Planning on social security?

[AlexOliver]

I noticed something on the social security website earlier today--that one must work for ten years in order to be eligible for retirement benefits.

(http://www.socialsecurity.gov/pubs/10072.html#number)
For those of you planning to retire in less than ten years, does this affect any of your plans?

[jacob]

No. However, to get a point, all you need to do is to earn $1100 or so per point for a maximum of 4 points. My book sales just got me my first point for 2010.
You can see how you're doing on the annual statements SSA sends out.

[photoguy]

I think for many americans, it may not be an issue since any earned income counts even part time work as a student and you only need 4k income per year. Unfortunately, when I was in grad school my stipend didn't count since I was a non-resident.

[Maus]

Well, it is an issue to a degree. If you are a twenty-something planning on retiring before mid-thirties you need 40 points at 4 per year; so 10 years of at least $4400 gross income. Then, your full benefit at 67+ is tied to the average of your highest 30 years of gross income. There is a minimum benefit, but it's fairly meager. If you have a lot of zeroes, you shouldn't count on much. You will at least get Medicare coverage at 65.

[HSpencer]

For any of you youngsters that are thinking of what SS can provide (at this time in history anyway) I will state what my wife and I are drawing:
Me - (Started at age 62) 1590 per month minus 110 for Medicare.

Wife - (Started at age 62 985 per month (she is under 65)
Brings to the table $2575.00 which isn't a bad addition to our other income. We elected to draw at age 62 due to the factor that one must be age 78 to break even by waiting. I was unable to get a letter from anyone (certified) that I would live long enough to make it worth my while by waiting until full retirement age. (I don't gamble well.)

Irregardless of what one's retirement income amounts to, $2575.00 added is not some small factor. So at least for us, SS kept it's promise. I hope it does for future generations.

[RightClawSouth]

I'm going to treat it as a bonus, or as a little protection if my investments under-perform (eg return less than 4% net of inflation and taxes).
I'm not sure you can count on it in it's current form since it really doesn't seem like it's gonna be solvent if left as it currently is. They're likely to have to push back the retirement age or cut benefits, I think.

[photoguy]

I think a big problem for people who ERE 20, 30, or more years before SS eligibility is that they effectively need a portfolio that can last indefinitely anyway so SS availability doesn't really help. Furthermore, the NPV of the SS stream is not really all that much when discounted so many years.

[George the original one]

Back in the old days (pre-Reagan), one could draw SS as a student if your parents were old enough. I lucked out and got to start on that benefit for one full year before it was phased out under the Reagan SS reforms.
Don't neglect the idea of spousal benefits. Even if one gets to ERE in 5 years, there's a good chance your (future?) spouse will have gained enough credits. [Unless the laws change]

[buzz]

I don't trust the government for much of anything, let alone to take care of me when I'm old, but that's just me.

[Maus]

I am inclined to agree with HSpencer that it's better to start at 62 and take the reduced benefit. Get it while the gettin' is good. In calculating my FIRE capital, I add the NPV of my estimated benefit from 62-80, discounted by the 10-year T-note rate.
On the other hand, if you're going to treat SS like a bonus, as RightClaw South suggests; it makes sense to delay the benefit until 70 because the increase is the equivalent of about a 6% ROI YoY.

[ktn]

@HSpencer: Hmm.. 1590 per month is pretty decent. I thought it did not get much over 1000 per month because I noticed a good friend of mine who had been in the navy till 26 and then worked a highly paid airline pilot until 60, was getting just a little over 1k per month. How could this be? Any ideas?
I paid into the SS system for some 20 or so credits before leaving the US. Sadly, I think what I paid in is down the drain for good unless I come back to the US AND pay another 20 credits AND live there in my old age (afaik, SS does not pay outside the country if you are not a citizen). I checked into the possibility of getting a refund or at least a credit to my Finnish pension system payments - seems like none unless I get disabled. :-/

[Q]

I don't like seeing the SS papers because it shows what you could earn doing "nothing" if you suddenly became disabled. It would be worth it to be disabled for the income they provide.
Also, investment and capital gains do not reduce the benefit - passive income to some degrees don't count...
I've already met my quota and I am still in my late twenties.

[Chad]

For those taking SS early because of concerns of life expectancy, but not because of financial need there is another option. You can repay the SS money you have received when you reach the age that authorizes you for a full payout. This will then give you your full SS payout every year. Of course, you would only want to do this after you had a clean bill of health from your future physical.
Of course, as a Gen Xer, I probably won't see much SS money. I don't even factor it in my money calculations. I just assume whatever I get will be a bonus. The Baby Boomers will screw me and everyone younger than me again.

[HSpencer]

@ktn
I am at about the current top of the draw. It had to do with my Civil Service time, and when I went to military active duty, I paid back in for all the SS that I was not paying in during the Civil Service. During my time in my business after the US Army, I paid in as a self employed business owner, which is at the tune of around 14%. With the earnings I accumulated, the draw was up around a couple hundred worth from what it might have been. I had some good advice when I swapped out of civil service, withdrew my money, and repaid SS. It paid off, I guess, but was pretty hard to do at the time!! Not sure you can still do that today, the laws adjust every time someone gets a deal.

[Mo]

I've spent a lot of time looking into the SS system. I'm in a peculiar position right now in that I can elect to receive several years of "contributions" back, but in exchange I don't get credited for contributing to the SS system during those years. So, I spent some time reverse engineering how the current benefits are calculated. I'll try to post this on Saturday or Sunday-- it takes a bit of time to explain things, and I'm not actually "R" yet.

[jacob]

This one has a rather large chapter on whether/how to factor in social security.
http://www.amazon.com/exec/obidos/ASIN/1589820088/

[HSpencer]

One could draw SS at age 62, and invest it. At full retirement age, (in my case 66) you could go to the SS office and then pay it back, rehash your benefit, and it would be as if you waited.

You would be using four years of the money to invest, but remember your getting it in monthly increments, so it would amass slowly during the four years. For me it was "Ok I am 62, show me the money!!!!"

[firefighter]

To go back to the OP's question, I would highly

recommend-
A) Planning your career to get 10 years of credits in some way.

Like Jacob pointed out, this is not hard to do.
B) Planning to max out the first tier of lifetime earnings.

Currently there is a 90% reimbursement on this.

Yes, the replacement ratio could be cut, but the lower

income brackets are the most likely to stay the same.
http://www.ssa.gov/pubs/10070.html
One currently needs ~320k in lifetime earnings

in today's dollars to max out this tier.

[firefighter]

Should have been more specific with the link...

Note steps 3-5.
The 90% bracket is a phenomenally good deal.

Essentially a COLAed pension with a 2.57 multiplier,

and whether you work 10 years or 35 years, the

average is what counts currently.

[Melissa]

I also don't plan on getting much in SS by the time I'm old enough. It's nice to hope that I will.... maybe I can afford a few things for my grandchildren that will allow them to hit FI a lot earlier than I will.