Originally Posted by gauss
Getting back to the original question (tax/IRMMA issues aside), I offer the following:
#1) The actuarial fair age-reduction is about 7% for each year a pension is drawn earlier than age 65
#2) Therefore if there was no employer subsidy, you pension would be reduced by about 35% if taken at age 60.
#3) Given that the reduction is only 20%, there is a significant employer subsidy that is being offered on the table for starting to draw the pension early.
Be sure to take this into account with along with the other issues.
Note also that we currently have a fairly wide 24% tax bracket that sits atop the 22% bracket until 2025. This is a a fairly small marginal increase of 2%. You may wish to use this to manage your long term IRMMA and tax-diversification goals while simultaneously drawing the pension early to take advantage of the employer subsidy. (That is basically what I am doing until TCJA expires).
Thanks gauss, our analysis has led us to this conclusion. We are planning on doing Roth conversions to the top of the 24% tax bracket for 4 years and then we'll likely relook at where we're at and then decide whether to continue doing the same until the end of 2025 and just live with the IRMAA surcharges for a few years when I turn 65 near end of 2025.
If plan goes well we will have the vast majority of the tIRA converted by then where we should then remain in the 22% tax bracket (or to the reverted 25% tax bracket if current brackets aren't extended).