spending future social security income now

When we officially stopped working for a regular paycheck, it would still be 30 years before I could start to collect full Social Security benefits at Age 67, and 35 years before Winnie could receive the spousal benefit.

With Social Security so far in the future, many early retirees don’t even consider SS as a factor. Who knows, maybe the program won’t even be in place in 30 years. Best case it might be an insurance policy, a final layer of protection for worst-case outcomes.

But time marches on. It is now only 18 years before I am eligible for reduced early benefits at Age 62.

Which got me thinking… should I start to include Social Security in our overall portfolio value? And if so, can we spend that future Social Security income now?

Spending Future Social Security Income Now

I have zero qualms about increasing spending based on portfolio growth. If our portfolio doubles, we can double our expenditures.

This is not without risk, of course. Maybe this year is the year that the 4% Rule fails. (but probably not.)

But this is not the only deviation from a traditional Trinity Study / 4% Rule type analysis. Social Security income is imminent, and income from any source means our portfolio will bear a lighter burden.

Or… bear the same burden with greater withdrawals.

How much greater? And when?

Insurance / Terminal Value of Social Security

Based on the 4% rule, somebody retiring at normal retirement age with $1 million can spend $40,000 per year. It is known.

Additionally, they can spend 100% of their Social Security income. Guaranteed.

But how do we factor Social Security income into the equation 10, 20, or 30 years in advance?

I injected a Social Security income stream into cFIREsim at 5 year intervals while holding spending constant, and evaluated the increase in portfolio terminal value (the projected value of a portfolio after 30 years of retirement.) This is purely a mathematical construct and is completely independent of the initial portfolio value or withdrawal rate.

I used a 90/10 stock/bond portfolio and Social Security income of $1,500/month for me and a 50% spousal benefit with a 5-year delay, This equates to SS income of $18,000/year for 5 years and $27,000/year thereafter. (This is our expected SS income and also about the average.)

Our projected SS income – Numbers from this calculator

More income = more money, so over every one of the available 30-year rolling window periods from 1871 to 2018, average and median terminal values increase significantly. The worst case year also saw a substantial increase in terminal value.

This is the effective insurance value of Social Security and is shown in the chart below. When we choose to ignore Social Security for purposes of planning early retirement, this is what we exclude.

Example data points:

  • It is reasonable to ignore Social Security if 30 or more years away from eligibility.
  • At 25 years from Social Security eligibility, the insurance/terminal value is around $100k, or 10% of a $1 million portfolio. At this point, it likely pays to stop ignoring Social Security.
  • Somewhere between 15 and 10 years before Social Security, the value of SS reaches $1 million. I would call that substantial.

Additional income, naturally, always results in an increase in terminal value. We should be able to spend some of that excess.

Spending Future Social Security Income Now

To determine how much of the excess we could spend, I again turned to cFIREsim, this time increasing spending while holding all other critical parameters the same, e.g. failure rate is the same and worst case dips in the portfolio are the same or improved relative to the no Social Security case.

From the historical record, the portfolio terminal value after 30 years will be no more rosy nor dire than if Social Security didn’t exist.

Example data points:

  • At the midpoint, retiring 15 years in advance of average SS income, we could spend about $7,500 extra per year.
    • Using exact numbers, we might spend $47.5k for 30 years rather than spend $40k for 15 years followed by $67k for 15 years. We drain the money bucket a little faster pre-SS and fill it up again post.
      • 47.5k/40k*4% = effective 4.75% withdrawal rate from core portfolio
      • assumes we’ll be alive to collect SS for 15 years, but if not, hey, we are dead
    • Or we continue spending $40k/year, with an effective withdrawal rate of 3.4% (40k/47.5k*4% = 3.4%)
      • insurance effect is an incredible 0.6% reduction in withdrawal rate
      • “sleep better at night”

Applying the Data to Our Own Plan

Deciding to spend future Social Security income now requires some confidence that the program will be there for us. This gets easier as we age.

If we are also confident that the insurance effect of a higher terminal value is no longer necessary, because of:

  • a positive sequence of returns in the early years,
  • spending less than 4% / less than projected
  • accidental income from other sources
  • general hubris

…then we could choose to tap SS early.

The benefits aren’t great when still 25+ years away from the Social Security event horizon, but increase rapidly with time. Where we are presently, 18 years out, we could expect a benefit of $5,000/year, which will grow by about $1,000 for each year we wait.

If we were to tap into SS early at some time, we would probably spend this extra on discretionary items versus lifestyle inflation, so spending can go back to normal levels if need be. In other words, use it to buy handbags and bicycles not a long term triple net lease on a dream house.


Many early retirees choose to ignore Social Security as part of their portfolio and longevity analysis. 30+ years from Social Security eligibility, this is a reasonable approach. But once we get within 25 years of our first Social Security income, the impact on portfolio longevity becomes significant.

More income, even decades from now, means an increase in portfolio terminal value (the value after 30 years of withdrawals.)

This increase is a real component of our overall portfolio, which has the effect of reducing our effective withdrawal rate if we continue to spend as usual.

Or, we can take this increase and spend it, in effect spending future Social Security income now.

For other interesting views on Social Security, check out when I estimated the value of SS as an annuity or when I calculated total SS return on investment.

Would You Consider Spending Future Social Security Income Now?