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Old 05-28-2013, 03:59 PM   #61
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I'm not sure I understand what Independent is saying. The only thing that counts for the 85% of SS that is subject to your highest rate of taxation is your total income - in this case your MAGI. If a married couple has more than $44K of MAGI, then 85% of the SS portion of that $44K is subject to taxation. There is a formula for amounts between $24K and $34K, but it's the total that counts. If you have $45K of MAGI, then 85% of your SS is taxable.

I may be mistaken, but the way I read the rules, the only thing that matters is the sum of everything that goes into your MAGI. Please let me know if this is a wrong interpretation.
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Old 05-28-2013, 04:38 PM   #62
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Quote:
There is a formula for amounts between $24K and $34K, but it's the total that counts. If you have $45K of MAGI, then 85% of your SS is taxable.
I think only 1/2 of the SS amount is used in the calculation. I have the details somewhere but will have to look them up. Perhaps someone else has it readily at hand.
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Old 05-28-2013, 04:59 PM   #63
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Originally Posted by misanman View Post
I think only 1/2 of the SS amount is used in the calculation. I have the details somewhere but will have to look them up. Perhaps someone else has it readily at hand.

the first line in the formula is 1/2 ss as you said.
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Old 05-28-2013, 05:12 PM   #64
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I'm just following this worksheet: http://apps.irs.gov/app/vita/content...heet_1040i.pdf

Here's my math for a simple case where the couple has $60k of total income - $30k of SS and $30k of other income:

1Social Security Benefit.... 30,000
21/2 of 1 15,000
3Other Income 30,000
72+3 45,000
8Input 32,000
97 - 8 13,000
10Input 12,000
11 9 - 10 1,000
12min ( 9, 10 ) 12,000
13.50 * 12 6,000
14min ( 2,13 ) 6,000
15.85 * 11 850
1614 + 15 6,850
17.85 * 1 25,500
18min ( 16,17 ) 6,850

Line 18 is the taxable share of SS income. In this case it's 6850/30000 = 23% of the SS benefit.

I don't know how to describe that with just a few words.
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Old 05-28-2013, 05:24 PM   #65
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Old 05-28-2013, 06:35 PM   #66
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I find these discussions about the spousal benefit and the file/suspend interesting... However they don't work well unless the couple is reasonably close in age. Someone posted a calculator earlier - (trowprice?) and it only worked if the couple was within 6 years of other.

My husband and I are almost 10 years apart.
I am the higher income earner.
If he takes it next year (turns 62) then we can also get a small amount for our minor children. That doesn't show up on many calculators. (I only knew from a previous discussion from a forum member here.)

If I delay till 70 - that's great - but he's now 79... We'll probably die close to each other - his family has more longevity than me. (Only one grandparent lived past 80 on my side, both parents died youngish.)

It's not so simple to figure this out.

For us - we're looking at him taking it at 62 because, with the kids benefits for 6-8 years - it pushes the break even point to late 80's for him. I have the spreadsheet to prove it.

Still haven't figured it out for me - but I have a decade to figure it out.

I'm sure I'll have a lot more data on my spreadsheet by then.
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Old 05-28-2013, 07:23 PM   #67
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The kids benefit is an unusual twist. Have you considered having socialsecuritysolutions.com do an analysis of your situation for you?
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Old 05-28-2013, 09:12 PM   #68
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Quote:
Originally Posted by rodi View Post
I find these discussions about the spousal benefit and the file/suspend interesting... However they don't work well unless the couple is reasonably close in age. Someone posted a calculator earlier - (trowprice?) and it only worked if the couple was within 6 years of other.

My husband and I are almost 10 years apart.
I am the higher income earner.
If he takes it next year (turns 62) then we can also get a small amount for our minor children. That doesn't show up on many calculators. (I only knew from a previous discussion from a forum member here.)

If I delay till 70 - that's great - but he's now 79... We'll probably die close to each other - his family has more longevity than me. (Only one grandparent lived past 80 on my side, both parents died youngish.)

It's not so simple to figure this out.

