Putting off Social Security until 70

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Workinghard
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Re: Putting off Social Security until 70

Post by Workinghard » Mon Jun 08, 2015 6:04 pm

BahamaMan wrote:
JW Nearly Retired wrote: Yep, I like to make such charts if the numbers are pretty easy to dig up. Thanks for noticing that one!
JW
Also, if you don't draw SS from ages 62-70, you have more opportunity to convert more Regular IRA to Roth IRA at a lower tax rate.
JW, you should post it again. It really helped me in seeing the difference and benefit of doing conversions before SS.

Bahaman, of course wanting to qualify for ACA subsidies makes doing conversions more difficult or at least can limit them since they count as income. I'm slowly accepting that I'll have to pay taxes unlike some people who know how to crunch the numbers.

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Re: Putting off Social Security until 70

Post by JW-Retired » Mon Jun 08, 2015 6:24 pm

Workinghard wrote:
JW Nearly Retired wrote: Yep, I like to make such charts if the numbers are pretty easy to dig up. Thanks for noticing that one!
JW
JW, you should post it again. It really helped me in seeing the difference and benefit of doing conversions before SS.
OK
The explanation of the chart was in this thread.
http://www.bogleheads.org/forum/viewtop ... 3#p2502764
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Workinghard
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Re: Putting off Social Security until 70

Post by Workinghard » Mon Jun 08, 2015 6:46 pm

JW, guess I should have said table rather than chart. :oops: I thought you did the 'green" table that showed the difference paid in taxes based on the comparison between SS and RMD earnings. That was easier for me to understand.

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Re: Putting off Social Security until 70

Post by JW-Retired » Mon Jun 08, 2015 6:53 pm

Workinghard wrote:JW, guess I should have said table rather than chart. :oops: I thought you did the 'green" table that showed the difference paid in taxes based on the comparison between SS and RMD earnings. That was easier for me to understand.
I don't recall a green table but I would like to see it too? Who did the green table? :D
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Re: Putting off Social Security until 70

Post by Workinghard » Mon Jun 08, 2015 7:07 pm

Oh my gosh, I not only get chart and table mixed up, but I'm also color blind. It's a BLUE table. I will see if I can find it, but the person who posted said, " The table below was made for various gross income levels and SS/RMD income mixes for single filing age 70 retirees. The two levels of SS income book that are meant to roughly represent early and late SS claiming".

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Re: Putting off Social Security until 70

Post by Workinghard » Mon Jun 08, 2015 7:15 pm

Found it! Not sure if the table will show up with copy and paste.
JW Nearly Retired wrote:This thread has covered the early/late SS issue exceptionally well. IMO, the only omission is the (large) effect of income taxes. I don't see any analysis of taxes impact here or in the Shoven & Slavov papers. I didn't read every word so please let me know if I've missed something.

I'm married and the most important thing for us was the joint couple strategy, which we implemented. However, I'm thinking taxes might be the driving consideration in this for unmarried retirees. Pension/RMDs/other income is effectively taxed at a much higher marginal rate than SS is throughout the SS taxation phase-in region, i.e. below the point where 85% of SS is being taxed. For the same gross income, people with more SS and less RMDs pay far less tax than those with these income components the other way around. Any kind of comparison analysis that only looks at gross income and assumes taxes are the same is going to be way off the mark.

Given the weird phase in formulas, doing an after-tax present value analysis seems pretty complicated, at least to me. All I can add here is to use TaxCaster to illustrate the large tax preference of SS versus RMDs/pension type income. The table below was made for various gross income levels and SS/RMD income mixes for single-filing age 70 retirees. The two levels of SS income looked at are meant to roughly represent early and late SS claiming. I showed this same table previously at the end of a tired old thread and got zero comments. Hopefully you folks here are not so weary of this yet. https://turbotax.intuit.com/tax-tools/c ... taxcaster/

