Key Points
Like most people, I expect to receive Social Security benefits in retirement.
But I want to be careful not to rely too heavily on it because of its uncertain future.
My retirement plans are based on covering my costs with fewer or no benefits.
Like most people, I expect to get Social Security benefits as a retiree. However, I’m not making these benefits a major focus of my retirement planning. In fact, I want to save enough to retire without counting on Social Security at all.
That’s not because I believe benefits will disappear before I reach retirement age, as some people fear. But I do have some other valid concerns about Social Security that have made me wary of making the benefits a major part of my retirement plan. Here are three of them.
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1. The future of benefits is uncertain
One of the biggest reasons I’m not planning to rely too heavily on Social Security is the program’s uncertain future. Social Security’s trust fund is expected to run out as soon as 2032. While I know that the program will still be able to pay the majority of promised benefits if that happens (around 78%), that would still be a big cut to absorb if I needed Social Security income to pay the bills.
The bigger concern I have, though, is that lawmakers will probably have to take action to stop that cut, because it would be a disaster for retirees. This could take the form of raising the full retirement age, increasing Social Security taxes, or limiting benefits to high earners, among other suggestions on the table.
Since I have no control over Social Security’s future, what changes are made, or when lawmakers set the full retirement age for collecting benefits, I don’t want to expect income that doesn’t show up when I need it.
2. I plan to retire early but claim late
I’m also not making Social Security a big part of my retirement planning because I expect to have many years when I am retired but not getting any income from Social Security.
Ideally, I’ll retire early, but I don’t want to claim Social Security until I reach 70 to maximize delayed retirement credits. Since most people end up with more lifetime Social Security income if they wait, I’m hoping to do that to maximize the amount I collect each month and over time.
That means I’ll need enough other income from my 401(k) to support me until I reach age 70, even though I want to retire at least a decade earlier. I’ll need a pretty big nest egg for that goal.
3. Benefits replace 40% of pre-retirement income at best
Finally, the last big reason I’m not focusing too much on Social Security is that there’s an inherent limit on the income these benefits can generate. Benefits are only designed to replace around 40% of income at most. Since I want to travel a lot in retirement as well as spoil any grandkids I’m lucky enough to have, I want to replace at least 100% of my earnings.
I am aggressively saving in retirement plans to make sure I can do that. That’s my focus, not on Social Security benefits that I can’t control and that have an upper limit I can’t exceed.
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