Don’t Rely on Social Security, but Know About It

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I’ve heard many great financial experts say that we should not rely on our potential Social Security (SS) benefits for retirement. I agree with that. Think of SS benefits as a bonus. It’s not guaranteed but it would be nice.

However, I think it’s wise to know what your potential SS benefits may be and especially if you are close to retirement. It might impact the date you actually pull the trigger.

First Things First

Have you created an account with Social Security Administration (SSA) online? If not, go here. Choose Sign in/up, select My Social Security, and then create an account.

You need to have or meet these qualifications to do so:

  • A valid email address
  • Social Security Number (SSN)
  • A U.S. mailing address
  • Be at least 18 years of age

You’ll need to enter some identifying information like your SSN and then create a username & password. Voila! There is your SS benefit information.

BTW, does use two-factor authentication.

How do you qualify for benefits?

This excerpt is taken directly from

To qualify for benefits, you earn “credits” through your work – up to four each year. This year, for example, you earn one credit for each $1,320 of wages or self-employment income. When you’ve earned $5,280, you’ve earned your four credits for the year. Most people need 40 credits, earned over their working lifetime, to receive retirement benefits. For disability and survivors benefits, young people need fewer credits to be eligible.

Estimated Benefits

They will estimate your benefits based on your earnings over the previous two years. Moreover, they’ll make the assumption that you’ll continue to work and make the same as you did the previous two years.

The closer you are to retirement, the more accurate your estimates will be.

You won’t be provided with an actual benefit amount until you apply for benefits. Reason being is that the following things can fluctuate:

  • Your earnings
  • Adjustments for cost of living increases
  • The law
  • Employment through which you did not pay SS tax

All of these are key to why you should not rely on SS benefits but the big one that sticks out to me is the possibility of the law changing…at any time.

Your estimated benefits are based on current law. Congress can change the law at any time and has done so previously.

Benefits change depending on when you take them

Estimated Benefits are based on three different ages:

  1. Early retirement (62)
  2. Full retirement (67)
  3. Benefits at age 70

Let’s break those down a bit. When I looked at my estimated benefits I saw that if I wait until I’m 70 to collect SS, I’ll get the biggest amount.

If I collect at full retirement (67), my benefits are 78% of that amount.

Furthermore, if I collect at early retirement (62) my benefits are 65% of the amount I can get at age 70.

At first blush, it makes the most sense to wait to collect until age 70. But maybe not.

Things that stick out to me

On my SS account, I receive the message that I’ve earned enough credits to qualify for retirement benefits. However, my estimates are based on the assumption that I’ll keep working and earning the same amount.

I’m planning on continuing to work and increasing my earnings. However, what if I stop working before I collect my SS benefits? Should I factor them into my retirement calculations?

I’ve made projections on when I can hit Financial Independence (FI) and I’ve calculated that I can hit single FI at the age of 59. That is based on my current savings rate. Of course, as my earnings go up, my savings will increase.

Furthermore, there are benefits to turning 50. At the age of 50, one can contribute what is known as catch-up amounts on certain accounts that I invest in, like HSAs, Simple IRAs, and Roth IRAs. I plan to take advantage of that.

So maybe I hit FI before 59, maybe not.

How do my SS benefits play into my FI number?

I did not factor in my SS benefits into my FI number, but I’m thinking about how they could affect me.

Let’s say I retire at 59 and live off my investments. At that age, I’m close to what SS considers early retirement age (62). I imagine, that my SS benefit estimates will be fairly accurate at that point.

The time between 59 and 62 is short and I’d feel confident if SS benefits are still around when I’m 59, they’ll be around when I’m 62.

Obviously, I cannot collect them until the age of 62 but I can factor in what they may be. Furthermore, if I wait to collect them at 67 or even 70, my SS benefits will be more.

Can Social Security benefits affect the age I retire?

The short answer is, maybe.

I’m planning on saving as much as I can while continuing to live a happy and comfortable life.

As I approach the possibility of early retirement I might factor in my SS benefits. I believe this is a valid consideration since my early retirement age is really not that early, nor is it far off from being able to collect my SS benefits.

