On Sunday, August 14, Social Security celebrated it 87th birthday. From the SSA’s website, “69.1 million people received benefits from programs administered by the Social Security Administration (SSA) in 2019.” Most of us will be or are using SS for some of our retirement income. Some of us may be using SS disability or survivor benefits for income now.
Roughly what percent of your family’s income is or will be from SS benefits?
0 voters
I calculated this based on income (including dividends, interest, etc.), not on fluctuations in asset values. An investor who focuses on income (such as myself with a heavy allocation to I-Bonds and dividend-paying stocks) will have a lower percent from Social Security than an investor who focuses on asset price growth while minimizing income (such as intercst who uses that strategy to qualify for ACA health insurance subsidy). The latter strategy is more tax-efficient although portfolio values are more volatile.
Wendy
Surprised at the outcome…I’m in the minority @72%. I set my costs of living up so SSA could handle ALL living expenses. Savings withdrawals are for travel & entertainment…and home improvements.
My withdrawals were 24% of income …I only started w/d last year. I’m 71. My income/growth port is 2.3% dividend yield and that’s my only w/d once per Q. My SSA payments started when I was 67 and I worked PT. I fully retired at 69.
This also allows me to have a high growth portfolio (still down 50%+ in 2022; +20% in 2021; but up 110% in 2020)…so yeah volatile as heck… and SSA expense coverage allows more “asset price growth (volatility)” in my income/growth port (30% tech & small caps)…not counting GOOG & MSFT - though tech, hardly small or overly volatile. 60mo beta MSFT = 0.98; GOOG 1.08…though even those in last 24 mo 1.17 and 1.2, respectively. Nothing compared to high beta holdings TTD (2.24) or DDOG (1.8)…but I love growth investing and couldn’t do it without SSA income
I didn’t plan on 6-8% inflation though. Ugh.
Joe
Joe
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Surprised at the outcome…
In general, we’re a high net-worth group.
DB2
An investor who focuses on income (such as myself with a heavy allocation to I-Bonds and dividend-paying stocks) will have a lower percent from Social Security than an investor who focuses on asset price growth while minimizing income (such as intercst who uses that strategy to qualify for ACA health insurance subsidy).
I think that statement is incomplete. The reason is that portfolio heavy in bonds and dividend paying stocks will have a lower total return than say, a 90/10 stock/bond portfolio. While indeed the second investor will have to sell more stocks to obtain cash initially, in most cases the growth rate will outstrip the fixed-income investor even after taking an inflation-adjusted withdrawal. For example, if you retired in the early 1990s and took an inflation-adjusted 4% withdrawal rate on the initial balance, by today the WR would be only 1.3%. With a WR that low, you don’t need Social Security at all.
That was my conclusion after processing it a little more.
Nothing wrong with that
I calculated this based on income (including dividends, interest, etc.), not on fluctuations in asset values. An investor who focuses on income (such as myself with a heavy allocation to I-Bonds and dividend-paying stocks) will have a lower percent from Social Security than an investor who focuses on asset price growth while minimizing income (such as intercst who uses that strategy to qualify for ACA health insurance subsidy). The latter strategy is more tax-efficient although portfolio values are more volatile.
It’s not that simple for most cases. First off, the question said “income”, it didn’t say “taxable income”. So “income” is left for the reader/commenter to define. And in retirement, most of the time, “income” is what you need to remove from your investments to spend that year.
So, for the mostly fixed income investor (Wendy, for example), their income will be interest and dividends and sometimes principal from fixed income investments (as necessary) and social security/pensions/etc. Sometimes it will be drawn from taxable accounts and sometimes it will be drawn from tax deferred accounts (SEPP if desired while young, and later definitely RMD).
And for the mostly equity investor (John, for example), their income will be interest (John, for example, has had 5 years of living expenses in fixed income for many years, maybe a little less today), dividends (can’t always be avoided*), social security/pensions/etc, AND sales of equity holdings. Note that the sales of equity holdings, when done in a tax efficient manner result in low additional “taxable income”, but still provide income to spend. And, of course, both from taxable accounts and tax deferred accounts (SEPP if desired while young, and later definitely RMD). And equity investors in what I call the “sweet spot” can time their gains in such a manner to avoid some income taxes on parts of it (basically use up the tax bracket where their LTCG tax rate is zero [up to $80k MFJ] or 15% [up to $500k MFJ]). The tax code is incredibly generous to those in the “sweet spot” who have long-term capital gains. Among all the other very good reasons to favor equity over fixed income, this is yet another big one.