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Old 07-15-2017, 04:10 PM   #41
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Taking SS at 62 is not a whole lot of money. IIRC, not facts, go check SS for facts, it's less than $2000 a month, so about $24k per year. Some(not all) people's retirement account earns more than that in a month, so it depends on the amount.
What I found beneficial in this up and up market is after you convert, you earn more in Roth IRA to cover tax and the subsequent years, they are tax free. What's not to like. But I don't want to like it too much because somebody will find ways to close the loophole.
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Old 07-15-2017, 04:15 PM   #42
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Now that is an idea I haven't seen before! Very interesting. It is definitely something to keep in mind.
Stick around here, there are a lot of good ideas that go around. I was convinced that I should take SS at 70 for longevity insurance. But I kept my mind open and heard this rationale, and it has become my strategy for that time, subject to some of the other factors.

To bingybear's point that it's market timing, yes, but only to a small degree. If the market does bounce back quickly, you've just made a decision that's more or less neutral unless your life span is an outlier. If it doesn't recover right away, you're probably coming out ahead. And if you pull the trigger a little early, you probably still come out ahead, not as much. I feel like it's pretty low risk market timing. Not that much downside.
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Would you delay taking SS?
Old 07-15-2017, 05:13 PM   #43
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Would you delay taking SS?

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Originally Posted by bmcgonig View Post
If you have a heloc that you can access at around 4% then borrowing the SS amount would let your SS increase by 8%. Better choice?


You have to do the math. Apparently you are going to pay higher than 4% since you would have to borrow enough extra to service the payments throughout the expected downturn, meaning you pay extra interest on cash in accounts while it is also being devalued to inflation. Not a place I would want to be. Probably way smarter to take SS and if it is more than you need take that heloc and stick it in the index for some IR arbitrage during the downturn - should come out way ahead in 5-10 years at most.
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Old 07-15-2017, 06:13 PM   #44
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FYI SS does not increase 8% per year for those born in 1960 or later. If you start SS at 62, you'll get 70% of your full benefit (age 67). It increases to 75% at 63
80% at 64
86.7% at 65
93.3% at 66
100% at 67
according to https://www.ssa.gov/planners/retire/1960.html
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Old 07-15-2017, 06:48 PM   #45
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I think 8% is at FRA till age 70. IIRC
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Old 07-15-2017, 08:54 PM   #46
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........ IIRC
I don't know either.
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Old 07-15-2017, 09:04 PM   #47
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I don't know either.
Stop being a lazy bum in retirement. Do your own googling. Here I've found it for you. Mathjack often mentioned this that's why I remember.

https://www.kitces.com/blog/social-s...-age-66-to-67/
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Old 07-15-2017, 09:41 PM   #48
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If I was in the 15% tax bracket, I would take it and live more. Even if you have enough to live, living below the 15% bracket is not much spending.

Take it and live a better life.
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You can't always assume it's $40K for 15 % bracket. It depends on one's tax situation. Right now I have a lot of income that's not taxed thanks to various depreciation from my rentals. So this is why one has to look ahead using Turbotax.
+1, if you have significant money in post tax accounts it can be very profitable to stay in the 15% bracket. 0% capital gains allow you to increase your basis or take profits for free up to the top. You can also look to maximize ACA subsidy. Finally you can look to see if Roth conversions are for you.

Your tax bracket isn't dependent on what you spend or your lifestyle, its dependent on how much you receive from untaxed sources.
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Old 07-15-2017, 10:28 PM   #49
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Kudos! Quite an accomplishment in Bay area!

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It all depends on spending habits, mentality and how many family members you support. For me, $40K per year in retirement is more than enough: currently I live on $30K per year in SF Bay Area (but health insurance from employee). And it is not really a frugal: I buy whatever I want, and have regular trips overseas.
Congrats! I would love to get a couple of clues on how you do it!

