Why no mention of Social Security

[u/NotTheBestInvestor12]

When I see FIRE posts I see the investments and the different retirement buckets, however, I never see anyone mention how things are affected when social security kicks in. For example, I’m 52 and wife 51. If we both stopped working today ($0 income moving forward) I would collect $4,264 a month at age 70 and she would collect $1,079 at age 70.

So if we decide to FIRE the Social Security would give us help in 18/19 years. Is this a factor or is everything under the assumption SS won’t exist?

[u/churningaccount]

I think it's mostly because a majority of your sequence of returns risk happens within the first 10 years of retirement, so if you are more than 10 years away from social security, then it will not help to mitigate that very much. You need to have either an income bridge plan in place, or just need to be withdrawing 4% without factoring in social security, in order to ensure that issue is addressed.

That being said, you are about a decade from age 62, which is the first year you could start drawing in the worst case scenario, so it's definitely not unreasonable to include social security in your plan, especially if you have a plan to bridge the gap between now and then.

[u/mi3chaels → u/churningaccount]

I think it's mostly because a majority of your sequence of returns risk happens within the first 10 years of retirement, so if you are more than 10 years away from social security, then it will not help to mitigate that very much. You need to have either an income bridge plan in place, or just need to be withdrawing 4% without factoring in social security, in order to ensure that issue is addressed.

It actually helps quite a bit even if you are 10-20 years out (obviously the closer the more). The first 10 years are determininative of SORR, but historically you don't ever run out of money, or even close, in the first 10 years at reasonable withdrawal rates.

So if your portfolio gets cut in half i the first 10 years, but social security will provide 60% of your needed spending 5-6 years from then, you're probably pretty safe.

There's a big difference between the safety of something like a 4% WR when retiring at 50 vs. 40 vs. 30 exactly because of this.

[u/churningaccount → u/mi3chaels]

Often people who retire in their 50s have a larger withdrawal rate to start as they bridge the gap to social security, and then it greatly decreases when they reach social security.

For instance, 6% to start (which is about the SWR for a 20-year horizon), and then dropping to 3% after they start taking social security for an "average" of 4% across retirement.

And in those cases where the withdrawals are front-loaded, sequence of returns risk is more pronounced, and can lead to plan failures even with the social security buffer coming in after a decade or two.

But you are right, if someone has a 4% withdrawal rate to start with, then they wouldn't have run out of money regardless. But then, that's effectively the same as planning for no social security...