Woke up wondering about adding more work years to boost SS payment, and also considered Roth conversions. Anyone want to check the math and logic of my conclusions?
So as I ran the numbers I came up with the following. Basically every additional year of work would add approximately $60,000 in earnings to my 35 working years. When running through all the calculations it will add approximately $21 per month of Social Security income. Due to the self-employed nature of my earnings that will require me to pay $9180 in additional SS taxes & Medicare taxes @the full 15.3%, per year of working.
This would require a 36 year payback!
Ignoring the additional income
I would receive during the OMY, am I missing something or is it dumb in my position to engage in OMY for SS benefit goosing
On to Roth Conversions:
I've known for some time that as I reach 79.5 MRD, I'm going to have a tax issue. I'm going to owe a ton.
This is a good problem to have, and surely beats the alternative.
Having concluded from the above that OMY isn't worth it for goosing SS, I began noodling the logic of Roth Conversions prior to collecting SS. I'm anticipating about $60K a year in rental income, and may inherit some IRA's which will have RMD prior to 62 as well. This tax situation only gets worse as I hit age 72.5, any RMD on the inherited IRA's are going to be quite large, and have my own RMD's added into the mix.
In exploring Roth conversions, I come up with some immediate concerns:
1) Do you pay SS tax & Medicare taxes on the converted amounts?
2) After a conversion are you allowed to withdraw the converted funds penalty free? IE I take $100K from a IRA Pay $25K in tax, then a year, or some other time prior to age 59.5, pull out $75K tax free?
3) How do conversions vs straight IRA withdrawals impact SS income?
Due to family longevity, I'm leaning towards collecting SS @62, so I see about a 10 year window to do conversions with the least income impact. Not sure if I might change this for spousal survivor reasons in the future.