SSecurity.....is this a stupid idea?

[F4mandolin]

Finally got in to the SS office today (short lines). Confirmed a few things that makes me feel better....although since they don't deal with questions about a UK spouse very often(that took several "I'll be back in a few minutes" trips to bigger bosses) But.....because I haven't worked for the last two years my SS estimate has gone down rather quicker than I thought. Last year, my tax final numbers came out to just over $20k.....wham, another big drop in SS estimate. I "should" be getting an annuity supplement starting (well, couple weeks ago) now until 62. Will this add to my yearly tax totals? In which case it would bump me up closer to $30k a year. Then I got to thinking about rolling over some of my TSP into a Roth and just paying the taxes now. If I moved $20-30k or so of that over each year.....would that then bump my yearly wages up that much more? Then that will keep my SS estimate about $70+ a month higher at 62 as well.

 

[Rustward]

Finally got in to the SS office today (short lines). Confirmed a few things that makes me feel better....although since they don't deal with questions about a UK spouse very often(that took several "I'll be back in a few minutes" trips to bigger bosses) But.....because I haven't worked for the last two years my SS estimate has gone down rather quicker than I thought. Last year, my tax final numbers came out to just over $20k.....wham, another big drop in SS estimate. I "should" be getting an annuity supplement starting (well, couple weeks ago) now until 62. Will this add to my yearly tax totals? In which case it would bump me up closer to $30k a year. Then I got to thinking about rolling over some of my TSP into a Roth and just paying the taxes now. If I moved $20-30k or so of that over each year.....would that then bump my yearly wages up that much more? Then that will keep my SS estimate about $70+ a month higher at 62 as well.

I'm afraid I don't understand the question. You might try asking it a different way. It sounds as though you will be taking some income from tax deferred accounts and are asking if somehow that will get you a larger SS benefit. It won't -- only earned income on which you and your employer paid the SS tax counts for this purpose. Not sure I understand about the UK spouse. But maybe I didn't understand the post well enough to answer.

 

[Bestwifeever]

I didn't think your SS could go up if you are not contributing to it from earned income (13 percent usually split between employer and employee) regardless of Roth vs traditional IrRA, etc.

 

[RunningBum]

Rolling TSP into Roth does not give you more SS earnings, if that's what you mean. One way to understand this is that if you aren't paying SS/FICA taxes, it doesn't go towards your SS earnings.

 

[F4mandolin]

Rolling TSP into Roth does not give you more SS earnings, if that's what you mean. One way to understand this is that if you aren't paying SS/FICA taxes, it doesn't go towards your SS earnings.

That's what I was wondering.....if you move TSP money over to a Roth (in Vanguard for instance) .....I would pay a 15% tax....but none of that would go to SS? That's what I was wondering. If they take regular tax out plus a % for SS....and a % for medicare etc etc like they would with regular pay....then it should help SS. Since I haven't taken any money out of TSP....I wasn't sure what "taxes" you would be paying.

 

[growing_older]

if you move TSP money over to a Roth (in Vanguard for instance) .....I would pay a 15% tax....but none of that would go to SS? That's what I was wondering. If they take regular tax out plus a % for SS....and a % for medicare etc etc like they would with regular pay....then it should help SS.

That tax withholding is only income tax. None of it is for SS and indeed this is not SS earnings. It will have no effect on your benefits calculation. For that you need to have income from a job or self-employment.

 

[Fishingmn]

Obviously, one way to significantly increase your SS check is to delay taking it at 62. I'm sure they can give you details on what the difference is by waiting to take it at different ages. There are plenty of threads on here that discuss the pros/cons of starting it early at 62 vs. waiting.

 

[nun]

An IRA to ROTH rollover is not earned income and there's no FICA tax on it, so it does not get counted when calculating SS.

Once you stop working you will get a SS estimate that assumes you continue to earn nothing. So rather than seeing this as a reduction in SS think of it as your SS freezing at the value projected when you stopped working. If you have any non-SS earnings (you might as you mention having a TSP) make sure you tell SSA so they can do the WEP calculation.

 

[F4mandolin]

Yep....it was a stupid idea. Went back to look at my pension tax forms etc... guess there are a few hard to do loop holes that could be used (like self employment). One of the other things I found out....and I kind of knew I had it wrong....was that the 50% spousal SS will likely be less than that for us. I was hoping that she would get 50% of whatever I got....whenever I took it. If I take SS at 62-64 as planned, she would still have to wait until she was 66 to get 50% of what I got.

 

[Alan]

As others have said, other than working (self-employed means you pay 13% FICA as you pay both the employer and employee portion), I don't believe there is another way of increasing your number of years benefits.

Also note that your SS will increase by ~8%/year if you delay SS after age 62, so it may be worth delaying, particularly since you're married. Plenty of recent threads on when to take SS.

