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Should you or shouldn't you?
Old 03-28-2011, 07:51 PM   #1
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Should you or shouldn't you?

Nearing 63 and ready to retire, does it make sense to not draw SS but instead to take the same amount out from the traditional IRA savings. This will allow SS increase 8% annually and reduce the RMD in the future.

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Old 03-28-2011, 08:10 PM   #2
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You don't get an increase of 8% of age 62 to your FRA age. You do get 8% from your FRA (assume age 66) through age 69 - four years.

Folks keep looking at age 62 as a "base year" to build upon; it is not.

If you take SS before your FRA, you are reduced by a certain percentage for each month before your FRA, as measured from age 62.

"In the case of early retirement, a benefit is reduced 5/9 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.
For example, if the number of reduction months is 60 (the maximum number for retirement at 62 when normal retirement age is 67), then the benefit is reduced by 30 percent. This maximum reduction is calculated as 36 months times 5/9 of 1 percent plus 24 months times 5/12 of 1 percent."


If you take SS after your FRA, your benefit will be increased by 8% a year, up to the maximum at age 70.

As to the question of using TIRA funds to reduce possible "excess" RMD's at age 70.5 (I use the term "excess" RMD's being those funds you are required to withdraw due to tax law - not necessarily due to fund current living expenses) is something to be considered.

As for us? DW will take SS in three years at her FRA. I'll claim 50% spousal benefit at that time (we're the same age), while delaying my SS till age 70. That will allow me to get some SS (DW's), increase my benefit (primarily for the benefit of DW, assuming I die first), and lastly to reduce required RMD's after age 70.5 since I retired at age 59 and use my TIRA's as my primary retirement income.

Since you asked...

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Old 03-28-2011, 08:29 PM   #3
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Originally Posted by Funnel View Post
Nearing 63 and ready to retire, does it make sense to not draw SS but instead to take the same amount out from the traditional IRA savings. This will allow SS increase 8% annually and reduce the RMD in the future.
Sure! The question, "When should I take social security?" is pretty contraversial here, but quite a few of us have decided to put off taking it.

Others decided to take it earlier.

There is no "right answer" to your question, but I am withdrawing from my TSP (= 401K) right now, at 62, instead of claiming SS this early. In a few years, once I claim SS, I plan to withdraw less from the TSP.
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Old 03-29-2011, 12:03 PM   #4
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Unless you are going to die early or you think the govt is going to cut SS payouts, I think it's best to postpone, leaving you with a good size annuity with a COLA that you can live off, this will allow you to spend more freely in the pre-70 years and not worry about running out of money.
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