When to take Soc. Sec. - another consideration

[Ron]

For those trying to decide when to start taking SS here's another interesting angle to factor into your decision:

https://seekingalpha.com/insight/financial-advisors/article/4106442-important-social-security-tip-never-heard

[eddie1261]

Note that in the linked article, Bob sold $240,000 worth of stock. Seriously? If I had $240,000 worth of stock to sell, I would live happily ever after.

I had this debate with some self proclaimed know it all friend of mine who badgered me to keep working. I retired 17 days after my 62nd birthday, and I could not be happier. Had I waited like most of the world thinks is necessary, I would still be working, until Dec 27th, 2017. The idea was that I don't want to work anymore. I have no desire to be the richest corpse in the graveyard. Then I got the "As long as my kids are taken care of..." speech. Seriously? Your kids will be 50 when you die. By 50, they should be taking care of themselves. I have kids too, and they are categorically not named in my will. Our death is not supposed to be a windfall for our kids. 

The other way to look at this is that I would have NOT gotten these last 54 months of checks. But it all comes back to this. I don't want to work anymore. I don't want to get up at 6am, shower, drive 30 miles to an office so I can sit at a desk with a headset on and tell dummies how to click their mouse. 

And "it all comes down to this", parte deaux.

Are you guaranteed those extra 4 1/2 years? Or tomorrow? You want to work until the minute you become worm food?

On Jan 25th, 2013, I had no idea when I drove to work that 10 hours later some idiot would lose control of his car and cross the highway and damn near kill me. That was the wake up call that reminded me that we are not guaranteed a tomorrow, and as soon as some things turned for me financially and the math worked out, it was retirement time.

That guy who badgered me to keep working? It came down to him being jealous that he still has to work. For about 3 months I texted him every morning to remind him that it was 9am and I was just getting out of bed.

So factor all of that into your decision. If you don't get enough from SS to support yourself and you have to keep working for the man anyway, you may as well wait. But if you are like me and have had enough of schedules, deadlines, meetings, emails, and 2am pages... get out now and start living!!

And if you like, email me and I will send you the song I wrote after the accident called Second Chance. Pretty much a reminder to smell the roses....

[Dennis M]

Every person has their own priorities and specific situation which determines the best plan. Very hard to generalize. I retired and started taking SS 10 years ago at 62. Like Eddie I was sick of working. In addition I had just survived colon cancer with a clean bill of health. 

My investment advisor took enough out of our portfolio to supplement my SS for 10 years. He put it in CDs with staggered maturity dates, which coincidentally protected those assets from the recession. We let the rest of our investments ride it out and they have more than recovered.

Now my wife has reached 65 and was able to take advantage of filing a "restricted application" for her SS and put off collecting until it reaches max payout at 70. The she filled for the spousal share of my SS. She gets 50% of my full benefit, not the reduced benefit I receive. Now we can let her SS benefit grow for five years and then she can switch from half of mine to her full benefit - which will be more. They have closed that so-called loophole, but you can do what she did if you were born before early 1952.

So right now I am really happy with my decision to begin collecting as soon as I could.

 

[TheDuke]

I agree, taking SS and when is eaches choice. But the article makes one major error. 60,000 living expenses at 62 or 67 or 66 does not equate to 60,000 at 70. I don't know the number but I know what it isn't. He throws too many dates and years and growth for me to make heads or tails of the article. 

[justRich]

 

The opposing example assumes $1,000 dollars per month in SS;

12,000 per year at age 62
96,000 accumulated at age 70  (12K x 8 years = $96,000)
Deceased at age 71

OR;
If one waits until age 70, how much longer would it take to regain the $96,000 dollar loss?
And if the $96K had been invested over the 8 year period in CD's then the loss is even greater.

 

 

 

 

[Barbaraok]

Plus, when you die, your kids won't collect any 'left over' SS, but the money that is still in your investment accounts (whether IRAs or otherwise) will be inherited by them. 

[whj469]

Well said Barbaraok. We also don't know how long we will live.

[mds1]

Interesting article, thanks for posting it. As the original poster's thread is titled When to Take Social Security, Another Consideration I suppose it's okay to add another detail which my wife and I considered. She is older than me. Even at age 65 her social security benefit is less than mine at age 62.  If I was to die before her, she would take my benefit because of the higher payment.  So she took hers at 62.  I'll decide later if I take mine before full retirement age.  We can use the extra money now as we are saving for my own retirement. If we did not need her social security as part of our financial plan she probably would have still taken hers at 62, although the 8% (or whatever it is) that her payment would have grown per year if she delayed taking the benefit is attractive.

The way I understand social security is the government has a formula where they consider life expectancy. The intention is to pay out the same total amount regardless if you take social security at 62 or not. If I did the math correctly, it takes about 12 years, after full retirement age, to see any net "benefit" of having waited until full retirement age. For me, should I die before age 79 then it would not have been a good idea to delay taking social security later than age 62.  Few males in my family make it into the 80's. However, my wife's family has better longevity and it would be nice to leave her with a higher benefit if she uses mine after death. Then again, she is older than me so might be a mute point.

