stepford
Thinks s/he gets paid by the post
I know this is the sort of topic that must have been bandied about in these forums many times over the years, but please have patience as I appear to be search-impaired.
I will retire (semi-voluntarily) in a couple of months at age 54. I can start taking my non-COLA'd Megacorp pension at age 55, but if I delay starting the pension the monthly payout will increase around 5.7%/year (but then remain constant once I start). I had been assuming that the break even point was far enough in the future that I would start immediately on my 55th birthday, but I realize now that I hadn't been considering the potential tax advantages of delaying it for a few years.
My income source in retirement is about $900K about equally split between tax free muni bonds and stock mutual funds. I also have tIRA/401K assets of a bit over $1M and would like to convert as much as possible to a Roth without incurring excessive tax. If I don't take the pension my taxable income will be low enough that I can do significant Roth conversions in the 15% bracket while once I take the pension I'll be bumped up at least into the 25% bracket. My projected expenses in retirement are low enough so that, whenever I start my pension, it plus the income from my taxable portfolio will cover everything. However, if I delay the pension I will have to cut into my taxable principle by $25-30K/yr.
So my question is whether to delay the start of my pension and, if so, for how long.
I realize the answer is to do a detailed model of my income, tax and assets over time and determine the optimum strategy - and I intend to do this. I was just wondering if there is some standard received wisdom on this topic (i.e. always better to take the pension sooner, or....).
Any advice welcome.
I will retire (semi-voluntarily) in a couple of months at age 54. I can start taking my non-COLA'd Megacorp pension at age 55, but if I delay starting the pension the monthly payout will increase around 5.7%/year (but then remain constant once I start). I had been assuming that the break even point was far enough in the future that I would start immediately on my 55th birthday, but I realize now that I hadn't been considering the potential tax advantages of delaying it for a few years.
My income source in retirement is about $900K about equally split between tax free muni bonds and stock mutual funds. I also have tIRA/401K assets of a bit over $1M and would like to convert as much as possible to a Roth without incurring excessive tax. If I don't take the pension my taxable income will be low enough that I can do significant Roth conversions in the 15% bracket while once I take the pension I'll be bumped up at least into the 25% bracket. My projected expenses in retirement are low enough so that, whenever I start my pension, it plus the income from my taxable portfolio will cover everything. However, if I delay the pension I will have to cut into my taxable principle by $25-30K/yr.
So my question is whether to delay the start of my pension and, if so, for how long.
I realize the answer is to do a detailed model of my income, tax and assets over time and determine the optimum strategy - and I intend to do this. I was just wondering if there is some standard received wisdom on this topic (i.e. always better to take the pension sooner, or....).
Any advice welcome.