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Retirement Projection

March 24th, 2014 at 12:34 pm

Anyone who has been following my blog for most of the past three years knows that I spend a lot of time putting together financial projections of all sorts. That includes my retirement, even though it's 20 plus years away.

I've got a retirement tab on my master spreadsheet. It includes an accumulation phase, where I estimate how savings will grow, and a depletion phase where I estimate how well that fund will stand up under various scenarios.

I've struggled for some time deciding what kind of number to plug in for Social Security payments, and to a lesser extent when to plug in a beginning age for collecting SS.

Until recently, I've used a 15K number (annual), and begin drawing at age 72. I thought of those numbers as low-ball estimates.

I know that there is a prevailing attitude among many in the SA community (particularly people younger than about 45) that they are making retirement plans assuming that there will be no SS 25 or 30 years from now, and that they will consider any SS payments to be gravy in their retirement.

While they may be right - there may be no SS 25 or 30 years from now - I'm betting that there will be SS in some form, reduced from where it is now. I just don't know what I can expect for a reasonable guess as to what that amount will be. I don't think anyone younger than 50 does either. The law is clearly subject to (and expected to) change.

So, I set to come up with a more reasonable, and still conservative number to plug in to my spreadsheet. I did some very quick "research" on the internet, and found a site that quoted that SS trust fund reserves would be exhausted by 2033 (oddly enough, a few years prior to my own retirement), and after that tax income would be sufficient to pay about three-quarters of scheduled benefits through 2087.

I also went to the Social Security web site, and found my current projected monthly payments at ages 62, 67, and 70.

I took the number projected at age 67, multiplied it by 0.75, and plugged it into my spread sheet, starting at age 70.

It turns out that I wasn't that far off with my previous estimate. My new number is $2,000 greater per year, and I'm starting the payment two years earlier in my projection now.

Certainly every single number in that projection is subject to a great deal of change. What I really want is a target retirement fund figure to shoot for. That number will change. However, I think my estimate now is a bit more refined than it was a few days ago.

I'll continue to go in and adjust things from time to time. Hopefully in another 15 years, I can have a very solid plan for retiring 5-10 years after that.

If anyone is interested, this is the page that I quoted above: http://www.thenewamerican.com/economy/commentary/item/16497-the-future-of-social-security

4 Responses to “Retirement Projection”

  1. creditcardfree Says:

    I'm sure you are right their is likely to be some social security. I don't think it is wrong to use it in projections, but I also think it is good to know that you can't rely on it as your only retirement income. I think there is a segment of the population that doesn't get this. I'm glad you found your estimates on the SS site, as I was going to suggest that before you wrote about it. I still say keep saving as much as you can for retirement. In most cases you won't regret it!

  2. Buendia Says:

    I would love to have a spreadsheet like that! Did you make it yourself or is there something like this online?

  3. Bob B. Says:

    CCF - You nailed it. I completely agree.

    Buendia - I've not found anything on line that works really well for me. I think the are geared for people within five or so years of retirement. Users can't adjust their income up over the years before retirement, at least on the ones I've found . So, I made my own spreadsheet.

  4. snafu Says:

    Since employers dropped with holding 10 - 15% of gross income + matching funds to create company pension plans, saving for retirement has been dismal. SS will likely be re configured and retirement age benefits extended past 70. People don't seem to understand that they will need to pay for lifestyle from savings/retirement plans for 30 plus years. Of course this doesn't affect politicians and decision makers, they have lucrative pensions.

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