What if at the age of 57, I’m at what Joel from FI180 calls lean FI in his phenomenal article, The Milestones of FI.  Furthermore, what if I calculate that when I start collecting my SS benefits at the age of 62, I’ll be at Fat FI?

I’m not certain I’d do this as a lot can change between now and then. Although, I will definitely look into this as I approach FI.

Can Social Security change what I do in retirement?

The short answer is, yes.

In favor of being more conservative, I’ll probably retire when I’ve confidently achieved financial independence with some cushion.

However, receiving SS benefits can certainly play a factor in what I do in my retirement. For example, let’s say I retire comfortably at the age of 59 and decide to collect my SS benefits at the age of 62.

Maybe I can travel more? Maybe I can give back more? It will be bonus money at this point and it’s fun to contemplate what I’ll do with it.

I’ve heard it said, that it’s better to wait until you’re 70 to collect your SS benefits because it will be more money. My argument to that is that is twofold and it’s based on SS being bonus money:

  1. If you don’t really need the money and collecting it at a younger age allows you to do more in retirement, I say get it as soon as you can!
  2. Who knows how long you’ll live so may taking less sooner is better

Closing Thoughts

I plan on checking my social security benefits once a year when I do my annual review meeting. I have this task scheduled in my todoist app for June of each year. I’ll let you know how my first review goes in 2019.

Anyway, it’s interesting to think about how SS benefits will play into retirement, especially when you are considering it to be bonus money.

What have I missed? Do you factor your SS benefits into your retirement?

*Edit November 4, 2018:

I just used On Trajectory to calculate the most optimal time to take SS benefits for me. Turns out, waiting until I’m 70 makes the most mathematical sense. This pivots off the belief that I’m going to live a long life.


8 thoughts on “Don’t Rely on Social Security, but Know About It”

  1. The book “Your Money or Your Life” first got me to look at SS. An exercise in the book is to look up your total lifetime earnings and get a sense of where all that money has gone which is truly eye opening.

    I look at SS as only a possible cherry on top down the road. Where it gets complicated is the bendpoints. Short story is you want to make sure you qualify for the minimum 40 credits. We had my wife who is SAHM make sure she didn’t quit until she reached the 10 yr min. Also the bend points show you how little more you get by staying at your job additional years. I hear much older workers comment on staying at their job to get more SS benefits which is true but not enough to justify staying on.

    1. That is so funny as I ordered that book from my library months ago and it just came through. I am eager to read it.

      From what I can tell on my SS log in, it appears that I’ve met my 40 credits but I should probably verify that. However, calling into SSA means long wait times -loads of fun!

      Thanks for commenting, Jeff!

  2. I’d suggest taking some time to get better educated about Social Security. It doesn’t sound like either of you have a good understanding of the calculation formula. SSA takes the highest 35 years of earnings indexed to establish the baseline. Years where there is no income (SAHM) count in the calculation formula go in as zero. So if a SAHM has 18 years without income, she has 18 years of zeros in the calculation. If she goes back to work, any income she earns replaces a zero year.

    They go all the way back to when you first began working. In later years, in most cases you’re making higher income than earlier years. So those lower earning years get replaced by the higher earning years. So, contrary to what many thing, working longer can substantially increase your benefit.

    Here’s an article that will lay out the calculation, bend points, AIME, etc.

    1. Fair enough. I do like to get better at all things money so I thank you for your comment.

      Firstly, as I said in the title of my post, I’m not relying on social security benefits in any way but rather thinking of them as a perk. Fortunately, my misunderstanding on how they are calculated has not harmed me. Secondly, I plan to work until about 59 or 60 and have my income steadily increase. Very good to know about SSA taking the highest 35 years. I just did some quick reading on how the benefit is calculated here –

      Thank you for helping me get better.

      1. Though you’re single now, if you marry and you or your spouse claim early, that also reduces the spousal benefit for the survivor. That benefit is based on the amount he/she was receiving at death. I have an article on that as well.
        The point is, there’s a lot more to it than most people realize.

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