Originally Posted by bubblehead
I've been reading these posts.
Money from deferred accounts is going to be taxed.most of the people on this site have substantial deferred income.
should not the goal be not to reduce the 'dollar figure of taxes" but to make sure you never pay more than the 15 percent rate.
one reason to take ss early is obviously to be able to control one's income in the future.
once my wife and i hit 70-we both have retirement accounts. our goal is to not be taxed at more than that 15 percent tax rate.
There are two paths for minimizing taxes for folks who can receive Social Security and also have deferred accounts.
1) Take SS early to reduce the annual SS income, and withdraw from deferred accounts later, when required minimum withdrawals start at age 70.
2) Withdraw from deferred accounts early, spending down the accounts to the point where they won't make the higher SS payments (too) taxable when one starts those later, at age 70 for example.
Additional considerations here include other taxable income outside SS and IRA withdrawals, and whether you consider SS to be longevity insurance, that is, your ultimate fallback income stream much later in life should you outlive your portfolio. The idea is to minimize overlapping taxable income streams.
In my personal evaluation, I want to use SS payments as longevity insurance, so I'd prefer to start SS later with a higher monthly payment. As an additional consideration, if I left my IRA untouched, the required minimum withdrawals at age 70 from my IRA would make most of the SS payments taxable. The best plan in my case is to use a combination of investment returns (at the low capital gains & dividend rates, with capital gains offset by losses carried forward from 2009), and IRA withdrawals starting at 59 1/2. The goal is to run the IRA balance down to the point where the required minimum distributions won't push my Modified Adjusted Gross Income too far above the baseline where Social Security becomes taxable.
Note that in no way will I let the tax tail wag my lifestyle dog. I'd rather pay the modest tax bill than sit around shivering in the dark while cackling over how I foxed the The Man!