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Old 05-15-2018, 04:07 PM   #101
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One thing is a dead cert in all of these SS discussions. Lots of heat, very little light.

Ha
Very true, but sometimes there is light. For me it was when someone pointed out that a deciding factor, if you're otherwise pretty neutral, could be to take it if/when the market drops, so that you are selling less stock at a low, and able to let it recover while you are using SS benefits. Until then, hold off, for longevity insurance. I hadn't thought of the market timing aspect of taking SS. It makes a lot of sense to me, and barring other changes to me or the SS program, that's what I'll do.
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Old 05-15-2018, 04:59 PM   #102
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Very true, but sometimes there is light. For me it was when someone pointed out that a deciding factor, if you're otherwise pretty neutral, could be to take it if/when the market drops, so that you are selling less stock at a low, and able to let it recover while you are using SS benefits. Until then, hold off, for longevity insurance. I hadn't thought of the market timing aspect of taking SS. It makes a lot of sense to me, and barring other changes to me or the SS program, that's what I'll do.

There always seems to be new thoughts on this discussion, unless of course you already 'know everything', in which case you should be 'Shedding Light' on this topic.
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Old 05-15-2018, 11:20 PM   #103
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Very true, but sometimes there is light. For me it was when someone pointed out that a deciding factor, if you're otherwise pretty neutral, could be to take it if/when the market drops, so that you are selling less stock at a low, and able to let it recover while you are using SS benefits. Until then, hold off, for longevity insurance. I hadn't thought of the market timing aspect of taking SS. It makes a lot of sense to me, and barring other changes to me or the SS program, that's what I'll do.


This makes total sense to me. No one knows how long he/she will live, and although the longevity insurance aspect is attractive, I think weíll decide based on market performance at the time.
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Old 05-16-2018, 06:51 AM   #104
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That is how I look at it too. Since I turned 62 I have been making monthly deposits towards a COLAed joint life annuity at a bargain price that I can start benefits anytime between now and age 70. If we had another 2008-2009, I could start benefits if I want to but otherwise I'll buy the bargain priced COLAed annuity since COLAed annuities are hard to find and there is good longevity in my family.
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Old 05-16-2018, 06:54 AM   #105
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A lot of this topic depends on your personal perspective of retirement. What income level do YOU need to provide YOU with the lifestyle YOU want for the rest of YOUR life.


The tallest 4 bars in the middle of this graph show that more than 56% of the households in the US earn between $35,000 and $150,000, and many of them could be facing the excessive marginal tax rates shown in section C of the following graphic.



Section C generally starts when you enter the 22% Federal Bracket while your Social Security benefits are being taxed at an 85% level. 185% of 22% results in a marginal tax rate of 40.7%. The 49.95% marginal rate only exists if your also have LTCG or Dividend income.

SSordinaryTaxabilityTaxableAGI -TaxesGrossAfterTax   
BenefitIncomeBasisSSB$12,000 PaidIncomeTaxRate   
$35,000$32,554 $50,054$18,146 $38,700 $4,454 $67,554 $63,101 6.59%   
$25,000$34,852 $47,352$15,849 $38,700 $4,454 $59,852 $55,398 7.44%ExtraAtTax
$25,000$41,206 $53,706$21,250 $50,456 $7,040 $66,206 $59,166 10.63%$6,355 40.7%$2,586
$25,000$46,251 Over Max$21,250 $55,501 $8,150 $71,251 $63,101 11.44%$5,045 22%$1,110

If you are an individual who desires a $63,101 after federal tax lifestyle, the taxable AGI minus standard deduction column of line 1 indicates that you can achieve that lifestyle with a $35,000 SSB without entering the 22% Federal bracket.

If your SSB is only $25,000, one way to look at the overall changes from line 1 to line 4 is that you had to withdraw an extra $13,696 from your IRA to get over the 40.7% Tax Hump to get the extra $7,703 needed to reach your lifestyle goal on the lower SSB level.
  • Line 3: some of the extra cash was taxed at the 40.7% marginal level.
  • Line 4: some was taxed at the standard 22% federal bracket.
  • Some was just plain taxed at normal levels!
  1. $16,854 of your $35,000 SSB was tax free on line 1.
  2. Only $3,750 of your $25,000 SSB was tax free on line 4.
  3. You lost $13,104 of tax free income!
The end result is that the extra $13,696 that was withdrawn from your IRA only raised your standard of living by $7,703. The remaining $5,993, 43.76%, went somewhere else!

