$95\u2013$133 per month<\/strong>, which isn\u2019t a meaningful reduction. So please play around with your assumptions as well. <\/p>\nHow The Social Security Benefits Are Calculated<\/h2>\n
Benefits are based on your lifetime earnings. Social Security \u201cindexes\u201d your past wages for inflation, then averages your highest 35 years to determine your monthly benefit amount. For 2025, the 6.2% Social Security tax applies to income up to $176,100 for employees. If you are self-employed, you have to pay double.<\/p>\n
To qualify for retirement benefits, you need\u00a040 total work credits. You can earn up to\u00a04 work credits per year, and in 2025,\u00a0one credit is earned for every $1,730 of income. So if you earn at least\u00a0$6,920\u00a0in a given year, you\u2019ll receive the maximum\u00a04 credits\u00a0for that year.<\/p>\n
These years do\u00a0not\u00a0have to be consecutive. Once you\u2019ve earned your\u00a040 credits (takes 10 years), you are considered\u00a0fully insured\u00a0for Social Security retirement benefits for life, even if you never work another day.<\/p>\n
The more consistently you worked and the more you earned, the higher your benefit will be (within SSA limits). I\u2019ve technically been paying FICA taxes since 1994, when I worked at McDonald\u2019s in high school for two years, so I crossed the 40-credit threshold long ago.<\/p>\n
Can I Live Off $3,751 a Month in Retirement?<\/h2>\n
Surprisingly\u2026 I think the answer is\u00a0yes.<\/p>\n
The benefit amounts shown on SSA.gov are expressed in\u00a0today\u2019s dollars<\/strong>. They don\u2019t include future COLA (inflation) adjustments. But as we saw during COVID, Social Security is\u00a0willing<\/em>\u00a0to keep up with inflation. 2023 saw an impressive 8.3% COLA increase. That was an eye-popping bump and gave me hope the system won\u2019t let retirees fall too far behind.<\/p>\nIf we assume ~3% annual inflation, my benefit in nominal<\/em> terms<\/em> will roughly be:<\/p>\n\n- ~$4,000\/month at 62<\/li>\n
- ~$6,500\/month at 67<\/li>\n
- ~$8,800\/month at 70<\/li>\n<\/ul>\n
Building a Budget to Live Only on Social Security<\/h2>\n
If I start at 67, I\u2019ll receive\u00a0$3,751\/month<\/strong>, or\u00a0$45,012\/year<\/strong>\u00a0in today\u2019s dollars. Today, my family of four can\u2019t<\/em> live on that amount. But in 19 years? It\u2019s highly possible assuming a few key things happen:<\/p>\n1. Both Kids Become Financially Independent<\/h3>\n
By 2044, when I’m 67, my kids will be 27 and 24. If they\u2019ve launched successfully, they shouldn\u2019t need help from the Bank of Mom & Dad. I estimate a 40% chance of this happening, given how home prices have outpaced wage growth. Young adults face a tough road to independence, especially with higher housing costs.<\/p>\n
That said, I\u2019ve intentionally purchased a rental property each time one of my children was born. The plan is to hold these properties through their college years to help cover the cost of raising them. And if they decide they want to live in San Francisco as adults, I\u2019ll rent the homes to them at\u00a0<\/strong>30% of their gross income, which feels both fair and financially sustainable. If they don\u2019t end up needing the housing, I\u2019ll simply continue using the rental properties to help fund our retirement.<\/p>\n2. We\u2019re 100% Debt-Free<\/h3>\n
This is extremely likely. I only have one rental property mortgage left, which I\u2019m on track to pay off by 2030. I could pay it off now with my Treasury bond holdings, but since Treasuries yield ~2% more than my mortgage rate, I\u2019d rather keep the spread and earn free money. <\/p>\n
3. We Relocate to Honolulu To Save Money<\/h3>\n
Even without a mortgage on our San Francisco home, property taxes and maintenance exceed my Social Security benefit. The solution is to move into my parents\u2019 property in Honolulu. The place is paid off, the land has multiple homes, we spent $40,000 updating the in-law unit, and I\u2019d be splitting property taxes and maintenance costs two or three ways. Hawaii\u2019s property tax rate is the lowest in America.<\/p>\n
If these three things happen, I\u2019m\u00a090% confident<\/strong>\u00a0I could live off $3,751 a month gross. Here’s a realistic budget per month:<\/p>\n\n- Core living expenses: $1,500<\/li>\n
- Food: $1,000<\/li>\n
- Transportation: $300<\/li>\n
- Entertainment: $300<\/li>\n
- Medical: $500<\/li>\n
- Total:<\/strong> $3,<\/strong>600 (vs. $3,751 monthly gross SS benefit)<\/li>\n<\/ul>\n
My Wife Gets Social Security Too<\/h2>\n
Assuming my wife and I are both still around and together at 67, she\u2019ll have a comparable benefit. Suddenly, we\u2019re not talking about $3,751\/month, we\u2019re talking\u00a0$7,000\u2013$8,900\/month<\/strong>, depending on when she starts taking Social Security. If she takes Social Security at 64 when I’m 67, then our combined Social Security benefits will be roughly $7,100\/month.<\/p>\nWith two people living together, housing and utilities don\u2019t double, so the spending efficiency is huge. After core living expenses, we may have $5,000+ a month left. Plenty for food, travel, and hobbies.<\/p>\n
Sure, we might not cruise Europe with a balcony room twice a year, but one nice vacation every year or two? Easily doable.<\/p>\n
Hawaii offers so many free or inexpensive activities, such as beach days, tennis, pickleball, and hiking, that a high-rolling retirement isn\u2019t necessary.<\/p>\n
Even spending $100\/day on food ($3,000\/month) still leaves $2,000+ for everything else. Without debt and childcare expenses, life gets much easier to afford. In this scenario, I’m 98% certain we can live off both our Social Security benefits<\/strong>. <\/p>\nAdd On Tax-Advantaged Retirement Accounts, Rental Properties, and Brokerage Accounts<\/h2>\n
Until today, I never seriously considered the idea that Social Security could cover\u00a0100% of our retirement expenses. Instead, my entire focus has always been on maxing out my 401(k), building a rental property portfolio, growing our taxable brokerage account, and investing in venture capital to fund our traditional retirement years.<\/p>\n
But after running the numbers, it\u2019s obvious I\u2019ve saved\u00a0way<\/em>\u00a0more than necessary. And strangely, even though I retired early at age 34, it might still not have been early enough! <\/p>\nThanks to a roaring bull market in both stocks and real estate since 2012, when I left finance, my investments have compounded faster than my spending and income. Add in supplemental income from side hustles (e.g., Uber driving) and this site, and I\u2019ve been grinding for no reason.<\/p>\n
And now, with Bill Bengen raising the safe withdrawal rate from 4% to\u00a05%, it reinforces the idea that we could all lighten up and relax more. If you are a regular Financial Samurai reader, I’m pretty sure most of you are accumulating more wealth than you need as well. <\/p>\n