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Old 03-06-2013, 12:47 PM   #161
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Some thoughts for GD. If you have not retired yet and want a reasonable guess at the FERS annuity supplement you will receive until age 62, divide your number of years as a FERS employee (military buyback years for retirement, etc don't count) by 40 and multiply your expected age 62 SS annuity by that number. For me, I had ~16 yrs working as a FERS employee along with military buyback time when I retired last year so 16/40 times my age 62 SS annuity gave me a good estimate of the FERS Annuity Supplement.

For Roth conversions, if you have money outside the retirement accounts to pay the taxes due for a conversion, it may make sense. If you have to raid your retirement accounts to do the conversion, it is much more difficult for the numbers to work out.

Lastly, a reason to delay taking your SS (assuming your annuity is significantly higher than your spouse's) would be to maximize survivors benefits if you die first. Even if you chose maximum Survivors Benefits for both your FERS and Military annuities, your spouse would receive just over 50% of the annuity amount paid while you are alive. Maximizing SS survivors benefits by delaying when you start taking them may be an important long term consideration in your planning for your spouse's income.

As many folks in the thread have stated...lots of individual reasons to pick an earlier or later date. Just some thoughts as you make your financial and estate plans...
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Old 03-06-2013, 12:54 PM   #162
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Originally Posted by Greg V View Post
Some thoughts for GD. If you have not retired yet and want a reasonable guess at the FERS annuity supplement you will receive until age 62, divide your number of years as a FERS employee (military buyback years for retirement, etc don't count) by 40 and multiply your expected age 62 SS annuity by that number. For me, I had ~16 yrs working as a FERS employee along with military buyback time when I retired last year so 16/40 times my age 62 SS annuity gave me a good estimate of the FERS Annuity Supplement.

For Roth conversions, if you have money outside the retirement accounts to pay the taxes due for a conversion, it may make sense. If you have to raid your retirement accounts to do the conversion, it is much more difficult for the numbers to work out.

Lastly, a reason to delay taking your SS (assuming your annuity is significantly higher than your spouse's) would be to maximize survivors benefits if you die first. Even if you chose maximum Survivors Benefits for both your FERS and Military annuities, your spouse would receive just over 50% of the annuity amount paid while you are alive. Maximizing SS survivors benefits by delaying when you start taking them may be an important long term consideration in your planning for your spouse's income.

As many folks in the thread have stated...lots of individual reasons to pick an earlier or later date. Just some thoughts as you make your financial and estate plans...
although my at 62 payout is higher than my wifes she gets a small pension when combined with her ss is higher than my only ss. her pension payout dies with her.
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Old 03-06-2013, 02:24 PM   #163
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Having the choice of leaving the surviving spouse even a portion of your Military/Civil Service annuity is a really nice feature of the Federal retirement system not often replicated in private systems.

My remarks may have more relevance for GolfingDuo than other readers since our situation of having Civil Service and Military annuities is similar.

We'll (DW and me) be doing lots of reading, studying and pondering as we make our SS decisions in the upcoming years. Sometimes I think that the more options I discover, the confuseder I get.
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Old 03-06-2013, 02:30 PM   #164
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Having the choice of leaving the surviving spouse even a portion of your Military/Civil Service annuity is a really nice feature of the Federal retirement system not often replicated in private systems.

My remarks may have more relevance for GolfingDuo than other readers since our situation of having Civil Service and Military annuities is similar.

We'll (DW and me) be doing lots of reading, studying and pondering as we make our SS decisions in the upcoming years. Sometimes I think that the more options I discover, the confuseder I get.

ditto to the confused part. No all right answer
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Old 03-06-2013, 03:15 PM   #165
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So as I read these three posts and apply them to my situation I should defer and convert in the meantime. Let me explain this out.

I will have two retirements. One military and one FERS both will gross 2k plus each per month. I get a FERS supliment of right now an unknown quantity until age 62. I have 400k plus right now in a 401k pretax contribution. I might have 10k in Roth. My wife is saving at a nice rate and I expect her savings to reach 100k by she reaches 62. We are both 55 now. My SS will be 2100 per month at 62 and if I wait I will get 2800 per. I will leave out other capital gains of sales of two homes and a business.

