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Good-Natured Filth posted:How does everyone factor in things like Social Security or Pensions into their future expected income? I was playing around with FIRECalc, and it seems like the pension I have at a former employer won't impact much, but social security (as it works today in the US) could allow me to RE by a few years if I wanted. In New Zealand the planning is a shambles at the moment. There has been talk of means testing the pension versus our 401K equivalent Kiwisaver. So the pension scheme paid by the Government may give me little or nothing. Our problems are compounded by the Government reviewing adding a capital gains tax (we have none for 99% of the population). The schemes that have been discussed could have a negative impact on share portfolios, they have also come up with some crazy ideas about taxing capital gains before they have been realised, which if property and stock market had a 50% drop we would get massive tax refunds. Given the crazy ideas they have deferred making a decision (it would be such a mess it would be likely that it would cost them the next election). I can't rely on the uncertainty so I'm targeting $3m+ in assets for retirement.
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Jan 30, 2019 23:45
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Good-Natured Filth posted:How does everyone factor in things like Social Security or Pensions into their future expected income? I was playing around with FIRECalc, and it seems like the pension I have at a former employer won't impact much, but social security (as it works today in the US) could allow me to RE by a few years if I wanted. We don't count it in. Neither my husband nor I have a ton of faith that it will exist in its current form. If it does give us anything, it will be a happy bonus.
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Jan 30, 2019 23:56
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Good-Natured Filth posted:How does everyone factor in things like Social Security or Pensions into their future expected income? I was playing around with FIRECalc, and it seems like the pension I have at a former employer won't impact much, but social security (as it works today in the US) could allow me to RE by a few years if I wanted. You can take social security early at age 62, but this reduces your payout by 30%, or ~6% per year before FRA. Using the previous example, this would reduce your $3,333 monthly benefit to $2,333. The benefit of this is that you have 5 years worth of income you can draw before FRA, meaning you've gained $140,000 worth of income prior to hitting it. The downside is that if you live to be 79, you'll end up with less money overall than if you'd waited until FRA. Something to consider. But if you're retiring early, you may already have a stable and robust portfolio, and so the loss of potential value by the time you're in your late 70s is less meaningful. However, waiting until FRA is the equivalent of getting a roughly 6% return on investment, which while not exactly comparable to average market returns is nothing to sneeze at. You can also delay taking social security up to age 70, with your payout being increased by 8% per year delayed (specifically, 0.66% for each month past FRA). After ~12 years (age 82), the total benefits earned from taking at FRA will be eclipsed by your increased benefits from delaying. You've delayed taking 3 years of payments, and so you've missed out on 3 years of income you would have already had that you need to catch up on. Using the previous example amount of $3,333, you would have foregone $120,000 worth of income over those previous 3 years in favor of having your monthly payment be $4,199 instead. Once again, waiting until age 70 for the delayed benefit amount is equivalent to 8% increase to your payment per year, which is pretty close to equity returns. An incredibly simplified version of your decision algorithm looks like this: - If you take your benefits early, you're deciding to trade your 6% guaranteed increase to your SS benefit for potential investment portfolio growth. - If you take your benefits delayed, you're deciding to trade investment portfolio growth for 8% guaranteed return in the form of increased SS benefits. There's no cut and dry answer. If you expect to be long-lived and want to bequeath a large estate to your heirs, taking early doesn't make any sense because SS benefits die with the person (unless they're transferred to the spouse, who then stops receiving theirs). If you expect to die in your early 70s and you just want to maximize the amount of money available to you in your 60s, delaying it doesn't make sense because you'll never live long enough to earn back what you could have made by just taking them. If you RE at 62, it might make sense to take early benefits to help mitigate sequence of returns risk so you can pull less of your portfolio. If you retire way before age 62, sequence of returns risk should no longer be impacting you, and you can probably afford to wait until FRA or whenever you're comfortable taking them. If you're able to work until age 67, it makes sense to just start pulling them at FRA to get the best return and again allow you to mitigate sequence of returns risk at the start of your retirement. The only certainty in all of this is that it makes zero sense not taking them once you turn 70, since delaying it beyond that accumulates no additional benefit. silicone thrills posted:We don't count it in. Neither my husband nor I have a ton of faith that it will exist in its current form. If it does give us anything, it will be a happy bonus.
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Jan 31, 2019 00:20
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The one thing that every generation has had in common is the confidence that SS won't be there when they get old. Don't expect big changes unless ruining your political career (on purpose) becomes more popular.