Bottom line: There is no simple answer! You have to do your own personal math. What lifestyle do you want? What will it cost? Where will that money come from? And most of all, act as if you are already there and calculate your after tax income for if I do it this way and if I do it that way. Finally, make your own personal decision!
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Old 05-16-2018, 07:03 AM   #106
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This makes total sense to me. No one knows how long he/she will live, and although the longevity insurance aspect is attractive, I think weíll decide based on market performance at the time.
And I don't think this is counter to the longevity insurance planning. The thought is, if the market is at a low, you think you can invest the money you'd get from taking SS at that point better than what you'd get by waiting for a higher SS payout.
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Old 05-16-2018, 09:31 AM   #107
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And I don't think this is counter to the longevity insurance planning. The thought is, if the market is at a low, you think you can invest the money you'd get from taking SS at that point better than what you'd get by waiting for a higher SS payout.


Agreed
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Old 05-16-2018, 01:02 PM   #108
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SS is actuarially neutral for an individual. Excluding most all other outside factors, it makes little difference when to start SS. Once you start including those outside factors and plans, there are significant differences.
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While +1 for the last part, the first sentence is totally wrong. It is absolutely not actuarially neutral for an individual. It is neutral for a VERY large group.
My understanding is that the SS is actuarially neutral for the government. If it were acturally neutral for an individual then the following graph (screen snip of a Pralana Gold Retirement Planner sensitivity planning chart) would show little difference in black line (taking SS at 70 for wife and self) and blue line (SS at 63 and 62.) It turns out that the average of our expenses for the last 4 years was $69k +/- 2k. At 70 our joint SS actually exceeds that! So long as both of us survive, we could live comfortably on SS and only a little of our savings. Delaying SS and burning through assets till SS at 70 allows us to retire now with less than a million, rather than working to 65+.
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Old 05-16-2018, 03:17 PM   #109
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That is an exact duplicate of many sooner vs later charts. The sooner people say “what if we die before 2038?!! Then we wouldn’t have gotten all our money back!!!” To which the later people say “well, yeah, but you’re dead, so who cares?” Your not living any better because you have to live on less since you know it’s not going to be as high later on and you didn’t KNOW you were going to die before 2038. To which the sooner people will say “you are 70 in 2025! You really expect to still be alive at 83!!” And so we are right back to ... it depends. Everyone on both sides if our families all go on to late 80s and they smoke and drank. We are healthier and had less hardships in our lives. We are betting 90.

And you are correct. It is actuarially neutral for the government payouts. Which in turn represents the whole pool of recipients.
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Old 05-16-2018, 03:23 PM   #110
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This is one advantage that widow(er)s have. They can start out early on a small benefit, then when they live longer, change over to the other at a higher level!


Their loss turns into a win win!
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Old 05-16-2018, 04:22 PM   #111
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So those of us with low projected SS (~$25k combined) @ 67/70 & then using taxable account withdrawals (at long-term capital gains rate) to meet expenses don't really need to worry about the above ABCD chart?
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Old 05-16-2018, 04:59 PM   #112
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Last year the taxability of LTCGs started at the 25% tax bracket. This year, for some reason, it starts $100 before the 22% bracket, $38,600 for individuals.

If your gains are not being pushed over the $38,600 limit, then your gains remain tax free.

