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07-16-2017, 12:00 PM
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#61
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Thinks s/he gets paid by the post
Join Date: Oct 2014
Posts: 1,544
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Quote:
Originally Posted by Alan
DW will be taking her SS later this year at 62 while I delay taking mine.
a) She has a much higher life expectancy and much lower SS so it is a form of insurance to ensure she has a better income when I'm gone as she will lose 50% of my pensions.
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With what you stated in a), wouldn't it make sense for her to delay until 70? Am I the only one confused here? My wife is sort of in the same boat. She is 6 years younger and will not get my pension. Her SS will be the same as mine. Because we are planning for her to have 15 years at the end w/out me, she will delay her SS until 70 so she get's the max amount and will not be too harshly affected by the loss of my pension.
Am I missing something Alan? Probably.
__________________
-Big Dawg-FI since 9/2010. Failed ER in 2015. 2/15/2023=DONE! "Blow that dough"-Robbie
" People say I'm lazy, dreaming my life away Well, they give me all kinds of advice designed to enlighten me When I tell them that I'm doing fine watching shadows on the wall "Don't you miss the big time, boy. You're no longer on the ball" -John Lennon-
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07-16-2017, 12:19 PM
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#62
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Dryer sheet aficionado
Join Date: Feb 2014
Posts: 36
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Quote:
Originally Posted by Out of Steam
I could be missing something, but the opportunity to move IRA/401k money from pretax to after-tax accounts (Roth or regular) for 15% seems like something to take advantage of.
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Agreed, and I said that further down the post. However there are situations where maxing the 0% capital gains or maxing a ACA subsidy produce a better result. It is a complicated juggle between these (then add SS and pension projections for a real mess)
YMMV, but serious optimization can produce large increases in your future assets especially when factoring in current and future taxes.
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07-16-2017, 01:24 PM
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#63
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Thinks s/he gets paid by the post
Join Date: Apr 2016
Location: Dutchess County
Posts: 1,599
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Quote:
Originally Posted by misanman
You may well have something different but I had retiree medical too but the company required that I sign up for Medicare when eligible and the retiree plan became a supplemental policy. You might want to check on the details to be sure.
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Thats how mine works also.
But they reimburse my part B premiums and I retain prescription drug, so no part D needed.
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07-16-2017, 01:36 PM
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#64
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2016
Posts: 9,521
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I will not delay SS at this time. My plan is to take SS and the draw out of deferred accounts till I'm just under the 25% tax bracket. I will continue to do that till 70 and then will have to take RMD amount that is required by law. For me the best I can figure it won't make any difference which way I do it I will still be in the 25% tax bracket at some time. The one thing is I will be able if markets stays health that money will keep growing each year and it will pay for the taxes that way. If markets go down I won't be required by law to take as much out if that is the case.
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07-16-2017, 01:37 PM
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#65
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,128
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Quote:
Originally Posted by Bigdawg
With what you stated in a), wouldn't it make sense for her to delay until 70? Am I the only one confused here? My wife is sort of in the same boat. She is 6 years younger and will not get my pension. Her SS will be the same as mine. Because we are planning for her to have 15 years at the end w/out me, she will delay her SS until 70 so she get's the max amount and will not be too harshly affected by the loss of my pension.
Am I missing something Alan? Probably.
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She gets it tax free for the next 5 years until she starts drawing UK SS which will put her over the UK tax free allowance and then part of it will be taxed at 20%. If we were living in the USA 80% of it would be taxed at 25%, plus it will help pay the taxes on Roth conversions each year, which is to avoid that 40% tax hit for me at RMD time. I prefer paying the taxes on Roth conversions with taxable funds, effectively moving more money into tax free accounts.
She will be getting ~$10k/year tax free which then essentially goes into a Roth by paying taxes on the conversion.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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07-16-2017, 01:48 PM
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#66
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Thinks s/he gets paid by the post
Join Date: Oct 2014
Posts: 1,544
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Quote:
Originally Posted by Alan
She gets it tax free for the next 5 years until she starts drawing UK SS which will put her over the UK tax free allowance and then part of it will be taxed at 20%. If we were living in the USA 80% of it would be taxed at 25%, plus it will help pay the taxes on Roth conversions each year, which is to avoid that 40% tax hit for me at RMD time. I prefer paying the taxes on Roth conversions with taxable funds, effectively moving more money into tax free accounts.
