I’m always seeing Americans saying everyone needs to plan and save for their retirement. I know you have social security but I don’t know many details about it and I’m curious. is the benefit always not a lot of money, even if you’ve worked and earned a lot throughout your life? does it vary by state? how much would you get if you earned 10K a month for the last 20 years? is inflation taken into account? are there people who get nothing? how common is it to work past the retirement age? I’m sorry if some of these questions might sound dumb to you but trying to read about it made me even more confused.
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Social security is meant to be supplemental to your own retirement savings. Honestly https://en.wikipedia.org/wiki/Social_Security_(United_States) this explains it better than I can.
Social security is tied to how much you make and indexed to inflation , but isn’t sufficient to provide for a particularly enjoyable retirement. It’s intended to keep you from starving to death in the streets, not visiting your grandkids at Disney.
I’m not going to run a bunch of estimates for how much it would be, there are websites you can use for that.
Some companies and government jobs still provide an additional pension, but this is increasingly rare.
Most people save additional money for retirement in a variety of tax-advantaged accounts that can provide additional income during retirement.
SS is for survival, retirement savings are so you can live your best life.
Social Security doesn’t vary state to state. How much you get depends on your income and when you start taking social security. So even with the 10k per month income example it’s going to vary a lot.
Many people work well into their 70s and 80s in the US. Many people never retire. Historically, the US had an employer-funded pension program, and we’re just now really getting to people retiring that do not have that.
It’s looking pretty bleak, especially now that the US has some of the highest COL in the world. The average American adult only has $65,000 in retirement savings. Many people never retire, only semi-retire, or live essentially stuck in their homes with no money to do anything other than survive and drive to the store.
For context, a healthy retirement account in the USA is considered something like $1 million to 2 million per person.
We generally work until we ~~did~~ die if we’re born 1970 and later
Decades ago, pensions were more common. You would work for so many years with a company, then they would pay you a set amount the rest of your life. You could get it in addition to social security. Pensions, with some exceptions, are largely gone now since they were a pretty big cost to companies. In return, there is a lot less loyalty to your employer.
Now, it is largely up to the individual to put money away for retirement during their working years. Social security supplements your retirement, and is calculated based on how much you made over a period of your working years, and is capped. You can start drawing it at 62 if you want, but the amount you get will increase the longer you wait. It tops out when you reach 70. The maximum you can get at 62 is going to be about $2500/mo. The maximum you can get at 70 is about $4500.
Social security was established to ensure that elderly people (who often cannot work) had a safety net to help prevent poverty and destitution in their later years. It was never intended to be the sole source of income in retirement, although this unfortunately does happen.
Social security does see inflation adjustments.
Most retirees have saved to retirement accounts throughout their careers. 401k, 403b, and IRAs are self elected retirement accounts. Union members may still have pensions, although those have fallen from favor.
And there are other accounts for saving. Market accounts with stocks, precious metals, and shares of stock from their employers.
Lastly, there is equity in their homes. They can do a reverse mortgage, which pays them over time.
In my situation of planning for retirement:
1. I budget zero for social security. I don’t count on it being available, or it will become means tested. I’m fine with doing that to save it for others.
2. 10% of my wealth is in my home.
3. 30% of my income will come from retirement accounts.
4. The other 60% for me will be from company stock.
It’s really not that different from other developed countries. You get social security, a 401k, and a pension.
>does it vary by state?
The variations by state only come into affect when it comes to how your distributions are taxed.
>is inflation taken into account?
Yes
>are there people who get nothing?
yes
> how common is it to work past the retirement age?
pretty common
The maximum social security benefit at this time is a bit over 3600 per month based on the top end of social security taxation of 160,000 dollars in a year(the maximum goes up most years). Most people get less. If your house is paid for(and you don’t rent) and you live in a low cost of living area it’s a lot easier to retire and thrive. My last full time year was when I was 60 and it’s been on/off since(7 years ago).
I started taking social security at 65 years and 10 months, I really didn’t need to wait until February of this year for an additional 25 bucks a month. I can sell my coin collection and get 25 bucks a month for 133 years
Social Security checks aren’t a lot of money. If you’re a Senior Citizen living only on a Social Security check, you’re poor. I save for retirement so I will be financially secure in my old age. Social Security will be just supplimental income (if it’s still solvent) when I retire.
> how much would you get if you earned 10K a month for the last 20 years?
Social Security is funded in part by a % tax on your income. There is a *maximum* value each year (in 2023 dollars – ~$160k) – earnings beyond that don’t garner you a larger payout from Social Security, but also don’t have that tax taken out.
If you earned the taxable maximum for most of your career and wait to retire until 70 (the age where you get the maximum payout per year), you’d get around ~$55k this year from the government as a Social Security payment.