If they are over that limit, each $100 will make $85 of your SSB taxable so you will pay 12% of $185, $22.20 in federal tax, PLUS, 15% of the $185 of LTCGs that was also pushed into the taxable range, another $27.75. Your total tax increase for earning $100 will be $22.20 plus $27.75, $49.95 which is 49.95% of that $100. At least they are taking less than half your money!
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Old 05-17-2018, 05:55 AM   #113
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Somewhat worded incomplete. If the gains are your only other source of taxable income ( besides SS) then that is correct. Throw in a $50k or more pension and that all goes out the window. Gains are taxed and the Tax Torpedoe is already bypassed.
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Old 05-17-2018, 08:50 AM   #114
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So much analysis and over analysis. You donít know when you are going to die.
The government isnít stupid. You arenít beating their system. Mortality tables estimate the average age of death for men and women. It really doesnít mean much of a total dollars difference when you take it. Take it early and you get more years of monthly checks. Wait and you get less checks but at a higher rate. Itís pretty much a wash. You are splitting hairs. Just relax and take it when you feel you need the money and be happy.

This is exactly correct. And my calculations using multiple longevity calculators predict I will die before the age of 78 so I am going to start taking SS at age 62.
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Old 05-17-2018, 09:02 AM   #115
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my calculations using multiple longevity calculators predict I will die before the age of 78 so I am going to start taking SS at age 62.
Sorry to hear that!

Have you researched to find out if there's anything you can do to extend your life over the next 16+ years? Have you talked to your doctors about this?

Do you have a spouse? Are you two coordinating your SS benefits?
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Old 05-17-2018, 12:05 PM   #116
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Has anyone used Net Present Value?
The following are some numbers based on longevity of 100 years of age:

 FRA 66SS@70Difference
Total Payments:1,919,0662,160,116241,049
NPV (100):1,078,5441,155,206 76,662
NPV (84): 585,495 558,970 -26,525
NPV (90): 770,388 782,559 12,170

Discount rate = 3%

The calculations indicate the difference is really minute. If the discount rate were higher, the result favors taking SS at FRA.
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Old 05-17-2018, 01:03 PM   #117
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Last year the taxability of LTCGs started at the 25% tax bracket. This year, for some reason, it starts $100 before the 22% bracket, $38,600 for individuals.

If your gains are not being pushed over the $38,600 limit, then your gains remain tax free.

If they are over that limit, each $100 will make $85 of your SSB taxable so you will pay 12% of $185, $22.20 in federal tax, PLUS, 15% of the $185 of LTCGs that was also pushed into the taxable range, another $27.75. Your total tax increase for earning $100 will be $22.20 plus $27.75, $49.95 which is 49.95% of that $100. At least they are taking less than half your money!
projected ~$25k in combined SS, MFJ, so qualified dividends/long-term capital gains federally tax-free up to $77,200, right?

with no pensions, & nearly everything in taxable accounts, we'll be fine as long as we spend under ~$100,000 annually?
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Old 05-17-2018, 01:14 PM   #118
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Has anyone used Net Present Value?
The following are some numbers based on longevity of 100 years of age:

 FRA 66SS@70Difference
Total Payments:1,919,0662,160,116241,049
NPV (100):1,078,5441,155,206 76,662
NPV (84): 585,495 558,970 -26,525
NPV (90): 770,388 782,559 12,170
Discount rate = 3%

The calculations indicate the difference is really minute. If the discount rate were higher, the result favors taking SS at FRA.

Sure, it's been discussed at length many times.... But, again...... This just looks at just how much S.S. you can "pile up", which is not that helpful. It totally ignores spousal benefits, how much you can actually get to spend in your 60s, Tax advantages by delaying, Roth Conversions and a myriad of other issues.
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Old 05-17-2018, 01:30 PM   #119
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The biggest issue we use is how much of our SSB can we get “Tax Free”. Doing the Math in advance so that you can avoid the Federal 22% bracket makes a major difference.

In the example I used above, $16,854 of your $35,000 benefits was tax free when your target was $63,101 after tax. Only $3,750 was tax free with the same target when your SSB was only $25,000.

We did some major planning, Roth Conversion, Paying off Mortgage, etc. prior to retirement so that we could avoid taxable income sources that would push us into the 22% bracket which results in marginal brackets of 40.7% and 49.95%. You lose huge amounts of tax free benefits when you are pushed into those tax rates.
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Old 05-17-2018, 03:28 PM   #120
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...No one knows how long he/she will live...
Yes, but you can quite easily determine the maximum you will live: https://www.theguardian.com/australi...in-switzerland
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