Living on SS..anybody else?

[meleana]

Hi
I am 64, retired at 58 from megacorp with retirement health benefits. My DH is 63 and retired from the same megacorp at 60. No pensions. We both took SS at 62 for a total of $3900/mo. Fortunately we live in a LCOL southern state. We are enjoying our retirement immensely. We both ride e-bikes, he golfs, I swim. We have many social and fun activities in & outside of this beautiful 55+ active community.

No debt, house paid off. We’ve travelled internationally in previous years and enjoyed it but we will be staying in the country for any future traveling for many reasons. We have 1.3M in Vanguard (we manage) with a 50/50 AA. We did an IRA to ROTH conversion last year, staying below taxable income but wondering if doing future conversions would even be worth doing? Our cash stash (>150K) pays for any extra expenses but we rarely exceed our SSA income. Just wondering if there are other folks in this community that are like us … very comfortable living on basically social security income only?

My brotherinlaw does but he lives in LCOL Delaware.


We are are in our 60's but waiting to collect our SS until age 70, so we are living off our savings.


I hope our financial guy knows what hes doing. He wants us to do a few Roth conversions for the next 3 years until my husband starts to collect SS. I don't see how it will be that worth it just for 3 years. Plus I was on an ACA plan for 5 months this year so have to keep our income low. I still don't get how much it will help. Not like we have 10 years until SS.

 

[Rustic23]

We could, but there would be holes. $48,000 would cover expenses, but not future capital improvements. Think, car, roof, floors, a/c etc. IRA and savings, will cover LTC.

 

[Jeb-NY]

In my early years of early retirement I took it as a goal to pay zero or as little taxes as possible then it dawned on me to start doing ROTH conversions up to the top of the lowest bracket. Wish now I would have not missed those few years to further reduce my RMDs. We waited till 70 to start SS and have plenty for our expenses even if we hadn't moved to a lower cost of living area a few years ago. We have plenty of emergency cash stashed and reinvest all of our RMD currently. Even when we try to be more extravagant it is hard after so many years of being frugal.

 

[isisdave]

@Free2BMe, we're about in the same boat. This year we moved from CA to IN, for family reasons, but selling the old huge house and buying a smaller one, the lack of a mortgage, lower taxes, and generally lower COL are permitting us to get by on SS alone. We also have a little rental real estate income, but we don't spend that.

DW will turn 72 next year (I'm older) so this is the last year she'll have no RMD. I bought the 2021 version of TurboTax -- $39.95 at walmart.com -- and discovered we can do a Roth conversion of up to about $20k without owing ANY taxes, so that's the "why-not?" plan. Maybe we'll do a little more and pay the 10% tax, but probably not, as it's likely that we won't have to tap either tIRA in the future

I understand you can do an approximation with the 2020 version and the "What-If" option, but I haven't tried it.

 

[Free2BMe]

Thanks to everyone who responded.

I've been thinking about changing my approach from a focus on spending at or below SS income (even though it more than covers basic needs) to enjoying life while I still have life to enjoy. We are frugal folks so this doesn't mean spending like crazy... just loosening the grip a bit. Typing this out has given me yet another reason to smile.

 

[RobbieB]

Not even close. My SS survivor bene is 15 grand a year.

 

[Free2BMe]

Maximizing Roth conversions is a great tax avoidance strategy....combine that with maximizing life experiences and now you're really talking about something. And as a naturally frugal person, I know that great life experiences do not always involve spending money... BUT it's time for me & my DH to spend more money. I'll be joining the BTD forum soon!

 

[rrs26ja]

Response to pb4uski

pb4uski If I read your first post to this, you said he could take out $18,000 and move it to a Roth IRA and pay zero taxes. I don't believe that is true. It may not move him to the next tax bracket, but he will still have to pay 12% on the additional withdrawal of the $18,000. Maybe I misread your post.

