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Old 01-31-2016, 11:48 AM   #21
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I'll just mention our current situation a bit. Right now we have SS, IRA withdrawals + Roth withdrawals for income. The Roth helps a lot to keep the taxes way down. At RMD time, the taxes will go up and are unavoidable but again the Roth's will help a lot to keep taxes within bounds.

I personally don't think the government will change the rules on taxation all that much for our age group. I do expect to pay more for Medicare (maybe even 2x) and I do expect the tax rules to change incrementally.

I would recommend the OP and anyone else use TurboTax to fill out what-if scenarios. Each year I do a table which increments our income and then I select what bracket I want to be in. So one needs TT and a spreadsheet. If you aren't good at this then either become proficient or see a planner.
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Old 01-31-2016, 12:42 PM   #22
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I ran these scenarios using Fidelity's retirement income planner and got the result that even in a poor market scenario, it came out better to wait on SS. As a result of those calculations, I'm pushing back taking SS as long as possible. However, I believe that spending more money to enjoy life is important during my early 60's, so I've created a strategy to split my investments into two pools. One will support dividends only @2.7% for the rest of my life, the other will be used up until it is gone. When this 2nd pool is gone, I will start my SS at around 67 years old. Later if the markets are good earlier if they are not.

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Old 01-31-2016, 12:59 PM   #23
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I'm doing both this year, I need to close out an exotic IRA, for simplicity sake, $50k, plus $2000 a month SS for my husband and we have other investments to throw off the income. I ran this number last night and surprisingly, I'm still way under the bracket 15% bracket. I might get to convert some IRA to Roth IRA. So run the numbers for more accurate tax situation.


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Old 01-31-2016, 04:13 PM   #24
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Would the individual be better, in general, to live off the taxable account until it is exhausted then take SS or start taking SS immediately and extend the life of the taxable account or even dip into the IRAs for some percentage of expenses? Or are these the sorts of details that retirement planners of some sort can effectively deal with?
Ian,

Please follow the advise of earlier posters and run i-orp using your numbers. It will give you much insight into what is best.
For me, I ended up starting SS at 62 when I said for years I was waiting until 70. I did not understand before how SS was partially taxed if you manage to keep your income on the low side. The amount you pay in taxes can vary a lot depending on when you start SS and draw from your IRS's ect.
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Old 01-31-2016, 04:28 PM   #25
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Thanks to all for the suggestions. There's really no alternative to running various scenarios I guess and it is apt to be quite different depending on individual circumstances.
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Old 01-31-2016, 04:53 PM   #26
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Ian,

Please follow the advise of earlier posters and run i-orp using your numbers. It will give you much insight into what is best.
For me, I ended up starting SS at 62 when I said for years I was waiting until 70. I did not understand before how SS was partially taxed if you manage to keep your income on the low side. The amount you pay in taxes can vary a lot depending on when you start SS and draw from your IRS's ect.
I did run i-orp and it helped. But I recall the tax treatment is not very exacting. I contacted the developer and he said that yes, some of the tax issues were beyond the i-orp scope.

It can depend on which state you live in, for instance. Also the taxes, especially at RMD time can depend on if you have deductions or just claim the standard deductions. Complicated but I'd rather be doing this then living in a poor country on subsistence.
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Old 02-01-2016, 12:56 AM   #27
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+1. This solution is simple and the logic is sound.

But... Above , others gave reasons why this might not be the best way to go , so why is the logic completely sound ?


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Old 02-01-2016, 08:38 AM   #28
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Use the taxable until there is a bad down year, then start SS to limit the withdrawal while prices are down.....
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+1. This solution is simple and the logic is sound.
I don't think so. The OP's main issue is a lot of tax-deferred and not a lot in taxable. Even if prices are down if you take a withdrawal then you are still improving tax diversification.

In the extreme I would agree... if investment results are poor to an extent that your nestegg is getting uncomfortably low, then SS becomes and option for cash flow that you can exercise and stem the bleeding but a single down year would not likely put the OP in a position where their nestegg becomes uncomfortably low.
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Old 02-01-2016, 11:30 AM   #29
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I've started to play with the i-orp tool but can't see a way to account for an anticipated inheritance. Anyone know if there's a way?
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Old 02-01-2016, 11:52 AM   #30
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I've started to play with the i-orp tool but can't see a way to account for an anticipated inheritance. Anyone know if there's a way?
Looking at the input form, MAYBE you could try the Illiquid Asset line item for other, and put age you think you would receive it?
Try it and see what it spits out compared to running it without.
You will then see if it handles it or not according to how you want it to.
This is a guess on my part, YMMV as always.
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Old 02-01-2016, 01:13 PM   #31
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Looking at the input form, MAYBE you could try the Illiquid Asset line item for other, and put age you think you would receive it?
Try it and see what it spits out compared to running it without.
You will then see if it handles it or not according to how you want it to.
This is a guess on my part, YMMV as always.
Yes, that does appear to be the way to handle it although one needs to put in a cost basis that will yield no capital gains that would be taxed. My first run through seems to make a huge difference in the resulting amount of roth conversions so I need to check that more closely for why that's seems to be the case.
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Old 02-01-2016, 01:23 PM   #32
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And if he is not in good health, it doesn't matter if he takes it at 65 or 70, other than his beneficiaries... So 70 is still a better choice.
A better choice for you in your own circumstances. But, certainly not for everyone.
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Old 02-01-2016, 02:55 PM   #33
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My Fidelity simulations say it is better to wait to take SS, even in a down market. See above.

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