 

[growing_older]

Also note that your SS will increase by ~8%/year if you delay SS after age 62, so it may be worth delaying, particularly since you're married. Plenty of recent threads on when to take SS.

You might want to consult this chart:
Retirement Planner: Benefits By Year Of Birth

to better understand the reductions in benefits if you take SS early. It is about a 6% per year reduction, but varies depending on your FRA. Similarly, if you can delay taking SS until after your FRA, then the benefit grow by 8% (not compounded) per year that you delay.

 

[F4mandolin]

Oh yeah.....I know all of those points. I have read plenty of arguments both here and on other sites about whether it's better to take it early or not. Take it later.....burn more savings and the earnings that that gives you. No right answer. Although it really bugs me the magazines etc just point out the benefits of waiting.....but never mention the other little side effects. But we will eventually have to sit down and figure out all the little effects and see which one works better. Right now we are both in great health (56+53), but who knows in 6 years. I was kind of leaning towards putting SS off for a year or two.....but 6 years from now is something I don't have the crystal ball for. Don't even know which country I will be in at that time.

 

[nun]

The combinations and permutations of how to take retirement income are almost infinite. When my head is about to explode I step back and I'm thankful that I have such troubles. When you throw in cross border taxes, SS and investing it all just gets worse and it's time for a cocktail.

I'm a big proponent of the middle course, not too much of any one thing. So if you have UK state pension coming too you could defer that and take US SS early. By deferring the UK pension you'd delay WEP.

 

[F4mandolin]

nun- definitely agree with you on being confused at times....over the years I have followed a plan that usually works out eventually. First I suck in as much info as I can handle and am totally confused. Then I go away for a while and come back and do it again.....and again....and again. Sooner or later the cogs usually start to click together.....just not as quickly as some people. Even after reading Bogelhead books, investing books etc etc.....I STILL don't feel more than so-so confident on where I put my investments. But.....confident enough to have dropped EJones. I'm jealous as hell with people who just pick that stuff up with little effort.

I have to assume I don't quite understand WEP like I should. Looking at the short version online, it shouldn't bother me until I hit $25,000 income. My pension certainly doesn't get me anywhere near that. Are you saying that when my wife eventually gets her UK pension at 67 (est. about 6200 Pounds at this time) that that could shove me over the limit as well? If I read the WEP info correctly even taking my TSP money could trigger it. Hmmm.....maybe I should consider moving TSP money over to a Roth every year NOW and pay the tax to get it out of the way so I don't get surprised later. I was already thinking I might do this after I turn 60 just to avoid a bigger required withdrawal at 70.

 

[nun]

It won't matter if you roll the TSP over to a ROTH if the money is from non SS wages, WEP will still apply. It's not the income tax that matters its the lack of FICA payments. If the TSP is anything like my MA state defined contribution plan they'll send the SSA a statement of the size of the account when you separate from service and use that to calculate an annuity type payment that will be used in your WEP calculation

 

[F4mandolin]

I always paid SS. I think every job I ever had I did.

 

[nun]

I always paid SS. I think every job I ever had I did.

Then you have no WEP issue.

 

[Alan]

I always paid SS. I think every job I ever had I did.

Then you have no WEP issue.

+1

I'll have a WEP issue because I worked for companies in the UK that pay / will pay me a pension, plus I'll get UK SS. I'll be in for a WEP'ing to the maximum extent

 

[F4mandolin]

Then my wife's future UK pensions of 1500 Pounds yr (private) at 60, 1500 Pounds yr at 65 and around mid 6,000 yr at 67 are of no consequence? at least as far as WEP goes. There is still a part of me that wonders whether moving a little bit of the TSP on a yearly basis might not be bad idea (move some to Roth now, and then at 60 just pull $10k a year or so out. If I have my required withdrawal at 70 numbers correct.....minimum would be a little over $18k on $500,000.

 

[Alan]

Then my wife's future UK pensions of 1500 Pounds yr (private) at 60, 1500 Pounds yr at 65 and around mid 6,000 yr at 67 are of no consequence? at least as far as WEP goes. There is still a part of me that wonders whether moving a little bit of the TSP on a yearly basis might not be bad idea (move some to Roth now, and then at 60 just pull $10k a year or so out. If I have my required withdrawal at 70 numbers correct.....minimum would be a little over $18k on $500,000.

I believe that what you get from SS is based on the years you paid into FICA, and any non-FICA pension based jobs your wife has is of no consequence as far as your WEP is concerned.

 

[F4mandolin]

Thanks folks.

 

[BLS53]

WEP only applies if you receive or are entitled to a pension based on non-SS employment. Simply working at a non-SS job for a few years, doesn't trigger the WEP. You have to be there long enough to get vested in the pension.