1997

Admiral
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by Admiral » Wed Jun 13, 2018 7:25 am

Just as an aside, I thought speculation about future tax/law changes were forbidden on the board? I've been flagged for this in the past, so I'm just curious how so many of these posts have not been removed....? :confused Seems like nothing but speculation.

bberris
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by bberris » Wed Jun 13, 2018 7:26 am

It's a little weird that people here think their stock market investments are ironclad guarantees but social security is hopelessly lost.

Austintatious
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by Austintatious » Wed Jun 13, 2018 8:09 am

Admiral wrote:
Wed Jun 13, 2018 7:25 am
Just as an aside, I thought speculation about future tax/law changes were forbidden on the board? I've been flagged for this in the past, so I'm just curious how so many of these posts have not been removed....? :confused Seems like nothing but speculation.
Actually, those posting here have shown remarkable constraint in their commentary, clearly striving to stay on the forum-relevant side of this discussion re Social Security and staying away from the minefield. Knowing and determining how to deal with Social Security is a vital part of one's retirement planning for most Americans, whether one chooses to admit it or not. In that respect, it's likely impact on our personal futures, including its fiscal viability, are factors relevant to the core issues typically discussed on the forum. It's just another income stream and a discussion of whether it's likely to be there when we will most need it falls squarely within the "meat and potato" subjects typically discussed on the forum. Is one's reliance on annuities as a source of income in retirement wise or even reasonable? What about relying on one's investments in the stock market for a dependable income stream? Anyway, this discussion about relying on Social Security is no different, at least, so far. And, bberris, your comment is a pretty good one, I suggest.

SGM
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by SGM » Wed Jun 13, 2018 8:50 am

I don't understand why some people think SS payout is too little to be concerned with. We will get $60k at age 70 for the two of us. I would need $1.5 MM to have a 4% withdrawal rate of $60k. If I were to buy a SPIA it would cost somewhat less to generate a $60k income stream. Even with a large portfolio reducing the need to take withdrawals by $60k per year is significant.

dbr
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by dbr » Wed Jun 13, 2018 9:01 am

SGM wrote:
Wed Jun 13, 2018 8:50 am
I don't understand why some people think SS payout is too little to be concerned with. We will get $60k at age 70 for the two of us. I would need $1.5 MM to have a 4% withdrawal rate of $60k. If I were to buy a SPIA it would cost somewhat less to generate a $60k income stream. Even with a large portfolio reducing the need to take withdrawals by $60k per year is significant.
Right. As I mentioned before just discarding the existence of SS out of cynicism is really just as bad planning as being overoptimistic. If a person wants contingencies and hedges against things not being as hoped for that reasoning should be made explicit and not just used as an excuse to not think about something. A better planning process is to consider how sensitive the plan outcome is to different assumptions to identify what one should care about.

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CyclingDuo
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by CyclingDuo » Wed Jun 13, 2018 9:12 am

investingdad wrote:
Sat Jun 09, 2018 7:40 am
I have not used social security in any retirement planing model since I began modeling back in my 20s. Just today I tried an SSA calculator to estimate my benefits. I told it I would stop earning at 54 and entered my yearly earnings up to this year. I'm 44.

The result was a monthly benefit of $1600 in today's dollars starting at 62.

First, can that possibly be correct? Am I really going to get 20k a year in benefits? My wife has higher earnings and we are the same age. 40k a year in benefits?

Like I said, I hadn't spent much time looking at SS and I never include it in my planing. Because, holy crap, if we really do get those types of benefits in 18 years it radically alters my model.
Yes - that could be correct for you. :beer

Yes, it is an income stream that was initially designed to not provide all of one's retirement income, but certainly impact one's retirement planning model. In our opinion, you should include it in your plans. Ditto for those who have pension plans (we have one in our household).

As everyone has said, sign up for my Social Security. It updates your account every year based on your reported wages that include up to the maximum taxable earnings for SS ($128,400 in 2018). It's based on the 35 years that you make the most. My first year paying SS tax was in the mid 1970's, so each year I have worked those lower income years are thrown out and replaced by the higher earning years. If you sign up for my Social Security, it also allows you to view your earnings history and report any mistakes that may appear (such as a missing year of earnings, or incorrect amounts).