She will be getting ~$10k/year tax free which then essentially goes into a Roth by paying taxes on the conversion.
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OK, but you could do THAT (coversions) w/out her drawing US SS. Like you mentioned, she will not get your pension. If she takes US SS at 62 then she get's that reduced amount forever. If she delays until 70 she will get the increased amount forever. Like I said, maybe I am missing something. Probably am.
__________________
-Big Dawg-FI since 9/2010. Failed ER in 2015. 2/15/2023=DONE! "Blow that dough"-Robbie
" People say I'm lazy, dreaming my life away Well, they give me all kinds of advice designed to enlighten me When I tell them that I'm doing fine watching shadows on the wall "Don't you miss the big time, boy. You're no longer on the ball" -John Lennon-
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07-16-2017, 01:50 PM
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#67
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2003
Location: Florida's First Coast
Posts: 7,723
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My answer to OP's question is No.
__________________
"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
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07-16-2017, 01:57 PM
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#68
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Recycles dryer sheets
Join Date: Jul 2013
Posts: 129
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If you were already taking SS and you knew your other incomes which calculator would you use to run various scenarios?
ie. SS is 24,000 per yer, pension is 6,000, rental income 6,000
How would you figure how much to convert to Roth if any at all.
I've seen a calculator Smart Asset looking for another excluding Turbo Tax.
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07-16-2017, 03:26 PM
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#69
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Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,985
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Quote:
Originally Posted by ShokWaveRider
My answer to OP's question is No.
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Likewise.
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07-16-2017, 04:51 PM
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#70
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Thinks s/he gets paid by the post
Join Date: Feb 2007
Posts: 2,525
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Quote:
Originally Posted by youbet
I think this knife has two edges.......
Most folks I know that delay SS are doing so because they refuse to consider the time value of money and the impact of investing the SS dollars you receive between 62 and 70. While inflation rates and investment returns can't be predicted, reasonable assumptions indicate a good probability of accumulating extra FIRE portfolio dollars that will more than offset the lower SS after 70.
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Good point. A quick calculation shows that since SS collection started almost 7 years ago (at age 62 for both of us) our RR has been 7.9% and the money in our kitty not touched and left invested is getting to be a tidy sum ~ $200K. Of course, that "not touched" money will continue compounding at whatever the future RR turns out to be.
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07-17-2017, 01:03 AM
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#71
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,128
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Quote:
Originally Posted by Bigdawg
OK, but you could do THAT (coversions) w/out her drawing US SS. Like you mentioned, she will not get your pension. If she takes US SS at 62 then she get's that reduced amount forever. If she delays until 70 she will get the increased amount forever. Like I said, maybe I am missing something. Probably am.
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When I file she will get a significant bump in SS albeit still reduced. Meanwhile we'll be taking her SS tax free and investing it. The markets will ultimately make this a win or lose strategy.
https://www.thebalance.com/clearing-...fusion-2388948
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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07-17-2017, 05:30 AM
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#72
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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Prior to age 62, it's an easy decision, wait. You can say 62, 65 or 70, it doesn't matter; you have no choice anyway.
When you determine when to take SS, you have insider knowledge of your health. Knowing when you are going to die is the main unknown factor that would make the decision easier. Gamblers would sell their soul for the insider knowledge that you have that the 'dealer' does not. Card counting in BlackJack gives about a .5 to 1% advantage, you have knowledge that give you probably a 10%+ advantage.
When SS says actuarial neutral, they do not know a lot of individual items that make a large difference. SS knows nothing about you personally. They do not calculate into the formula your family history, your current health, your sex, or your current risk factors.
You know if you have high-blood pressure, diabetes, prior heart attacks, smoking or drinking issues, previous cancer, go free climbing, hang around with criminals, etc. The SS administration doesn't.
You can go to a mortality calculator and guesstimate longevity based on life style factors. SS does not. They just know averages based on millions of people that have collected before.
You can hedge your bets with the insider knowledge. Of course, if it means eating dog food until you can collect a larger SS, that was the wrong choice.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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07-17-2017, 05:36 AM
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#73
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
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Quote:
Originally Posted by FlaGator
.....What I haven't figured out yet is a good analytical framework for evaluating the options. Can do the TVM calcs, but need a roadmap for the steps to make sure I don't forget anything significant. The online calcualtors I have found like SSAnalyze appear to use assumptions that are not relevant for me.
