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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 01:29 PM   #21
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Re: Taking SS Early - Tax Related Question

I came across a well-written white paper that sets out many of the ideas discussed in this thread:

http://www.prudential.com/media/mana...Strategies.pdf

It includes an interesting analysis of how drawing down tax-sheltered accounts can help with minimizing SS taxation.

Peter
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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 01:31 PM   #22
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Re: Taking SS Early - Tax Related Question

Quote:
Originally Posted by OAG
You better believe the Medicare premiums are INCLUDED in your TOTAL SS benefit and are subject to possible TAXATION.
Well that truly sucks!

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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 01:46 PM   #23
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Re: Taking SS Early - Tax Related Question

Quote:
Originally Posted by Peter
I came across a well-written white paper that sets out many of the ideas discussed in this thread:
Peter, one of the authors of this piece posts on this board as "New Thinking".

Ha
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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 04:52 PM   #24
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Re: Taking SS Early - Tax Related Question

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Originally Posted by HaHa
Given enough medical inflation and time, it would be theoretically possible for a recipient to pretty much use up her SS payment to pay her Medicare Pt B premium.
I believe that the monthly Medicare Part B premium can't increase by more $ than the CPI adjustment (in $) to your monthly SS payment, so I don't believe your scenario could actually happen.
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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 05:27 PM   #25
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Re: Taking SS Early - Tax Related Question

Quote:
Originally Posted by Peter
I came across a well-written white paper that sets out many of the ideas discussed in this thread:

http://www.prudential.com/media/mana...Strategies.pdf

It includes an interesting analysis of how drawing down tax-sheltered accounts can help with minimizing SS taxation.

Peter
Thanks this helped answer a lot of my questions.

Now a follow up - Not being smart enough to completely follow all of the examples and math, does anyone see any fallacies with their data or conclusions? Thanks.

Now I am leaning towards
a) delaying SS (to 70?) file and delay so my DW can get hers at 66
b) @ FIRE in July, move 401K to IRA and start converting up to 20% effective tax rate to Roth, see how much I can drain at that rate from IRA over the years so I don't have a big tax bill because of RMD.

Thanks all.
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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 05:56 PM   #26
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Re: Taking SS Early - Tax Related Question

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Originally Posted by FIRE'd@51
I believe that the monthly Medicare Part B premium can't increase by more $ than the CPI adjustment (in $) to your monthly SS payment, so I don't believe your scenario could actually happen.
This SS thread just gets thicker and thicker. I believe that what you said above may introduce a factor that might favor taking SS earlier rather than later.

The Medicare Premium will very likely increase at a faster rate than the CPI adjustment to SS. But there is a fail safe cap- your Medicare premium can only increase an equal $ amount to the CPI increase to your SS payment, so Medicare inflation is effectively capped- unless your SS is very large, in which case this cap on Medicare increases will not come into play. I suppose the intent is to prevent someone from having his nominal SS cash after Medicare premium decreasing. That would not play well in the voting booth!

Too confusing for me to parse out- but I think there is something here!

Ha
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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 05:59 PM   #27
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Re: Taking SS Early - Tax Related Question

Quote:
Originally Posted by Peter
I came across a well-written white paper that sets out many of the ideas discussed in this thread:

http://www.prudential.com/media/mana...Strategies.pdf

It includes an interesting analysis of how drawing down tax-sheltered accounts can help with minimizing SS taxation.

Peter
This was info I was looking for as well. Thanks
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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 06:03 PM   #28
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Re: Taking SS Early - Tax Related Question

Here is another link regarding the same material:

http://www.pensionresearchcouncil.org/pdf/news/49.pdf

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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 06:07 PM   #29
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Re: Taking SS Early - Tax Related Question

Quote:
Originally Posted by Peter
I came across a well-written white paper that sets out many of the ideas discussed in this thread:

http://www.prudential.com/media/mana...Strategies.pdf

It includes an interesting analysis of how drawing down tax-sheltered accounts can help with minimizing SS taxation.

Peter
The discussion in the link on SS, taxes, and qualified income was pretty good.

The Prudential solution using their annuity-related product is something that i would steer clear of though. Who needs Prudential in the equation and why should one cut them in.
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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 06:43 PM   #30
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Re: Taking SS Early - Tax Related Question

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Originally Posted by Masterblaster
The discussion in the link on SS, taxes, and qualified income was pretty good.