Consider the two retirees in the table with $60k gross income. One took $23k SS early but grew his IRA to produce a $37k RMD. The other gets delayed SS of $40k but spent down his IRA so RMD is only $20k. They have the same $60k gross income but the early SS/bigger IRA case pays nearly triple the Federal taxes. It amounts to $4237 higher taxes on the $60k of gross income. Huge difference, and State tax would typically increase this even more given most States don't tax SS at all. In this particular high tax case, TaxCaster adding a $1000 increment to the $37k RMD shows the marginal tax rate on RMD dollars is 46.3%. :shock: Doing the same to the $23k SS shows the marginal rate on SS dollars is only 11.3%. I think that makes SS dollars (1-0.113)/(1-0.463) = 1.65 x more valuable than RMD dollars.

The other cases in the table show the large tax differences extend over a fairly wide range of gross incomes. Eventually, differences do become small at $90k gross because SS taxing becomes fully phased in for both income splits.

Plenty of Bogleheads will be in a high income range where the full 85% of SS is taxed so the marginal Federal tax disparity between SS and RMD income is only going to be the 15%. They are probably safe ignoring taxes.
Other more middle income retirees need to pay close attention to taxes in their decision making about taking SS early or late. I'm guessing this is probably a large portion of the general population.

Perhaps those here with the NPV analyses can see if they can take taxes into account.

Note: None of this says exactly how you go about trading RMD income for an advantageous amount of SS income. It only says this is the direction to strive for if you are going to be in the nasty SS taxation phase-in zone.
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Miriam2
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Re: Putting off Social Security until 70

Post by Miriam2 » Mon Jun 08, 2015 7:16 pm

vested1 wrote:This is something that eludes many who use the break-even argument. It's as if they imagine themselves as Jacob Marley, pulling around chains and moaning about past mistakes. Dead is dead. Income while living is something more tangible than a fictional ghost story.
vested1 - I love your Jacob Marley imagery :happy
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Re: Putting off Social Security until 70

Post by vested1 » Mon Jun 08, 2015 7:26 pm

Miriam2 wrote:
vested1 wrote:This is something that alludes many who use the break-even argument. It's as if they imagine themselves as Jacob Marley, pulling around chains and moaning about past mistakes. Dead is dead. Income while living is something more tangible than a fictional ghost story.
vested1 - I love your Jacob Marley imagery :happy
Thanks, too bad I didn't notice that I spelled eludes as alludes. (What was he alluding to?)

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Re: Putting off Social Security until 70

Post by JW-Retired » Mon Jun 08, 2015 8:13 pm

Workinghard wrote:Found it! Not sure if the table will show up with copy and paste.
I'll be darned.... it was me.
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Workinghard
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Re: Putting off Social Security until 70

Post by Workinghard » Mon Jun 08, 2015 8:22 pm

JW Nearly Retired wrote:
Workinghard wrote:Found it! Not sure if the table will show up with copy and paste.
I'll be darned.... it was me.
JW
Glad I'm not totally losing it. I was beginning to think it was time to go to a single target retirement fund. :shock: So have you done a similar table for married couples?

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Re: Putting off Social Security until 70

Post by JW-Retired » Mon Jun 08, 2015 10:09 pm

Workinghard wrote:
JW Nearly Retired wrote:
Workinghard wrote:Found it! Not sure if the table will show up with copy and paste.
I'll be darned.... it was me.
JW
Glad I'm not totally losing it. I was beginning to think it was time to go to a single target retirement fund. :shock: So have you done a similar table for married couples?
The chart is for married couples. Don't know it I did the sort of table you like for married couples but I'll look for it, or recreate one. Will have to be tomorrow.
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Re: Putting off Social Security until 70