I coulda been a contender. After eleven years renting in DC Metro, swearing at the traffic etc., I have capitulated. I'm buying a condo. At this point, it's cheaper than renting.

Don't think I'll be able to avoid the 25% marginal in retirement, or the tax torpedo once RMDs start. So, all these years of paying taxes upfront for my Roths for naught...sad, really.
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Old 07-15-2017, 11:48 PM   #50
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When I said ealier that we would convert heavily to ROTH , it definitely means the full 15% , and quite possibly into the 25%.

Reason being is I may not be around long, and if DW is filing single, the 28% tax bracket starts at ~$91K. And with the 25% for single starting at $37,651 , she would pay 25% no matter what with RMD and SS.

Also currently our state IL, does not tax retirement income, so no State tax on IRA withdrawals and conversions Due to the poor finances of the State they just raised the income tax from 3.75% to 4.95% and are still looking for $$$$. Makes me want to convert before they tax it too.
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Old 07-16-2017, 09:07 AM   #51
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+1, if you have significant money in post tax accounts it can be very profitable to stay in the 15% bracket.
I could be missing something, but the opportunity to move IRA/401k money from pretax to after-tax accounts (Roth or regular) for 15% seems like something to take advantage of.
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Old 07-16-2017, 09:24 AM   #52
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#1, by collecting SS at 62, you can keep more of your investments intact, earning more money. The cost of deferring and getting the larger monthly payment at 70 is that you get $0 between 62 and 70. Your "analysis" totally misses this.

#2 Some people think that the benefits will change and nobody gets grandfathered in, such that you are better off getting the full benefit while it's still being given out. If you can get benefits at the current rate at age 62, but at age 69 they cut everything by 30% across the board, your breakeven point has been pushed quite a ways out.

There are a lot of other moving parts:
- Being able to convert 401K to Roth at a lower tax rate
- The tax impact if you can't convert it all before 70 and have to take MRDs,
- How much of your SS gets taxed in various situations
- Whether you are trying to limit income to get an ACA subsidy
- Your likelihood of living past the crossover point based on your health and your family history
- Special spousal situations
- The state of the stock market: If we're at a high, I'd rather be selling off a little more of my investments for living expenses and deferring SS. If the market drops, I'd rather limit my selling, and would likely take SS to cover more of my living expenses. Don't forget, you can make that decision at any point between 62 and 70, so if you are 62 now and think the market it high, you can hold off, and then if it crashes in 2 years you can start collecting then. There's no formula for that, just like there isn't one for #2 above, you go with your gut feeling of what's best for you
- others?

The good news is, most of these probably don't matter too much in the big picture. I think because it is an active decision you have to make, people (myself included) overthink this too much. I have a hunch that if the govt just automatically started giving you your SS benefits at 67 unless you explicitly told them otherwise, a lot of people would just passively accept it because then they wouldn't have to make a decision.
Good summary overall RB.
I've also often mentioned the fact that IRA distributions are taxed at 100% whereas the money you don't withdraw because of SS is taxed at a lower total. In my state SS is also untaxed.

Plus, if you take it at 62, you get 3 years at a higher benefit until you get hit with the Medicare bill reduction.

After all is said and done however most folks here will agree on at least one thing: you can slice it 100 different ways, but the break even point is around 80 years old, plus/minus, so it really doesn't seem to matter that much.
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Old 07-16-2017, 09:54 AM   #53
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The opposite view of why folks don't delay:

I talked to a neighbor, he said he is going to claim at 66, since it was not worth waiting until age 70, then he went on to say say a whole host of things that were totally wrong about SS
  1. You get a 25% benefit if you delay to age 70, no benefit to delay between 66 and 70.
  2. SS is based on the last 2 years of work.
  3. SS was tax free. (even if you are working).
It makes me think, a lot of the folks claiming at age 62, or could be doing so because they are filled with wrong information like my neighbor.

At least he knew if you claim early, you get less, and he didn't want less than the full amount.
I think this knife has two edges.......