The Prudential solution using their annuity-related product is something that i would steer clear of though. Who needs Prudential in the equation and why should one cut them in.
Agreed! The white-paper was highly informative ... the 'ad' at the end was shameless. I ignored discounted that part of the paper.
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Re: Taking SS Early - Tax Related Question
Old 05-17-2007, 07:13 PM   #31
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Re: Taking SS Early - Tax Related Question

This has been a very interesting thread. One further point emerged as I was doing various what-ifs:

While it's true that there is an effective marginal tax rate of 46% for someone in the 25% tax bracket, this rate only applies in the zone between paying no taxes on SS, at the low income end, and having so much income that your SS gets hit at the 85% level. Beyond that point, you're paying the same fixed dollar amount in tax on your SS, so the marginal rate on any extra income drops back to 25%. (Until you hit the next tax bracket, of course.)

This makes me feel slightly less bitter about the whole deal ...

Peter
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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 03:39 AM   #32
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Re: Taking SS Early - Tax Related Question

Quote:
Originally Posted by Peter
While it's true that there is an effective marginal tax rate of 46% for someone in the 25% tax bracket, this rate only applies in the zone between paying no taxes on SS, at the low income end

I read the article and the 46% TR... but it did not quite register. I saw the illustration add the 25% tax rate plus the 21% rate (.25*85%)... But I was not sure what that meant does that imply that my SS would be normally taxed at 25% no matter what. But since I have a higher income I will pay an additional 21% tax on my SS income?
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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 08:24 AM   #33
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Re: Taking SS Early - Tax Related Question

There is a lot I would like to say but probably shouldn't in a public forum..Let's just say I tried to introduce an alternative concept that I believed would help some individuals secure their retirements..For the most part, it is not the people on this board who needed new solutions in a world of a "Do-It-Yourself" retirement.
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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 08:36 AM   #34
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Re: Taking SS Early - Tax Related Question

New Thinking, you have always been curteous and helpful on this Forum as well as up front with you associations to the insurance industry. I know you take a fair amount of flak. I for one appreciate that you stick around and contribute to the discusssions.
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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 08:48 AM   #35
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Re: Taking SS Early - Tax Related Question

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I for one appreciate that you stick around and contribute to the discusssions.
I for two.

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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 10:23 AM   #36
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Re: Taking SS Early - Tax Related Question

Quote:
Originally Posted by chinaco

does that imply that my SS would be normally taxed at 25% no matter what. But since I have a higher income I will pay an additional 21% tax on my SS income?
No, not exactly.

In a nutshell, if you income is low enough, SS is not taxed at all. If it's high enough, 85% of it is taxed at whatever your marginal rate might be. In between, some proportion gets taxed at that marginal rate. It's the in-between zone that leads to the so-called tax torpedo.

A previous post pointed to this link:

http://www.fincalc.com/inc_08.asp?id=6

You can try various what-ifs, and quickly see how it works out. I found that you don't have to have huge IRA+pension+interest+dividend income to hit the 85% ceiling.

Of course 'huge' is a relative term!

Peter
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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 10:27 AM   #37
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Re: Taking SS Early - Tax Related Question

Quote:
Originally Posted by New Thinking
There is a lot I would like to say but probably shouldn't in a public forum..Let's just say I tried to introduce an alternative concept that I believed would help some individuals secure their retirements..For the most part, it is not the people on this board who needed new solutions in a world of a "Do-It-Yourself" retirement.
New Thinking, I don't post much, but your contributions are always worth reading.

Peter
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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 10:51 AM   #38
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Re: Taking SS Early - Tax Related Question

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Originally Posted by REWahoo!
I for two.

I for three. I think he is treated disgracefully.

Ha
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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 11:13 AM   #39
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Re: Taking SS Early - Tax Related Question

SS provides so little income I find it hard to believe people are worried about the taxes you would pay on it. If you receive income from qualified dividends or long term capital gains you only pay 15%. I also have T-notes to help reduce my Calif. taxes. I govern my income by setting the amount I will need and spend at the beginning of the year. Sales of stock or withdrawals from an IRA are only done if additional income is needed. My tax rate last year was 15%. Now it is more difficult to do that if you are receiving a pension which I don't.

The key is to manage your income.

I am taking my SS at 62 and enjoying the money and not worrying about the chump change in taxes.
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Re: Taking SS Early - Tax Related Question
Old 05-18-2007, 07:17 PM   #40
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Re: Taking SS Early - Tax Related Question

Just a word about the disgraceful treatment, since I think a fair bit of it originates from me.

I consider New Thinkings contributions to be very valuable, and see that he has thick skin. Which is a trait of a good salesman. And thats the hinge from which some of my criticism is swung.

His research and papers are designed to create an atmosphere in which his insurance company employer can sell annuities to people he just scared the bejesus out of. For some of these folks, it may be a great idea and what they really want.

That having been said I give sales people a hard time and make them earn their money.

So I agree that its good stuff, worth reading, and believe it or not, I'm glad he's hung in there with us through it all.

But I dont necessarily agree with everything he's put forth, and a few of our discussions in the past have left me with a bit of a bad aftertaste.
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