Post by 22twain » Mon Jun 08, 2015 11:54 pm

AAA wrote:
22twain wrote:
AAA wrote:The government has been continually raising the Soc. Sec. payroll tax
The payroll tax has not been raised since 1990, when it was set at 6.2% for both employee and employer.
http://www.ssa.gov/oact/progdata/taxRates.html
Thank you. What I meant to say was the amount of one's wages that is subject to Social Security payroll tax has been rising. Hasn't it?
etarini wrote:Yes, like the COLA, the taxable maximum rises with the CPI-W. Currently, the maximum is $118,500, and each year
So if your wages have been above that maximum, and they have risen at a rate less than the CPI-W, then the SS payroll tax has been an increasing % of your wages; but it's still less than the 6.2% that the hoi polloi among us have been paying all along.
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Re: Putting off Social Security until 70

Post by ObliviousInvestor » Tue Jun 09, 2015 12:31 am

etarini wrote:Yes, like the COLA, the taxable maximum rises with the CPI-W.
Minor correction here. The taxable maximum rises with the national average wage index rather than CPI.

http://www.ssa.gov/oact/cola/awiseries.html
http://www.ssa.gov/oact/cola/wageindexed.html
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Re: Putting off Social Security until 70

Post by JW-Retired » Tue Jun 09, 2015 1:45 pm

JW Nearly Retired wrote:
Workinghard wrote:
JW Nearly Retired wrote:
Workinghard wrote:Found it! Not sure if the table will show up with copy and paste.
I'll be darned.... it was me.
JW
Glad I'm not totally losing it. I was beginning to think it was time to go to a single target retirement fund. :shock: So have you done a similar table for married couples?
Don't know if I did the sort of table you like for married couples but I'll look for it, or recreate one........
JW
OK, here it is. This is from TaxCaster 2015 results for an age 70 married couple. For this couple filing MFJ, I doubled all the income amounts from those in the single person table above.
JW
ps: as "RMD" seems to be confusing to some, the RMD could as well be labeled "RMD + pension + wages + other such taxable income".
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Re: Putting off Social Security until 70

Post by Workinghard » Tue Jun 09, 2015 5:38 pm

Thanks, JW. I appreciate the additional table. Hard to believe draw down is around the corner.

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Re: Putting off Social Security until 70

Post by westie » Wed Jun 10, 2015 7:58 am

So the break even number is 81, yet life expectancy tables are 79? What would Vegas bet on? They make billions on small margins.

My bet would be SS will be needs based within 20 years, everybody eligible will get something but making projections 20 years out based on what you're eligible for now Is as full of uncertainty as how long you will live. 29% of people over 55 have no retirement savings right now. Just my take.

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Re: Putting off Social Security until 70

Post by dbr » Wed Jun 10, 2015 8:39 am

westie wrote:So the break even number is 81, yet life expectancy tables are 79? What would Vegas bet on? They make billions on small margins.

My bet would be SS will be needs based within 20 years, everybody eligible will get something but making projections 20 years out based on what you're eligible for now Is as full of uncertainty as how long you will live. 29% of people over 55 have no retirement savings right now. Just my take.
No, for males the life expectancy at age 65 is age 82.6 and at age 70 is 84.1. Females 84.2 and 86.3. Your number is the life expectancy at birth.

Taxation and means testing is indeed an issue to consider for people far enough out.

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Re: Putting off Social Security until 70

Post by JW-Retired » Wed Jun 10, 2015 8:49 am

westie wrote:So the break even number is 81, yet life expectancy tables are 79? What would Vegas bet on? They make billions on small margins.

My bet would be SS will be needs based within 20 years, everybody eligible will get something but making projections 20 years out based on what you're eligible for now Is as full of uncertainty as how long you will live. 29% of people over 55 have no retirement savings right now. Just my take.
At least use the right table. According to the SS longevity calculator, the 50% chance life expectancy of a 62 year old male today is 83.9 years. IMO, Vegas would bet on longer than 83.9 since drugs and other medical treatments keep increasing it.
JW
http://www.ssa.gov/cgi-bin/longevity.cgi
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Re: Putting off Social Security until 70

Post by SQRT » Wed Jun 10, 2015 8:54 am

Since the deferral arithmetic is "actuarial neutral" it really boils down to how different you think you are to the group that these actuary tables are based on and whether these tables will change during the remainder of your life? Ask yourself such questions as: do I smoke(ever?), am I obese(overweight?), longevity of family members, am I in shape, do I engage in risky behaviour, married, do I currently have any health issues that may shorten my life, am I relatively wealthy and can afford the best health insurance?