So based on what I have read I should take as soon as I can 2k or more per month to convert into Roth and use as needed in the meantime. Maybe I should take 4k so that I can draw down enough to mitigate the income tax bite later when I start drawing SS? Does that sound like something I should do? I anticipate not having any mortgage and probably only car payments on the wife's new car when we move to retirement community.
Since my post was on your list, I feel I should reply. The post was really a before-tax analysis, taxes are very complex.

I did some tax modeling for our situation, which is simpler than yours. I noted that the factors in the taxable SS formula aren't indexed, so I will get into the range where 85% of my SS benefits will be included in taxable income. That means I'll eventually be in a 25% marginal bracket.

But, soon after I retired we were spending after-tax savings and had lower reported income. We were in the 15% marginal bracket. So, I made some IRA withdrawals, paid the 15% tax, and put the money into a Roth. That seemed like an easy decision at the time.

I'm not sure if that's relevant to your situation.
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Old 03-06-2013, 03:48 PM   #166
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Originally Posted by Greg V View Post
Some thoughts for GD. If you have not retired yet and want a reasonable guess at the FERS annuity supplement you will receive until age 62, divide your number of years as a FERS employee (military buyback years for retirement, etc don't count) by 40 and multiply your expected age 62 SS annuity by that number. For me, I had ~16 yrs working as a FERS employee along with military buyback time when I retired last year so 16/40 times my age 62 SS annuity gave me a good estimate of the FERS Annuity Supplement.

For Roth conversions, if you have money outside the retirement accounts to pay the taxes due for a conversion, it may make sense. If you have to raid your retirement accounts to do the conversion, it is much more difficult for the numbers to work out.

Lastly, a reason to delay taking your SS (assuming your annuity is significantly higher than your spouse's) would be to maximize survivors benefits if you die first. Even if you chose maximum Survivors Benefits for both your FERS and Military annuities, your spouse would receive just over 50% of the annuity amount paid while you are alive. Maximizing SS survivors benefits by delaying when you start taking them may be an important long term consideration in your planning for your spouse's income.

As many folks in the thread have stated...lots of individual reasons to pick an earlier or later date. Just some thoughts as you make your financial and estate plans...
Thank you. What the SS turns out is going to be 75% of my SS benefit at 62. That is a nice penny when I turn 60. That will make my first employment looks easier.

For the SSA that made sense to me as well. So I am pretty sure we will be doing the spousal benefit at the right age. It looks right to me since we will have a pretty good retirement as is at that point too provided good health.

On the last about the 401k I might have some I am not sure if my wife put her IRA after tax or before tax. I dont know how much that will be either but it should be in the mid to upper 5 figures.



Quote:
Originally Posted by Greg V View Post
Having the choice of leaving the surviving spouse even a portion of your Military/Civil Service annuity is a really nice feature of the Federal retirement system not often replicated in private systems.

My remarks may have more relevance for GolfingDuo than other readers since our situation of having Civil Service and Military annuities is similar.

We'll (DW and me) be doing lots of reading, studying and pondering as we make our SS decisions in the upcoming years. Sometimes I think that the more options I discover, the confuseder I get.
Yes it gets quite confusing. It is a bit more for you though at least in my experience. The new FERS system is pretty straight forward at least to me.

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Originally Posted by Independent View Post
Since my post was on your list, I feel I should reply. The post was really a before-tax analysis, taxes are very complex.

I did some tax modeling for our situation, which is simpler than yours. I noted that the factors in the taxable SS formula aren't indexed, so I will get into the range where 85% of my SS benefits will be included in taxable income. That means I'll eventually be in a 25% marginal bracket.

But, soon after I retired we were spending after-tax savings and had lower reported income. We were in the 15% marginal bracket. So, I made some IRA withdrawals, paid the 15% tax, and put the money into a Roth. That seemed like an easy decision at the time.

I'm not sure if that's relevant to your situation.