We do use SS in our planning model. I remember well our initial financial advisor at IDS way back in the late 80's saying "SS may not be around when you retire..." and then proceeding to sell us some hefty front-end load/back-end load products as we were young and naive (uninformed about ER and AUM fees at the time). I remember the same comment about six or seven years later from our CPA. And we read similar comments here on these forums and other places as well. It's always been a hot topic, clickbait, fear/rumor mongering fodder. For better or worse, we rank most of it as noise. :P

I-Orp automatically calculates the current scenario of a reduction of 23% in SS benefits beginning in 2035. So it is a realistic planning tool with that built into the model. You can also check the optimistic box that there will be no reduction in benefits to compare for your planning. Likewise, as a couple we run it with both scenarios of each spouse not living beyond a certain age to see how it impacts the planning for the survivor.

Another leg of the stool or chair to be considered is investing in your own health for the highest quality of life and perhaps longevity. I don't get too excited about all of the proclamations US lifespans are getting longer, or dramatically longer - especially with the rising weight and associated health problems as a result. The Washington Post reported that for the first time since 1993, lifespans shortened in the US in 2015:

https://www.washingtonpost.com/national ... 4bd667de84

The last time SS was changed (1983), the average American has put on weight (which leads to health issues that are showing up in the above linked article from the Washington Post):

https://www.cbsnews.com/news/americans- ... startling/

This has us in the camp that SS will most likely work out just fine in some shape or form. (No pun intended. :mrgreen: )

You can't out exercise a bad diet. Nor can you out "pill" a bad diet. Poor health as a result of our own unhealthy eating/living is the ultimate ER and AUM fee to pay. Pay too high of a fee, and you won't have to worry about living much past 78. It also is a good reminder that one of our best investments (our body and health) is a crucial investment that needs just as much attention as everything else as we make all of these financial plans.

We suggest you include SS in your plans as one of the income streams by at least using your FRA and beyond (depending on when you plan to claim).

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by Small Law Survivor » Wed Jun 13, 2018 9:34 am

SGM wrote:
Wed Jun 13, 2018 8:50 am
I don't understand why some people think SS payout is too little to be concerned with. We will get $60k at age 70 for the two of us. I would need $1.5 MM to have a 4% withdrawal rate of $60k. If I were to buy a SPIA it would cost somewhat less to generate a $60k income stream. Even with a large portfolio reducing the need to take withdrawals by $60k per year is significant.
Agree, and in same situation - in three years, age 70, my wife and I will receive 60,000/year in social security. This will bring our withdrawal rate from its current 4% to under 3% per year. This is a significant financial consideration for us, and I am counting on it. If it only last until I'm in my early '80s, and is then reduced due to SS insolvency issues, it will still be significant.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by investingdad » Wed Jun 13, 2018 10:53 am

I locked down MySocialSecurity two years ago when I learned that was the path taken to my identity being stolen... documented on this site.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by Admiral » Wed Jun 13, 2018 10:59 am

investingdad wrote:
Wed Jun 13, 2018 10:53 am
I locked down MySocialSecurity two years ago when I learned that was the path taken to my identity being stolen... documented on this site.
Two-factor authentication now. Certainly not hack-proof, but better.

Rupert
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by Rupert » Wed Jun 13, 2018 11:01 am

investingdad wrote:
Sun Jun 10, 2018 4:54 pm
Thanks for all the replies.

I think because I've just assumed over the last 20 years that there'd be no social security and it was up to is to take care of ourselves, i was a little floored by the projection of payments.

I'll continue to assume zero for now.