Other considerations might include whether an increased annuity in later life, might be less risky than relying on your own assets, and thus beneficial.

I think trying to analyse the financial arithmetic is dubious given smarter people than us, with better data, have already figured it out. Mostly.

In my case I intend to defer till 70.

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Re: Putting off Social Security until 70

Post by joebh » Wed Jun 10, 2015 9:53 am

My sense is that most people first choose when to take Social Security based on personal reasons, then find data which supports their choice.

Human nature.

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Re: Putting off Social Security until 70

Post by VictoriaF » Wed Jun 10, 2015 10:00 am

joebh wrote:My sense is that most people first choose when to take Social Security based on personal reasons, then find data which supports their choice.

Human nature.
I can´t speak for most people, but the Bogleheads tend to be attuned to numerical comparisons and logic. Many of us are exposed to the Social Security analysis many years before we have to make the decision on when to take it and are not likely to let emotions to interfere. Also, most of us have sufficient assets to wait until the age of 70 if we choose to do so.

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Re: Putting off Social Security until 70

Post by ObliviousInvestor » Wed Jun 10, 2015 10:01 am

The Social Security claiming decision isn't actuarially neutral in the majority of cases. It is only actuarially neutral for an average unmarried person if real interest rates are equal to those used in the calculations. (Right now, they're lower.) And if it's actuarially neutral for a single person, it cannot at the same time be actuarially neutral for a married person for whom survivor benefits are a relevant concern.
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Re: Putting off Social Security until 70

Post by Independent » Wed Jun 10, 2015 1:38 pm

JW Nearly Retired wrote: OK, here it is. This is from TaxCaster 2015 results for an age 70 married couple. For this couple filing MFJ, I doubled all the income amounts from those in the single person table above.
JW
There's an "RMD" in a column label. To me, that means the Required Minimum Distribution. That is, it's money that I have no intention of spending this year, but I'm required to take by law.

I'd use a simple "distributions" or "withdrawals" to indicate money that's part of my normal spending plan.

Did you specifically want to talk about "Required Minimum" distributions?

I think the analysis is complex because it needs to include taxes both before and after I start SS. That is, I can lower my post-70 taxes by deferring SS and getting a bigger SS benefit after 70. However, that comes at the cost of raising my pre-70 taxes.

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Re: Putting off Social Security until 70

Post by JW-Retired » Wed Jun 10, 2015 3:16 pm

Independent wrote: There's an "RMD" in a column label. To me, that means the Required Minimum Distribution. That is, it's money that I have no intention of spending this year, but I'm required to take by law.

I'd use a simple "distributions" or "withdrawals" to indicate money that's part of my normal spending plan.

Did you specifically want to talk about "Required Minimum" distributions?
Spent or not, you do have to pay tax on the RMD. I used RMD because a common tradeoff in putting off SS until 70 will be spending down your IRA ...... giving you a smaller RMD in exchange for a bigger SS check. I'm trying to illustrate that the SS dollars are more valuable after taxes than RMD dollars.
JW
ps: as "RMD" seems to be confusing to some, the RMD could as well be labeled "RMD + pension + wages + other such taxable income".
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Re: Putting off Social Security until 70

Post by Gal almost there » Thu Jun 11, 2015 5:24 am

I am reading all this info with wide eyes and confusion.. ugh…first off Im new to all of this… secondly I just figured out what this "RMD" meant.. this is how well, let me say, not informed I really am.

I have been in touch with my financial guy about when i should retire. 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..

If anyone can explain this tangled web I sure would appreciate it. If this answer has been address in earlier forums my apologies, i just joined and haven't looked beyond this thread. PS Hubby is 12 years my jr and makes 1/3 of what I make.

tx
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Re: Putting off Social Security until 70

Post by joebh » Thu Jun 11, 2015 6:47 am

VictoriaF wrote:
joebh wrote:My sense is that most people first choose when to take Social Security based on personal reasons, then find data which supports their choice.