It does and is relevant. I think I will be in a higher tax bracket though. It depends on how they adjust tax brackets over the years and my income in those future years.

Thanks for everyone here in helping out. This is a great help.
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Old 03-06-2013, 08:51 PM   #167
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GolfingDuo,

Your situation is more complicated than mine and mine is too complicated to make a decision without carefully comparing the numbers of each strategy. The only tool that I found to incorporate all of the factors is Esplanner from esplanner.com It will count all your assets, taxable and tax-deferred, your SS benefits, both your pensions, your annual federal and state tax, if any, your house, your intention to sell the house in the future, relocate to another state, and more. Esplanner takes all of this and puts out an amount that is your disposable income each year for the rest of both of your lives (based on your estimate of how long you will live.) Your goal in running the software is to maximize the disposable income and keep it consistent to support your standard of living.
I recommend that you buy the software and run a number of scenarios to see how much difference your choices might make.

The decision to do Roth conversions depends on several factors taken together. Without knowing all of the details it's not possible to say if a conversion would be a benefit for you or not.
These are:

1. the expected life span of the Roth IRA itself. This might be your life span, but it might be your wife's especially if she is younger or it could be that of your children. Your wife and your children who inherit your Roth will never have to pay taxes on the money.

2. Your tax rate now and in the future. If your marginal rate will be lower or if you plan to move to a no income-tax state at some point, doing the conversion now might not be advisable. Some of us are delaying SS until 70 and have IRA assets that will necessitate RMDs at age 70. Those income sources together at 70 can push us into a higher bracket meaning that converting before then while still in the lower bracket gives an advantage.

3. The rate of return of the assets in the Roth. Since you are paying the taxes on those assets earlier than necessary in order to get the tax-free status, the value depends on how much you tax you would have had to pay. It also matters if you trade relatively more since that would generate capital gains if in a taxable account.

Rules of thumb and back of the envelope calculations are not going to be adequate for the complex decisions that many of us face.
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Old 03-07-2013, 02:53 AM   #168
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we will play it as we go ,the wild card being health. we plan on both retiring in 14 months.

for now the way it looks my wife is already receiving a 20k pension, we have another 20k in income from a real estate business and my wife just started collecting early benefits at 62 of about 800 a month.

our plan as it stands is i will take half my wifes at 66 and let my own continue to grow.

no way am i going to get 8% guaranteed and with colas on my own.

we will need about a 2%-2.5% withdrawal rate from assets to meet goal until i file and under 2% after i file..

our goal is about 120k in income in todays dollars to start.

we can spend way way more though in the early years if need be based on the fact we will refill later on after 70 with the much higher ss payments.

kind of like an annuity that will kick in at 70. we want to have the max we can spend early on while we are healthy and able to do anything we want.

but like everything else that is subject to change along the way.

glad to see you found your way here golfing duo.
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Old 03-07-2013, 03:02 AM   #169
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Thank you that SS calculator makes sense to me. It tells me that at 67 and 2 months apply for my SS benies and suspend them. Then a few year later have my wife take spousal benies. Then at age 70 take mine. and the same for her when she reaches 70.
We're also discussing such strategies in another forum, and this morning someone put forward something I never thought about - they consider taking spousal benefits and then switching to your own benefits to be a "loophole" that may be closed soon. (It was expressed in the context of another loophole, recently closed - folks who work in jobs that don't earn social security credits, for most of their life, and then switch in their last years to get social security full benefits.)

I didn't really think anyone would consider filing for spousal benefits and then switching to one's own benefits later as a "loophole" until it I read that posting, to be honest. I suppose the logic for considering it a loophole is that the person filing for spousal benefits could file for their own benefits instead, and the only reason not to do so would be to avoid reduced benefits or gain delayed retirement credits, i.e., solely for the purpose of allowing one's own benefits to increase. Since the lower, early retirement benefit is clearly considered to be "enough", using this "tactic" could be viewed by some as a loophole. And given the environment in Washington, I suspect anything that could be considered a loophole by anyone is ripe to be considered a loophole to be closed in the interest of improving the solvency of the program overall. I wonder how likely it is, though.