You can play with the quick calculator here: https://www.ssa.gov/OACT/quickcalc/index.html
Social security provides you a pretty solid foundation. People say its not a lot.. and it isn’t but it was never designed to do anything but keep a roof over your head.
If you want to retire with a boat and a sports car and plenty of money to give to grand-kids, you have to do that on your own. It’s stupidly easy to do but most people are just lazy and like spending more when they’re young.
For an idea, here’s a calculator:
https://www.bankrate.com/retirement/roth-ira-plan-calculator/
Most people take a portion of their paycheck and out it into a 401k, a 403b, or and IRA. If you make a lot, you can afford to put a lot away. These accounts are normally invested in low risk stock so that by the time you have access to it, it’s grown a lot.
People have already talked about Social Security, but another core part of retirement is Medicare, the insurance system for people over the age of 65. It doesn’t cover everything completely but it covers a lot, and there are also supplemental plans you can purchase in the private marketplace. Some employers may also offer medical retirement benefits.
A private pension, continued payments from your employer, is generally not a thing most current workers will get. If you do get a pension, you are either:
* union employee and its in your contract (this doesn’t mean all union workers have a pension)
* government worker
* The general rule of thumb with government work is you are going to be paid a bit less than your private sector counterparts but get better benefits
* employee at an older, legacy company.
LOL at these people saying having plenty of money in retirement is “easy” and only stupid people can’t manage it
This is a question where the general demographics of this sub (mainly young, white, and educated) are very relevant when considering the answers you get.
It doesn’t.
It doesn’t
Social Security is a state pension. You pay 6.2% of your paycheck up to around 160K of income and your employer matches throughout your working life (you pay both if you are self employed). In 2023 the *average* annual payment for Social Security is $20,316 or $1693 per month. There are also Social Security pensions for disabled people and supplemental payments income for the poor.
Social security is a required withdrawal that is managed by the government, or more accurately, mismanaged by Congress. My social security at full retirement would be about half my net and a third of my gross. I make over six figures.
I also have two 401(k)’s from two former employers, a 457(b), an IRA, and a pension.
The 401(k) is a pre-tax withdrawal from your paycheck into an interest-bearing savings account. Your employer may or may not contribute additional money to your 401(k).
The 457(b) is similar to a 401(k), but is used as supplemental savings by government employees. I don’t think any employers contribute additional funds to 457(b), since governments often have a pension or other primary retirement.
IRA – Is a post-tax retirement savings account. Since it’s post-tax, I can withdraw it and it won’t contribute to my tax burden at the time of withdrawal.
Pension – I’m a former government employee, which is one of the very few industries that still have a pension. Pensions used to be more common with private employers, but after companies got a reputation for raiding their employees’ pension funds, they all but disappeared from the private sector.
It doesn’t. You either get rich and quit whenever or die trying.
Here’s the thing; it doesn’t for most people.
Eventually you die.
Social Security is “supposed to” cover about 40% of your expenses in retirement… It’ll probably keep you off the street, but for any quality of life, you’ll want additional money saved. Having a paid-off home helps enormously since housing expenses are such a significant part of overall expenses. But that’s functionally having money saved in retirement anyway — it’s just tied up in an asset.
Benefits are calculated based on your N highest earning years (35 highest earnings years maybe?), but it’s a case of diminishing returns, with two “bends” in the return graph. So low earners tend to get a higher percentage of their contributions back than high earners.
You can choose when to take Social Security — the longer you wait, the larger the payments. For instance, if I start at 70, I might get twice as much per month as if I start at 62.
It does not vary by state — it’s a federal program.
I don’t know what 120k for 20 years would earn you, but I suspect you’d be near the second bend in the benefits graph — probably in the vicinity of $2000/mo, but that’s just a seat-of-my-pants number. Depends on when you start taking social security.
Ideally if you were making $120k a year, you’d have an employer with a 401k (or 403b, or 457) plan, and you’d elect to have them withhold a certain percentage of your income and put it in the 401k where it’d be invested in mutual funds. There are different types of contributions (Traditional and Roth), but in either case, the tax savings can be significant. If you maxed out your contributions for those 20 years at today’s max yearly contribution ($22,500), you’d have put away about half a million dollars away. Many employers will match part of your contributions as well — that might account for another $100,000. Market gains over the years should outpace inflation significantly, so you could easily retire a millionaire.
Additionally, there are IRAs (individual retirement account) where you can save money for retirement. Those aren’t through your employer, but available to all Americans. The contribution limit on those is lower, around $6,500 a year in 2023. But you can be banking money there too.
And then there’s a magic account for people with certain health plans called an HSA, with an even lower contribution limit ($3,850/year), but it’s another place to squirrel away money for retirement. That money is ostensibly for healthcare — if you spend it on healthcare, you never pay tax on that money. But there’s no real penatly for using it for other things; you just pay income tax on the money you take out for other reasons.