The article does bring up a good point, in my humble opinion, in terms of taking money from investments (stocks) at the wrong time rather than taking social security. But  it seems like the stock market is getting harder to understand when comparing it to historical data, such as what a stock is trading at compared to earnings per share. Over-valued stock markets seem to not scare a lot of people. It scares me and my financial guy who is still waiting for a market correction with about 40% available investment money now sitting in cash. Sucks because we are missing out on the current growth trend in the market. But sure will not suck when the correction does come and he is able to buy stock with that 40% at a better price.

One also has to consider the tax consequences of withdrawing 401K/IRA assets as well as the consequences of having to pay taxes on at least a portion of social security depending on what your gross earned income is each year.  

 

[RV_]

While we try to mitigate our tax burden, I now feel like a ping pong ball. On one hand capital gains and if cashed out of my investments to avoid a big recession again, the banks could again fail and seize my deposits as their own under "Bail In" rules made law in the last few years.

The game's been rigged again but now we can't wait out a stock crash with cash because then the banks get our money when they fail. The FDIC can't cover even one superbank failure.

 

 

 

[justRich]

On 9/14/2017 at 9:39 AM, Barbaraok said:

Plus, when you die, your kids won't collect any 'left over' SS, but the money that is still in your investment accounts (whether IRAs or otherwise) will be inherited by them. 

If you have kids as beneficiaries, then consider putting money in a Roth IRA every year even if you're over 65.  When you pass, the beneficiary gets the Roth but can't touch it (without penalty) until they attain 59.5 years old.  By then that Roth account should have grown SUBSTANTIALLY!  That's quite a "reach" to benefit the kids.

[LFDR3116]

Unless they have changed the rules, you cannot contribute to your Roth IRA or another IRA unless you have a job and earned income.  Investment income, pensions, social security do not count.

[Barbaraok]

Isn't it just a roll-over from your current IRA into a Roth IRA by paying taxes on it?

[Al F]

9 hours ago, Barbaraok said:

Isn't it just a roll-over from your current IRA into a Roth IRA by paying taxes on it?

According to the IRS, yes you can rollover your IRA to a Roth IRA, by paying taxes on what you disburse from the traditional IRA.

Here is a PDF file with a chart showing what retirement accounts can be rolled over to what other retirement accounts: https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

More info here: https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions

 

[Al F]

Can anyone point me to an online reference definitely stating that there "is" or "is not" a limit on the amount which can be rolled over from an IRA to a Roth IRA? 

For example can someone rollover $100,000, or even $500,000 from the IRA to the Roth IRA, by paying the taxes on the money and depositing the remainder in the Roth?

I see plenty of references stating you can make the rollover, but no explicit statement that there is NO limit to the amount that can be rolled over. 

However there is a express limit of $5000/year in contributions to the Roth IRA. 

Again I am looking for an explicit statement stating you can exceed the $5000 limit. 

[Al F]

I think I just answered my question.  This link states there is no limit on the amount you can rollover from an IRA to a Roth IRA.

http://www.rothira.com/what-is-a-backdoor-roth-ira

 

[Barbaraok]

Actually the Treasury Department is happy for you to roll over into a Roth so they can get their tax money now and hopefully at a higher percentage than if you slowly take it out via RMD over a number of years.

[Al F]

22 hours ago, Barbaraok said:

Actually the Treasury Department is happy for you to roll over into a Roth so they can get their tax money now and hopefully at a higher percentage than if you slowly take it out via RMD over a number of years.

My thought goes along these lines.

Since the RMD pushes the income to the point that our SS gets taxed close to the max, that taking additional money from the IRA and rolling it to Roth IRA up the the point of reaching the marginal tax rate of 25% would keep the tax rate on that money at 15%.  

The RMD forces much more of our SS to being taxed.  Which pushes our marginal tax rate well above the 15%. 

[Barbaraok]

Al, I do agree with you on the problems that RMD's can cause.   Each year I do "what ifs" in TurboTax which lets me plays with various levels of withdrawals to see how much tax will result and plan on amount above the RMD to take that will do the least damage.  

[mptjelgin]

On 11/5/2017 at 6:23 AM, Al F said:

However there is a express limit of $5000/year in contributions to the Roth IRA. 

Again I am looking for an explicit statement stating you can exceed the $5000 limit. 

Not sure where you are getting that. The current limit on contributions to a Roth IRA are $5500 per year, unless you are 50 or over in which case the limit is $6500. This limit is specifically for contributions directly into a Roth.

As you've discovered there is no limit on a rollover, as long as you can handle the taxes.

[Ron]

1 hour ago, mptjelgin said:

Not sure where you are getting that. The current limit on contributions to a Roth IRA are $5500 per year, unless you are 50 or over in which case the limit is $6500. This limit is specifically for contributions directly into a Roth.

As you've discovered there is no limit on a rollover, as long as you can handle the taxes.

Depends somewhat on your situation.  Review the IRS website below and see if it answers you question:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

[Al F]

1 hour ago, mptjelgin said:

Not sure where you are getting that. The current limit on contributions to a Roth IRA are $5500 per year, unless you are 50 or over in which case the limit is $6500. This limit is specifically for contributions directly into a Roth.

As you've discovered there is no limit on a rollover, as long as you can handle the taxes.

My bad.  I was going with what I thought I remembered.  Thanks for correcting my error.