I also wonder what form closing that "loophole" would take. The only thing I could think of is to make filing for spousal benefits versus one's own to be a terminal decision - choose one or the other. Are there any other ways they could change what we might encounter? (We're about twelve years away from the younger of us reaching age 62.)
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Old 03-07-2013, 03:26 AM   #170
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while i certainly will take advantage of it , the restricted application and file and suspend options are kind of double dipping if you both have work records of your own.

quite frankly the only reason i see they have not cut that tap off is the fact congress utilizes it.
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Old 03-07-2013, 06:24 AM   #171
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while i certainly will take advantage of it , the restricted application and file and suspend options are kind of double dipping if you both have work records of your own.

quite frankly the only reason i see they have not cut that tap off is the fact congress utilizes it.
I agree
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Old 03-07-2013, 06:28 AM   #172
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We're also discussing such strategies in another forum, and this morning someone put forward something I never thought about - they consider taking spousal benefits and then switching to your own benefits to be a "loophole" that may be closed soon. (It was expressed in the context of another loophole, recently closed - folks who work in jobs that don't earn social security credits, for most of their life, and then switch in their last years to get social security full benefits.)
+1 whether we consider any of the provisions or formulas in SS loop holes does not really matter. The fact is that if Congress gets serious about deficit reduction, all bets may become moot as to our current thinking or strategies for collecting SS. While its always a good idea to plan with what we know today, its important to recognize our plans may need to change going forward.
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Old 03-07-2013, 07:25 AM   #173
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+1 whether we consider any of the provisions or formulas in SS loop holes does not really matter. The fact is that if Congress gets serious about deficit reduction, all bets may become moot as to our current thinking or strategies for collecting SS. While its always a good idea to plan with what we know today, its important to recognize our plans may need to change going forward.

Without a doubt.
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Old 03-08-2013, 05:03 AM   #174
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We're also discussing such strategies in another forum, and this morning someone put forward something I never thought about - they consider taking spousal benefits and then switching to your own benefits to be a "loophole" that may be closed soon. (It was expressed in the context of another loophole, recently closed - folks who work in jobs that don't earn social security credits, for most of their life, and then switch in their last years to get social security full benefits.)

I didn't really think anyone would consider filing for spousal benefits and then switching to one's own benefits later as a "loophole" until it I read that posting, to be honest. I suppose the logic for considering it a loophole is that the person filing for spousal benefits could file for their own benefits instead, and the only reason not to do so would be to avoid reduced benefits or gain delayed retirement credits, i.e., solely for the purpose of allowing one's own benefits to increase. Since the lower, early retirement benefit is clearly considered to be "enough", using this "tactic" could be viewed by some as a loophole. And given the environment in Washington, I suspect anything that could be considered a loophole by anyone is ripe to be considered a loophole to be closed in the interest of improving the solvency of the program overall. I wonder how likely it is, though.

I also wonder what form closing that "loophole" would take. The only thing I could think of is to make filing for spousal benefits versus one's own to be a terminal decision - choose one or the other. Are there any other ways they could change what we might encounter? (We're about twelve years away from the younger of us reaching age 62.)
Iím not sure if I understand this correctly. Letís use the following scenario not using real numbers or considering any annual cost of living increases to make it simple.

Wife (66) is retired taking SS at $1000/month. I (65) delay taking my SS until 70 when it will be $2000/month. In the meantime for the next 5 years I apply and receive Ĺ of wifeís SS giving us a total of $1500/month. Then when I turn 70 I drop the payments that were based on my wifeís SS and start taking my own SS at the $2000/month. Now if I die first my wife can assume my SS that is a higher monthly payment.

Does this sound right? I'm so confused.

Cheers!
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Old 03-08-2013, 06:50 AM   #175
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I’m not sure if I understand this correctly. Let’s use the following scenario not using real numbers or considering any annual cost of living increases to make it simple.