Once in our mid 50s in a decade, I'll consider it for a revenue stream.
I think this is a safe approach. The older you get, the less likely any major future changes to Social Security will apply to you. I've always thought that you can stop worrying about it once you are over 50 or so. Young workers just entering the work force are more likely to be severely impacted.

dbr
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by dbr » Wed Jun 13, 2018 11:06 am

In general retirement planning is an exercise in successive approximation. For someone in their 20's or 30's, even 40's, SS is one of the least of all the uncertainties that apply. How your career will go, whether or not you will marry or if married divorce, life altering events affecting you and your family, and many others loom larger. That does not even mention the luck of how any specific financial scenario will develop from now compared to the ex ante average expectation.

yeahman
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by yeahman » Wed Jun 13, 2018 12:14 pm

Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
Last edited by yeahman on Wed Jun 13, 2018 1:47 pm, edited 1 time in total.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by BigMoneyNoWhammies » Wed Jun 13, 2018 12:24 pm

investingdad wrote:
Sat Jun 09, 2018 7:40 am
I have not used social security in any retirement planing model since I began modeling back in my 20s. Just today I tried an SSA calculator to estimate my benefits. I told it I would stop earning at 54 and entered my yearly earnings up to this year. I'm 44.

The result was a monthly benefit of $1600 in today's dollars starting at 62.

First, can that possibly be correct? Am I really going to get 20k a year in benefits? My wife has higher earnings and we are the same age. 40k a year in benefits?

Like I said, I hadn't spent much time looking at SS and I never include it in my planing. Because, holy crap, if we really do get those types of benefits in 18 years it radically alters my model.
I do not incorporate any SS into my retirement planning. There is almost no chance the government lets SS default, but by the time I retire decades from now I fully expect the benefit will be drastically reduced to the point of irrelevance. I plan as though it won't be there at all, and if it is when the time comes then it's a cherry on top.

dbr
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by dbr » Wed Jun 13, 2018 1:41 pm

BigMoneyNoWhammies wrote:
Wed Jun 13, 2018 12:24 pm
investingdad wrote:
Sat Jun 09, 2018 7:40 am
I have not used social security in any retirement planing model since I began modeling back in my 20s. Just today I tried an SSA calculator to estimate my benefits. I told it I would stop earning at 54 and entered my yearly earnings up to this year. I'm 44.

The result was a monthly benefit of $1600 in today's dollars starting at 62.

First, can that possibly be correct? Am I really going to get 20k a year in benefits? My wife has higher earnings and we are the same age. 40k a year in benefits?

Like I said, I hadn't spent much time looking at SS and I never include it in my planing. Because, holy crap, if we really do get those types of benefits in 18 years it radically alters my model.
I do not incorporate any SS into my retirement planning. There is almost no chance the government lets SS default, but by the time I retire decades from now I fully expect the benefit will be drastically reduced to the point of irrelevance. I plan as though it won't be there at all, and if it is when the time comes then it's a cherry on top.
As you get closer to retirement you will have better information regarding what to expect. That applies to all the other factors involved as well.

delamer
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by delamer » Wed Jun 13, 2018 2:23 pm

yeahman wrote:
Wed Jun 13, 2018 12:14 pm
Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
:D

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by JoeRetire » Wed Jun 13, 2018 2:35 pm

yeahman wrote:
Wed Jun 13, 2018 12:14 pm
Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
Mmm, gravy...

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galeno
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by galeno » Wed Jun 13, 2018 3:05 pm

Social security taxes can be raised. The roof can be lifted or eliminated. COLAs can be adjusted down. Retirement age can be raised. There are so many ways the SS system in the USA can be fixed.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.4%. Port Yield = 2.0%. Term = 35 yr. FI Duration = 6.2 yr. Portfolio survival probability = 100%.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by dbr » Wed Jun 13, 2018 3:06 pm

galeno wrote:
Wed Jun 13, 2018 3:05 pm
Social security taxes can be raised. The roof can be lifted or eliminated. COLAs can be adjusted down. Retirement age can be raised. There are so many ways the SS system in the USA can be fixed.
Right, and the result will be a moderation of benefits and not some cynical "There will be no SS."