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Jan 31, 2019 00:23
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^^excellent summary above, with the central take away that any decision you make will entail some degree of actuarial risk and there is a personal element based on your personal health and expected longevity. Beyond the strict dollars and time value of Social Security payments, the mitigation of sequence of returns risk in early retirement is also an important factor that is somewhat difficult to account for and depends upon your other portfolio elements. I don't expect huge changes but the possibility that it becomes means-tested in the future or is inflated away significantly over the next 30 years is not trivial. One thing I think is almost 100% certain to happen is that the SSI wage base cap is likely to increase a lot, possibly to unlimited on earned income BEHOLD: MY CAPE fucked around with this message at 01:05 on Jan 31, 2019 |
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Jan 31, 2019 01:02
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BEHOLD: MY CAPE posted:^^excellent summary above, with the central take away that any decision you make will entail some degree of actuarial risk and there is a personal element based on your personal health and expected longevity. Beyond the strict dollars and time value of Social Security payments, the mitigation of sequence of returns risk in early retirement is also an important factor that is somewhat difficult to account for and depends upon your other portfolio elements.
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Jan 31, 2019 01:15
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Hoodwinker posted:I had forgotten about this option. I agree it's the most likely outcome. And something that needed to happen a long time ago.
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Jan 31, 2019 01:45
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Motronic posted:And something that needed to happen a long time ago.
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Jan 31, 2019 01:46
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Yeah I'm not gonna count on it existing, even if there's a good chance it will. Bonus money when I'm in my sixties will be nice if it happens but having to rely on it would mean I hosed up somewhere along the way.
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Jan 31, 2019 02:39
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Social security will definitely be there in some form or another. I use it as a way to strengthen the 4% withdraw argument. People debate whether 4% is "very safe", but if you're getting a nontrivial injection of money around 65-70, that can make up for a decent amount. If you're going to get 1k a month, that's like another $300k of net worth. Of course, this is more tenuous if you retire very early like in your 20s or 30s, but that's not really going to be a concern for me.
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Jan 31, 2019 14:18
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drainpipe posted:Social security will definitely be there in some form or another. I use it as a way to strengthen the 4% withdraw argument. People debate whether 4% is "very safe", but if you're getting a nontrivial injection of money around 65-70, that can make up for a decent amount. If you're going to get 1k a month, that's like another $300k of net worth. Of course, this is more tenuous if you retire very early like in your 20s or 30s, but that's not really going to be a concern for me. Social Security will probably exist in some form in the sense that letting the elderly die in the streets would be too shocking. But introducing changes on the table today like means testing could easily effectively eliminate it for anyone with their own savings
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Jan 31, 2019 14:25
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AreWeDrunkYet posted:Social Security will probably exist in some form in the sense that letting the elderly die in the streets would be too shocking. But introducing changes on the table today like means testing could easily effectively eliminate it for anyone with their own savings
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Jan 31, 2019 15:38
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Hoodwinker posted:Do you think the rich elite that write laws would gently caress themselves like that? For what amounts to a trivial amount of money to them and if it saves them from the guillotine for a bit longer.........possibly.
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Jan 31, 2019 16:41
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Motronic posted:For what amounts to a trivial amount of money to them and if it saves them from the guillotine for a bit longer.........possibly.
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Jan 31, 2019 16:46
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Yeah an age increase for eligibility/reducing payments over time by untethering from CPI seems more likely. I've been hearing about the means testing thing as a boogeyman from upper-middle class people for decades now, but I don't see it happening.
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Jan 31, 2019 16:54
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Hoodwinker posted:Do you think the rich elite that write laws would gently caress themselves like that? Means testing social security is the first step on the path to killing it.
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Jan 31, 2019 16:58
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Also, like, you can get a decent understanding of how social security works now and just modify your expectations when actual changes do occur. It's not like one day you'll wake up and there's a news headline that says, "Social security? Never heard of it." Changes will be gradual enough to respond to unless that news headline is followed by one that says, "Nuclear Launch Detected."
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Jan 31, 2019 16:58
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gently caress, I don't have a ComSat Station yet!
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Jan 31, 2019 17:01
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GoGoGadgetChris posted:gently caress, I don't have a ComSat Station yet! (I'm glad somebody caught the reference)
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Jan 31, 2019 17:03
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Ersatz posted:To be honest, there's a massive gap between the rich elite who write laws (millionaires), and the richer elite (billionaires) you might have in mind. The typical lawmaker would notice a 2-3k drop in monthly income from being means tested out of social security. The "rich elite who write laws (millionaires)" are owned by the "richer elite (billionaires)". Hope that helps.
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Jan 31, 2019 17:22
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Motronic posted:The "rich elite who write laws (millionaires)" are owned by the "richer elite (billionaires)". Hope that helps. Means testing social security would directly impact their personal finances in the long run, and attempting to do so would likely contribute to a loss of their seat in the following election cycle.
