I’m looking forward to claiming Social Security in retirement, but there are some big reasons I don’t want to rely on it.
Although retirement is still decades away for me, planning for retirement has been a top priority for me since entering the workforce. I am an avid saver and have tried my best to choose the right account for my money. I thought about when I wanted to retire and how much it would cost me to retire.
What I haven’t included in my plans so far is Social Security. It’s not because I don’t think I’ll benefit from it, I know it will, but right now trying to plan for it feels like more trouble than it’s worth.
Image source: Getty Images.
Reasons for not planning for future Social Security benefits
You have about 29 years until you can claim Social Security retirement benefits, and that’s if you join at age 62. I plan to delay receiving my check until age 70 to maximize my lifetime benefits. So you actually have about 37 years left until you’re ready to apply.
Many things can happen during that time, and the nature of social security is likely to change as well. The program’s trust fund is expected to be depleted in 2034, according to a recent Congressional Budget Office (CBO) report. If the government cannot find a way to increase social security funding in the long term, it could lead to benefit cuts.
We have no idea what the solution to this solvency crisis will be or when it will arrive. The proposed amendments also include raising taxes on workers, which could affect their ability to save for future retirement. Others include direct benefit reductions and taking actions that result in indirect reductions to beneficiaries, such as cost-of-living adjustment (COLA) reductions and full retirement age (FRA) increases. .
With all of this uncertainty, there is currently no way to determine exactly what future profits will be. We also don’t know how a potential increase in Social Security payroll taxes will affect your ability to save for future retirement. So now I’m saving as much as I can. I would like to fund most of my retirement savings myself so that whatever happens with Social Security doesn’t affect me too much.
Looking beyond 2034
Once I have a better idea of what Social Security will look like a few decades from now, I’ll probably start factoring that benefit into my retirement plan. If I find that I’m contributing more than I should to my retirement account after taking Social Security into account, I may consider retiring early, reducing my current savings rate, or building a larger nest egg for retirement. You may decide to build a .
However, I understand that this approach is not ideal. This is especially not ideal for people who cannot consistently save money for retirement on their own. In this case, it’s okay to use your current Social Security estimate as a starting point when calculating future checks.
The best way to do this is to create a Social Security account. When you set this up for the first time, you’ll need to answer a few identity questions to prove you’re who you say you are. You can then set a username and password for future logins.
Your account has a tool that shows you an estimated monthly benefit amount for each claiming age from 62 to 70, based on your past earnings history and future income projections. You can change these future predictions if you wish. Check the claiming age you’re considering, or choose from a few if you’re not sure which one to choose. Find out how much money you can get from this program based on your current Social Security benefit formula.
If you want to be conservative, you can adjust these estimates for benefit reductions. If the government does nothing to increase funding, the Social Security Administration will have to cut benefits by 23% starting in 2035, and benefits will fall another 5% by 2098, according to a CBO report. I will.
This is the worst-case scenario under current law, so if you plan for this outcome, you probably won’t have to worry about any unpleasant surprises. That being said, you may end up needing to save more than you originally planned. If that’s not possible, you may need to reconsider your retirement schedule. And once you have a clearer idea of what Social Security will look like in the future, it’s a good idea to update your plan.
