Estimating (Or Ignoring) Your Social Security Benefits for Retirement
All your retirement income may not have to come from your savings. Do you have a company pension, did someone leave a bunch of money in a trust fund for you, or are you eligible for and planning to receive Social Security? If so, you need to add this income to the income that can be produced from your current retirement savings.
Social Security represents only about 40 percent of the average retiree’s income needs. And most observers feel that something drastic must occur now, or the Social Security system will be broke in 20 to 40 years. Tack on 20 to 40 years to your current age. Are you still going to be around and depending on Social Security when you’re least able to be without it? Also, very few people now have old-fashioned defined-benefit pension plans. The responsibility of providing for your retirement is mostly or entirely up to you.
For planning purposes, assume that people under age 40 won’t receive any Social Security retirement benefits. For people between the ages of 40 and 60, discount the amount of Social Security benefits that you’re expecting to receive by 50 percent.
The Estimated Social Security Retirement Benefits worksheet helps you estimate the Social Security retirement benefit you’re projected to receive. Find your current annual earnings in the left column and then the monthly projected benefit based on your year of birth. Keep in mind that you likely should reduce the estimated amount or completely ignore Social Security in your retirement planning.