Tapping IRA to Postpone Social Security

[jimandthom]

+1

It's a safety valve. And it's certainly not take it at 62 or get nothing, zero, nada until 70. You can turn SS on anytime the market, the math or some sleepless nights make it a better option.

The math is really starting to suggest turning on the spigot. Every quarter when I send in medicare premiums, we are going to consider it. 1st payment already sent in.

Open SS suggests I collect at 67 and a couple of months as no survivor for spouse available.

Our income exceeds our bills for the upcoming month by +2400. So all we have to do is pay for food and fun from this total.

 

[Bir48die]

+1

It's a safety valve. And it's certainly not take it at 62 or get nothing, zero, nada until 70. You can turn SS on anytime the market, the math or some sleepless nights make it a better option.

Make that +2

 

[klscaz]

Since benefits increase each year for both deferral and for inflation (benefits are COLA adjusted).... then you should be comparing real portfolio rates to the annual increase in benefits.

Where can you get a real return of ~6.25%+/- or 8%? Assuming only 2% for inflation, that is an AVERAGE nominal portfolio return of ~8.25%+/- to 10%!

I agree. I think of it as having an annuity without having to buy one.

I retired at 60 and will wait until age 70 to take my benefit. I was the higher wage earner and I am 7 years younger than my husband, so it makes sense to me to have the higher benefit if he passes before me.

 

[audreyh1]

For me the monthly differences between 62 and FRA and 70 are significant. Also, FRA is at 66 years and 10 months, so there is just slightly over 3 years difference between FRA and 70, unlike the 5 years it is or has been for some people. Due to the later FRA, the cut at 62 is also more severe.

 

[Perryinva]

My take is slightly different. It is basically a wash, actuarially and in my case very little to suggest I will die before 85 or live until 95. DW is just over 5 hears older than I am, so less of a protection incentive. However, I’ve been building that dam portfolio forever so that I can USE IT, not leave it behind to go to heirs that will more than likely just waste it. So USE IT I will, so that I can enjoy as much of it as I want, while I am as young & healthy as I will ever be. I don’t need any of it to live on, and the longer I delay filing, the more I get to use of my portfolio because there will be more guaranteed income from SS....forever. At 70, (less than 9 years) my SS is predicted to be $44k in todays dollars, and at least $50k in 2028 dollars. Because of “forced” income, I couldn’t possibly take SS until 2021 anyway. So that leaves me only 7 years to spend and Roth convert to my hearts content, because after that, I will have more spendable income than I will need by far , and still a very sizeable portfolio for “what ifs”. If it’s a wash, then there is no reason to NOT take it later, since it is a clear “if I live” quality of life, not an “if I die” how much is left question.

 

[Sunset]

There is some provision of hold harmless, that (I think) means Medicare cost increases are limited while you get SS.

What happens if I delay SS to age 70, and have been paying larger increases in Medicare since age 65. Do the premiums revert to what they would have been had I taken SS at age 65. Or to they stay permanently higher ?

 

[Chuckanut]

There is some provision of hold harmless, that (I think) means Medicare cost increases are limited while you get SS.

Doesn't that simply delay the increase in premiums until the SS increase is greater than the Medicare increase? Then Medicare starts getting the 'missing' increase back. Or am I wrong?

 

[MissMolly]

There is some provision of hold harmless, that (I think) means Medicare cost increases are limited while you get SS.

What happens if I delay SS to age 70, and have been paying larger increases in Medicare since age 65. Do the premiums revert to what they would have been had I taken SS at age 65. Or to they stay permanently higher ?

No. They don't revert. And eventually everyone else catches up to what you are paying. Taking SS means the increase in Medicare premiums cannot exceed any SS annual increase (that's the hold harmless part). But if the annual SS increase exceeds the Medicare premium increase, then the increase will be sucked up by Medicare until you are paying the full premium.

 

[imoldernu]

Advice on using 401K's .

Retirement expert: 'Compound interest is the 8th wonder of the world'

https://finance.yahoo.com/news/retirement-compound-interest-401k-153017949.html

 

[Archman]

I agree. I think of it as having an annuity without having to buy one.

If I live to a hundred, I will get ~ 12.7 times more than I paid into, or 6.35 times that I and my employer paid into. So, far I've gotten back 1.26 times of my contribution.

 

[Lawrencewendall]

My spreadsheet may be wrong but it says I will get what I paid in, in 6 years, starting withdrawals at 62.

 

[dtbach]

It is a different story for everybody. For us, DW was low earner so we will take hers (and I am FRA so will file restricted for half of hers) and then I will take at 70. That way if I go first, she can take my higher SS.


Plus I'm taking down some of my IRA funds so don't get hurt so hard at RMD time.

 

[audreyh1]

Doesn't that simply delay the increase in premiums until the SS increase is greater than the Medicare increase? Then Medicare starts getting the 'missing' increase back. Or am I wrong?

Yes.

And the folks subject to the IRMAA don’t get held harmless.

 

[Sunset]

No. They don't revert. And eventually everyone else catches up to what you are paying. Taking SS means the increase in Medicare premiums cannot exceed any SS annual increase (that's the hold harmless part). But if the annual SS increase exceeds the Medicare premium increase, then the increase will be sucked up by Medicare until you are paying the full premium.

