Pension Deductions

[MasterBlaster]

No problem. All my investments are in IRA's so any withdrawal is a taxable event. If I take SS I do not use IRA money. If I take SS equivalent from IRA fed tax is $2,850. In my case this would also trigger $1,431 in state taxes for a total of $4,281. By taking SS my tax is $900 fed and no state income. So $4,281- $900 = $3,381 in tax savings plus interest earned on IRA assets @ 4% = $760 for a total saved of $4,141.

SS of $19,000 x 8% = $1,520.

So in the first year you beat em'. I suspect you intend to live longer than just one year though. That $1,520 (plus COLA) comes every year until your demise. If you live to say 82 that's 20 years of COLA'd payouts with a net present value (pick your own discount rate here) of maybe $25k.

 

[Bikerdude]

So in the first year you beat em'. I suspect you intend to live longer than just one year though. That $1,520 (plus COLA) comes every year until your demise. If you live to say 82 that's 20 years of COLA'd payouts with a net present value (pick your own discount rate here) of maybe $25k.

You have to consider the break-even age for taking at 62 vs. say 66 is around 76, never mind my considerable tax savings. I get the same cola percent each year on my SS as anyone else. With judicial use of my Roth IRA I will be able to keep my taxable SS low for a considerable time. Easily past age 66. Just avoiding the state tax trigger is almost worth the 8%.

 

[MasterBlaster]

You have to consider the break-even age for taking at 62 vs. say 66 is around 76, never mind my considerable tax savings. I get the same cola percent each year on my SS as anyone else. With judicial use of my Roth IRA I will be able to keep my taxable SS low for a considerable time. Easily past age 66. Just avoiding the state tax trigger is almost worth the 8%.

Well if you want to extract the maximum dollars out of SS, taken all by itself then that's the way to look at it.

However if you want to have the most spendible income over your lifetime then your results will be different.

What good does all of your retirement stash do you if you die early ?

 

[Bikerdude]

What good does all of your retirement stash do you if you die early ?

Well for one thing I get to leave it to my daughter and grandson instead of giving it away in taxes. I mean, if I die before I collect SS, say 69, I spent a lot of my money and paid a lot of taxes for nothing. I know I'm dead and who cares but I'm happy with my plan and that's all that counts.

 

[MasterBlaster]

Well for one thing I get to leave it to my daughter and grandson instead of giving it away in taxes.

Yes your heirs may do well. If you die though there is no benefit to you.

And keep in mind that for many spouses the SS benefit can be assumed upon your death. If it's a larger amount cause you delayed taking SS the spouse will be better off and can pass even more to the daughter and grandson.

I mean, if I die before I collect SS, say 69, I spent a lot of my money and paid a lot of taxes for nothing. I know I'm dead and who cares but I'm happy with my plan and that's all that counts.

And if you die you saved all that money for nuthin'. Lets face it - if you die early you lose either way. You paid all those SS taxes, you saved all that money - and the worst thing is now you are dead.

getting back to the original discussion - I suspect that you could do better by delaying.

 

[Bikerdude]

getting back to the original discussion - I suspect that you could do better by delaying.

That's your opinion (everyone has one). I guess we are going to have agree to disagree on this one.