Some employers are much more generous in their contributions to your retirement account than others. Mine happens to be exceptionally generous, contributing over 15% of my salary separate from what I contribute. But they’re very much the exception, not the rule. Highly educated STEM folks are much more likely to have access to good employers who do things like that.
Social Security benefits do adjust with inflation… the adjustment for the last couple years has been large due to higher inflation. In previous years, inflation was low so the adjustments were small.
People who don’t qualify for social security get nothing. the social security administration also controls whether you qualify for access to government run healthcare (medicare) in retirement as well. But qualify is a very low bar — being American and having a full time job for a decade is generally enough.
Working past retirement age is not uncommon. Sometimes by need, sometimes by choice. Nominal retirement age is 67.
What’s this thing you call retirement? I will never be able to retire if I want to do things like eat and I’m 60 . One faction of our government says Social security will be broke by 2032 and they want to end it so there’s that
Social Security is a federal program so it doesn’t vary state by state if you have your house paid off and car paid off you can live off it alone and many do.
The average is $20,000 a year per person and is inflation adjusted.
What’s a retirement?
Lol retirement
Mostly people work for a long time then retire and realize they don’t like fishing or golf as much as they thought they would, and go back to work.
If you are good with your money and work continuously you will get (give or take) $37-3800 a month. But that’s for me, it will change slightly as the next generation ages.
hahah what? It doesn’t really “work”. Basically you need a couple mil to retire which all could be wiped out pretty fast with a few medical mishaps, a round of cancer treatment, or a year or so in a retirement home.
>how much would you get if you earned 10K a month for the last 20 years?
If you earned $10k per month for the past 20 years (starting in 2003), and you stopped working this year you would get $2,825/month at full retirement age (67) assuming you are 40 now.
But social security takes the highest earning 35 years of your life as input for the calculation. So if you worked an extra 15 years (from now) to make 35 total, you would get $3468/month.
>is inflation taken into account?
Yes, this number will generally go up by a certain percentage each year based on inflation.
>are there people who get nothing?
Yes, you need to work at least 10 years at some point during your life in order to get benefits. If you have never worked, you can still get spousal benefits if you were married to someone who worked at least 10 years (even if you are now divorced).
>how common is it to work past the retirement age?
About [20% of adults work past age 65.](https://www.aarp.org/work/employers/americans-working-past-65/)
You are expected to die at your desk and not complain. 🤐
It doesn’t. I will work until the day I die
I feel like this question is way beyond the purview of this sub.
Because in some states teachers can’t claim social security and the also claim teacher retirements. Military personnel have specific requirements for retirement.
State/ County/city employees have certain requirements.
And, union/trade groups have their own.
And then…. There are the 10,000 requirements that private companies place on retirement.
Social Security is a federal government program has these basic features:
* The average benefit is $1830.66 per month.
* The benefit amount is based on average wages over your 35 highest-earning years, with zeroes averaged in if you worked fewer years, and a minimum of 10 work years to qualify.
* Low-income workers will get a 90% replacement rate, but additional income beyond certain points adds benefits at a lower rate, and income beyond a cap (currently $160200 per year) gives no additional benefits.
* Benefits can be claimed as early as age 62 for a reduced benefit, or delayed until age 70 for an increased benefit.
* The maximum benefit is $4555 per month, which requires 35 years of income at or above the cap and delaying to age 70.
* Wages are indexed based on wage changes before retirement, and after retirement the benefits are indexed for inflation.
* https://www.ssa.gov/benefits/retirement/planner/AnypiaApplet.html has a detailed calculator. Assuming no income prior to the 20 years at 10K, the monthly benefit seems to be $1873 if retiring now at age 62 and $3109 if retiring now at age 70.
* Benefits are the same in each state.
* Almost all workers are covered, but there are a few exceptions. There is a separate system for railroad workers, and some (but not all) government employees have different systems.
In spite of recommendations to save for retirement, many retirees in the US in fact rely mainly on Social Security.
A combo of social security, and a 401k that comes from your paycheck automatically and rises and falls with the stock market.
My employer has esop which is amazing to have. As you don’t directly contribute anything to it and can cash out and transfer to another fund when you leave or retire and are vested.
I would like to get to year 3 and be 50% vested but there’s a new auto plant coming like 5 minutes from my home and they’re advertising a median salary higher than my current salary
As John Oliver said, the retirement age in America is “no.”
I’m just going to hang myself when I turn 75 and still have to work
Some people don’t retire. Many need a job with health insurance as Medicare doesn’t cover the medication they need. Look up
Medicare donut hole
Hahahhahajaja.. retirement…. hahhahajahaha…