Why I am taking SS before 66

[Independent]

Quote:

Originally Posted by rayvt For someone with little money, say under $750K, they need to take SS as soon as they can. They can't affored to delay, so delaying is not an option for them. FWIW, CNN says the median net worth for 65 year olds is $232,000.

$750k seems well above the #1 cutoff to me.

A typical SS annual benefit is $16k starting at 66 or $12k starting at 62. Double that for spouses who both worked.

I don't see how deferring SS is a particular problem in that case for someone with $750k.

[springnr]

Quote:

Originally Posted by pb4uski Actually, that was one of my w*rk distractions.

Deploying to the exotic Near, Middle, Far East with our young aviators was my w*rk distraction, crazy the changes that attract one in retirement.

[dnorton50]

I will retire when I turn 63 in January or 2017. We will be completely debt free; with 6-8 months of living expenses. I have two pensions from two different companies, a IRA and a Roth. I will draw SS and then draw from my two pensions and leave the IRA and Roth for later. I am a bit confused about taxes..do they take taxes out of SS?

[Independent]

Quote:

Originally Posted by dnorton50 I will retire when I turn 63 in January or 2017. We will be completely debt free; with 6-8 months of living expenses. I have two pensions from two different companies, a IRA and a Roth. I will draw SS and then draw from my two pensions and leave the IRA and Roth for later. I am a bit confused about taxes..do they take taxes out of SS?

You do not pay FICA on SS benefits. You may pay Federal Income Tax.

Quote:

You can do the following quick computation to determine whether some of your benefits may be taxable: First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income. Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable. The 2010 base amounts are: $32,000 for married couples filing jointly. $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year. $0 for married persons filing separately who lived together during the year.

Are Your Social Security Benefits Taxable?

The percent of your SS benefit that gets into your taxable income increases with your income. The formula is hard to explain in a few words, but here's the worksheet. http://apps.irs.gov/app/vita/content...heet_1040i.pdf

Note from lines 17 and 18 that the maximum fraction that can get into taxable income is 85%.

If your question was about withholding, here's a source: Benefits Planner: Withholding Income Tax From Your Social Security Benefits

[Bikerdude]

Quote:

Originally Posted by Independent You do not pay FICA on SS benefits. You may pay Federal Income Tax. Are Your Social Security Benefits Taxable? The percent of your SS benefit that gets into your taxable income increases with your income. The formula is hard to explain in a few words, but here's the worksheet. http://apps.irs.gov/app/vita/content...heet_1040i.pdf Note from lines 17 and 18 that the maximum fraction that can get into taxable income is 85%. If your question was about withholding, here's a source: Benefits Planner: Withholding Income Tax From Your Social Security Benefits

Here's a easy calculator:

How much of my social security benefit may be taxed? | Calculators by CalcXML

[Dave J]

Quote:

Originally Posted by dnorton50 I will retire when I turn 63 in January or 2017. We will be completely debt free; with 6-8 months of living expenses. I have two pensions from two different companies, a IRA and a Roth. I will draw SS and then draw from my two pensions and leave the IRA and Roth for later. I am a bit confused about taxes..do they take taxes out of SS?

Depending on the amount of your SS and two pensions, and the value of your IRA, it may be lower taxes in the long run to start drawing some from your IRA right away(upon retirement). It also may not. You have to run the numbers and see what tax bracket your money will be in , in future years.
I've been drawing down my Regular IRA's before my SS starts( I am in a very low bracket presently) to attempt to have a few years my SS will be in a lower tax bracket than if I did not. I also rolled over some into Roth IRA's and Roth 401k's. I have been fully retired 4 years and semi-retired 10 years before that.(I started early)

[fh2000]

I plan to delay till 70. My reason is Roth conversion so by 70 1/2 our RMD will be manageable. We have enough assets to carry us until then.

Looks like I can add ACA as another reason to support my thinking, though I will review these as we get closer. I am 58 and working on my OMY.

[F4mandolin]

This really is like a Dem vs Rep issue......it just keeps going......

