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Old 01-06-2013, 04:20 PM   #81
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I have not done the math, but I am not sure the tax hit is that much different by converting to Roth vs never taking more than RMD from 70.5 on.
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Old 01-06-2013, 05:01 PM   #82
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But you're missing the point, that money is worthless for its own sake. The idea isn't to not spend it, but to spend it when it has the most positive impact for you. If you make the analysis so cold and calculating that you only see the money's side of it, then you cannot possible appreciate the impact what money buys can have on enjoying life. There most certainly is a connection, because otherwise we'd all be better off becoming ascetics.
Well, you don't know my posting history so you don't know that I am not crazy. But others here realize that your examples are ridiculous extremes that I never would advocate, or do.


I merely meant to show that there are good reasons for having more money than less, no matter what is your age or your physical prowess or your level of wealth. One of those reasons is to turn the thermostat to whatever level you like, or to avoid shopping at Wal-Mart if you don’t like to, or to eat only wild fish, or organic food or whatever floats your boat. Most here realize that the main value of being financially self sufficient is freedom.

There are even levels of living among the homeless. At bottom are the crazy drunks and crack whores, above them those who can get a dry place to live by performing some little service for the storeowner. Those who qualify for selling Real Change are above those who can't.

Aristocrats are those who have some little pension or stipend. They often will have lackeys to run errands, and "girlfriends" to perform little services

Therefore, an argument that you will only be able to use your SS money early to climb to the top of Mt Washington, or Mt. Hood or Mt Rainier or whatever other mountain you might name, is beside the point.

I can go you one better. Climbing to the top of Mt. Washington, or even Rainier is mainly an achievement of endurance. Anyone of sound body can train, and do it. Many things take skills that are often only obtainable by full time or very close to full time application during childhood and the years between 10 and 25. Even then you may not make it, but you certainly won’t without this devotion. Your choice- an academic preparation to allow you to likely achieve FIRE reasonably early, or go to the mountain?

To take it even further, are there many pleasures in the world that are not better when young? Isn't subjugating the here and now to ER essentially tradng one's youth for an early retirement? For that to be a good trade for me it had better be for something more rewarding than climbing to the top of Mt Washington.

But as life goes on, most mature people realize that part of the skill in living is in realizing that everything has seasons, and one does better harmonizing his expectations with the seasons.

Certainly if doing something that you think you may be able to handle at 62, but not later, is important, by all means do it. But I agree with Cut Throat, if you need early SS to do it you can likely not afford that choice.

I do think that political questions might question this, but that opinion annoys some members. For sure I took the age 70 option.

Ha
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Old 01-06-2013, 06:31 PM   #83
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And the answer may be 'yes': Ron walks over to the thermostat, and it reads 58F. He could turn on the heat, but he knows that he barely has enough money to pay the monthly service fee, and doesn't want to start ticking up the per-kwh charges this early in the month. When does he turn on the heat? 56F? 54F? Some would say that 50F is okay - the pipes won't burst, that way - and think of all that money he saves by not heating his home beyond 50F. He could use that money twenty years from now to turn on the heat a little higher that year, if he lives that long.

But you're missing the point, that money is worthless for its own sake. The idea isn't to not spend it, but to spend it when it has the most positive impact for you. If you make the analysis so cold and calculating that you only see the money's side of it, then you cannot possible appreciate the impact what money buys can have on enjoying life. There most certainly is a connection, because otherwise we'd all be better off becoming ascetics.
Ron could wear a sweatshirt and be just as comfortable as someone whose entire house is heated to 70 degrees. Or perhaps he obtains personal satisfaction knowing that his energy usage and environmental footprint are modest. Or perhaps he leaves a large estate to charity because he did not spend his money on things that were not important to him. I do not understand why any of this is bad.

I disagree that money is worthless for its own sake. Money can bring enormous feelings of independence and freedom. I hope to ER this year at age 53. Due to solid financial resources and frugal living, it is likely that I will remain in the accumulation phase for the rest of my life and leave a decent estate to charity. Not spending money on things that I do not want or need is not worthless. Knowing that I can buy a McMansion is far more important to me than actually buying and living in one. Knowing that I can provide for family members in need is valuable regardless of whether I ever do so. Knowing that I can spend any amount of money on veterinary bills for a pet eliminates the financial component of worry. This flexibility is not worthless. It adds greatly to my contentment and emotional wealth.

For many people, knowing that a larger SS check will be waiting at age 70 has more value than spending a smaller check at an earlier age.