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Jan 31, 2019 17:35
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GoGoGadgetChris posted:gently caress, I don't have a ComSat Station yet! Get with the times! We convert ordinary CCs into Orbital Command Centers now.
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Feb 1, 2019 02:18
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Ersatz posted:To be honest, there's a massive gap between the rich elite who write laws (millionaires), and the richer elite (billionaires) you might have in mind. The typical lawmaker would notice a 2-3k drop in monthly income from being means tested out of social security. Any changes are likely to grandfather in anyone waaay below the average age of Congress - the median lawmaker is basically eligible today. Not to mention they have their own pension system for the few who aren't independently wealthy by retirement age. A "bipartisan comprehensive tax reform" law that gradually introduces means testing to Social Security recipients 15 years from now is just the kind of thing that doesn't piss off old, reliable voters, comes off as sound fiscal policy to Very Serious People, and generally screws most people under 40. Gradual cuts that and raising the retirement age or changing cost of living adjustments couple put people who aren't paying attention in a boiling frog situation.
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Feb 1, 2019 03:06
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It's already happening in Canada with The government raising the public pension eligibility age for everyone after the boomers.
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Feb 1, 2019 09:22
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Instead of a Roth IRA, after I max out my 401k, can I start a company in another country that doesn't have income taxes and give my money to that company, then let that compy hold my assets? So I can rebalance whenever I want without having to worry about short-term capital gains taxes, just like a 401k? Seems like I'd basically be starting a foreign hedge fund just for myself. Anyone know if that would be okay legally?
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Feb 13, 2019 14:09
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It's legal to do, but the US taxes worldwide income, so it won't save you any taxes.
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Feb 13, 2019 14:31
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Motronic posted:The "rich elite who write laws (millionaires)" are owned by the "richer elite (billionaires)". Hope that helps. If you have a million dollars, you're not owned.by anyone. That's the point of FIRE.
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Feb 13, 2019 14:43
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SlapActionJackson posted:It's legal to do, but the US taxes worldwide income, so it won't save you any taxes. So I'm thinking, the company owns the assets. It makes a gain on Facebook stock, sells it, buys Nvidia. Doesn't pay taxes because it isn't subject to taxes in the country it was created in, and the US isn't going to tax foreign companies. E.g., Nintendo of Japan doesn't pay US income taxes. Later, when I want to retire, I can have the company sell its assets and pay me. I would probably pay the higher income tax rate on this income but I wouldn't worry about capital gains until then, kind of like a 401k. Or maybe when I want to retire, I can just sell the entire company and pay capital gains on that one sale?
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Feb 13, 2019 14:48
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oliveoil posted:If you have a million dollars, you're not owned.by anyone. That's the point of FIRE. A million dollars, which has a safe withdrawal rate of around $35k/yr. I don't know about you, but that's not sufficient for the cost of living where I'm at nor the standard of living I'm going for.
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Feb 13, 2019 16:54
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Even if it's not your ideal level of wealth, you're still not owned by a billionaire. And things only get easier for you as you get more money and become one of the "rich elite who write laws (millionaires)".
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Feb 13, 2019 17:03
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oliveoil posted:Instead of a Roth IRA, after I max out my 401k, can I start a company in another country that doesn't have income taxes and give my money to that company, then let that compy hold my assets? So I can rebalance whenever I want without having to worry about short-term capital gains taxes, just like a 401k? Quick googling seems to indicate that there are super complicated tax laws if you control a foreign entity.
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Feb 13, 2019 20:24
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Man, this thread needs a reminder of the scale between Million and Billion Billionaires control elections and legislative decisions Millionaires get invited to fundraisers.
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Feb 13, 2019 20:34
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That's with a "b."
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Feb 14, 2019 16:46
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Feb 14, 2019 17:55
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Having billions of dollars sure would be cool
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Feb 20, 2019 00:49
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JIZZ DENOUEMENT posted:Having billions of dollars sure would be cool No it would turn you into a broken rear end in a top hat.
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Feb 20, 2019 10:58
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Yeah, having ten million dollars would be fantastic, having ten billion dollars would be horrible.
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Feb 20, 2019 13:27
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Potrzebie posted:No it would turn you into a broken rear end in a top hat. Don’t need billions of dollars to be a broken rear end in a top hat. Look at this forum, bunch of broken assholes and don’t make poo poo
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Feb 20, 2019 14:54
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Jokes on you, the entire forum is actually just a bunch of rich dicks.
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Feb 20, 2019 15:18
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Vomik posted:Don’t need billions of dollars to be a broken rear end in a top hat. Look at this forum, bunch of broken assholes and don’t make poo poo Well yes, but not exactly, no.
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Feb 20, 2019 16:31
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