[marko]

Quote:

Originally Posted by razztazz Every time I run the SS scenarios through FireCalc it always tells me I can spend more if I take SS at 62 instead of waiting. At 62 I immediately spend less of my own money.

Not only that, but if you're withdrawing from your IRA, depending on what state you live in, you'll pay less income taxes too.

In addition "your own money" has the chance to grow at a greater rate than the ~8% per year that SS accounts for.

Between taxes and portfolio growth, I figure I bank about $4000 extra per year by taking SS asap.

[growing_older]

Quote:

it may be lower taxes in the long run to start drawing some from your IRA right away(upon retirement). It also may not. You have to run the numbers and see what tax bracket your money will be in , in future years.

Depending on your age and situation, this may also help reduce RMD later in life, which might have pushed you into higher tax brackets if you didn't drawl down earlier.

[Independent]

Quote:

Originally Posted by razztazz Every time I run the SS scenarios through FireCalc it always tells me I can spend more if I take SS at 62 instead of waiting. At 62 I immediately spend less of my own money.

We had a long discussion on this a couple years ago. One person said that Firecalc gave him higher spending if he started early. The other said the opposite.

The best explanation I could come up with was that the first person was 54 and the second was 62. The first person was starting his Firecalc run at 54. Since order of returns is more important after retirement than before, it seemed that the periods of low returns had more impact on the start-at-62 runs.

[Which Roger]

Quote:

Originally Posted by Independent We had a long discussion on this a couple years ago. One person said that Firecalc gave him higher spending if he started early. The other said the opposite. The best explanation I could come up with was that the first person was 54 and the second was 62. The first person was starting his Firecalc run at 54. Since order of returns is more important after retirement than before, it seemed that the periods of low returns had more impact on the start-at-62 runs.

Or the 2 people specified different #s of years for longevity.

[Katsmeow]

Quote:

Originally Posted by Independent We had a long discussion on this a couple years ago. One person said that Firecalc gave him higher spending if he started early. The other said the opposite. The best explanation I could come up with was that the first person was 54 and the second was 62. The first person was starting his Firecalc run at 54. Since order of returns is more important after retirement than before, it seemed that the periods of low returns had more impact on the start-at-62 runs.

When I was running Firecalc 4 years ago (DH was 62 and I was 56) it said we did better if I took SS at 62. (DH was already taking at 62 since we had minor children at the time and they could receive benefits if he did). Now, it has changed and we do slightly better if I take SS at 66.

In our case, we are using the variable spending model on Firecalc since we have higher expenses until our kids get out of school in a couple of years and then our expenses will drop precipitously. As we get closer to only having a couple more years of higher spending, Firecalc is starting to show that we do better with me starting SS at 66 (in reality, I would probably do spousal at 66 then switch to my benefit at 70).

What I really plan to do is run Firecalc again when I get to 62 and see what it says at that time.

[rodi]

Quote:

Originally Posted by Katsmeow When I was running Firecalc 4 years ago (DH was 62 and I was 56) it said we did better if I took SS at 62. (DH was already taking at 62 since we had minor children at the time and they could receive benefits if he did). Now, it has changed and we do slightly better if I take SS at 66. In our case, we are using the variable spending model on Firecalc since we have higher expenses until our kids get out of school in a couple of years and then our expenses will drop precipitously. As we get closer to only having a couple more years of higher spending, Firecalc is starting to show that we do better with me starting SS at 66 (in reality, I would probably do spousal at 66 then switch to my benefit at 70). What I really plan to do is run Firecalc again when I get to 62 and see what it says at that time.

I've seen similar results...
My plan is to keep running the calculators (firecalc, RIP, iORP, etc) as I reach the decision points. And to stay agile as the market can change... so if I decide to wait till FRA or 70, I can change my mind if the market tanks and I don't want to pull money out.

I did become aware of something from this thread - that 100% of SS is included in the MAGI for ACA. I hadn't looked as closely at that - but it's something to keep in the back of my mind. Both kids will be under 26 when I turn 62 - so likely still on our insurance.... so I'll have to run all the factors through my spreadsheet.