I’m Planning for No Social Security Benefits at All in Retirement. Here’s Why.
Social Security is facing some big financial challenges. In the coming years, it will owe more money in benefits than it collects in revenue as baby boomers leave the workforce at full speed and too few workers come in to replace them.
The good news is that Social Security has trust funds it can draw from to keep up with scheduled benefits in the absence of adequate incoming revenue. But once those trust funds run dry — which could happen by 2035, if not sooner — benefit cuts may be on the table.
Still, to be clear, right now, benefit cuts are the worst-case scenario. There’s absolutely no talk of Social Security going away completely and paying no benefits at all. But in spite of that, I’ve made the decision to write it off as far as my retirement goes. Here’s why.
1. Those benefits will only cover a small portion of my living expenses
It’s a good idea to plan to need 70% to 80% of your former paycheck to live comfortably in retirement. That’s a threshold I’m expecting will apply to me as well. While I don’t want to spend my senior years pinching pennies, I’m also a fairly frugal person by nature, and my hope is to downsize my home and relocate to a less expensive part of the country, both of which should help keep my expenses manageable.
That said, Social Security will only replace about 40% of the average earner’s pre-retirement income — and that’s if benefits don’t get cut. Since a reduction in benefits is on the table, I don’t expect Social Security to go very far in helping me pay my bills. And rather than spin my wheels trying to estimate what my benefit might be whittled down to, I’d rather just aim to get through retirement without it.
2. I want to be motivated to save as much as possible
Writing off Social Security — which I did years ago — has lit a fire under me to ramp up on the savings front. For many years, I’ve been maxing out my 401(k) plan contributions plus buying stocks that I intend to hold for many years — ideally, into retirement if things work out. My goal is to save enough money to not even have to think about what my benefits look like — so by telling myself to forget about Social Security, I’m pushing myself to do better at saving and investing.
To be clear, there’s no reason for me to think I won’t get a dime from Social Security in retirement. But I’m not factoring that income into my plans. I figure whatever money I wind up collecting from Social Security can be regarded as bonus cash — money I can use to travel, rescue more dogs (a passion of mine), or donate to charities that mean a lot to me. But either way, I don’t want to have to concern myself with what Social Security’s cash flow looks like, so I’m instead focusing my energy on taking savings matters into my own hands.
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