TL;DR: Social Security matters.

My wife & I are 35. If we quit working today, at 70 we are entitled to a combined $50k in annual SS in today’s dollars. (Source: SSA.tools)

$50k real is significant. Let’s be conservative and say that a 70 year old couple spends $100k per year. That’s SS meeting half of your required expenses.

Current law with current demographics shows that SS can fulfill 79% of benefits into perpetuity.

Assuming SS will disappear means working decades longer than needed

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They just keep upping the age.

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What do you mean? The last time the ssn retire age was changed was in 1983… and it was only by a few years. In “real” terms, the retirement age has been decreasing given the growth in life expectancy

Right but imagine what you would make at 70 if you threw 6.2% of you income into a bucket you control every year.

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AD - Not sure what point you’re making here?
They would have been worse off without social security as a safety net.

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You know what? I just had a change of heart on this. The more people who mistakenly believe SS will go to zero, they more they will overwork and pay into the system.

So yeah, SS will go to zero, folks. Work until you drop!

likefunny

Totally agree.
At worst social security might get a little less generous, but significant cuts are unlikely.

People saying it will disappear are living in fantasyland.

likefunny

I don’t think you understood the OP

likefunny

This sounds a bit high - the value calculated on the SS site and calculators like bankrate assume you keep working and making money at a growth rate each year all the way until you take SS.

You and your wife have enough credits, but you still have to keep working to get up to the potential.

If you zero out average future annual salary, I’d expect it to drop to ~20k each (though it will depend on your wary earning years). This will prob be partially funded, so could easily actually come out to $15k each.

Either way, buying power of $50k in 35yrs is ~$17k today.

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Seems you you & your partner have had healthy earnings over your careers so far, (maxed out at least 10 years I’d guess?) but seems legit.
SSA benefits are indexed to wages until you retire so historically this has meant benefits will likely be a bit MORE than currently projected in real terms. Though this year wages rising slower than inflation.

Wow!!! I’m around the same age. I had noo idea social security benefits could be anywhere close to 50k for a married couple. I thought it was more like. 10k

upliftinghelpful

So interesting. This has been a great post

If they want to save SS then they should just get rid of the income cap on it and make us high earners continue to contribute into it

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Or raise the tax rate a little, or appropriate funds from another source.
They have a lot of options it’s just a question of which one they’ll choose.
As US GDP continues to rise its inconceivable that politicians will make large cuts to benefits to people who can no longer work.

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One thing that a lot of people over look or don’t consider is the military. Military retirement pay is for life and so is VA disability. Both also increase every year with the cost of living increase. I retired a month and a half ago and get $75k from both combined and will be over $80k next year. The military isn’t just about war fighting. It’s also about developing people into leaders. Not boasting, just saying it’s a viable option for 20 years of service with a free bachelors degree and job security no matter what is going on in the economy for good money that pays out until the day you die.

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I read SS benefits are based on the average of your highest earnings over a 35 year period.

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VP - agreed, due to the “bend points”
The maximum benefit requires 35 years of full contributions up to the annual cap.
(The benefit earning mechanism is not really an average, realistically it’s cumulative.)

But only the first 10% of these max’d contributions gets a full weighting to qualify for benefits.
10-50% contribution get approx one-third weighting.
50-100% get approx one-six weighting.

So if you’re lucky enough to contribute to the cap for 15 years then you’ve already qualified for well over half of the max benefit.
Lower earners who don’t hit the annual cap however benefit more from working closer to the full 35 years, especially if they haven’t hit the upper “bend point”

I’m simplifying somewhat. SSA website goes into the full detail.

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Here’s another factor I take into account: Social Security survivor benefits. Made me rethink the need for life insurance.

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You pick the greater of the 2. You don’t get both for a deceased spouse

Given that you have the credits today, what would the impact if you retired at 40?

The numbers above are accurate for me and my wife retiring today at 35. If we keep working to 40 we’ll get close to $60k real benefits

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Does Social Security keep up with inflation? And what's the deal with the whole "fully funded in perpetuity"? Isn't the government good for the full amount even if current payroll taxes don't cover it?

They would have to pull the money from elsewhere and it’s potentially a huge amount of money to pull from somewhere else. If the working population is less than the retired population then there is a funding issue.


Since there is a cap such that if you make more than “x” amount your income over that limit is no longer taxed towards social security then there is a potential funding issue. That becomes a real funding issue when most of the proportionate earning income is concentrated in a small amount of people making more than the cap - which happens when there is a wealth divide gap as is happening now. When the system was set up, no one contemplated the type of enormous salaries some people earn or that income would be so disparate between the classes.

