I spent the weekend up in Vail with my girlfriends. Lots of interesting conversations! Among them, for a change, was lots of talk regarding finances and retirement (we’re all between 52 and 56 years old). How much money do you need to retire? When should you start collecting social security?
It varies depending on your circumstances and expectations, of course. About six years ago Jay and I decided that we could retire comfortably on $100K/year. I indexed it for 3% inflation and today, at the end of 2012, that amount has already increased to $119K. I still feel we’d be comfortable at that level and, in fact, I could probably adjust it downward.
The next step to seeing where we are in regards to meeting our retirement goals was to calculate how we’d fulfill this future retirement income (and praying that Social Security is still around). I include our projected Social Security payments, keeping in mind the vulnerability of the program.
You can see your projected Social Security benefits at https://secure.ssa.gov/RIL/SiView.do
Register and revisit the site every year so you can recalculate your numbers. (Social Security also sends you a summary every two years, I believe.) The site shows your estimated benefits at full retirement age (67), at age 70, and at early retirement age (62). The longer you delay receiving benefits the higher the monthly benefit. Of course, the number of years you receive the benefit is reduced. Also, the more you pay into Social Security before retiring, the greater your benefit. Therefore, Jay’s projected benefit goes up every year. Mine, as I have been making less and less money the past couple of years, has been going down – a big incentive to kick it into higher gear between now and age 62!!
I’ve run calculations and it’s clear to me that I should start taking benefits as soon as possible. I would have to live to 79 to make it more profitable to start taking benefits at 67, and I’d have to live to 83 to make it more profitable to start taking benefits at 70. Who knows if I’ll make it to 79 or 83?! And I could invest the money I start collecting at 62 and make it worth much more than what I’d get if I delayed payments. (* I’ve changed my mind on this. See this post.)
The same scenario exists for Jay. However, you must look at the bigger picture when there are two of you. Here’s a link to a helpful article on the subject:
Besides Social Security, what other income streams are we going to have? Investment interest/income, drawing down of principal, rentals, royalties, pay for part time work… I factor all of these into our projected scenarios. It gets complicated. And we’re talking estimates and projections. But I had to run the numbers to get a decent idea of where we’ll be and what strategies we should start implementing in order to save ourselves from a life of Medicaid and semi-poverty.
I think we’re looking pretty good. 😉