Austintatious
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by Austintatious » Wed Jun 13, 2018 3:18 pm

Here's an article currently posted on Jonathan Clements' blog "Humble Dollar" that has a brief discussion relevant to this thread.

http://www.humbledollar.com/2018/06/laying-claim/

First part of the text:
IN MY WORK as a financial planner, there’s one topic that always seems to raise an eyebrow: Social Security. When people see projections of future retirement benefits, they often respond with skepticism. My sense is that media reports, questioning the system’s solvency, have led people to discount the value of Social Security benefits—or disregard them entirely.

In my view, this is a mistake. While no one can guarantee what Social Security will look like in the future, it’s important to understand the basics of how the system works. This understanding may help you maximize your own benefits and avoid costly mistakes.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by marcopolo » Wed Jun 13, 2018 5:16 pm

yeahman wrote:
Wed Jun 13, 2018 12:14 pm
Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
That still sounds pretty risky, can you really count on working past age 50?, with all the age discrimination. :happy
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by The Wizard » Wed Jun 13, 2018 5:21 pm

marcopolo wrote:
Wed Jun 13, 2018 5:16 pm
yeahman wrote:
Wed Jun 13, 2018 12:14 pm
Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
That still sounds pretty risky, can you really count on working past age 50?, with all the age discrimination. :happy
Depends on your field of employment.
In professional sports, certainly not...
Attempted new signature...

bberris
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by bberris » Wed Jun 13, 2018 6:18 pm

yeahman wrote:
Wed Jun 13, 2018 12:14 pm
Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
I embrace all of that, and a stock market crash wiping out all equity. Then hyperinflation wiping out the bonds. I'm happier already seeing that all that hasn't happened yet.

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galeno
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by galeno » Wed Jun 13, 2018 6:23 pm

In Costa Rica it's almost impossible to find or keep a legitimate job if over 50 years old unless you have a professional degree.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.4%. Port Yield = 2.0%. Term = 35 yr. FI Duration = 6.2 yr. Portfolio survival probability = 100%.

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cockersx3
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by cockersx3 » Wed Jun 13, 2018 8:11 pm

adam1712 wrote:
Sat Jun 09, 2018 1:01 pm
mdroz888 wrote:
Sat Jun 09, 2018 7:52 am
Don't forget to keep this in mind:

http://chicago.cbslocal.com/2018/06/07/ ... -out-2034/
For younger people, I think it makes sense to not assume full, current SS benefits but useful to remember there will likely be some benefits.

There's likely 3 possible changes:
1) Based on the article, if nothing is done, the current system could pay out 79% of current benefits once the reserves are depleted in 2034.

2) There could also be increased SS taxes so the payouts are close to the same as they are now.

3) There could be means testing based on your other retirement income or greater benefit reductions for previous higher earners. Harder to plan for but also means you have some insurance if your other investments and career don't go as well as you hope.
There's also option 4 (perhaps better called Option 2B) - which is removing the earnings cap on social security taxes as described in this article. It amazes me that this is still a thing - as a high earner, I would have a tough time justifying the "raise" i get each year to others. It must be because those that are not affected by it almost certainly don't know it occurs. (I didn't realize it until after it first happened to me, lo those many years ago.)

Again, not trying to get political here, just wanted to point out that there are lots of options out there on this problem. It is totally solvable.

Regarding the original post - yes, I do count that in my planning. That said, I also understand that plans for things that are 20-ish years out have only limited use. The most important thing is to remain flexible in all of your planning.

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randomizer
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by randomizer » Wed Jun 13, 2018 8:29 pm

Nope. I am young enough that I make no assumptions about government benefits 30 years from now. Too much can change.
75:25

wrongfunds
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by wrongfunds » Thu Jun 14, 2018 9:54 am

randomizer wrote:
Wed Jun 13, 2018 8:29 pm
Nope. I am young enough that I make no assumptions about government benefits 30 years from now. Too much can change.
BUT you are perfectly happy about making certain assumption about how US stock market will be doing from 30 years from now and have no fear that Chinese/Indians would have taken over the entire country.

