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Originally published Saturday, October 19, 2013 at 8:05 PM

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Scott Burns: A million-dollar question; deferring Social Security

The amount of money you need in retirement should be based on the standard of living you want. And deferring Social Security benefits is a good idea, despite concerns about the future of the program.

Syndicated columnist

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Q: I’ve heard it suggested that I might need a million dollars in my retirement fund to retire comfortably. That has always stressed me out. My focus has been primarily on having zero debt and owning real estate, primarily rental property.

I’ve just turned 60 and have paid off one rental property, a single-family home with a net of about $900 a month. This month, my own home will be paid off.

My wife, who is four years younger, is happily employed with a good salary. I am employed with a good salary and a company car. My plan leading into a possible retirement is as follows:

• Save up a good down payment for a downsized home.

• Buy the home and pay it off in three years.

• At move-in time, lease my current home.

With that in place, I’ll be 64. I will have net rental income of about $2,000 a month and expect to have about $400,000 in my 401(k). My wife will have a much smaller amount in hers. I’ll probably have a used-car payment and groceries. I’ll sign up for Social Security whenever I start needing the income — should it still exist.

So, do I still need the million dollars?

A: How much money you need to save for retirement depends on the standard of living you plan.

And, trust me, a loosey-goosey estimate that figures on “a used-car payment and groceries” won’t do. You will need a meticulous list of the spending you expect to continue in retirement.

So, if you own your house, have no debt and include your likely future Social Security benefits, you may already be in good shape. Or not. You can get some idea by checking your annual statement and benefit estimates with Social Security.

Q: Responding to an inquiry on whether deferring Social Security was wise or not, you wrote that given the current life expectancy, deferral is a good idea.

Does your answer take into consideration that by 2033, the payroll taxes collected may be enough to pay only about 77 cents for each dollar of scheduled benefits? If not, does this fact change your view on deferring?

A: I’m not alone in suggesting that people defer taking Social Security benefits. Economists, financial planners and financial journalists have supported the idea because the math works for anyone who is reasonably healthy.

It works particularly well for married men who have earned more than their spouses, because the benefit increase is also passed on to his surviving spouse. In a sense, delaying Social Security benefits also works as a form of life insurance, providing a lifetime benefit to a spouse at death.

If benefits were reduced sometime in the future to reflect actual employment-tax revenues, the value of deferral would go down. But it could decline quite a bit before it would be a bad deal compared to alternatives.


Copyright 2013, Universal Press Syndicate

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