Most folks I know that delay SS are doing so because they refuse to consider the time value of money and the impact of investing the SS dollars you receive between 62 and 70. While inflation rates and investment returns can't be predicted, reasonable assumptions indicate a good probability of accumulating extra FIRE portfolio dollars that will more than offset the lower SS after 70.

I really think that in the end it won't make much difference, delay or not, for most people (as long as they are informed and prudent investors) and that special circumstances regarding marital status, health and other factors prevail.
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Old 07-16-2017, 10:05 AM   #54
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I will likely delay Social Security to full retirement age, especially since I expect to continue to do some work until then.

As for delaying beyond that, unless someone has excellent health and a strong family history of longevity, I find the case unconvincing.
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Old 07-16-2017, 10:22 AM   #55
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Without ever actually doing the math, I firmly believe the optimum strategy with SS is to delay taking until when you portfolio begins to under-perform, like in a recession. Let SS grow, then pull the trigger when it does you the maximum good of avoiding full drawdown in your first down market.

+1.

And if the first down market occurs while I'm still working, I'll probably work through the down market, at least for a year or two, and then retire, and not pull the trigger on SS until the first to occur of age 70 or the next down market. I feel comfort believing that some amount will probably be available when I start it not later than 9 years from now, as a kind of insurance against a first drawdown after work stops.
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Old 07-16-2017, 10:28 AM   #56
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Congrats! I would love to get a couple of clues on how you do it!
Thank you. To be honest, I did not do much about it. Other than cooking at home and paying off the mortgage, which may not be a wise choice after all as I can see it now. But I still pay around $1K property tax per month, which is increasing. Though it is included into the amount I provided.
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Old 07-16-2017, 10:39 AM   #57
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I did delay SS until 70. Income prevented our rolling into a Roth IRA and now RMD's are required. If we reduce income, there will be an even larger amount left for charities. You pay taxes at some time, especially if you have a decent income.
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Old 07-16-2017, 10:47 AM   #58
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DW will be taking her SS later this year at 62 while I delay taking mine.

a) She has a much higher life expectancy and much lower SS so it is a form of insurance to ensure she has a better income when I'm gone as she will lose 50% of my pensions.

b) Living in the U.K. means that she will not be taxed on it by the US, only the U.K. and since she files as an individual and has little other income it will remain untaxed.

c) RMD's plus UK & US SS will put me in the 40% UK bracket since IRA distributions are taxed first in the U.K. so I have been converting to Roth up to the top of the 25% bracket and will continue to do so now we are living in the UK since Roth conversions are taxed only in the US. (3 more years of conversions before the IRA account is zero, then another couple of years converting DW's IRA)
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Old 07-16-2017, 11:12 AM   #59
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And I don't even need Medicare, I have retiree health insurance.
You may well have something different but I had retiree medical too but the company required that I sign up for Medicare when eligible and the retiree plan became a supplemental policy. You might want to check on the details to be sure.
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Old 07-16-2017, 11:22 AM   #60
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DW will be taking her SS later this year at 62 while I delay taking mine.

a) She has a much higher life expectancy and much lower SS so it is a form of insurance to ensure she has a better income when I'm gone as she will lose 50% of my pensions.

b) Living in the U.K. means that she will not be taxed on it by the US, only the U.K. and since she files as an individual and has little other income it will remain untaxed.

c) RMD's plus UK & US SS will put me in the 40% UK bracket since IRA distributions are taxed first in the U.K. so I have been converting to Roth up to the top of the 25% bracket and will continue to do so now we are living in the UK since Roth conversions are taxed only in the US. (3 more years of conversions before the IRA account is zero, then another couple of years converting DW's IRA)
If she took SS at FRA, wouldn't she get more even based on 50% of your SS benefit , but taking it early for her, doesn't it reduce the amount she gets of hers, AND yours (when you die) ?
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