Anyone else plan to take SS early, to stay in a lower tax bracket?

[Exchme]

Its been a goal the past 9 years of retirement to stay in the 12% bracket.
(Unlike when working, got killed the entire time)
And have tried to configure things to be able to stay there going forward.
Not 100% sure I can pull it off. But its a goal. Roth conversions. Draw down the IRA in small amounts over a long period of time etc.
Plan to take SS at 62 in 2024. About $2900 a month for both my wife and I.
Just wanted to post this, as I don't recall too many SS threads about taking it early.


...will save the after tax accounts till the end. Have not got into the IRA or Roth IRA yet (am 60) Plan to start in 2024 with SS.
After this years and next years Roth conv. will have about 450k in the IRA. And plan make the same yearly withdrawals (27k) over 20 years. Figuring a 3.5% return. Not saying its the best plan, but so far seems like what I feel good about.

Comparing hoped-for future returns from risky assets like stocks and bonds to inflation protected cash flow from Social Security is comparing two completely different things. The best answer is probably to use each for what it’s best at.

SS is weak in the upside case of large stock and bond returns, happiness and sunshine. Best to use risky assets for growing the portfolio to meet goals like living better, gifting to charity, or leaving a legacy to heirs.

SS is strong in helping cushion the downside risks. Once one spouse passes, only the larger benefit will continue, so it’s typically best for the larger earner (or older if about equal) to wait until age 70 to claim. Other examples that happen to too many folks is future-you starts losing cognitive ability and gambles away your money in high-risk investments, or gets ripped off by scammers, or maybe you hurt someone and get sued. Or maybe you were just unlucky in your retirement date and get hit by extra-bad returns.

Up to you to figure out how much of each you want to plan for, but don’t just assume all will be well.

Note that RMDs from a $450K IRA probably don’t hurt that much and there are possible tax deductible uses for the IRA like long term care, so it’s not urgent to lower that balance. You would have to study, but it seems likely to me that it would be better to deplete your taxable account first.

I use opensocialsecurity.com for standalone SS optimization and Pralana Gold to model the various interactions of taxes, SS, ACA, Roth Conversions. Pralana costs $99 and needs Excel (I’ve seen others recommend paid on-line calculators MaxFi and Income Strategy). Obviously no tool can see the future, but I always find it odd how many folks make decisions that could mean thousands or tens of thousands of dollars difference without capable tools that cost a tiny fraction of that.

 

[almost there]

Don't have stocks or bonds. Will probably just put the SS from 62 to 70 in CDs. Making up for any differences living longer than average. Also, I may have a little less faith in the govt. than some. "Everyone has a plan" quote Mike Tyson....Also asked, no ACA here.

 

[SevenUp]

...and Pralana Gold to model the various interactions of taxes, SS, ACA, Roth Conversions.

Is P.G. similar to a combination of the Retiree Portfolio Model and Case Study Spreadsheet tools?

In other words, how do the above tools compare with each other?

 

[TheWizard]

Don't have stocks or bonds...

No stock mutual funds or ETFs anywhere?
Really?
That's living rather dangerously, don't you think?

 

[misanman]

This is strictly anecdotal, but I have two friends that took SS at 62 while I waited until 70. We're roughly the same age. I just note that they often complain about how small their SS payments are and that their inflation adjustments are tiny. Meanwhile, mine is near the max and DW and I could live on it entirely if we needed to. Gives me peace of mind when the stock market is volatile. Of course, as always, YMMV.

 

[almost there]

No stock mutual funds or ETFs anywhere?
Really?
That's living rather dangerously, don't you think?

No, just the opposite. Was in it for over 30 yrs.
Am happier being out of fluctuating investments.

Based my retirement on a 0% return.
So, if I get 3-4%, I am living large.

 

[almost there]

This is strictly anecdotal, but I have two friends that took SS at 62 while I waited until 70. We're roughly the same age. I just note that they often complain about how small their SS payments are and that their inflation adjustments are tiny. Meanwhile, mine is near the max and DW and I could live on it entirely if we needed to. Gives me peace of mind when the stock market is volatile. Of course, as always, YMMV.

If I take $2900 a month at 62 (as a couple) (34800) x 8 years. Thats $278,400.00 at 70.
There isnt a rule that you have to spend it... Just another way to look at it.

 

[misanman]

If I take $2900 a month at 62 (as a couple) (34800) x 8 years. Thats $278,400.00 at 70.
Just another way to look at it.

