Here’s exactly how I plan to spend my Social Security checks in retirement

I am 42 years old. So it might seem like I have decades to plan for my retirement and figure out where Social Security fits into those plans. And you would be right. However, it’s never too early to start thinking about where your income will come from after you leave the workforce.

With that in mind, here’s how I think about Social Security when it comes to my retirement plans, and why people in their thirties and forties might want to take a similar approach.

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How Much Social Security Will I Get?

If you have decades before retirement, there’s no way to know for sure how much you’ll get in Social Security. Your eventual Social Security benefit depends on a combination of your highest 35 years of inflation-adjusted earnings, your annual Social Security taxable maximum, the benefit formula in effect when you become eligible, and the age at which you begin collecting monthly checks.

That said, you can get a good estimate by checking your most recent Social Security statement, which is available by creating an account at www.ssa.gov if you haven’t already. You can see an estimate based on your actual work record as well as other valuable information. Without sharing my details, I will say that I check my Social Security statement every year and have a good idea of ​​what to expect.

What will Social Security look like 20+ years from now?

Before we go any further, it’s important to point out that all of the estimates we see are based on Social Security as it stands. today.

You may have seen headlines indicating that Social Security is expected to run out of money by 2035. And it’s true. Between now and then, one of two things will have to happen:

• Social security benefits will be cut by a little more than 20% (this is unlikely). After 2035, all benefits will have to be paid from tax revenues.
• Changes will need to be made either to increase Social Security revenues (raising taxes) or to reduce the amount of money coming out of the program (reducing benefits). Or a combination of the two.

Either way, it’s fair to say that Social Security until retirement could look quite different than it does today. There’s no way to know for sure what that means — not yet, anyway. And there’s no way to know whether any changes would affect people’s retirement ages or benefits decades after retirement.

How I plan for uncertainty

Given the uncertainty of Social Security, there are some important steps I take to prepare. To be clear, I’m pretty sure Social Security will exist in the some build when I retire, but plan as if I will rely solely on my savings.

• I save aggressively in my retirement accounts. For me, that means my SEP-IRA, a type of IRA that’s designed for self-employed individuals and small businesses. But depending on your situation, you might be able to increase your 401(k) contributions or open a traditional or Roth IRA.
• I also plan to pay off my house in full (whether it’s my current one or wherever I live). Fewer monthly expenses mean I’ll need less income from savings.

Here’s the idea. Even if Social Security is fixed by Congress before it runs out of money, there is a good chance that benefits will be significantly lower than they are today. For example, it is quite possible that the full retirement age could be increased to 68, 69 or even 70.

So, I am hopeful that Congress will preserve and protect Social Security and that my eventual benefit checks are equal to what my last Social Security statement indicates. But if I’m not, I’ll be ready.

How will I spend my Social Security checks?

The bottom line is that I don’t really have any grand plans for my Social Security checks after I retire. The short answer is that I will probably use them to cover my day-to-day expenses, healthcare costs, and other living expenses.

I have over two decades until I plan to start collecting benefits and let my investments build, so I’m saving aggressively for retirement in the meantime. In short, I plan as if I cover all my expenses from retirement accounts. Given the uncertain future of Social Security, it would be smart for workers in their 30s and 40s to approach things with a similar mindset.