Social Security is the most undercounted asset in FIRE planning. Most calculators — including most Coast FIRE calculators — ignore it entirely. The result is that a typical 40-year-old planner targets a portfolio big enough to fund 50 years of expenses without Social Security, even though Social Security will plausibly cover 30-50% of those expenses for the back half of retirement.
This article is the calmer version. How Social Security works. Why most FIRE planners do not count it in their core FIRE number. And how, once you reach claiming age, it can shrink your required portfolio by hundreds of thousands of dollars.
How Social Security works
Social Security is a federal insurance program funded by payroll taxes. You pay 6.2% of your wages (up to a wage base that adjusts annually, $168,600 in 2024) and your employer pays another 6.2%. Self-employed people pay both halves, 12.4%, but deduct the employer half.
In exchange, you earn credits. You need 40 credits (10 years of work) to be fully insured for retirement benefits. Each year you work and earn at least a small threshold amount, you earn up to 4 credits.
Once you are fully insured, you are eligible to claim a monthly benefit starting at age 62 — but the amount depends on two things:
- Your primary insurance amount (PIA), which is based on your 35 highest-inflation-adjusted earning years.
- The age at which you claim, relative to your full retirement age.
The benefit formula: 35 years, three bend points
Your PIA is calculated by taking your 35 highest years of wage earnings, adjusting each for national wage inflation, summing them, dividing by 420 (the number of months in 35 years) to get your Average Indexed Monthly Earnings (AIME).
The AIME is then run through three "bend points" to produce your PIA. In 2024, the formula is roughly:
- 90% of the first $1,174 of AIME
- 32% of AIME between $1,174 and $7,078
- 15% of AIME above $7,078
The formula is progressive — lower earners get a higher replacement rate. A worker with a $40,000 lifetime average gets about 50% of pre-retirement income replaced. A worker with a $150,000 average gets closer to 25%.
The Social Security formula is the most progressive piece of the U.S. retirement system. A dollar of wages earned at $40k replaces about 50 cents of retirement income. A dollar earned at $150k replaces about 25 cents. The math favors lower and middle earners.
If you worked fewer than 35 years, the missing years are counted as zero. This matters for FIRE planners who stop working at 40 — claiming at 62 means only 20 to 22 years of earnings, with the rest as zeros, dragging down the average.
Claiming ages: 62, 67, and the 8%/yr delayed credits
You can claim Social Security as early as 62 or as late as 70. The longer you wait, the bigger the monthly check.
- Age 62 (early). Reduced benefit. For anyone born after 1960, claiming at 62 cuts your monthly benefit by about 25-30% versus full retirement age.
- Full retirement age (FRA). Currently 67 for anyone born in 1960 or later.
- Age 70 (delayed). Maximum benefit. Each year you delay past FRA adds 8% in delayed retirement credits. Waiting from 67 to 70 boosts your monthly benefit by about 24%.
The trade is simple: claim early, get more checks but smaller ones. Claim late, get fewer checks but bigger ones. The break-even age — where waiting to 70 beats claiming at 62 — is around 80 to 82, depending on assumed investment returns.
For FIRE planners, the age-70 claim is often the mathematically optimal choice, especially if you expect to live past 80. The 8% annual increase is a guaranteed, inflation-adjusted return that few investments can reliably match.
Spousal benefits
Social Security also pays spousal benefits. A spouse can claim either their own benefit, or up to 50% of their partner's PIA at full retirement age — whichever is higher.
This matters most for couples where one earner was significantly higher. A high-earning spouse claiming at 70 maximizes their own monthly benefit, which also raises the spousal benefit floor.
Survivor benefits are also tied to the deceased spouse's claim. A surviving spouse receives 100% of the deceased's benefit — including delayed retirement credits — so delaying to 70 locks in a higher floor for the survivor.
Why most FIRE planners do not count SS in their number
This is the counterintuitive part. Despite Social Security being a real, government-backed, inflation-adjusted income stream, most FIRE planners exclude it from their core FIRE number.
The reasons are pragmatic:
- Political risk. Social Security's trust fund is projected to be depleted around 2034. After that, payroll taxes alone are projected to fund about 75-80% of scheduled benefits. FIRE planners tend to assume the worst-case 75% payout to be safe.
- Timing uncertainty. If you retire at 40, you cannot know what your benefit will be at 62 or 67 — the formula uses your 35 highest earnings years, and you have not finished working them yet.
- Lower-bound safety. If your FIRE number works without Social Security, it definitely works with it. Excluding SS gives you margin against political, economic, and longevity risk.
Excluding Social Security from your FIRE number is conservative planning, not financial nihilism. You are not saying it will not exist. You are saying your plan does not depend on it.
The downside of exclusion is that you work longer than necessary. If you could have retired at 45 with a FIRE number that assumes 70% of pre-65 expenses are covered by Social Security, but you instead saved for a portfolio that covers 100% of expenses for 50 years, you may have worked 5 to 8 extra years for safety you did not need.
How SS shrinks your required portfolio after claiming
Here is where the math gets interesting. Once you reach claiming age — say 67 — and Social Security starts paying, your required portfolio often drops dramatically.
Suppose your annual expenses are $50,000 and your Social Security benefit at 67 is $30,000 a year. Your portfolio now only needs to cover the $20,000 gap.
required portfolio at age 67 = ($50,000 - $30,000) × 25 = $500,000Versus the standard FIRE number of $1,250,000 — which assumed no Social Security. The gap shrinks by $750,000.
This is the equivalent of a $750,000 defined-benefit pension landing in your lap at 67. If you model it in your plan, your required portfolio is much smaller. If you do not model it, you saved $750,000 more than you needed to.
| Social Security benefit | Annual expenses | Gap to cover | Required portfolio (25×) |
|---|---|---|---|
| $0 | $50,000 | $50,000 | $1,250,000 |
| $15,000 | $50,000 | $35,000 | $875,000 |
| $30,000 | $50,000 | $20,000 | $500,000 |
| $40,000 | $50,000 | $10,000 | $250,000 |
The pattern is clear. Social Security is the single biggest gap-closer in most FIRE plans — once you reach claiming age.
How to actually plan around it
Most experienced FIRE planners use a two-number approach:
- Strict FIRE number. The portfolio that funds 100% of expenses for 50+ years, assuming no Social Security. This is the target you retire on.
- Post-claim adjusted number. A separate calculation that models Social Security from age 67 or 70 onward, and shows how the required portfolio drops.
The strict number is what you retire on. The post-claim number is what you actually need once you cross 67 — and it lets you take more from the portfolio, give more to charity, or work less in the back half of retirement.
The Coast FIRE calculators on this site let you toggle Social Security on or off. The default is off, because that matches the conservative planning style of the FIRE community. But once you are within 10 years of claiming age — and can see your actual benefit estimate from the Social Security Administration — turning it on gives you a more honest picture.
It is not a substitute for saving. It is a supplement that arrives late and scales with pre-retirement earnings. For a high earner, it may replace only 20-25% of income. For a low earner, 50% or more. Either way, you still need a portfolio to cover the rest.
The honest framing: Social Security is the closest thing most Americans have to a guaranteed, inflation-adjusted pension. Pretending it does not exist makes your plan harder than it needs to be. Pretending it will cover everything makes it dangerously easy.
You can model both scenarios — with and without Social Security — in the Coast FIRE calculator. The gap between the two numbers is the value of Social Security in your plan.