Any tips from the crowd as to how to approach this type of analysis?
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The most relevant analytical framework for me is analogizing the incremental benefits to the purchase of a COLA-adjusted annuity.
If your FRA is age 66 and your FRA benefit is $1,000/month and you wait until 70 to claim, your benefit will be $1,320 ($1,000 + ($1,000 * 8%) * (70-66)), an increase of $320/month or $3,840/year. In the meantime, you will have foregone 48 months of benefits totalling $48,000. At 4% real interest return, that $48,000 might have grown to $51,840 or so. So the payout rate would be 7.40% comparing the $3,840 annual benefit increase to the "premium" of $51,840.
A few years ago, I priced out a CPI-U inflation adjusted annuity and for a single life annuity the payout rate was 6.98% so you get a 6% higher benefit if you "buy" your inflation adjusted annuity from the SSA rather than a commercial provider. (My analysis was for a married couple and the benefit was 50% higher since the payout rate for the SSA joint life annuity was the same 7.40% but the payout rate for a commercial joint life annuity is much lower 4.93%).
FWIW, as another point of reference, a fixed immediate annuity for a 65 yo single and couple woud be 6.74% for a single person and 5.72% for a married couple according to immediateannuities.com.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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07-17-2017, 07:26 AM
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#74
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Recycles dryer sheets
Join Date: Nov 2014
Posts: 198
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In response to OP's question - YES.
Quote:
Originally Posted by always_learning
Assuming tax brackets remain the same and SS is not needed to meet living expenses, would you delay SS in order to reduce the amount of money in tax-deferred accounts subject to future RMDs?
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Our plans recently changed because I was positioning myself to spend down Roth accounts to qualify for ACA subsidies in 2020 and 2021. Now we assume those subsidies will not exist in 2020 and 2021, so the new plan is:
A) Delay SS until 2027
B) 2017-2026, convert tIRA monies (max the 15% bracket and venture into the 25% bracket) to Roth.
C) 2027 and after, collect SS with lower RMDs, draw on Roths as needed and stay in the 15% bracket.
I agree with the notion that we either pay taxes now or later - it makes little difference. (Except to the extent you can pay 15% to avoid 25% later).
I agree that the early demise of one spouse will throw the survivor into a higher marginal rate, thus the 15% marginal rate could be elusive.
I like the idea of converting tIRA to Roth upon market drop. If done correctly, one may be out of the market not at all or for one day at the most, so it is hardly market timing - more timing to minimize income tax.
The above plan would prove its worth if we are subjected to income based means testing for SS by or after 2027- a possibility. If that happens, lower RMDs could be golden. Of course, the plan achieves nothing if Roth distributions are included in the means testing.
__________________
ER'd 6/5/2015 at age 58. DW retired 6/18/2021 with small pension and SS. Planned WR before my SS (2024-2026) is 4-5%, then we will start my SS and a lower WR at age 70 (2027)
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07-17-2017, 08:40 AM
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#75
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,094
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Quote:
Originally Posted by Niuatoputapu
In response to OP's question - YES.
....
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I like the idea of converting tIRA to Roth upon market drop. If done correctly, one may be out of the market not at all or for one day at the most, so it is hardly market timing - more timing to minimize income tax.
......
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You can convert from IRA to ROTH "IN KIND" , I have done it. So you are never out of the market.
The only issue is, You know the share price when you start the conversion, but depending upon your brokerage, the actual transfer date was different, so the actual money value of the shares was different. But you have a good estimate, and they send you a tax form for the conversion with the precise value so doing taxes is no issue.
We are talking about an insignificant difference, as there is no IRS defined maximum to worry about, unlike a yearly IRA/ROTH contribution for taxes where you might try to hit the $6,500 limit per person, so I didn't worry about it.
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07-17-2017, 08:57 AM
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#76
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by pb4uski
The most relevant analytical framework for me is analogizing the incremental benefits to the purchase of a COLA-adjusted annuity.
If your FRA is age 66 and your FRA benefit is $1,000/month and you wait until 70 to claim, your benefit will be $1,320 ($1,000 + ($1,000 * 8%) * (70-66)), an increase of $320/month or $3,840/year. In the meantime, you will have foregone 48 months of benefits totalling $48,000. At 4% real interest return, that $48,000 might have grown to $51,840 or so. So the payout rate would be 7.40% comparing the $3,840 annual benefit increase to the "premium" of $51,840.
