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Old 09-17-2016, 03:10 PM   #41
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What tax threshold?

For ACA subsidies?

I receive no subsidies.

Because I have no debt and no mortgage, I am able to comfortably live on a small income. Beginning when I took early SS, my income has been under the IRS tax threshold. Not only do I pay no income tax, I am not required to file a return. Unfortunately, that will change when I am forced to take RMD.

In the meantime, I am enjoying life !

.
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Old 09-17-2016, 09:16 PM   #42
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Paying no tax now, and waiting for rmd might not be optimal, but I'm sure paying zero tax is a great feeling.
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Old 09-17-2016, 10:48 PM   #43
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I receive no subsidies.

Because I have no debt and no mortgage, I am able to comfortably live on a small income. Beginning when I took early SS, my income has been under the IRS tax threshold. Not only do I pay no income tax, I am not required to file a return. Unfortunately, that will change when I am forced to take RMD.
....
You should calculate what you would be paying in tax if you took the RMD. It might be higher than you think as it could cause SS to be partially taxable too.

Here would be a scenario to consider:
Pretend RMD bumps you into the 15% tax rate or higher.
What you could do is in the years before 70 take some money out of the RMD subject accounts so you pay 10% tax on it.
You can invest it in dividend paying etfs/stocks as dividends are not taxable in the 15% and lower tax bracket.

The idea of taking out the RMD money early is that way you won't be paying 15% or more tax on it when 70 and instead only pay 10%.

(now people with lots of money will be willing to pay 15% on early RMD money to avoid 25% RMD tax later. And this may apply to you).
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Old 09-17-2016, 11:28 PM   #44
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Paying no tax now, and waiting for rmd might not be optimal, but I'm sure paying zero tax is a great feeling.


That's why I take out just enough money from my traditional IRA every year to keep me under the IRS threshold.


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.

Because I have no debt, I am able to comfortably live on a modest income.

In addition to early SS... I take just enough from my traditional IRA every year to keep me below the tax threshold. It also serves to reduce the tax surprise of future RMDs.

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Old 09-17-2016, 11:29 PM   #45
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You should calculate what you would be paying in tax if you took the RMD. It might be higher than you think as it could cause SS to be partially taxable too.


I've done that homework.

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Old 09-18-2016, 06:24 AM   #46
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I would recommend taking SS at 62. This is what I plan to do. The break even is 78 if you wait until 66 to collect and higher if you wait until 70.
In what useful way does the "break even" at 78 mean anything at all? Are you planning to make sure you are dead by 78, so you will not need any more income? The decision to delay is many fold and while not right for everyone, the "break even" or "leaving money on the table if I die" arguments are not one. It totally depends on whther you are married or not, whther you pay taxes or not, what percentage of your income your SS check is,mand how much you wan to live on in retirement . My biggest gripes with some very early FIREers is they assume that they will be able to manage their investments and income in very old age,mand continue to live on a frugal income. By FIREing with little contributions to SS, and filing at 62, they guarantee a small check for life. By living off of my savings from 62 until 70, I guarantee myself a monthly COLA check of at least $3500/mo for life, and for my wife if I die first. At just 1.5% COLA, that becomes $5k month in early '80s. Not everyone wants to FIRE early to work at living on $40k a year. I'd rather FIRE when I can guarantee an income north of $100k a year, then drop from there as I require less, because no one can predict how much it will cost to survive at the end.
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Old 09-18-2016, 08:13 PM   #47
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In what useful way does the "break even" at 78 mean anything at all? Are you planning to make sure you are dead by 78, so you will not need any more income?


The break even age of 78 means one must live beyond that age for delaying SS past age 62 to have any advantage.

My break even age is also 78. Since genetics plays a big role in longevity, the fact that most of my family has died before age 78 did play a role in my decision to take SS at age 62. My father also took early SS at age 62. He died at age 72. My older sister took early SS at age 62. She died at age 66.

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Old 09-19-2016, 01:59 AM   #48
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Not to sound unsympathetic or cold, but in the context of my question to Freedom56, you are stating the obvious. "I'm taking it at 62, and you should too, because the break even is 78" is still an invalid piece of advice, unless you do indeed plan to die before 78, which appears to be your plan, and exactly what I asked in the second sentence of my post. I am glad you are enjoying and living your life by retiring as early as possible. You have your own personal reasons. Also, as noted in my post, if you REed and because of that have little SS anyway, then absolute amount increased by delaying may make little difference either way.

