I have a detailed plan regarding how much income I'll need in retirement and how much money my savings will provide. When I made my plans, I didn't count on money coming in from Social Security.
The reasons that I didn't consider these benefits in my calculations may surprise you.
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Why I didn't consider Social Security in my retirement plans
There are three big reasons why I set my retirement savings goals with the assumption that my savings would need to provide enough income to support me without any Social Security income coming in.
1. I don't have control over what happens to Social Security
The reality is, the amount of future Social Security benefits that I'll receive -- and the timeline for when I can claim them -- is out of my control.
While benefits won't stop even if Social Security's trust fund runs dry, it's entirely possible lawmakers will make changes to the program because of the trust fund's financial trouble. A law change could alter the age when you can claim your full benefit. And if lawmakers take no action, a 22% benefits cut could occur automatically in the future when the trust fund money runs out and benefits can be paid only from current revenue.
I'd prefer not to count on an income source that's out of my control because if I end up with less income than expected from it, this could create financial problems. I have much more influence over what happens to my retirement nest egg, as I can adjust the amount I need to save to end up with the income I want.
2. I may need to rely on savings before I claim Social Security benefits
Social Security benefits can be claimed as young as 62, but doing so would mean taking a huge cut to my standard benefit.
If I want to put off my claim to get a larger Social Security check or to enable larger survivor benefits for my spouse, there's a very good chance I will need to rely on my savings as my sole source of support for a number of years after leaving the workforce.
Since I anticipate a time when only savings provides for my needs, I want to make sure my investment accounts will produce enough income at a safe withdrawal rate -- even with $0 coming from Social Security.
3. I would rather end up with extra money than not enough
If I don't factor Social Security in when determining how much income my nest egg must provide for me, any money from my retirement benefits will be extra.
I'd rather have this financial cushion in case I'm faced with surprise expenses as a senior, such as healthcare costs that are higher than I'm anticipating or a need to provide more financial support for my children.
Not factoring in Social Security means I need to save more
The one big downside of trying to build a nest egg that will support me without Social Security is that I need to save a lot more money.
After all, I need to plan for my savings to replace about 80% of my preretirement income. If I instead assumed Social Security would provide 40% of it, I could save substantially less. But I'd rather sacrifice more to save extra than struggle later once I can no longer work to support myself.
So is this a good approach to take when making retirement plans, despite this downside? Ultimately, it comes down to a choice between whether you want to have some of your future retirement income come from a source you can't control or whether you want to take full charge of ensuring your retirement security. For me, the choice was clear.