Human nature.
I can´t speak for most people, but the Bogleheads tend to be attuned to numerical comparisons and logic. Many of us are exposed to the Social Security analysis many years before we have to make the decision on when to take it and are not likely to let emotions to interfere. Also, most of us have sufficient assets to wait until the age of 70 if we choose to do so.
I can't speak for all Bogleheads, and I agree that many here are more focused on numbers than the general population. And I agree that many folks here are more financially able to wait than the general population.

I still believe my observation holds true - when it comes to the decision about starting Social Security benefits, the majority of people decide emotionally/personally, then seek numbers and reasons to support their choice.

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Re: Putting off Social Security until 70

Post by etarini » Thu Jun 11, 2015 7:13 am

ObliviousInvestor wrote:Minor correction here. The taxable maximum rises with the national average wage index rather than CPI.
Thanks for the clarification, Mike. I was looking at a press release announcing the 2015 COLA, and it also included the new taxable maximum, which was the source of my confusion.

Eric

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Re: Putting off Social Security until 70

Post by Ron » Thu Jun 11, 2015 7:19 am

Independent wrote:<snip...> There's an "RMD" in a column label. To me, that means the Required Minimum Distribution. That is, it's money that I have no intention of spending this year, but I'm required to take by law.

I'd use a simple "distributions" or "withdrawals" to indicate money that's part of my normal spending plan.
Be it normal TIRA distributions or "excess RMD's" (that is, withdrawals required by law, not necessarily to support your expense/budget), all fall into the RMD "pot" for measurement to see if you are withdrawing enough to meet the letter of the law, without the 50% surtax.

- Ron

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Re: Putting off Social Security until 70

Post by PatrickA5 » Thu Jun 11, 2015 11:43 am

Independent wrote:
JW Nearly Retired wrote: OK, here it is. This is from TaxCaster 2015 results for an age 70 married couple. For this couple filing MFJ, I doubled all the income amounts from those in the single person table above.
JW
There's an "RMD" in a column label. To me, that means the Required Minimum Distribution. That is, it's money that I have no intention of spending this year, but I'm required to take by law.

I'd use a simple "distributions" or "withdrawals" to indicate money that's part of my normal spending plan.

Did you specifically want to talk about "Required Minimum" distributions?

I think the analysis is complex because it needs to include taxes both before and after I start SS. That is, I can lower my post-70 taxes by deferring SS and getting a bigger SS benefit after 70. However, that comes at the cost of raising my pre-70 taxes.
I agree with this. The "RMD" column is confusing. It would probably make more sense to say something like "Taxable Withdrawals" or something similar - with the total of the two columns representing total income needed in retirement. Some of the RMD's in the table would require multiple millions in tax deferred savings (if we're talking true RMD's).

Having said that, this type of analysis is necessary in getting the whole picture in determining when to take social security. I plan on doing something similar when the time comes using my own numbers. Thanks for the table.

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Re: Putting off Social Security until 70

Post by heyyou » Thu Jun 11, 2015 3:50 pm

For numerous reasons, waiting until age 70 works for DW and I. Good luck to those who have a less clear decision to make.

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Re: Putting off Social Security until 70

Post by JW-Retired » Thu Jun 11, 2015 4:07 pm

PatrickA5 wrote:
Independent wrote:
JW Nearly Retired wrote: OK, here it is. This is from TaxCaster 2015 results for an age 70 married couple. For this couple filing MFJ, I doubled all the income amounts from those in the single person table above.
JW
There's an "RMD" in a column label. To me, that means the Required Minimum Distribution. That is, it's money that I have no intention of spending this year, but I'm required to take by law.

I'd use a simple "distributions" or "withdrawals" to indicate money that's part of my normal spending plan.

Did you specifically want to talk about "Required Minimum" distributions?