Maybe I should have mentioned that DW started SS at 62. It's her "play money" and I think it makes her happy, so maybe we have the best of both approaches, IDK.

 

[Accidental Retiree]

This is strictly anecdotal, but I have two friends that took SS at 62 while I waited until 70. We're roughly the same age. I just note that they often complain about how small their SS payments are and that their inflation adjustments are tiny. Meanwhile, mine is near the max and DW and I could live on it entirely if we needed to. Gives me peace of mind when the stock market is volatile. Of course, as always, YMMV.

My dear departed aunt, age 96, bemoaned the fact she took her SS early. She strongly encouraged and applauded delay.

 

[HarryHawk]

Plan to take SS at 62 in 2024. About $2900 a month for both my wife and I.

If I take $2900 a month at 62 (as a couple) (34800) x 8 years. Thats $278,400.00 at 70.

Just wanted to post this, as I don't recall too many SS threads about taking it early.

Personally speaking, the most important question - Is my wife in good financial shape for the next 25 years if I get hit by a bus tomorrow and the household SS maybe gets cut in half?

Based on that criteria, I opted to wait until 70 (just started this month).

 

[almost there]

Good question. Yes, she will be fine with 1/2 of SS.
She'll be 61 in Dec. . And will probably live to be 100. (her mom is 97 now)
One thing I have noticed, most folks I know seem to spend quite a bit less around 80.
Even in good health. (Or late 70's for some) I wonder if its been captured anywhere?
Actual spending based on age.
Aside from health care costs...They just don't do as much...
Just an observation.

 

[Looking4Ward]

Did you consider doing Roth conversions to at least fully utilize your standard deduction fully... at the same time considering the 0% tax bracket for qualified dividends and LTCG? If not, you're leaving an opportunity to do tax-free Roth conversions on the table.

I did. Unfortunately (or fortunately) my after-tax account throws off a large amount of dividends and CG distributions each year, almost getting me to 400% FPL and since I've been on ACA for so many years it seemed at this point in time the savings in health insurance outweighed the potential future savings of doing Roth conversions and losing ACA subsidies.

At least, that's what my calculations came out to be at the time. Now, with three years of SS before Medicare, it's an even more delicate balance to keep ACA eligibility.

But then this thread is making me rethink taking SS early. Gotta run some more calculations........

 

[pb4uski]

I did. Unfortunately (or fortunately) my after-tax account throws off a large amount of dividends and CG distributions each year, almost getting me to 400% FPL and since I've been on ACA for so many years it seemed at this point in time the savings in health insurance outweighed the potential future savings of doing Roth conversions and losing ACA subsidies.

At least, that's what my calculations came out to be at the time. Now, with three years of SS before Medicare, it's an even more delicate balance to keep ACA eligibility.

But then this thread is making me rethink taking SS early. Gotta run some more calculations........

Ah, didn't know that ACA was an additional constraint.

On the last part, just know taking isn't irreversible, you can get a do over if you pay them back anything that you have received since you haven't been receiving for a year.

 

[Winemaker]

Please refresh my memory, I'm try to model for DS. Aren't Roth conversions prior to 59.5 subject to a 10% penalty? She is single, 55, will have a pension, and trying to cypher when she should take SS, and has tIRA and after tax $$.

 

[RunningBum]

Please refresh my memory, I'm try to model for DS. Aren't Roth conversions prior to 59.5 subject to a 10% penalty? She is single, 55, will have a pension, and trying to cypher when she should take SS, and has tIRA and after tax $$.

No, withdrawals may be, but conversions are not.

 

[Bamaman]

Many take SS early for one reason--out of need. We have expenses to pay and we need the income.

 

[garyt]

My dear departed aunt, age 96, bemoaned the fact she took her SS early. She strongly encouraged and applauded delay.

My still kicking 96 year old Dad is thrilled to have taken SS at 62 as it allowed him to retire at 62 from a construction job. Different strokes.

 

[Dtail]

Please refresh my memory, I'm try to model for DS. Aren't Roth conversions prior to 59.5 subject to a 10% penalty? She is single, 55, will have a pension, and trying to cypher when she should take SS, and has tIRA and after tax $$.

Delete

 

[pb4uski]

My still kicking 96 year old Dad is thrilled to have taken SS at 62 as it allowed him to retire at 62 from a construction job. Different strokes.