On a tactical level ... while I agree that age takes its toll, don't underestimate what the human body can do as it gets up in years. Yes, there are limits but many of these limits depend on attitude and lifestyle. People are too quick to discount the physical capabilities of people in their 70's, 80's, and older. I know several people in their 70-80's who can easily bicycle 50-100 miles. I know people at that age who have hiked Mt. Whitney. I met a couple in their mid-70's who hiked the Pacific Crest Trail (Mexico to Canada). Yes, when I'm 80, I plan to continue hiking Mt. Washington (which I have never done) and the rest of them.
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Old 01-07-2013, 04:43 AM   #84
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Climbing to the top of Mt. Washington, or even Rainier is mainly an achievement of endurance.
Of course. I was pointing out how the same economics works with a different currency - health instead of money. That's one thing I'm trying to get across, that money isn't the only thing.

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Anyone of sound body can train, and do it.
I'll turn the analogy into something more obvious: A woman can try to have a baby when she's 30 or 60. Age matters.

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Certainly if doing something that you think you may be able to handle at 62, but not later, is important, by all means do it.
This is the point I've been making. There is a matter to consider - there are considerations that could result in the decision being 62 as much as there are consideration that could result in the decision being 66 or 70. Financially, there really is a single answer. But money isn't the only thing, so there isn't only a single answer.


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Ron could wear a sweatshirt and be just as comfortable as someone whose entire house is heated to 70 degrees.
I think that's a cop-out. You're nitpicking an analogy, so it is simple enough to point out that Ron's ears and nose would get cold, and that this logic carried forward would have him walking around his own home in a ski mask. Reducción al absurdo, at least as far as I'm concerned. Beyond that, the point is that the levels of unknowns in any real scenario that involves projecting into the future four years or eight years tends to degrade the later options - not from a strictly financial perspective, but from a human perspective. Bird in hand and all that.

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I do not understand why any of this is bad.
Perhaps because you didn't know anyone who excessively deprived themselves to economize. Or perhaps you simply don't hold to the same values with regard to living life. And I'm not saying that any measure of economizing is bad - not by a long-shot. My spouse will tell you that I'm stingy to a fault. But it is, literally, a fault to fail to adequately factor-in the "soft" negatives of a plan, because the "hard" positives are so definitive.

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I disagree that money is worthless for its own sake. Money can bring enormous feelings of independence and freedom.
We'll have to agree to disagree about that, or at least we'll have to agree to disagree about any disagreement you may have with what I said, i.e., that money is worthless for its own sake. Focusing on your specific counter-examples - independence and freedom: There are paths to independence that bypass money. And most paths to wealth are traps, themselves. You may be independent from some structure or entity that you hold antipathy for, but you are beholden and veritably enslaved to that which safeguards your wealth. Asset allocation, bond yields, safe withdrawal rates, etc. You probably don't see these things as hallmarks of dependence and captivity, so we won't see eye-to-eye on this.

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I hope to ER this year at age 53.
I wanted to make an unrelated comment on this unrelated comment. I think there are different paths to ER (and again, I'm not talking financially - I'm talking about motivation). Some folks - perhaps most folks here - seek ER for its own sake, to achieve what I would consider the fiction of independence and freedom, as I mentioned earlier. Others - myself included - seek ER because we view things the way I have indicated, above, and pursue ER as a back-up plan - as part of my own personal "Plan B". I suspect that difference in perspective plays into our differences of opinion.

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Not spending money on things that I do not want or need is not worthless.
The money in question still doesn't have worth for its own sake. Rather, it is the choice that has worth, which brings us back to the original point, the choice between 62, 66 and 70. That's what's of value - not the money involved.
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Old 01-11-2013, 09:48 PM   #85
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I actually was not as familiar with social security benefits as I should be, because I am not close to collecting yet. I was thinking about mean testing and clawing back through taxation as future fixes the government will bring in that may affect the calculation, but I did not realize it is actually already the way it is. But on researching the additional benefits on waiting until 70 years old, one really have to take into account the total income and tax bracket they will be in, and those may differ from individuals to individuals.

Benefits Planner: Income Taxes And Your Social Security Benefits
"
  • file a federal tax return as an "individual" and your combined income* is
    • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    • more than $34,000, up to 85 percent of your benefits may be taxable."
so presently up to 85% of the increase in benefits level you get by delaying will be subjected to tax if your total income is over $34000. The damage from the tax bite depends on how much you have saved for your own retirement and how much has your own nest egg grown (your tax bracket). Don't forget, age 70.5 is when you have to take RMD from your traditional IRA and your total annual income may be higher.

My thinking now is that in some cases if you take SS at full retirement age and investing the unspent sum, and stow the growth as unrealized capital gain, you can get a better return than what you may have after the tax bite, on the increase you get if you wait till 70 years old. And there are life span risk that is not totally predictable, and possible limitation imposed on a lifestyle you hope to be engaged in, because of poorer health as you get older.