A few years ago, I priced out a CPI-U inflation adjusted annuity and for a single life annuity the payout rate was 6.98% so you get a 6% higher benefit if you "buy" your inflation adjusted annuity from the SSA rather than a commercial provider. (My analysis was for a married couple and the benefit was 50% higher since the payout rate for the SSA joint life annuity was the same 7.40% but the payout rate for a commercial joint life annuity is much lower 4.93%).
FWIW, as another point of reference, a fixed immediate annuity for a 65 yo single and couple woud be 6.74% for a single person and 5.72% for a married couple according to immediateannuities.com.
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I don't understand your choice of a 4% real interest return. Since when has that been available on a government obligation?
I think that there are many reasons for waiting to age 70, even for a single male. Female, married, etc etc make it even more clever to wait. In a different SS thread I posted a personal reason for wanting wait until 70. Mainly, I want a COLA annuity. Another real benefit is this is a funds source that I cannot personally screw up. Many of us tend to think that our personal investing will do much better with this money. Overall, I doubt it. I know that I sometimes cringe when I think some of the many things I have mishandled over the years. I literally sometimes cringe.
And for sure, there is a diversification benefit.
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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07-17-2017, 09:07 AM
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#77
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
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Im using a 4% real interest rate to be conservative and many posters would want to frame the decision based on investment rates of return since if they chose to delay SS they will be living off of investments during that 4 year period and forgoing that return. So if inflation was 2.5% then the nominal rate of return would be 6.5% which is pretty reasonable for a diversified portfolio.
If one were to use the real rate of return on a government obligation then the advantage of delaying is much greater (but you knew that).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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07-17-2017, 09:19 AM
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#78
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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Quote:
Originally Posted by Niuatoputapu
....
I like the idea of converting tIRA to Roth upon market drop. If done correctly, one may be out of the market not at all or for one day at the most, so it is hardly market timing - more timing to minimize income tax.
The above plan would prove its worth if we are subjected to income based means testing for SS by or after 2027- a possibility. If that happens, lower RMDs could be golden. Of course, the plan achieves nothing if Roth distributions are included in the means testing.
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This is an interesting approach. In my case if I did conversions to Roth, the conversions would be taxed at 25% or possibly 28%. If the market drop was greater than say 10% and I believed they would climb back before I would be subject to RMD, I think I would be a winner although I would loose the opportunity to make money on the amount turned over to the government in taxes. One down side is I would be bumped into a much higher Medicare bracket for that year. BTW, this is certainly market timing, but I don't see a major down side. I think there are even games you can play if the market is lower at the end of the year. A detailed analysis would be required to determine how large that market drop would need to be to come out ahead.
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07-17-2017, 09:46 AM
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#79
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Full time employment: Posting here.
Join Date: Jun 2015
Location: Redmond
Posts: 892
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Quote:
Originally Posted by Senator
Prior to age 62, it's an easy decision, wait. You can say 62, 65 or 70, it doesn't matter; you have no choice anyway.
When you determine when to take SS, you have insider knowledge of your health. Knowing when you are going to die is the main unknown factor that would make the decision easier.
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Back in college, my best friend thought he might not live past 60, I felt the same way. Maybe the era...I took SS at 62, so will my wife this year. We do not need the income, but we paid full for 40 years and deserve some back.
Oh, BTW, my old friend retired early and just turned 62. He was found cold dead last week in his bed. Sort of puts things in perspective. He had no decision to make.
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07-17-2017, 02:20 PM
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#80
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by pb4uski
Im using a 4% real interest rate to be conservative and many posters would want to frame the decision based on investment rates of return since if they chose to delay SS they will be living off of investments during that 4 year period and forgoing that return. So if inflation was 2.5% then the nominal rate of return would be 6.5% which is pretty reasonable for a diversified portfolio.
If one were to use the real rate of return on a government obligation then the advantage of delaying is much greater (but you knew that).
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Thanks for replying. I knew that there was not nor had there been any investment of comparable to US Govt security with 4% real, but I didn't really know why you chose to use this.
This approach will be less attractive when the next bear appears.
Ha
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"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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