For us - we're looking at him taking it at 62 because, with the kids benefits for 6-8 years - it pushes the break even point to late 80's for him. I have the spreadsheet to prove it.

Still haven't figured it out for me - but I have a decade to figure it out.

I'm sure I'll have a lot more data on my spreadsheet by then.
if you are taking money out of savings to fund from 62-70 taking social security at 62 has an EFFECTIVE break even at 90.
the difference in taking 62/70 is 1.76. in example using 1000 dollars if you get 1000 dollars a year at 62 you would get 1760 at 70.


so 1760 x 20 equals 35200 at 90
so 1000 x 28 equals 28000 at 90

but you also did not use 8000 out of your accounts because you took SS at 62. 35200-28000 equals 7200. extra at 90 if from 70

however 8000 saved -7200 is 800 over for taken at 62.

if you use this formula with your actual 62/70 projections from ss you will see the same thing happen

actual break even is about 82 but EFFECTIVE break even is 90
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Old 05-28-2013, 09:38 PM   #69
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Originally Posted by willow View Post
if you are taking money out of savings to fund from 62-70 taking social security at 62 has an EFFECTIVE break even at 90.
the difference in taking 62/70 is 1.76. in example using 1000 dollars if you get 1000 dollars a year at 62 you would get 1760 at 70.


so 1760 x 20 equals 35200 at 90
so 1000 x 28 equals 28000 at 90

but you also did not use 8000 out of your accounts because you took SS at 62. 35200-28000 equals 7200. extra at 90 if from 70

however 8000 saved -7200 is 800 over for taken at 62.

if you use this formula with your actual 62/70 projections from ss you will see the same thing happen

actual break even is about 82 but EFFECTIVE break even is 90
No.

If you are going to account for the 8000 you didn't have to take out of your account between 62 and 70, you would also have to account for the extra 760/yr you need to take out of your account every year after that because of the lesser amount you are getting after age 70.
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Old 05-28-2013, 10:04 PM   #70
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No.

If you are going to account for the 8000 you didn't have to take out of your account between 62 and 70, you would also have to account for the extra 760/yr you need to take out of your account every year after that because of the lesser amount you are getting after age 70.
no my numbers give the exact amounts until 90

28 times 1000 equals 28000
20 times 1760 equals 35200.

the 8000 is money not taken out of accounts between 62-70.
that's it .
it is indirect money it is NOT from ss directly but it is the EFFECT.

I suggest you just use your own numbers. try it
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Old 05-28-2013, 10:25 PM   #71
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If there is an effect to consider between the 0 and 1000 difference from ages 62-70, there is also an effect to consider between the 1760 and 1000 difference every year after.
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Old 05-28-2013, 10:27 PM   #72
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If there is an effect to consider between the 0 and 1000 difference from ages 62-70, there is also an effect to consider between the 1760 and 1000 difference every year after.
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Old 05-29-2013, 08:21 AM   #73
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one more time.

1760 x 20 equals 35200 at 90
1000 x 28 equals 28000 at 90

35200-28000 equals 7200- amount more that starting at 70 gives at 90

actual break even point about 81 -82

we probably all agree so far.

I say however that the 7200 you did not have to spend in the first 8 years is an INDIRECT benefit of taking at 62. In effect ss gives you a loan that only has to be paid by 90. It becomes EFFECTIVE break even.

after 90 of course the annuity affect hits big time-but if you think you'll be deceased at 90 taking at 62 is a wash.
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Old 05-29-2013, 08:53 AM   #74
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What you need to do is compare the cash inflows of alternative A (taking SS at 62) with the cash inflows of alternative B (taking SS at 70). Whichever alternative has the highest cash inflows wins IF you are looking at the decision as an investment decision.

So if you ignore the time value of money (discount rate = 0%), then the breakeven point is ~80.5.

(80.5-62)*1,000 = 18,500 ~ (80.5-70)*1,760

If you include the time value of money at 4% then the breakeven point becomes 86.9 since the pv of 1,000/year for 24.9 years discounted at 4% = the pv of 1,760 a year for 16.9 years discounted at 4% and then further discounted for the 8 year deferral period.

