Where can a 70-year-old buy the least expensive life annuity?
I hope this option is still around in 14 years...
Cb
I hope this option is still around in 14 years...
Cb
First, in his case it's a no-brainer. He has such a short working history and his SS will be a pittance of his SWR so he runs little risk in the early/payback attempt. The worst case is that he ends up starting SS at age 62 and getting slammed by the SSA at age 69. He could take solace in SG's & TH's excellent analysis of early SS's beneficial effects on his portfolio survival.I wonder if Greaney is planning on doing this with his own SS?
[SIZE=-1]1515.3 Can an application be withdrawn after a claimant dies?[/SIZE]
[SIZE=-1]After the claimant's death, an application may be withdrawn, regardless of whether we have made a decision on it if: [/SIZE]
[SIZE=-1]The application was for retirement benefits that would be reduced because of the claimant's age; [/SIZE]
[SIZE=-1]The claimant died before we certified his or her benefit entitlement to the Treasury Department for payment; [/SIZE]
[SIZE=-1]A written request for withdrawal is filed by or for the person eligible for widow(er)'s benefits based on the claimant's earnings; and [/SIZE]
[SIZE=-1]The conditions in (A) and (B) of the above section are met. [/SIZE]
I'm not sure about this. I always thought Line 67 was for the case where having more than one employer in a given year resulted in excess SS withholding. Intercst's example says this is reported on Line 70c which is Form 8885, but Form 8885 appears to deal with a tax credit for health insurance.Fire'd@51: I do not think any amended returns need be filed as line 67 of 1040 appears to be there just for this purpose.
I actually did some Excel and paper and pencil on this and came up with this; projected it to my age 70: SS received $172K (the Gross Payback Amount); amount taxed $113K (notice it is not exactly 85%); tax refund amount (@ 15% of the payback amount; which I project to be correct) $17K. There actually will be a tax credit carry forward to the next year and part of the following year. So what would be the gain on this plan? Tax Refund $17K (previously mentioned); Interest on previous benefits at 5.7% (my personal rate on benefits in CD's) $46K. So this makes the net out of pocket expense to do this $109K ($172-17-46=$109K). How long to recover the net payback amount ($109K divided by the $7K annual increase in benefits = about 15.5 years). So if at age 70 you think you will make it beyond age 85 year it would pay, if not don't. I know this is a "quick calculation" and may need some tweaking but it gave me some idea of what it would would entail it also makes me think it would really be not worth the effort. The $172K payback if kept in CD's (and not repaid) should spin off about the same rate as now which would be about $9.8K which tends to make the effort mute.
FIRE I took it at age 62 and all my calculations were based on that (age now 67, next month). Actually took the percentage from the SS site that was linked in the Intercst site. Will have to study IRS publication about that line on the IRS 1040 but I think that was what it was for (repaid benefits). Interesting exercise anyway.
Yes IMO this will work -- the "only" requirement for approval I could get out of a SS representative last year was repayment of ALL benefits received which INCLUDE any Medicare Premiums if over age 64 (i.e., on MEDICARE). ...
Did you know that when you retire and apply for Social Security, you will be forced to enroll in Medicare Part A (the socialized hospital program) or forgo your cash benefits? That's Social Security Administration policy. In other words, if you prefer to keep/pay for your private health insurance and reject Medicare Part A, you will pay a huge financial penalty.1
Additionally, once enrolled, the only way to get out of Medicare Part A is to pay back all the Social Security benefits you ever received, plus any money paid on hospitalization coverage.
I'm still confused by your calculation. According to the Handy Table linked to from Intercst's example, it looks to me like your payment increase would be
131.5/77.5 = 1.697 or a 70% increase
If your total received SS over 8 years is 172K, that would be an average of 21.5K per year, so the increase would be 21.5 x 0.7 = 15K, probably more since the last year would be greater than the average due to COLA's.
What am I missing?
(Looking at Publication 17, it appears that you could simply use Method 1 - treat the repayments as a deductible expense in this year - and ignore the recalculations required for Method 2. This may not maximize your tax refund, but it is a lot simpler. It seems especially appropriate if you spent the SS benefits so that you didn't have to withdraw from your IRA, and now you make a big IRA withdrawal for the repayment. It seems that the deduction and the IRA withdrawal exactly cancel each other out.)