Jym626, I believe I’ve read if you start it in January (payable in February) you will get the delayed retirement credits for the entire year. For example, if your spouse reaches full retirement age of 67 in October 24 and you wait until January 25 to start payment, you would get the 3 additional months of delayed retirement credit (for not claiming Oct-Dec) and the delayed retirement credits would be included in your payment starting the month of claiming (Jan 25) giving you a larger monthly payment. Someone please correct me if I am wrong!
I know there is an exception for age 70, where you get the full delayed credit the month you turn 70, no matter what month that is. That’s why it almost never makes sense to delay past 70.
That is correct, but the same is true anytime post-FRA. Every month you delay post FRA (up to age 70), you earn another DRC. More importantly, that higher DRC payment is not only for the remainder of that calendar year, but for the rest of your life (and surviving spouse if the higher of the two couples).
And since its longevity that matters, the NPV claiming difference between October and January is not material, and definitely not gonna move the needle.
Anyone can enter the info into OpenSS and see the little difference.
Right on both points @bluebayou, but before FRA through age 70, there are monthly increases to the amount you receive that will not increase once you start drawing. So in any given calendar year, if you start in November, your November amount is the January amount plus 10 monthly increases.
The following year’s COLA is based on the prior year’s monthly distribution. So the first COLA for a January start draw will be less than the COLA for a November start draw.
It isn’t much, but it is why it is better to take toward the end of the calendar year as @jym626 mentioned above.
While we still do nice things for our kids, I am glad to be way on the other side of financing from the Bank of Mom and Dad.
Today, ShawSon is taking me for my birthday to the tonight’s NBA finals game. A wonderful present – we will remember this forever – though very expensive. But, it serves as a clear indicator that the Bank of Mom and Dad is now focused largely on retirement. (If needed, we will kick in some for ShawD’s wedding, but they are on their own financially unless there is a major emergency or something we want to do and pay for).
Correct, and the January start (in the following year) will be even higher than the November start (in your example) in the previous year (by 0.66% x2). The point is that every month delay is always higher (up until age 70). The COLA just goes along, regardless. There is nothing “better” about a late year start, as the next month is always better (i.e., higher) while collecting DRC’s.
It’s the DRC’s that matter, not the COLA % which will be the same regardless of when you claim the previous year.
So. We need some cash, due to paying taxes on a 401K withdrawal last year in order to buy property, and the fact that we unwisely bought boat #3 before selling boat #2. Thought we sold boat #2 last night, but sometime between the 7:30PM purchase last night and noon today, our buyer suddenly found out his daughter was pregnant, and decided to cancel the deal, due to lifestyle changes. Convenient timing. I suspect that when his daughter found out that her parents were planning a family trip (with her) in a boat built for two from Seattle to Alaska, she said, “Oh no, guess what? I’m pregnant, can’t go”. Don’t blame her, I wouldn’t want to go either. Still!
Now we’re left with three choices to obtain our money:
Withdraw some from our Roths.
Utilize our 8.75% HELOC
Withdraw from our 401Ks at a 32% tax rate.
As much as I hate to do it, I think the best option is to access our Roths. I’ve always thought that’s the last thing I want to do, but the other options really don’t seem very good. We’ll still have plenty of Roth funds left. No, I don’t want to ask on Bogleheads, I trust this forum more, as far as retirement goes. Is there anything I’m missing, here? Sometimes things are so much clearer when it’s someone else’s situation!
How long does it take to sell a boat? Is that short term, i.e., <6 months, or much longer?
If it is short, I’d hit the HELOC first. You can always dip into the Roth to pay off the loan anytime. OTOH, if selling a boat takes 12+ months, I’d probably tap the Roth.
Not a fan of paying 32% tax today for a short term cash flow issue.
Hard to tell how long it can take. It could sell tomorrow, or it could sell in a year. If it doesn’t sell by the end of the month, we’re taking it from the broker and trying to sell it ourselves, so that will be another delay. Maybe I ought to wait until the end of the month to take action, since the broker is now trying very hard (realizing he’s going to lose his clients). Right now the excess is being funded by the HELOC.
We met with our financial planner who seemed very invested ( pardon the pun) in me retiring. As in saying things like “ Do you really want to die with it doing all the fabulous things your money can allow you to do?” Can anyone explain why a planner ( who has done a good job for us money wise) might have that attitude? Like what’s it to him exactly?
In my experience, planners often apply lessons gleaned from their other clients to the one they’re talking with. Ours had specific horror stories (not that he presented them as such, per se) that he cited years ago in urging us to get long-term care insurance, for example. Your planner is probably just thinking of frugal people who saved and saved for someday and then died before doing anything with the money.
I’m sure that’s a typo…and should say “without” instead of “with it”…right?
We absolutely think our financial planner is terrific. He helped advise DH on when exactly to fully retire. And he often tells us to spend more money. We like his “you can’t take it with you” approach…and we take it.
Your planner has done well with your money getting you positioned for retirement. It sounds like he feels you have enough to do so. Nothing wrong with that. I don’t view that as an attitude thing at all. He is advising you.
Yes. You are right about the typo. And yes intellectually I know we have more than enough to retire. It’s not really a question that I needed an answer on. But it’s a psychological thing for me. It was just a bit of a weird vibe. Like semi aggressive about it.
How long have you been with this advisor?
Could it have been long enough that the formerly ‘business only’ relationship has morphed into ‘friend from work’ status?
I feel that way about mine; we discuss life - and he tells me ‘Spend it, you’ve earned it!’
As I read, before I saw your last paragraph, I thought Roth.
IF you’re planning to do Roth conversions, then I wouldn’t suggest taking from Roth, but taking from your 401K (you’d pay the tax whenever you did conversion).
Maybe, but if you need say $20K cash now then you’d have to withdraw about $30K from the 401K to allow for taxes. Or you could just take $20K from the Roth, then replace it with a conversion later, after the boat sells, using some of those proceeds to pay the $6K of taxes on converting $20K. That would maximize the amount in your retirement account at the end of the day (and reduce your AGI, since you’d have $20K of additional income not $30K). This goes back to the first rule of conversions, to only do them if you have cash available in non-retirement accounts to pay the taxes.
Use of the HELOC is a separate question, on how confident you can be of the retirement account growth exceeding the interest rate you are paying. If the HELOC interest won’t be deductible then that means getting 8.75% in the HELOC or 12.9% in the 401K (since that gain will incur 32% tax). With the stock market at all time highs and the interest rate you are paying so high, that feels quite risky.
We’ve been told something similar. I think he sees his role as not just amassing money but in helping you feel good about where you are. We’ve all talked on here about the struggle going from savers to spenders, from accumulation to decumulation. He must see something in y’all that makes him think that you need permission to start spending and enjoying your money.
If you’re like me, I’m sensitive to people telling me “when are you retiring”. “You should retire” “I’d retire if I was you!”
That alone would make me annoyed - lol because I’m sensitive to it. Maybe he really didn’t mean any snark but are you like me and sensitive to remarks about retirement?