I think the analysis is complex because it needs to include taxes both before and after I start SS. That is, I can lower my post-70 taxes by deferring SS and getting a bigger SS benefit after 70. However, that comes at the cost of raising my pre-70 taxes.
I agree with this. The "RMD" column is confusing. It would probably make more sense to say something like "Taxable Withdrawals" or something similar - with the total of the two columns representing total income needed in retirement. Some of the RMD's in the table would require multiple millions in tax deferred savings (if we're talking true RMD's).

Having said that, this type of analysis is necessary in getting the whole picture in determining when to take social security. I plan on doing something similar when the time comes using my own numbers. Thanks for the table.
You guys are of course correct. It is "taxable withdrawals" and RMDs might be just a small portion of it. The relevant TaxCaster income box I used is actually labeled "IRA/Pension Distributions". The tax effects would be the same as long as we don't include something that is taxed differently than your ordinary marginal bracket.
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Re: Putting off Social Security until 70

Post by montanagirl » Thu Jun 11, 2015 4:27 pm

Gal almost there wrote:I 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.

tx
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That's not correct in itself..that's the rule if you file early (before 66) and keep working. Don't know what you make or what your tax rate would be if you file at 66 and continue to work full time.
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Re: Putting off Social Security until 70

Post by montanagirl » Thu Jun 11, 2015 4:28 pm

Oh and OP don't rely on your financial guy! Especially if he is young - they don't seem to know anything about this until they've looked into it for their own sake. Sad but true!

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Re: Putting off Social Security until 70

Post by DonCamillo » Thu Jun 11, 2015 5:17 pm

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)

Gal almost there
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Re: Putting off Social Security until 70

Post by Gal almost there » Thu Jun 11, 2015 8:38 pm

"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?"

First thanks to both you Don Camillo and Montana gal for responding to my dilemma.

Just to clarify, Im in my early 60s and could physically easily work another 8 years … but going part time is not a bad thing either and would love to… is it financially feasible remains to be seen…
Only other source of income would be my investments, my husbands income and either SS and or part or FT working. If i work PT round =$40 grand FT = about 90
Tax deferred savings is under $500,000

And debt, well according to my "younger" financial guy, in good shape…and yea Montana gal, not sure whether i should believe everything he says….

and what would i do??? garden and sew and travel…! !lol

So still scratching my head, but tx as this has given me more food for thought…

Gal..almost there

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BL
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Re: Putting off Social Security until 70

Post by BL » Thu Jun 11, 2015 10:15 pm

I would plan to wait until age 70, but file and suspend at FRA in case I wanted to go back that far due to fatal illness, financial breakdown, etc. In other words, every month you wait will give you more COLA increased SS, but if you feel you can't wait any longer, then file at that time. As mentioned, at spouse's FRA, spouse could request spousal only then and begin self at age 70. Or he could start his own at 62 and would keep that until/unless widow/widower applies.

Don't forget Medicare at age 65. If you are covered without penalty, only Part A is possible and without extra cost.

Gal almost there
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Re: Putting off Social Security until 70

Post by Gal almost there » Fri Jun 12, 2015 5:19 am

Waiting till 70 seems like the most logical way to go for me unless i decide to work part time..

"I would plan to wait until age 70, but file and suspend at FRA in case I wanted to go back that far due to fatal illness, financial breakdown, etc. In other words, every month you wait will give you more COLA increased SS, but if you feel you can't wait any longer, then file at that time. As mentioned, at spouse's FRA, spouse could request spousal only then and begin self at age 70. Or he could start his own at 62 and would keep that until/unless widow/widower applies.

Don't forget Medicare at age 65. If you are covered without penalty, only Part A is possible and without extra cost."


ahh i have heard this "file and suspend" thrown around… and now that you bring this up… again.. excuse my total ignorance on this matter.. but what in the heck does this actually mean?

Health insurance should not be too much of an issue hopefully.