LiterallyIronic
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by LiterallyIronic » Thu Jun 14, 2018 10:09 am

marcopolo wrote:
Wed Jun 13, 2018 5:16 pm
yeahman wrote:
Wed Jun 13, 2018 12:14 pm
Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
That still sounds pretty risky, can you really count on working past age 50?, with all the age discrimination. :happy
As a software developer, this is exactly why I'm trying to have enough to retire at 50. If I fail at that, then I at least want to have my house paid off by 50 so I can squeak by on a lower income until retirement, if necessary.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by annielouise » Thu Jun 14, 2018 10:33 am

LiterallyIronic wrote:
Thu Jun 14, 2018 10:09 am
marcopolo wrote:
Wed Jun 13, 2018 5:16 pm
yeahman wrote:
Wed Jun 13, 2018 12:14 pm
Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
That still sounds pretty risky, can you really count on working past age 50?, with all the age discrimination. :happy
As a software developer, this is exactly why I'm trying to have enough to retire at 50. If I fail at that, then I at least want to have my house paid off by 50 so I can squeak by on a lower income until retirement, if necessary.
I know that it is just one data point, but based on my husband's recent layoff/job search (age 53), I would suggest that this concern has been, perhaps, overblown. While salaries are slightly lower, job offers in software development are coming to fruition in less than 2 months.

We have paid off our house ($380k), live pretty frugally (~$65k/yr), and have saved ok for retirement (net worth is a bit over $2M). If it weren't for health care cost and our son's health concerns, we could probably retire now.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by BigMoneyNoWhammies » Thu Jun 14, 2018 10:35 am

dbr wrote:
Wed Jun 13, 2018 1:41 pm
BigMoneyNoWhammies wrote:
Wed Jun 13, 2018 12:24 pm
investingdad wrote:
Sat Jun 09, 2018 7:40 am
I have not used social security in any retirement planing model since I began modeling back in my 20s. Just today I tried an SSA calculator to estimate my benefits. I told it I would stop earning at 54 and entered my yearly earnings up to this year. I'm 44.

The result was a monthly benefit of $1600 in today's dollars starting at 62.

First, can that possibly be correct? Am I really going to get 20k a year in benefits? My wife has higher earnings and we are the same age. 40k a year in benefits?

Like I said, I hadn't spent much time looking at SS and I never include it in my planing. Because, holy crap, if we really do get those types of benefits in 18 years it radically alters my model.
I do not incorporate any SS into my retirement planning. There is almost no chance the government lets SS default, but by the time I retire decades from now I fully expect the benefit will be drastically reduced to the point of irrelevance. I plan as though it won't be there at all, and if it is when the time comes then it's a cherry on top.
As you get closer to retirement you will have better information regarding what to expect. That applies to all the other factors involved as well.
This is true; it is difficult at best to try to project where tax law and entitlement programs will be multiple decades in the future. After working for Congress the last few years, I'm inclined to believe that we'll be in a situation where we are forced to have tax rates be significantly increased and that SS benefits will be drastically reduced (assuming no wholesale overhaul of how SS functions) because the govt will be forced to do so as our national debt reaches a tipping point and SS/Medicare/Medicaid eventually balloon to the point where they collectively make up the entirety of our discretionary spending absent a drastic increase in taxes. There's a lot of road to walk between now and then though, so who really knows.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by marcopolo » Thu Jun 14, 2018 10:48 am

LiterallyIronic wrote:
Thu Jun 14, 2018 10:09 am
marcopolo wrote:
Wed Jun 13, 2018 5:16 pm
yeahman wrote:
Wed Jun 13, 2018 12:14 pm
Plan for no SS, no pension, 0% real growth, elimination of Roth and HSA tax advantages, inability to work past 65, death of a spouse, a 100-year lifespan with the last 20 years in assisted living, and a zombie apocalypse, and you'll be fine. If things turn out rosier, that's just extra gravy.
That still sounds pretty risky, can you really count on working past age 50?, with all the age discrimination. :happy
As a software developer, this is exactly why I'm trying to have enough to retire at 50. If I fail at that, then I at least want to have my house paid off by 50 so I can squeak by on a lower income until retirement, if necessary.
I was actually being a bit facetious because i think all the scary stories are bit overblown. But, I understand the concern. There has been a lot of discussion about this in recent threads.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by randomizer » Thu Jun 14, 2018 4:17 pm