Wife (66) is retired taking SS at $1000/month. I (65) delay taking my SS until 70 when it will be $2000/month. In the meantime for the next 5 years I apply and receive Ĺ of wife’s SS giving us a total of $1500/month. Then when I turn 70 I drop the payments that were based on my wife’s SS and start taking my own SS at the $2000/month. Now if I die first my wife can assume my SS that is a higher monthly payment.

Does this sound right? I'm so confused.

Cheers!
I am pretty sure it is opposite. You file for your SS ben and delay taking. Your wife files taking spousal ben of yours. Then when you reach 70 she drops spousal and you collect full. I am pretty sure that is how you should do it. I am sure others will chime in if I am wrong. That is based on your numbers that is how I would work it. Should she out live you then she resumes spousal. You out live her you take spousal.
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Old 03-08-2013, 07:11 AM   #176
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GolfingDuo,

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Your situation is more complicated than mine and mine is too complicated to make a decision without carefully comparing the numbers of each strategy. The only tool that I found to incorporate all of the factors is Esplanner from esplanner.com
I will look at this later today or this weekend.

The decision to do Roth conversions depends on several factors taken together. Without knowing all of the details it's not possible to say if a conversion would be a benefit for you or not.
These are:

1. the expected life span of the Roth IRA itself. This might be your life span, but it might be your wife's especially if she is younger or it could be that of your children. Your wife and your children who inherit your Roth will never have to pay taxes on the money.

Good points and I had a feeling I need to postpone due to my high tax state.

2. Your tax rate now and in the future. If your marginal rate will be lower or if you plan to move to a no income-tax state at some point, doing the conversion now might not be advisable. Some of us are delaying SS until 70 and have IRA assets that will necessitate RMDs at age 70. Those income sources together at 70 can push us into a higher bracket meaning that converting before then while still in the lower bracket gives an advantage.

The window between my age of 62 when I move to age 70 when I start collecting SS where my income will be lower and I am in a no income tax state is the point at which I can roll over to Roth. That would be in 7 years or so since we are 55 now.

3. The rate of return of the assets in the Roth. Since you are paying the taxes on those assets earlier than necessary in order to get the tax-free status, the value depends on how much you tax you would have had to pay. It also matters if you trade relatively more since that would generate capital gains if in a taxable account.

We have other accounts but I have the bulk of our savings in one TSP divided up in 4 funds. They are invested in a conservative manner but with 60% in equities.

Rules of thumb and back of the envelope calculations are not going to be adequate for the complex decisions that many of us face.
No I never thought this would be an easy task. It is why I am asking questions now, making notes and in that I am preparing for my second life. One away from this *&*^%^*&% snow!
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Old 03-08-2013, 08:02 AM   #177
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If the finances of the organization paying the annuity (AKA the US Government) were in order I would agree with the premise. Since they are not by a long mile, I would argue that depleting one's assets betting that 30 years of future payments from a financially crippled organization I have no control over are assured is too risky.
This is what worries me about waiting. In our retirement spreadsheet I just hate seeing that asset column drop too low in the years prior to collecting SS. I have control over my own assets, but no control over future SS benefit rules, taxation levels and inflation adjustments.
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Old 03-08-2013, 09:03 AM   #178
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This is what worries me about waiting. In our retirement spreadsheet I just hate seeing that asset column drop too low in the years prior to collecting SS. I have control over my own assets, but no control over future SS benefit rules, taxation levels and inflation adjustments.
if a straight line equation taking ss at 70 definetley gives more money.
however if you subtract added taxes because you have substantial tax deferred accounts plus the added money made on the earlier withdrawals( be reasonable i used 3 percent although in the funds i'm in i think it will be more) plus taxes saved in the 8 year period before forced withdrawals mandated

and the difference is much closer over the 30 year period i used to one hundred years old i just signed up for it at 62

it also makes me feel better-which is important to me
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Old 03-08-2013, 09:39 AM   #179
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it also makes me feel better-which is important to me

And that my friend makes all the difference in the world.
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Old 03-08-2013, 09:41 AM   #180
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And that my friend makes all the difference in the world.

Amen to that
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