Tx for your input BL

Gal..almost there

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Re: Putting off Social Security until 70

Post by BL » Fri Jun 12, 2015 7:10 am

Here is a little book on Amazon.com written by a Boglehead that explains more about SS decisions:
Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100...Sep 28, 2012
by Mike Piper
As I see it "file and suspend" just means telling them you want to sign up but then not collect just yet. Usually this is done so spouse (who is at least 62) can draw spousal SS, which is not possible until you file. But it also means you can use it to go back to that date for collecting rather than be limited to the last 6 months. I only learned of it here in the last few years, but it makes sense to me for your case, and no harm done if you don't need it. It would be as if you had started back then, so you would lose the higher age advantages.

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Re: Putting off Social Security until 70

Post by montanagirl » Fri Jun 12, 2015 9:06 am

joebh wrote:My sense is that most people first choose when to take Social Security based on personal reasons, then find data which supports their choice.

Human nature.

Not true. I planned to file at 66 and never dreamed I would delay, until I got to BH and learned the rationale for holding off. I was only a year away from filing...I turned on a dime. I think OP has plenty of time to research and think this through.

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Re: Putting off Social Security until 70

Post by mptfan » Fri Jun 12, 2015 9:14 am

montanagirl wrote:
joebh wrote:My sense is that most people first choose when to take Social Security based on personal reasons, then find data which supports their choice.

Human nature.
Not true. I planned to file at 66 and never dreamed I would delay, until I got to BH and learned the rationale for holding off. I was only a year away from filing...I turned on a dime. I think OP has plenty of time to research and think this through.
It is possible that most people do that, while you are among the minority who do not. So your experience does not prove that joebh's statement is not true.

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Re: Putting off Social Security until 70

Post by laughlinlvr » Tue May 28, 2019 12:22 pm

A number of posters have pointed out the tax advantage one gets by converting tIRA to ROTH in the years prior to taking SS. Depending on the size of the tIRA and one's circumstances (like maximizing benefit for one's spouse) a number of posters have found that waiting to age 70 to claim SS works best for them.
What about waiting until after age 70? Isn't there an advantage to be obtained by an individual whose birthday falls in the second half of the year? By waiting until the following calendar year, one can maximize the benefits in the year prior to taking SS as regards conversion. With RMDs required in the year one reaches 70-1/2*, there has to be some advantage in doing a conversion in the prior year which would otherwise have the additional income tax from the additional SS income in the six-or-less months of SS.
Since SS permits a "delay" of up to six months in the year of application, waiting until the following calendar year (if that's the year one reaches 70-1/2) means the applicant can defer the six months' back accumulation. Otherwise this would have to have been taken in the prior year.

*this is current law.
Investing - The hardest way to make an easy living.

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Re: Putting off Social Security until 70

Post by Silk McCue » Tue May 28, 2019 12:25 pm

laughlinlvr wrote:
Tue May 28, 2019 12:22 pm
A number of posters have pointed out the tax advantage one gets by converting tIRA to ROTH in the years prior to taking SS. Depending on the size of the tIRA and one's circumstances (like maximizing benefit for one's spouse) a number of posters have found that waiting to age 70 to claim SS works best for them.
What about waiting until after age 70? Isn't there an advantage to be obtained by an individual whose birthday falls in the second half of the year? By waiting until the following calendar year, one can maximize the benefits in the year prior to taking SS as regards conversion. With RMDs required in the year one reaches 70-1/2*, there has to be some advantage in doing a conversion in the prior year which would otherwise have the additional income tax from the additional SS income in the six-or-less months of SS.
Since SS permits a "delay" of up to six months in the year of application, waiting until the following calendar year (if that's the year one reaches 70-1/2) means the applicant can defer the six months' back accumulation. Otherwise this would have to have been taken in the prior year.

*this is current law.

This post has been dormant since June 2015. Just a reminder to check dates when you come across a thread.

Cheers

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Re: Putting off Social Security until 70

Post by laughlinlvr » Tue May 28, 2019 12:29 pm

2015 was not a year in which I gave this much thought. Four years on, it's become relevant for me. And perhaps others too, hence the reanimation. No need to start a new thread when the wisdom of former years' posters remains relevant.
Investing - The hardest way to make an easy living.