For most people, though ,the question should be "what will happen if I outlive my income because of inflation, rising health costs, etc, etc, as I become too old to do anything about it, and possibly mentally and or physically unable to handle my investments?" Not to be flippant but, it is a bigger problem for someone that has outlived their income than for someone that is dead.

RE should require not only savings but diversified passive income, COLA designed. There is no better annuity than SS. In your case, which personally is none of my business, you have good reasons to not want or need an annuity, and presumably plan to buget your living based on living less than 78.
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Old 09-19-2016, 02:21 AM   #49
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The break even age of 78 means one must live beyond that age for delaying SS past age 62 to have any advantage.

My break even age is also 78. Since genetics plays a big role in longevity, the fact that most of my family has died before age 78 did play a role in my decision to take SS at age 62. My father also took early SS at age 62. He died at age 72. My older sister took early SS at age 62. She died at age 66.

.
it is actually longer if you figure in the fact you are spending down invested assets to delay as well as get no spousal adders until the higher earner files .

but the roi after that point picks up very quickly . with the chance of someone in a couple seeing 85 at 74% and 90 at almost 50% they can see an after inflation return of 5-6% .

that rivals a balanced portfolio in the best of times . the delaying does it with no risk on what amounts to a gov't bond .

the reason we can all think of someone who died younger like right after retiring is because they stand out because they are so rare .

try making a list of your friends who died in their 60's or even early 70's vs all those you have known who lived to go on .
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Old 09-19-2016, 02:27 AM   #50
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You should calculate what you would be paying in tax if you took the RMD. It might be higher than you think as it could cause SS to be partially taxable too.........

(now people with lots of money will be willing to pay 15% on early RMD money to avoid 25% RMD tax later. And this may apply to you).
And there is the problem for some. For plenty of people, FIRE is age 55- 62 with an appreciable pension, that automatically puts them in the 25% bracket once SS or withdrawal of any useful amount from tax deferred savings occurs. They deferred to reduce their taxes while earning high wages. There is no efficient way to move money from tax deferred accounts to lower taxed LTCGs or Munis unless you have periods of low taxed rate living. It's a "nice" problem to have, but the question then becomes "How do I prevent my tax deferred savings, which was deferred at 15, 20, or 25%, from becoming taxed at 25 or 28% because of RMDs, SS, pension, and other incomes?" This is especially true for any large withdrawal that might occur and cause a tax torpedo. Living with income just under a tax bracket is fine....until you need more right now and you are thrust in to a much higher rate. The smart thing would have been to invest after tax dividend paying LTCGs all along, while earning, to avoid the taxes later. But that was not conventional wisdom when tax deferred IRAs and 401ks became the norm. "Delay now, because you will be in a lower tax bracket when tou retire!" Well guess what? I will not only not be in a lower bracket than I would have been had I not deferred, I could easiy be in a higher bracket! By the time I realized this, it was too late. And it's been damage control ever since.

The only sort of efficient way I Know of , is to maximize ones Roths via contributions and rollovers to the maximum of your current tax bracket. Maximizing that lower tax time means drawing down from savings, and delaying filing for SS until 70, which will reduce my RMDs and the associated taxes, and then at least when forced to take SS at 70, the max tax is on only 85% of that amount. Since that is available in only limited amounts, (to the top of the current bracket) it is limited. but at least your earnings will from that moment on, always have zero tax consequences. Roth early, Roth often, if you pay taxes.
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Old 09-19-2016, 11:04 AM   #51
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.

The government would like us all to delay SS as long as possible... and it holds out a nice carrot as an incentive to do just that. But in spite of all the propaganda to the contrary, one size does not fit all. Each person should do his own math to make an educated decision based on his own situation and needs. Because genetics play an important role in longevity, the longevity in his own family [or lack thereof] should be a factor.

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Old 09-19-2016, 11:21 AM   #52
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the reason we can all think of someone who died younger like right after retiring is because they stand out because they are so rare .

try making a list of your friends who died in their 60's or even early 70's vs all those you have known who lived to go on .