If he didn't have enough money to live off of savings from 62 until FRA or until 70 then you are right... taking SS when he stopped working allowed him to retire from that construction job (which is hard labor for many 62 year olds that have done it for many years... my DSIL's dad is a great example... his body is worn out).

It's apalling to me how many people think that if you stop working then you have to start your pension or social security and the idea of living off of savings for a while never seems to cross their minds.

I retired at 56 and we have lived off savings ever since... I started my pension when I was 61 because it made sense to do so... DW started SS at her FRA because it made sense to do so... and I'll start SS in 3-1/2 years when I am 70.

 

[augam]

I am surprised no one has mentioned solvency issues in just over a decade. There has been talk the plan may only be able to pay 75% of current projections beyond 2035.

 

[youbet]

This is strictly anecdotal, but I have two friends that took SS at 62 while I waited until 70. We're roughly the same age. I just note that they often complain about how small their SS payments are and that their inflation adjustments are tiny. Meanwhile, mine is near the max and DW and I could live on it entirely if we needed to. Gives me peace of mind when the stock market is volatile. Of course, as always, YMMV.

I have had similar experiences with my MegaCorp pension which I delayed until 70 to maximize its benefits. I don't know of any of my peers/buddies who took that path. But I took SS at 62. The reasoning? Financial protection for DW who qualifies to collect 50% of my MegaCorp pension but who is prohibited by the government from collecting any of my SS.

There seem to be an infinite number of scenarios to work through when making decisions about annuities such as SS and pensions. Having a person you want to protect financially but who is prohibited from collecting survivor benefits on your SS complicates the decision process.

 

[levindb]

If one does not take SSA at 62, then daily spending needs to come from a job (full or part time), pension, or savings. Often people only look at deciding when to take SSA based on a breakeven...total amount from SSA. Another approach would be to look at your savings balance at the end of life in addition to total SSA received.

To complicate things, one must forecast savings ROI, inflation/COLA, and taxes. While you are at it, a spouse may have to live off a single SSA when one passes...so, departure dates have to be estimated as well.

All of the above assumptions will have a large impact on what works best for each family. With a number of online calculators, you can determine which of those assumptions make the most impact to your decision, and whether the net difference over a lifetime really matters....i.e., $30K difference over a 30 year retirement would suggest $83/mo or about $20/wk...which may not be that big a deal to many folks here...

 

[pb4uski]

I am surprised no one has mentioned solvency issues in just over a decade. There has been talk the plan may only be able to pay 75% of current projections beyond 2035.

Many of us have baked this in. opensocialsecurity.com allows you to haircut benefits starting in a certain year and for a certain amount. Their default is 23% beginning in 2034 by you can put in whatever assumptions you want.

I personally think that at some point Congress will do something like what they did in 1983 and reform social security so current and near term beneficiaries will not be significantly impacted.

 

[daylatedollarshort]

If one does not take SSA at 62, then daily spending needs to come from a job (full or part time), pension, or savings. Often people only look at deciding when to take SSA based on a breakeven...total amount from SSA. Another approach would be to look at your savings balance at the end of life in addition to total SSA received.

To complicate things, one must forecast savings ROI, inflation/COLA, and taxes. While you are at it, a spouse may have to live off a single SSA when one passes...so, departure dates have to be estimated as well.

All of the above assumptions will have a large impact on what works best for each family. With a number of online calculators, you can determine which of those assumptions make the most impact to your decision, and whether the net difference over a lifetime really matters....i.e., $30K difference over a 30 year retirement would suggest $83/mo or about $20/wk...which may not be that big a deal to many folks here...

I posted about this in the other current SS thread. I used some average SS benefit amounts, similar earning and age spouses, the mortality tables and the default haircut in opensocialsecurity.com. The biggest lifetime difference in strategies I could find was $39K. Maybe others would have more of a difference with their own particular inputs / assumptions.

 

[pb4uski]

I posted about this in the other current SS thread. I used some average SS benefit amounts, similar earning and age spouses, the mortality tables and the default haircut in opensocialsecurity.com. The biggest lifetime difference in strategies I could find was $39K. Maybe others would have more of a difference with their own particular inputs / assumptions.

+1 In June 2020, I ran numerous scenarios of SS claiming strategies through opensocialsecurity.com using 2017 non-smoker preferred mortality, 0% real discount rate.

,	No haircut	Haircut
Optimal solution	100.0%	100.0%
Both now	91.2%	94.0%
Both 65	92.3%	94.9%
Both at FRA	94.5%	96.6%
Me 70/DW FRA	100.0%	100.0%