 

[goodcookie]

I understand how nice it is to be living comfortably on your SS income. I have been a saver since my first paper route at 9yrs old.
But after reading the Book Die with Zero. I have the mentality of trying hard to spend the money that we have worked so hard for. I will be giving our children each a couple hundred thousand, but after that, I'm going to try and spend the rest. Not going to go crazy spending, but now determined to successfully do the timing and spending accurately as possible to achieve the most of my time and money that I have accumulated. After contemplating this, it pains me to think, what if I wasted all them extra hours at work and away from the family. To now just let the money go unused and unappreciated. My happiness is not to live on SS. But to live having spent it all. (Can't take it with you)

 

[Free2BMe]

pb4uski If I read your first post to this, you said he could take out $18,000 and move it to a Roth IRA and pay zero taxes. I don't believe that is true. It may not move him to the next tax bracket, but he will still have to pay 12% on the additional withdrawal of the $18,000. Maybe I misread your post.

OP here. pb4uski is correct. We are in a 0% tax bracket now and if we convert $18,000, we would still pay no taxes. This is due to a low income (0% withdrawal rate; SS only).

 

[Retired Expat]

Well vs Awesome?

If we had only our Florida home then I suspect that we probably could live quite comfortably on SS, but alas we don't.

If we weren’t traveling and sold our US home we could live very well here (comfortably) in Uruguay on our combined SS. But happy we can live far better than just “well”. Retired life is pretty awesome actually. Looking forward to getting covered by Medicare so my Expat Medical insurance won’t have to cover our time in the US which is more than half my cost.

Not sure I get this whole rush to convert to Roth? My IRA is only about 13% of my financial investments and 7% of net worth not counting primary residence. Everyone tells me it isn’t worth it and my tax bracket is not likely to change drastically so why should I bother?

 

[FLJim]

Hi
I am 64, retired at 58 from megacorp with retirement health benefits. My DH is 63 and retired from the same megacorp at 60. No pensions. We both took SS at 62 for a total of $3900/mo. Fortunately we live in a LCOL southern state. We are enjoying our retirement immensely. We both ride e-bikes, he golfs, I swim. We have many social and fun activities in & outside of this beautiful 55+ active community.

No debt, house paid off. We’ve travelled internationally in previous years and enjoyed it but we will be staying in the country for any future traveling for many reasons. We have 1.3M in Vanguard (we manage) with a 50/50 AA. We did an IRA to ROTH conversion last year, staying below taxable income but wondering if doing future conversions would even be worth doing? Our cash stash (>150K) pays for any extra expenses but we rarely exceed our SSA income. Just wondering if there are other folks in this community that are like us … very comfortable living on basically social security income only?

"No debt, house paid off." Those are the magic words that lead to a great retirement.

 

[harllee]

I waited to age 70 to take my SS. Turned 70 last month and I just received my first SS deposit today. I feel fabulously wealthy!

 

[pb4uski]

pb4uski If I read your first post to this, you said he could take out $18,000 and move it to a Roth IRA and pay zero taxes. I don't believe that is true. It may not move him to the next tax bracket, but he will still have to pay 12% on the additional withdrawal of the $18,000. Maybe I misread your post.

OP here. pb4uski is correct. We are in a 0% tax bracket now and if we convert $18,000, we would still pay no taxes. This is due to a low income (0% withdrawal rate; SS only).

rrs26ja, yes it is true. Calculations from https://www.irscalculators.com/tax-calculator below.

 

[pb4uski]

If we weren’t traveling and sold our US home we could live very well here (comfortably) in Uruguay on our combined SS. But happy we can live far better than just “well”. Retired life is pretty awesome actually. Looking forward to getting covered by Medicare so my Expat Medical insurance won’t have to cover our time in the US which is more than half my cost.

Not sure I get this whole rush to convert to Roth? My IRA is only about 13% of my financial investments and 7% of net worth not counting primary residence. Everyone tells me it isn’t worth it and my tax bracket is not likely to change drastically so why should I bother?

If your IRA is only about 13% of your retirement nestegg then it's probably not much benefit because your RMDs won't be high enough to push you into a higher tax bracket.

In my case our tax-deferred is 61% of our retirement nestegg and for many/most people who worked as employees somewhere it is often a very high percentage of retirement assets.