People who don’t make much money don’t contribute much to the system. So, they aren’t able to fully support current retirees - particularly if those retirees made enough money that they will be paid the maximum possible benefit.

Also, companies by and large no longer provide pensions and people don’t stay with employers long enough to receive them anyway. So, the generations after the baby boomers are going to have significant issues with financially surviving retirement. Not all, but many.

The Great Depression era saved every penny so they could pass it on to their kids (baby boomers) so those kids would never suffer like they suffered during the Great Depression because it was so traumatizing. Those Baby Boomers grew up in those households and felt the pain of all of those savings practices and hated it, by the way. So many of the Great Depression era had pensions that supplemented social security and allowed them to accumulate wealth even as factory workers. I am really impressed by the amount of wealth some factory workers have been able to accumulate.

Some Baby Boomers are/will receive pensions or buy-outs (and some will receive nothing). They seem less inclined to save to pass on wealth to their children (which is ok, to each their own). They want to live and enjoy retirement - which is good in that it pumps that money back into the economy. They are/will receive inheritances and will spend as much of it as they need/want.

Gen X has had some good financial stability and suffered through some rockier times. They won’t, generally have pensions and I think there will be less buy-outs (because a potential pension that needed to be bought out was never on the table). They will have IRAs or 401(k)s IF they contributed to them. They are less likely to inherent from their Boomer parents - but some may inherit directly from their grandparents who sense Boomers are not as interested in passing wealth. But, some will/are experiencing the benefits of stepping into those big salaries as Boomers step out. So, that will help them further save. I think many of them also know not to rely on inheriting money. So, they are hopefully saving.

Millennials and later generations are still up in the air. They have had some hard financial times, but they have also learned how to save tightly by necessity. Some have gotten creative and done really well. They are not necessarily living ideally as many co-share space, etc. but they know how to save and how to spend less (which may become an issue as they get older if they are saving instead of injecting money back into the economy).

These are generalizations, of course, and apply to the middle class more than the upper class (or ultra upper class). The ultra upper class is likely to always have extra money to pass to the next generation.

The lower class knows the value of having even the slightest assistance an inheritance gives. They try to save, but it’s hard to save when there are so little assets to begin with. They keep the economy going because money in immediately goes back out by necessity.

Bottom line, though, is that there are likely going to be a lot of people who will need some government assistance as they get older because pensions are going away. If social security goes away then other government assistance will need to step in (housing assistance, food stamps, etc.).

We can’t just defund social security or stop providing some type of assistance to people who otherwise are unable to get by.

If we go to a “every person for themselves” approach then our society will falter. When people have nothing and no safety net to fall back on and are desperate, then they have nothing to lose in challenging the system.

We can’t say to poor elderly people “sorry you didn’t save for retirement, but that’s on you. Go be homeless.” I mean, we could, but I hope that’s not the society we are heading towards where there are a bunch of homeless elderly people in wheelchairs dying in our streets.

likesmartupliftinghelpful

I could be wrong as I took the CPA a couple years back but doesn’t the SSA benefits decrease depending on total income at retirement? So at $100k wouldn’t it be less than $50k income from ssa?

SS benefits are taxed higher if you have higher income. But it’s nowhere as bad as 50% tax rate

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What job lets you work until 70 🤔

Welcome to the world of your second career as a grocery bagger until your social security kicks in. My goal is to be a librarian in my second career - if libraries still exist then.

funny

I’m 32 and I’ve already contributed enough into Social Security. For those that think there won’t be enough the IRS can always increase the wage base of social security to make it seem like their “taxing the rich”. I’m not depending on social security at all. Sometimes I wish we could opt out of it to be honest.

Of course you want to opt out as a high earner because social security is redistributive. What’s your point? It’s like saying you would like to opt out of income taxes.

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BTW …. You are probably reading the Social Security tool wrong. That $$ amount assumes you continue to work until age 67 at your current salary. If you stop working now, it will change your numbers. You can manually enter your retirement age and it will adjust

Incorrect. Please review my earlier reply to A1

smart

We all know they'll wait until the last minute and then make adjustments to save social security so that the majority of the voting population notices little-to-no impact. The "running out of money", "can't be saved", "needs to be changed", etc. crowds all have valid arguments but you literally cannot expect a country without a safety net like social security to not deal with a plethora of problems.

Like you can crunch numbers and say "oh you'd have more money if you did x, y, and z." But at the end of the day not everyone can or will do x, y, and z. If everyone could or would do it then social security or guaranteed government benefits wouldn't exist in any country in the world.

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