If you change the 4% to 5% then you get ~90.

But the other thing is that the reason for taking at age 70 isn't necessarily to optimize the investment result, it is longevity insurance. For marrieds, you need to look at joint longevity and the joint longevity for a 62 yo couple would be 29 years - to age 91.
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Old 05-29-2013, 09:08 AM   #75
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I'm not looking at it as an investment decision. I'm looking at it as the payout at 70 to 90 and the payout at 62-90.

there are reasons to wait to 70.

No savings
was going to work til 70 anyways
wanted your spouse to inherit your lager benefit.
think you will live substantially past 90.
cola amounts higher on the higher SS

those are all good reasons to take at 70.

however reasons to take at 62
EFFECTIVE break even is 90.
lower taxes over years to 90 because of lower ss and required distributions.
interest earned on that pool of money saved.
you don't think you'll make it to 90. all my relatives have died between 86 and 90 that's why I took at 62

ther is NO question that you get more ACTUAL money from ss until 90 if you wait to 70 but the EFFECTIVE break even point is 90 not 82
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Old 05-29-2013, 09:10 AM   #76
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Last time, then I give up unless someone else tells me I'm wrong.

Say you start with 100,000 in your account, and you have 3000 in expenses/yr starting at age 62.

1) Taking SS at age 62, you have to take 2000 out of your account each year: 3000 expenses - 1000 in SS income

2) Taking SS at age 70, you have to take a full 3000 out of your account for expenses until you hit age 70, then you have to take 1240 (3000-1760) each year after that.

At age 80, you 62000 in your account with option 1, and 62360 with option 2. Every year after that is a bigger benefit for option 2.

Show or tell me with a spreadsheet how you make the breakeven point come at 90 instead. The only real factors are assets (starting amount), income (from SS) and expenses. If you are going to claim an "indirect" benefits you have to explain how to put it in a spreadsheet. I've already done this by taking 3000 out of the account each year with option 2 instead of 2000, so it's fully considered.

Run the numbers yourself. Use whatever you want for starting amount and expense amount, but they have to be the same for both cases.
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Old 05-29-2013, 09:11 AM   #77
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Old 05-29-2013, 09:17 AM   #78
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Last time, then I give up unless someone else tells me I'm wrong.

Say you start with 100,000 in your account, and you have 3000 in expenses/yr starting at age 62.

1) Taking SS at age 62, you have to take 2000 out of your account each year: 3000 expenses - 1000 in SS income

2) Taking SS at age 70, you have to take a full 3000 out of your account for expenses until you hit age 70, then you have to take 1240 (3000-1760) each year after that.

At age 80, you 62000 in your account with option 1, and 62360 with option 2. Every year after that is a bigger benefit for option 2.

Show or tell me with a spreadsheet how you make the breakeven point come at 90 instead. The only real factors are assets (starting amount), income (from SS) and expenses. If you are going to claim an "indirect" benefits you have to explain how to put it in a spreadsheet. I've already done this by taking 3000 out of the account each year with option 2 instead of 2000, so it's fully considered.

Run the numbers yourself. Use whatever you want for starting amount and expense amount, but they have to be the same for both cases.
I agree with you, though your age 80 breakeven assumes that the account is non-interest bearing. If you add interest or investment income, it moves the breakeven point out beyond age 80 (the same as discounting does in my post).
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Old 05-29-2013, 10:24 AM   #79
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I'm not looking at it as an investment decision. I'm looking at it as the payout at 70 to 90 and the payout at 62-90.

there are reasons to wait to 70.

No savings
was going to work til 70 anyways
wanted your spouse to inherit your lager benefit....2
Wait, there's a spousal lager benefit if we wait til 70? We are definitely waiting!
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Old 05-29-2013, 10:38 AM   #80
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Wait, there's a spousal lager benefit if we wait til 70? We are definitely waiting!
I think my spouse would prefer the lager benefit
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