wrongfunds wrote:
Thu Jun 14, 2018 9:54 am
randomizer wrote:
Wed Jun 13, 2018 8:29 pm
Nope. I am young enough that I make no assumptions about government benefits 30 years from now. Too much can change.
BUT you are perfectly happy about making certain assumption about how US stock market will be doing from 30 years from now and have no fear that Chinese/Indians would have taken over the entire country.
Where do you get that idea? I have a world cap-weighted portfolio. The only thing I know for sure is that I don't want to place any bets on any individual country.
75:25

LiterallyIronic
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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by LiterallyIronic » Fri Jun 15, 2018 9:36 am

annielouise wrote:
Thu Jun 14, 2018 10:33 am
We have paid off our house ($380k), live pretty frugally (~$65k/yr), and have saved ok for retirement (net worth is a bit over $2M).
TIL $65k/year is "pretty frugally" and $2M is "saved okay." :P

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by annielouise » Fri Jun 15, 2018 2:08 pm

LiterallyIronic wrote:
Fri Jun 15, 2018 9:36 am
annielouise wrote:
Thu Jun 14, 2018 10:33 am
We have paid off our house ($380k), live pretty frugally (~$65k/yr), and have saved ok for retirement (net worth is a bit over $2M).
TIL $65k/year is "pretty frugally" and $2M is "saved okay." :P
In my previous job, I worked with so many clients who earned under $20k, that $65k seems extravagant to me. On the other hand, hanging out here at BHs, makes me feel behind on retirement savings. Pessimism at work!

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by xb7 » Fri Jun 15, 2018 8:12 pm

I'm really new to the Boglehead universe, and just am reading through some of the more interesting threads at the top of the pile. This is one of the longer ones, but I was surprised in skimming through that I didn't see any discussion of HOW you factor SS into your planning (aka asset allocation) model. Treat it as domestic bond as a proxy, or ... ? It's essentially an inflation-adjusted annuity, for which one can calculate a present value given some equivalent interest rate, an actuary table and an estimate for monthly or annual payout, which in turns has some variables to select.

I went through this drill recently, trying to figure out what I might get from SS and then what the present value of the SS "annuity" might be, and considering that as sort-of belonging in the "domestic bond" bucket. Since it's annuity-like, the value declines as you age --- i.e., approach death. So it does something a bit odd really to the glide path: You get this sudden spike in this bond-like asset starting, well for me at age 70-1/2, and then that 'new' asset value declines from there, approximated by the (somewhat depressing) acutary table prediction of my death. And of course factoring my wife's SS benefit into this further complicates things, as indeed picking some sort of percentage multiplier to account for the demographic trap our country is in --- i.e., reducing the value based on what I wildly guess I might get from the system relative to what the government currently suggests that I might get. Lots of variables, but as I get older, figuring if and whether this impacts my selected asset allocation glide path gets to be more worthwhile to think about. I think.

As some have suggested, the magnitude of the total portfolio in question is significant; people with relatively less assets definitely should factor SS in, whereas if the asset base is high enough, it becomes more and more discretionary whether you want to bother I think, again given multiple factors to guesstimate, resulting in a fairly wide range of possible outcomes (the SS version of Monte Carlo anyone?).

My feeling at this point is that starting at age 70 or so, I might just flatten out the glide paths for a few years, i.e., in a typical glide path the percentage of domestic stocks and international stocks declines with age, so suspend or reduce that decline for 5 - 10 years starting when you first take SS, and then resume the decline after that down to whatever "really old age" percentages seem appropriate. And ditto the upward path of domestic and international bond %'s in the glide path --- flatten those out too. I think that how early I start to flatten and for how many years I flatten it out might be based on how big a percentage the present value of SS plays in my overall asset base --- where of course if the asset base is big enough a person just wouldn't bother.