Friends ?

One's longevity is influenced by one's own family genetics.

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Old 09-19-2016, 11:52 AM   #53
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For those in this conversation who are talking about a break even point - remember that you can also treat SS as longevity insurance, in which case, the concept of breaking even isn't relevant.

Isn't there a line in "Wish You Were Here" by Pink Floyd about going over the same old ground again and again?
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Old 09-19-2016, 11:55 AM   #54
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.

I'm thinking of switching my strategy to similar to Audrey and W2R's method - percentage of portfolio on 12/31, dumped into bank on 1/1 (or at least that week). In other word, percentage of portfolio is updated each year. I'm still thinking about it... and figuring out the best way to work in Roth conversions, etc.

I also use that strategy but remember in down years you take a cut . I had a large cut in 2009 right after I had retired . It worked out but it was a belt tightening year .
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Old 09-19-2016, 02:08 PM   #55
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I think that no one can automatically conclude that any one method of SWR is superior or inherently better because there are so many variables that are of different importance.. Risk as well as required income to live vs DESIRED income to do more than just live. The less risky is to always evaluate at say 12/31, and adjust accordingly, as mentioned. In a bear run, belt tightening may be required. If, however, ones required living expense income (+ a little hedge) is covered by fixed income that is not market related (pension + SS+annuity), then the effect of the market, and potfolio growth or depletion only affects items of less significant importance: traveling, new car, gifting, donations, etc. I found it very interesting to read so many different means of paying oneself, but without knowing what percentage of their budget is divided between essential and discrectionary, then determining the amount of risk associated with each strategy is of limited value.

None of this is new or revolutionary. Just new people asking the same questions asked before because it's too hard to find old answers.

And FWIW, IF the government (as in the SSA) actually cared as to whether one filed early or late, from an actuarial standpoint they would prefer everyone filed early, because on average people are living way longer than the break even point, so the SSA comes out ahead, dollar wise. I've never seen any propaganda touting filing later as the best one size fits all answer. The "nice carrot" supposedly dangled is simply the actuarial equal of life expectancy and reduced claiming years based on rates that were generally accepted in the mid 1980's. When viewed as a COLA compensated annuity, (or longevity insurance) that passes at 100% to a surviving spouse, there is nothing in the financial markets that can touch it. How many annuities let you chose, as you are paying for it, how long you want to pay for it, and determine your benefit on the fly? None. It's only the deal right now that it is because all the percentages for delayed credits have remained constant since the mid '80s, but rates of return and longevity have certainly not. But it has always been ones individual circumstances that must be considered, not some columnist advice..

My mother died at 68. But I'm not a two pack a day smoker my whole adult life like she was. I've never smoked. My FIL died at 88. His brother and a sister, amd both parents died in their 50's and 60s. So times and health reasons change.
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Old 09-19-2016, 06:00 PM   #56
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Friends ?

One's longevity is influenced by one's own family genetics.

.
Exactly--and the current (and estimated future, as much as is possible) state of one's own health, I might add. If I wasn't in the excellent state of health I am in and didn't have grandparents/parents who lived/are living to old age, I would personally seriously consider taking SS at 62. Further, if my health changes (i.e., a severe form of cancer <knock on wood>), I would also reevaluate my decision to delay. Hoping I never have to.
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Old 09-19-2016, 06:17 PM   #57
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Paying no tax now, and waiting for rmd might not be optimal, but I'm sure paying zero tax is a great feeling.
Especially if you get ACA subsidies.
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Old 09-19-2016, 07:11 PM   #58
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Friends ?

One's longevity is influenced by one's own family genetics.

.
One's longevity can also be influenced by the neighborhood one lives in--and by one's friends who also live in that neighborhood.
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Old 09-19-2016, 07:31 PM   #59
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One's longevity can also be influenced by the neighborhood one lives in--and by one's friends who also live in that neighborhood.

I was thinking natural causes. But now that you mention it, most people who are murdered are murdered by someone they know.

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Old 09-19-2016, 07:36 PM   #60
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Especially if you get ACA subsidies.

This is the second time a poster here has mentioned "ACA subsidies."

I had to look up the term because I have company retiree health insurance.

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