Gal almost there wrote:
He gives me a general idea however, not one word about advantages or disadvantages to taking my full retirement at 66 or waiting till 70 in regards to taxes. I plan to continue to work either full or part time depending on which will financially be more beneficial to me. I hear about the "for every $2 you make you have to pay in $1 for taxes" if you continue to work past full retirement age. I also hear that I can make as much as i want and not worry about taxes. I have scoured the SS .gov forum and well let 's just say I can't find the answer. For me , JW and others brought up a point of taxation and how it can truly impact how much retirement funds you have available.
I am totally confused and have not been given an answer other than here is what you get at 66 and here is what you get at 70… well i can figure that out.. but which to draw off of first, RMD or SS?, or work part time till 70 or FT till 70 or 66 ??? Yikes all confusing to me.. fyi both parents in 90s mom still kicking 92 , dad passed at 91 of heart issues.. so longevity runs in our family..
The answers are complex and depend on many factors. Based on what you said, it is probably financially advantageous for you to wait to 70 to claim (since you are the high earner, have family history of longevity, and are older).
If you take SS at 70, your husband would be eligible to get spousal benefits at his full retirement age ("FRA", which for him is likely to be 67). His spousal benefit will be half of what you would have gotten if you had retired at FRA (depending on your age now, might be between 66 and 67). He can then draw his full SS at 70, which will give the two of you the maximum tax advantaged income, and when the first of you dies, the survivor will get the larger of the two pensions. Also, you will get the maximum possible benefit from Cost of Living Allowance increases in SS.
If you are already in your 60s, you could take the assumption of retirement at 70 with your spouse getting spousal SS at FRA as your base case and then compare it to other alternatives.
If you are in your mid 50s or younger, this is only a hypothetical discussion. There will probably be changes to SS and taxation between now and your retirement which might change the best scenario.
If you do not want to work until 70, you could retire earlier and take distributions from your tax deferred retirement assets until you reach 70. That will reduce your RMDs and taxes when you have to take RMDs at 70 1/2.
I spent about an hour or two a year from the age of 50 learning about SS and modeling results before I made my decision. (Which is essentially what I described above, older spouse waiting to 70, younger spouse taking spousal and then getting own SS at 70.) But Social Security changed during those years, including making 85% of my pension taxable and increasing the full retirement age, both of which reduced my pension. Also, I took early retirement at 55 with a pension and started a new job that was more enjoyable and less demanding. All of those things affected my plans. That is why I said you can only know what is best as you get close to retirement.
You have to answer all the following questions to decide what is best for you.
How long do I want to work?
How long does my spouse want to work?
Is it likely that both of us will be able to work that long?
What will I do when I retire? (And what do I want to do that I can't do until I retire?)
What other sources of income will I have?
How much tax deferred savings will I have?
What will I do if I am retired and my spouse is still working?
There are two implicit assumptions in most discussions about SS retirement age.
1) People want to maximize the lifetime income from SS.
2) People want to minimize the taxes they pay.
For many people both assumptions are reasonable. But neither is so important that they should determine when you retire. You might have very good personal reasons to take SS earlier or later than the age that will yield the highest return, and the easiest way to reduce taxes is to have a low income, which may not be what you want. Taxes should almost always be a factor in financial decisions, but seldom should be the deciding factor.
Les vieillards aiment à donner de bons préceptes, pour se consoler de n'être plus en état de donner de mauvais exemples. |
(François, duc de La Rochefoucauld, maxim 93)