Bir48die
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Re: Putting off Social Security until 70

Post by Bir48die » Tue May 28, 2019 2:32 pm

I love how most posters make comments from one vantage point. It's either about payback or it's about longevity insurance. If you look at things with the mindset that maybe 40% of the people have unique circumstances. Think of examples of situations where others can take it during the continuum between 62 and 70 and it makes sense. I am one of those.

Once again a personal decision.

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Re: Putting off Social Security until 70

Post by MJS » Tue May 28, 2019 2:59 pm

laughlinlvr wrote:
Tue May 28, 2019 12:22 pm
What about waiting until after age 70? Isn't there an advantage to be obtained by an individual whose birthday falls in the second half of the year? By waiting until the following calendar year, one can maximize the benefits in the year prior to taking SS as regards [Roth] conversion.
According to AARP, yes.

Social Security payments are always paid one month later than the start date, so someone born from December 2 thru January 1 is already factored into this strategy.

One risk is dying before your Social Security starts. According to Finder, (data from the Social Security Administration's mortality rates for 2014) at 70 a man has a 2.34% chance of dying within a year, versus a 2.14% chance at 69 (Woman 1.56% / 1.41%.) So there's better odds for women than men, but the pay off may be worth the ~1% risk.

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Re: Putting off Social Security until 70

Post by moneyman11 » Tue May 28, 2019 3:11 pm

Assuming one does not need the money (in which case taking as soon as necessary is correct), the "correctness" of taking before 70 comes down to when you die.

For those who do not "need" the money ...

All those who take before 70, and turn out to be correct in doing so have one thing in common - they are dead.

All those who take before 70 and turn out to be incorrect in doing so also have one thing in common - they (and/or their spouse) are alive, living with the financial effects of their incorrect decision for the remainder of their days.

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Re: Putting off Social Security until 70

Post by Tdubs » Tue May 28, 2019 4:16 pm

Jack FFR1846 wrote:
Mon Jun 08, 2015 7:04 am
I may very well not make it to 70. Combine this with my belief that benefits will be reduced sooner rather than later and it makes it a no-brainer to take ss at 62.

All of these numerical exercises are only exercises. Any number of assumption could turn out to be wrong in the end.
My FIL took SS early because he didn't expect to live past 70. He celebrated his 90th birthday this month and regrets taking it early every day. The question isn't how old you think you will live, it is, how old should you plan for? SS is often described as dementia insurance, and I plan on enrolling for the maximum. If moving in with the kids is an option and you don't mind them controlling your money, take it early.

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Re: Putting off Social Security until 70

Post by dcare » Tue May 28, 2019 4:30 pm

I would like to respectfully submit that if you have a spouse, the expected longevity of the longer surviving spouse should be the age factor used in the consideration of of whether to wait or not. I see many 'I's' and 'my's' in these types of threads and am not sure if that is always the case.
If it were only me, I would take at 66. Because of my wife, I plan to take at 70 to maximize her eventual benefit.

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Re: Putting off Social Security until 70

Post by JoeRetire » Tue May 28, 2019 4:42 pm

Tdubs wrote:
Tue May 28, 2019 4:16 pm
My FIL took SS early because he didn't expect to live past 70. He celebrated his 90th birthday this month and regrets taking it early every day.
Oops!

Does he actually regret it? In my experience it's rare for anyone to regret their SS claiming choice - no matter if they took it early, late, or at FRA and no matter how old they are. Almost everyone seems happy with their choice.
The question isn't how old you think you will live, it is, how old should you plan for?
Yes. And the "how old should you plan for" should usually include any spouse as well.
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Re: Putting off Social Security until 70

Post by The Wizard » Tue May 28, 2019 5:17 pm

70 seems like a good idea.
I retired at age 63 in 2013.
Age 70 SS starts in 10 months.
Three cheers for late SS...
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