Logical? Too complicated and over-thinking? This really does seem complicated when written out, but it's not that big a deal to factor in with a glide path laid out in a spreadsheet.

Apologies in advance if there's a separate thread that already deals with this; but it did seem to me to be worth talking not only about "if" but about "how".

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by delamer » Fri Jun 15, 2018 8:58 pm

xb7 wrote:
Fri Jun 15, 2018 8:12 pm
I'm really new to the Boglehead universe, and just am reading through some of the more interesting threads at the top of the pile. This is one of the longer ones, but I was surprised in skimming through that I didn't see any discussion of HOW you factor SS into your planning (aka asset allocation) model. Treat it as domestic bond as a proxy, or ... ? It's essentially an inflation-adjusted annuity, for which one can calculate a present value given some equivalent interest rate, an actuary table and an estimate for monthly or annual payout, which in turns has some variables to select.

I went through this drill recently, trying to figure out what I might get from SS and then what the present value of the SS "annuity" might be, and considering that as sort-of belonging in the "domestic bond" bucket. Since it's annuity-like, the value declines as you age --- i.e., approach death. So it does something a bit odd really to the glide path: You get this sudden spike in this bond-like asset starting, well for me at age 70-1/2, and then that 'new' asset value declines from there, approximated by the (somewhat depressing) acutary table prediction of my death. And of course factoring my wife's SS benefit into this further complicates things, as indeed picking some sort of percentage multiplier to account for the demographic trap our country is in --- i.e., reducing the value based on what I wildly guess I might get from the system relative to what the government currently suggests that I might get. Lots of variables, but as I get older, figuring if and whether this impacts my selected asset allocation glide path gets to be more worthwhile to think about. I think.

As some have suggested, the magnitude of the total portfolio in question is significant; people with relatively less assets definitely should factor SS in, whereas if the asset base is high enough, it becomes more and more discretionary whether you want to bother I think, again given multiple factors to guesstimate, resulting in a fairly wide range of possible outcomes (the SS version of Monte Carlo anyone?).

My feeling at this point is that starting at age 70 or so, I might just flatten out the glide paths for a few years, i.e., in a typical glide path the percentage of domestic stocks and international stocks declines with age, so suspend or reduce that decline for 5 - 10 years starting when you first take SS, and then resume the decline after that down to whatever "really old age" percentages seem appropriate. And ditto the upward path of domestic and international bond %'s in the glide path --- flatten those out too. I think that how early I start to flatten and for how many years I flatten it out might be based on how big a percentage the present value of SS plays in my overall asset base --- where of course if the asset base is big enough a person just wouldn't bother.

Logical? Too complicated and over-thinking? This really does seem complicated when written out, but it's not that big a deal to factor in with a glide path laid out in a spreadsheet.

Apologies in advance if there's a separate thread that already deals with this; but it did seem to me to be worth talking not only about "if" but about "how".

One school of thought is that you don’t factor SS, or a pension, directly into your asset allocation.

You account for SS in your planning depending on how large a portion of your expenses are covered by it. The more SS covers, the less dependent you are in your portfolio. And vice versa.

Some Bogleheads believe if you are less dependent on SS, then you can afford to take more risk with your portfolio since you can handle the volatility. Others believe that you should take less risk with your portfolio, because why take unnecessary risk?

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Re: Are you including SS in your planning model? Are the benefits really that high?

Post by tadamsmar » Fri Jun 15, 2018 10:10 pm

new2bogle wrote:
Tue Jun 12, 2018 10:40 am
mdroz888 wrote:
Sat Jun 09, 2018 7:52 am
Don't forget to keep this in mind:

http://chicago.cbslocal.com/2018/06/07/ ... -out-2034/
Oh please. The only way SS funds run out is if current congress stops funding it while still looting from it.
The link does not say SS funds will run out. It says a 21% cut in 2034 under current law. That's when the reserve fund runs out so that the system would have to be funded on current receipts. That is if congress makes no changes.

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