So at the end of the day, I feel there is not one right answer, and one needs to customize the start date to his/her own circumstances and financial picture.
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Old 01-12-2013, 12:39 AM   #86
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So at the end of the day, I feel there is not one right answer, and one needs to customize the start date to his/her own circumstances and financial picture.
Likely true, although I have tended to feel that 70 is best if you are single, and even better if you are married. But when you start looking into taxes, possible IRA conversions, etc, it can really get tricky.


Recently there has been some discussion here about taking ltcgs, and qualified dividends at 0% tax. It appears to me that although this may be possible, for a single person it is not going to be easy. About 70% or more of my assets are taxable. I am 71. When I add my modest SS and RMDs to ordinary income from a few royalty trusts and MLPs and a REIT, and some interest from old CDs that still have a return, if I want to stay in the 15% bracket I'm going to have to realize at max about $5000 in ltcg. So at that rate, in 40 years I'll have whittled them down a bit. This means I will do only strategic stock sales- ie. if I think the gain may not last. Doesn’t seem that a planned program of taking gains to reduce the potential tax is going to happen. I think it might work fine for someone who can get a much earlier start, or who does not have some legacy taxable investments that would be very taxspensive to sell.

Also, the mlps and royalty trusts shelter more of their income when new in the portfolio, but as the assets get depreciated down, more income starts falling into various taxable categories, especially ordinary income and l.t. capital gains and royalties. Most of mine are getting some age on them, and I never will know until it is too late to sell other appreciated stock if I have any room (in the 15%) or not. My guess is that in a year or so, no more room will even be possible.

I am not good at the search functionhere- I think RE Wahoo can find anything that has ever been posted- but not me. Anyway, I think there was a very helpful discussion a few years ago about how if you have long term capital gains, and you get ordinary income or do a conversion that produces enough ordinary income to push capital gains or qual divs out the top of that 15% bracket, in effect those capital gains are not going to be taxed at 0%, not 15%, but at 30%.

I am afraid I had only a dim understanding, but it was enough to convince me. I think the key is that where previously you had ltcg in the 15% bracket being taxed at 0%, now that space is occupied by ord income being taxed at 15%, and the ltcgs that formerly occupied that space in the 15% bracket are now in the 15% bracket, also being taxed at 15%. So you have some amount x of ordinary income (say from a conversion) costing .15x in tax, and some amount x of ltcg displaced by the conversion, also being taxed at 15%. So that conversion x is costing 30% in tax.

Is this crazy?

I really like ROTH, and a big conversion would make me happy, but not this extra tax.

Can people please comment? Maybe I am just getting too tired to think clearly.

Ha
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Old 01-12-2013, 02:06 AM   #87
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wow. y'all are sure wound up. it is a personal decision. i won't change you and you won't change me.
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Old 01-12-2013, 09:12 AM   #88
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Interesting reading from all posts. Lots of important items to consider and each of us must take our logical and emotional views into the analysis.

An issue that makes me tend to wait until 70 (if possible) is the higher benefit my spouse would collect if I'm the first to die...statistically probable since I'm older and male. My SS annuity is the higher amount. Leaving her a larger, "guaranteed," income stream with some sort of COLA is every bit as important as the math that has been already discussed about what option results the largest total payout and/or annual consumption.

Just another thought to toss into the blender...
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Old 01-12-2013, 10:25 AM   #89
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wow. y'all are sure wound up. it is a personal decision. i won't change you and you won't change me.
What makes you think anyone is trying to change you? I can't even remember what your preference is, let alone your rationale for it.

Ha
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Old 01-12-2013, 11:25 AM   #90
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I actually was not as familiar with social security benefits as I should be, because I am not close to collecting yet. I was thinking about mean testing and clawing back through taxation as future fixes the government will bring in that may affect the calculation, but I did not realize it is actually already the way it is. But on researching the additional benefits on waiting until 70 years old, one really have to take into account the total income and tax bracket they will be in, and those may differ from individuals to individuals.

Benefits Planner: Income Taxes And Your Social Security Benefits
"
  • file a federal tax return as an "individual" and your combined income* is
    • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    • more than $34,000, up to 85 percent of your benefits may be taxable."
so presently up to 85% of the increase in benefits level you get by delaying will be subjected to tax if your total income is over $34000. The damage from the tax bite depends on how much you have saved for your own retirement and how much has your own nest egg grown (your tax bracket). Don't forget, age 70.5 is when you have to take RMD from your traditional IRA and your total annual income may be higher.

My thinking now is that in some cases if you take SS at full retirement age and investing the unspent sum, and stow the growth as unrealized capital gain, you can get a better return than what you may have after the tax bite, on the increase you get if you wait till 70 years old. And there are life span risk that is not totally predictable, and possible limitation imposed on a lifestyle you hope to be engaged in, because of poorer health as you get older.