I looked it up, and so it appears that it is a dollar value comparison, I was foolishly thinking it was a percentage comparison.

Let's say my example SS could be $1,500/mo, and Medicare B is $134. A 2% increase in SS (for 2018) would be an increase of $30 so Medicare can go up by $30 before it gets capped.

I see how folks can catch up to the full rate, once SS gets an increase.

 

[Archman]

My spreadsheet may be wrong but it says I will get what I paid in, in 6 years, starting withdrawals at 62.

It took me 37 months, starting at 63.5 years old.

 

[audreyh1]

I see how folks can catch up to the full rate, once SS gets an increase.

Yep. We got to see that in action 2015-2016-2017. By 2018 I believe most had caught up.

The SS COLA for 2016 was 0%, and 2017 was 0.3%, but Medicare part B premiums went from $104 to $134. So most were held harmless until 2018 which had a 2% COLA. But folks who had been held harmless did not see that much of an increase in their SS check because they were finally paying the full Medicare premium rate.

 

[kimmsa]

Lots of opinions. Not much fact. Here's the scoop;

After exhaustive research I learned that as long as you; Live to your Expected Lifespan, You will receive the SAME amount of money REGARDLESS of when you begin collecting SSI. Read this again; Provided you live to your Expected Lifespan, you will collect the SAME amount of money regardless when you begin collecting.

Waiting for bigger checks is ONLY beneficial IF you can OUTLIVE your Expected Lifespan.

If you do not NEED the income at 62 or whenever you can begin collecting, then INVEST IT! This is the ONLY way to beat the system and come out ahead, weather you die young OR live the Expected lifespan OR Live Longer.

You are right on, invest it!

 

[Dtail]

Yep. We got to see that in action 2015-2016-2017 I believe. By 2018 I believe most had caught up.

The SS COLA for 2016 was 0%, and 2017 was 0.3%, but Medicare part B premiums went from $104 to $134. So most were held harmless until 2018 which had a 2% COLA. But folks who had been held harmless did not see that much of an increase in their SS check because they were finally paying the full Medicare premium rate.

That is why I believe the hold harmless aspect of SS is not really a large factor in the when to take it decision making process.

 

[audreyh1]

That is why I believe the hold harmless aspect of SS is not really a large factor in the when to take it decision making process.

People who are not subject to IRMAA may get a break once in a while, but historically it’s been rare. With a threshold of $170K MAGI for MFJ, most retirees on Medicare and drawing SS aren’t subject to IRMAA.

 

[eastnortheast]

My (admittedly) simplistic take on when to take SS is based on returns.

I believe that SS goes up about 8% per year for every year a person delays taking it. If I think my investments will do less than 8% per year, then I will probably not take SS until 70 years old. If the opposite is true, then better to take it earlier.

Fortunately, SS will be a relatively minor part of my retirement income, when and if it is still around when I am old enough to take it.

 

[robnplunder]

For now, I am going to take SS at 67 (rather a randomly picked age). That's 10 years from now. Things can change from now until then. Even now, there are just too many variables to consider - tax, ACA subsidy situation, where to draw money from (LT investment, 401k - not Roth, house equity). Finally, I believe the SS will be a minor part of our retirement budget no matter when we decide to take. In the bigger scheme of things, taking at 62, 65, 67, or 70 will not have significant financial impact unless I know what my and DW's life span are.

 

[Tadpole]

These discussions have a way of making us forget that we can decide take SS on any day after we turn 62. The amount we get depends on what day/month we start.

Come to think of it, wouldn't it have been easier to use 62 as the full retirement age and have some monthly scheduled increase for a delay thereafter?

 

[joeea]

Come to think of it, wouldn't it have been easier to use 62 as the full retirement age and have some monthly scheduled increase for a delay thereafter?

If they used the term "full retirement age" attached to 62, then an even higher percentage would take it at that "full" age, rather than delaying for even more "fuller" benefits, IHMO.

I'd prefer to use 70 as the "full retirement age". That would nudge more folks to delay starting until that age.

 

[Independent]

My (admittedly) simplistic take on when to take SS is based on returns.

I believe that SS goes up about 8% per year for every year a person delays taking it. If I think my investments will do less than 8% per year, then I will probably not take SS until 70 years old. If the opposite is true, then better to take it earlier.

Fortunately, SS will be a relatively minor part of my retirement income, when and if it is still around when I am old enough to take it.

That is far too simplistic for me.

The (very approximately) 8% annual increase should not be compared to an 8% return on a bond or a stock.

If I buy a bond that yields 8%, I give the issuer $10,000 today, get $800 every year, then get all of my original $10,000 back at maturity.

If I defer SS for a year, I give up one year's benefit (let's say $10,000), I may get an extra benefit of $800 every year, but I never get my $10,000 back.

 

[Dtail]

That is far too simplistic for me.

The (very approximately) 8% annual increase should not be compared to an 8% return on a bond or a stock.

If I buy a bond that yields 8%, I give the issuer $10,000 today, get $800 every year, then get all of my original $10,000 back at maturity.

If I defer SS for a year, I give up one year's benefit (let's say $10,000), I may get an extra benefit of $800 every year, but I never get my $10,000 back.

Very true. Some TV advisors sell it as an 8% return, which is not accurate.