If you haven't already, you'll soon get an email from the Social Security Administration telling you to create an ID.me account to access your Social Security statement and other info. I took it as a prompt to look at my numbers.
When you look at your expected payout information it says the numbers assume you continue to earn what you made last year until age 67. You can change that assumption though. We frequently look at the extent to which people have their hand forced to retire or at least out of their primary career earlier than they were planning. It happens frequently and it is not easy to replace the lost income. I think finding work that pays a decent wage is a reasonable probability but far less so, finding a new job that pays as well as your old job.
I've said many times, I plan to wait until 70 but will encourage my wife to take it at the same time as me which would be 64 and 2 months. If that all works out, we'd get my $4664 (in today's dollars) plus her $1496 which is half my age 64 benefit (she'd get a few dollars more for waiting the two months). If I die first, her $1496 goes away and she'd get my $4664.
We don't need to safeguard against things going exactly the way we plan for, we need to safeguard for things going wrong somehow. I cannot envision the scenario where I am not doing the same work I am doing now but I would have said the same thing two years ago right before the partners of my old firm got shut down (I was never a partner).
What does going wrong reasonably look like for you? If I lost the income from my day job, we could get by but it would be uncomfortable at least emotionally whenever a big fix it came along. I've been cultivating incident management team work but only got out onto one fire so far this year. It's been a weird fire season in Arizona this year. We've had a lot of fires around the state but they've ended very quickly. There appears to be a lot more money for air resources than in previous seasons and the sequence has worked out such that there hasn't been much need for trainees in my position. Unless of course I screwed something up. The fires in other states are cooking pretty good but that might involve flying to an incident and I don't really have it dialed in yet to the point cutting what I take by 2/3rds versus loading up my truck with more than I probably need and driving.
All of that is a path to maybe two full two week assignments which would work out to about $25,000. If our earned income dropped to $25,000 in this context, we'd be in good shape financially thanks to Airbnb income but it would have a noticeable impact on our Social Security as follows.
An earned income of $25,000 would reduce my age 70 amount by $500/mo and my wife's age 64 and 2 months benefit by $134/mo. For reference you can compare the age 67 amounts in the two graphics, about a $340/mo haircut.
If you're situation changed what might a replacement income be? The path to mine is plausible for the reasons I laid out even if there can be no assurances, I take nothing for granted. Maybe you have a very lucrative backup plan or maybe not but whatever it is, what is a reasonable income expectation? I could see myself in this sort of scenario taking more than the two assignments I mentioned above and if I really get my foot in the door (not there yet) I might sort of have to take more than two assignments.
The Social Security website does have some quirks to it but I think they are trying to provide information needed for planning and I think modeling in the possibility for a drop in income from late 50's/early 60's is worth doing.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
1 comment:
Your insights on planning for Social Security and potential income loss are incredibly valuable. It’s crucial to consider various scenarios, especially since life can change unexpectedly. I appreciate your proactive approach, both in terms of looking at your benefits and preparing for alternative income sources. The emphasis on realistic expectations is key—too often, we focus only on the best-case scenario. Your experience with the incident management team illustrates the unpredictability of work opportunities, highlighting the need for a flexible and robust financial plan.
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