So at the end of the day, I feel there is not one right answer, and one needs to customize the start date to his/her own circumstances and financial picture.
Keep in mind the 25K and 34K amounts were set in 1986 and have not been adjusted for inflation.
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Old 01-12-2013, 11:38 AM   #91
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Keep in mind the 25K and 34K amounts were set in 1986 and have not been adjusted for inflation.
So this is like the alternative minimal tax that eventually hit everyone in the middle class because no adjustment to inflation was taken into account.
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Old 01-12-2013, 11:40 AM   #92
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So this is like the alternate minimal tax that eventually hit everyone in the middle class because no adjustment to inflation was taken into account.
Perhaps that's how the government is planning on making up the SS shortfall in the future.

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Old 02-28-2013, 04:31 PM   #93
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I just turned 62 on february 14. Earlier on this thread that was in january i said my wife and i were going to use the 62/66/70 plan.

she took ss at 62 4 years ago and i was going to wait until 70.

so what did i do tuesday. I signed up to take ss now. In all honesty i do not need to but i did anyway.

Why? I'm not sure. it kept nagging at me.

I did find on the web a few financial people that recommend both taking at 62.

my wife and i actually fell into the catagory-not because of our high net worth which is not that high based on this board but because we have got ourselves down to a low maintenance life.

is this right. there is no doubt that putting of ss means higher payments later on but i like my decision.

it works for us.

i also have one more reason. although i became a part times employee march 1st-i did not want to be tempted to work to much. the ss max is 15,000 a year. i make this working 5 hours a week. i did not want to be tempted to work more
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Old 02-28-2013, 04:49 PM   #94
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I just turned 62 on february 14. Earlier on this thread that was in january i said my wife and i were going to use the 62/66/70 plan.

she took ss at 62 4 years ago and i was going to wait until 70.

so what did i do tuesday. I signed up to take ss now. In all honesty i do not need to but i did anyway.

Why? I'm not sure. it kept nagging at me.

I did find on the web a few financial people that recommend both taking at 62.

my wife and i actually fell into the catagory-not because of our high net worth which is not that high based on this board but because we have got ourselves down to a low maintenance life.

is this right. there is no doubt that putting of ss means higher payments later on but i like my decision.

it works for us.

i also have one more reason. although i became a part times employee march 1st-i did not want to be tempted to work to much. the ss max is 15,000 a year. i make this working 5 hours a week. i did not want to be tempted to work more

Honestly I think you did right. I think I will be similar to you and not really needing it but..... I will want to save for my daughter in spite of the fact she wants to disown us because we want to move to Texas . I plan on saving up a big enough nest egg that she will want it. Then before she can get it she will have to set foot in Texas. All the way to San Antonio.
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Old 02-28-2013, 05:11 PM   #95
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I did find on the web a few financial people that recommend both taking at 62.
It's important to keep in mind that you can find plenty of advisers online who recommend every conceivable option. Your situation is your own, and you have to research it thoroughly and make the decision that you feel most comfortable with.
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Old 02-28-2013, 05:28 PM   #96
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It's important to keep in mind that you can find plenty of advisers online who recommend every conceivable option. Your situation is your own, and you have to research it thoroughly and make the decision that you feel most comfortable with.

most advice on the web says wait. i searched for other opinions because i wanted to take it.

who knows if i'm right
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Old 02-28-2013, 05:29 PM   #97
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who knows if i'm right
Only you, and that's all that matters.
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Old 02-28-2013, 05:40 PM   #98
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You can model the various scenarios in Firecalc to see which is best for you.
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Old 02-28-2013, 05:42 PM   #99
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Only you, and that's all that matters.
This is one of those areas where there are too many unkowns to make a blanket call. If SS were to continue as it now is, it would almost always be better for a healthy, non-poor individual to take it later under low return conditions like our current situation. There is no way tha tmoney can be safely invested and return more than putting off the start of SS payments. This is quite easy to demonstrate, and has been explained over and over in these pages. But I have come to think that there is a < 25% chance that payments to affluent people will not be cut in some way or another, most likely greater taxation and some form of means testing. In that case, it might always be best to take it as soon as possible, and put it safely in a pocket.

So we are back at deciding by whim.

Ha
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Old 02-28-2013, 05:52 PM   #100
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there are many opinions. i went part time 3/2/13. i can work some hours if i want

what really started this is taxes. just on a whim i decided to figure 2013 taxes(using rules from2012) figuring taxes pulling money out of retirement accounts to make our 60,000 minimum with my wife.s ss and small pension .

85 percent of ss becomes taxable this way. however replacing work/ira income with SS brought our taxable ss way way down and our taxes way down.

this is one calculation that is rarely brought up. the return rate is usually brought up but the savings in taxes not mentioned
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