The real key is to compare your effective tax on RMDs (increase in tax caused by RMD divided by RMD) to your effective tax rate on a Roth conversions (increase in tax caused by conversion divided by the amount converted). If the latter is lower than the former then there is a benefit to converting... and the higher the difference then the higher the benefit.

 

[pacergal]

We could live on our SS income alone if needed.
We choose not too. Retirement is what we saved for!

 

[Sunset]

@Free2BMe, we're about in the same boat. This year we moved from CA to IN, for family reasons, but selling the old huge house and buying a smaller one, the lack of a mortgage, lower taxes, and generally lower COL are permitting us to get by on SS alone. We also have a little rental real estate income, but we don't spend that.

DW will turn 72 next year (I'm older) so this is the last year she'll have no RMD. I bought the 2021 version of TurboTax -- $39.95 at walmart.com -- and discovered we can do a Roth conversion of up to about $20k without owing ANY taxes, so that's the "why-not?" plan. Maybe we'll do a little more and pay the 10% tax, but probably not, as it's likely that we won't have to tap either tIRA in the future

I understand you can do an approximation with the 2020 version and the "What-If" option, but I haven't tried it.

RMD's mean you have to take money out of your IRA's each year.
Maybe you mean you won't have to take extra money out of the IRA's above the RMD amounts.

 

[athena53]

I might be able to but it would be a lot different than my current life. I'm getting $24K/year in Survivor benefits and that will go to about $42K when I collect on my own record next year at age 69. My bare-bones expenses ($700 mortgage, utilities, groceries) are pretty low but I give a lot to charity and like to make upgrades to the house when cash flow allows it. This year I had the exterior painted and the deck replaced with TREX. Yesterday I had 2 dental implants placed. Last year my car died after 134,000 miles and I had to buy a new one. Those things aren't in a SS budget.

Even the people living "only on SS" are typically subsidized in other ways- help from friends and family, as mentioned earlier, subsidized housing or breaks on property taxes, stimulus payments (high-income people didn't qualify), Medicare "extra help" or ACA subsidies, Medicaid for LTC. Not a pleasant existence since the gubmint does a lot of your choosing for you, but it makes living on SS somewhat more palatable.

 

[Stormy Kromer]

DW and I will file together in 6 years. Our combined benefit will be $39,600. Our current living expense is $60,000 including income tax (5,000) and health insurance ($15,600).

No mortgage or debt.

I'm thinking medicare with supplement will be less than $15,600 in 6 years. We'll see.

I anticipate SS will cover almost half of our living expense in 6 years. I'd be very pleased with that.

 

[Gumby]

We could not live on social security alone, since it is only $26k per year.

 

[Vacation4us]

We could not live on SS alone. I will start collecting in 7 years and will only get about 15 k a year. DH will never collect but we’ll be fine. We planned for this.

 

[Sunset]

We could not live on social security alone, since it is only $26k per year.

Agreed, it would be very tough.

I have known a couple of single folks that live mostly on just their SS, which is about $24K.
They own their home without a mortgage.
They never travel in decades.

Once in a while they have to tap into savings for lumpy expenses to fix furnace, car, water heater, etc..

It is not the kind of retirement most folks imagine.

 

[jldavid47]

We are living comfortably on our combined Social Security income and have money left over from it at the end of the month for extra things we want to buy or do. Our house is paid off and I can even convert 20K of my IRA to a Roth without having to pay Federal income taxes.


Overall our lifestyle is not extravagant at all (never has been) and we live in a below average cost of living area (central Indiana) which helps. If we had a mortgage, things might be different.

 

[Surewhitey]

Mom has been living on it for a while now. Probably around $24k combined with SF's. Paid for home and cars & living the same way they always have.

MIL living with SIL on $30k (includes 1/3 pension). She's dead broke otherwise (married / divorced 5 times).

We have a while before getting it, but our basics (including travel) could be met with ours today. We'll eventually learn how to BTD...

 

[harllee]

I think I have read that something like 50% of people over age 65 live on SS as their sole source of income. And for many of them the SS payment is much lower than the SS most of us posting on this Forum receive. I don't know how some of them make it.