Pension Deductions

[Bikerdude]

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Originally Posted by rescueme If I was single (and only responsible for myself) I would take it as soon as I could (and I can - I'm 62). However for the benefit of my wife, she will take it at 62, I'll claim against her for the 50% benefit when she turns 66 (we're within a couple months of age), and then I'll claim mine at age 70. It all depends on your situation...

Exactly. You have to run your own numbers. In my case, I'm saving more in taxes (by taking SS at 62) than the annual yearly increase in SS benefits for delaying. Add to that what my IRA money is making and I'm way ahead. Do your numbers.

[MasterBlaster]

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In my case, I'm saving more in taxes (by taking SS at 62) than the annual yearly increase in SS benefits for delaying.

Would you care to enlighten us of the details here ! As I recall delaying by a year gives around 8 percent more SS (COLA-ed) payment some of which is not taxed. That's hard to beat year end and year out.

[W2R]

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Originally Posted by Bikerdude Exactly. You have to run your own numbers. In my case, I'm saving more in taxes (by taking SS at 62) than the annual yearly increase in SS benefits for delaying. Add to that what my IRA money is making and I'm way ahead. Do your numbers.

The numbers (for me) clearly say to take it at 66 as I can balance my taxable income in other ways, and my expected longevity far exceeds the median (as is true for many women).

But my point was the same as that of the OP, which is that numbers aren't all that we must consider these days. There is the huge unknown as to what will happen with SS. Like Ziggy says

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Originally Posted by ziggy29 I firmly believe it's inevitable that SS will become a worse deal for folks in the future (one way or another, whether added means testing, increasing eligibility ages, reduced payments). But I also tend to believe that no one already collecting SS will be asked to share the pain. So yeah, I'd get in at the first chance to reduce the chances that "reforms" would screw me later.

[Bestwifeever]

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Originally Posted by MasterBlaster Would you care to enlighten us of the details here ! As I recall delaying by a year gives around 8 percent more SS (COLA-ed) payment some of which is not taxed. That's hard to beat year end and year out.

In our case, DH opted to start receiving his pension last summer (foregoing a couple hundred dollars a year had he waited til 65) because it replaces money we would have taken from our IRA (and thus paid tax on it plus losing the earnings on it). We may take SS as early as possible for the same reason.

[Bikerdude]

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Originally Posted by MasterBlaster Would you care to enlighten us of the details here ! As I recall delaying by a year gives around 8 percent more SS (COLA-ed) payment some of which is not taxed. That's hard to beat year end and year out.

No problem. All my investments are in IRA's so any withdrawal is a taxable event. If I take SS I do not use IRA money. If I take SS equivalent from IRA fed tax is $2,850. In my case this would also trigger $1,431 in state taxes for a total of $4,281. By taking SS my tax is $900 fed and no state income. So $4,281- $900 = $3,381 in tax savings plus interest earned on IRA assets @ 4% = $760 for a total saved of $4,141.

SS of $19,000 x 8% = $1,520.

[MasterBlaster]

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Originally Posted by Bikerdude No problem. All my investments are in IRA's so any withdrawal is a taxable event. If I take SS I do not use IRA money. If I take SS equivalent from IRA fed tax is $2,850. In my case this would also trigger $1,431 in state taxes for a total of $4,281. By taking SS my tax is $900 fed and no state income. So $4,281- $900 = $3,381 in tax savings plus interest earned on IRA assets @ 4% = $760 for a total saved of $4,141. SS of $19,000 x 8% = $1,520.

So in the first year you beat em'. I suspect you intend to live longer than just one year though. That $1,520 (plus COLA) comes every year until your demise. If you live to say 82 that's 20 years of COLA'd payouts with a net present value (pick your own discount rate here) of maybe $25k.

[Bikerdude]

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Originally Posted by MasterBlaster So in the first year you beat em'. I suspect you intend to live longer than just one year though. That $1,520 (plus COLA) comes every year until your demise. If you live to say 82 that's 20 years of COLA'd payouts with a net present value (pick your own discount rate here) of maybe $25k.

You have to consider the break-even age for taking at 62 vs. say 66 is around 76, never mind my considerable tax savings. I get the same cola percent each year on my SS as anyone else. With judicial use of my Roth IRA I will be able to keep my taxable SS low for a considerable time. Easily past age 66. Just avoiding the state tax trigger is almost worth the 8%.

[MasterBlaster]

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Originally Posted by Bikerdude You have to consider the break-even age for taking at 62 vs. say 66 is around 76, never mind my considerable tax savings. I get the same cola percent each year on my SS as anyone else. With judicial use of my Roth IRA I will be able to keep my taxable SS low for a considerable time. Easily past age 66. Just avoiding the state tax trigger is almost worth the 8%.

Well if you want to extract the maximum dollars out of SS, taken all by itself then that's the way to look at it.

However if you want to have the most spendible income over your lifetime then your results will be different.

What good does all of your retirement stash do you if you die early ?

[Bikerdude]

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Originally Posted by MasterBlaster What good does all of your retirement stash do you if you die early ?

Well for one thing I get to leave it to my daughter and grandson instead of giving it away in taxes. I mean, if I die before I collect SS, say 69, I spent a lot of my money and paid a lot of taxes for nothing. I know I'm dead and who cares but I'm happy with my plan and that's all that counts.

[MasterBlaster]

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Originally Posted by Bikerdude Well for one thing I get to leave it to my daughter and grandson instead of giving it away in taxes.

Yes your heirs may do well. If you die though there is no benefit to you.

And keep in mind that for many spouses the SS benefit can be assumed upon your death. If it's a larger amount cause you delayed taking SS the spouse will be better off and can pass even more to the daughter and grandson.

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I mean, if I die before I collect SS, say 69, I spent a lot of my money and paid a lot of taxes for nothing. I know I'm dead and who cares but I'm happy with my plan and that's all that counts.

And if you die you saved all that money for nuthin'. Lets face it - if you die early you lose either way. You paid all those SS taxes, you saved all that money - and the worst thing is now you are dead.

getting back to the original discussion - I suspect that you could do better by delaying.

[Bikerdude]

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Originally Posted by MasterBlaster getting back to the original discussion - I suspect that you could do better by delaying.

That's your opinion (everyone has one). I guess we are going to have agree to disagree on this one.