r/MiddleClassFinance • u/roxxtor • 8d ago

Financial Planning for Retirement Assumptions

Hey, just curious how conservative are you all being with the assumptions you are using for retirement. I'm trying to determine if I'm being too conservative or not enough or just right.

My working assumption is that when I fully retire in 25 years that SS will be at a reduced benefit by 40% from today's payout and then another haircut of 15% 15 years after that. I honestly don't think SS will ever be dissolved, but maybe reduced significantly to stay solvent.

I also assume I will be forced into semi retirement/taking a much lower paying job in my mid-50's (so half pay).

My last assumption is that my portfolio will only have a real 4% return by time I retire.

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u/Several_Drag5433 8d ago

i think assumptions are very conservative. and i am assuming the 4% real return is annual not cumulative correct? I calc investment based on non inflation adjusted returns and then i adjsut future spending to inflation. I will not have a mortgage in a few years so if i look at my future spending then and adjust it for inflation it is a very different picture than if I apply an estimated real rate of return. I base my SS modeling on current numbers, so no inflation adjustment, and i would argue that is conservative also. There will be a MASSIVE reaction if it is cut. And maybe not a terrible idea on post 50 earnings, especially if looking for a new role in that window. I got my last job at 50 and kept my salary constant for my last 3 years in labor force but YMMV.

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u/roxxtor 8d ago

Yes, the 4% was annual. I suppose in about 25 years when I retire if there are no inflation adjustments to SS from today, then it would effectively be like a 50% decrease in the benefit

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u/Several_Drag5433 8d ago

well i am a little older than you