I’m really used to getting a paycheck. I’ve been working since I was 14 and truly value the security that comes from a regular income. The scariest thing about retirement (for me) was giving up that security. I’ve never been a very good saver; I’m more of a spender as it turns out. The idea of giving a paycheck up spooks the crap out of me.
One of the first things I did in our plan is to figure out our projected income. Almost everyone will be able to count on social security. I was suprised to learn that social security income (SSI) was not directly tied to the taxes I’ve been paying my whole life. Instead, my benefits are based on an average of the last 35 years of income history. It’s true the more you make means the more you’ll get, but the relationship is not direct.
Anywhoooo … the bigger headline is that the SSA website will actually provide you with an estimate of your ultimate payout. It’s not a guarantee but it’ll be close enough for you to start planning your income. See for yourself at https://www.ssa.gov.
There’s also the question of WHEN you start taking benefits. You can technically start drawing at 62 but benefits will be reduced. 67 is (roughly) the age where you’re able to draw full benefits. And you get even more every month if you wait until 70 and collect deferred benefits. So, clearly, if you CAN wait all the better. But not everyone has that choice.
One nice thing is that Social Security benefits are adjusted based on inflation. Whether they’re adjusted enough to actually compensate for increased expense across across multiple types is an open question so don’t count on it as being a total panacea for increasing costs. Still, more is always better!
Finally, SSI is taxable although at a reduced rate. It’s a complex calculation but, essentially, half of your SSI counts toward your total income. If that total income reaches a certain level, you pay tax on 50-85% of that value. More details here:
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