Ran across this by accident:
https://www.kiplinger.com/article/r...e-may-want-to-take-social-security-at-62.html
The claim is that by claiming early at 62 ,instead of at 66, you end up ahead because of lower taxation on the SS. Anybody able to agree w/ their numbers?
What the author says is that people with a lot of IRA/401k should still take out SS early. Of course, this is of interest to me. So, I tried to back out his numbers.
He does not provide some basic numbers in the case under consideration, but let's see if we can back out some numbers.
If this family were to delay Social Security payments from age 62 to age 66, it’s estimated they would be deferring nearly $146,000 in Social Security payments over that period. They would be forced to pull money from their retirement accounts to live on, paying a projected $51,372 in federal taxes from age 62 to 66....
From the above, we get 2 numbers:
1) Their SS benefit at 62 is $146K/4 = $36,500/year, ignoring COLA.
2) If they take no SS, their income would be such that their tax is $51,372/4 = $12,843/year.
Ah, that's enough for me to work with!
For a married couple under 65 claiming the standard deduction of $24K in 2018, the tax calculation will be as follows.
$0 - $24K: $0 tax
$24K - $43,050: 10% of amount over $24K
$43,050 - $101,400: $1905 + 12% of amount over $43,500
$101,400 - $189,000: $8907 + 22% of amount over $101,400
With the tax of $12,843, we can see that they are in the 4th bracket above. To pay that tax, their income is $119,290 as drawn from IRA/401k. After paying tax, they have $106,447.
Now, suppose they draw SS early at $36,500, and supplement that with IRA/401k withdrawal of $82,790, so that the total is also $119,290.
The SS tax rule says that if the joint income plus 1/2 of SS is greater than $44K, then 85% of SS will be taxed.
That means their taxable income decreases from $119,290 down to $113,815. The tax on that lower amount is $11,638.
That's a reduction of taxes of ($12,843-$11,638) =
$1205. But the author claims that
By drawing early and minimizing taxes on retirement and brokerage funds, the family would owe $9,768 in taxes during the same period. That’s a savings of $41,604 in taxes at the beginning of their retirement career.
His computed tax reduction is $41,604 for 4 years or
$10,401. That's a huge difference from what I calculate at $1205.