That could be a good plan. It is nice to have a bucket of non-taxable Roth funds in addition to taxable IRA. Gives some flexibility. Also spreads the risks of guesswork about current vs future tax rates.
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After 73 when I am required to take RMD, I won’t be able to put RMD into Roth, I would need to withdraw more IRA money into Roth, and all of that would put me into a higher tax bracket. That’s why I need to do it before 73 while I am living off my after tax money.
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yup, that is exactly what many folks do, including me.
btw: be wary of IRMAA thresholds, which are hard cliffs. And right now, Trump’s so-called ‘No Tax on SS’ deduction, which starts getting phased out at $150k MFJ.
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Might your after tax brokerage account generate a bit of taxable income? We hardly converted anything to Roth because our income after retirement was still high due to income generated by real estate and equity investments.
My after tax brokerage account would generate mostly capital gains and it would be taxed at 15% most likely.
It would really depend on how much assets you have and if they would generate a lot of ordinary income.
My investments are not that complicated - no real estate income or annuity.
I am asking my FA to do some mock tax returns to determine how much I could convert.
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I’m still pondering whether we should take Social Security now (both age 63). Went through the Open Social Security program, it said one of us should take it now and other should wait. But apparently now the fund will require benefits to be reduced significantly in 2032, based upon less payments into the system due to the latest tax bill. And they have a plan, supposedly, but they’re not going to reveal it until next year. I’m assuming that it cuts benefits.
So, what to do, is the million dollar question.
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If you can figure out exactly when you and spouse will die, the choice is easier… but of course, nobody can do that.
Certainly opensocialsecurity.com site is helpful. It gives some suggestions based on ages / lifespan averages. But it also enables playing what-if on a variety of scenarios, better understanding of the factors.
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I have consistently agreed with the advice that the lower SS should be taken relatively early, and the higher SS should be taken as late as possible in cases where SS is not required for daily expenses.
The survivor benefits and delaying past Full Retirement Age providers the best and safest return in the case of a long life. Personal finance is very personal, but unless you are in need of the checks before 70, that increased benefit on what amounts to about the safest income stream you can have is very appealing.
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This is only my .02.
Congress likes to act when up against a deadline and only then.
2032 is a few election cycles away. I will assume that congress will not want to alienate a huge voter base and will not reduce social security.
I will draw social security based on my timeline and not a government that loves a hard deadline.
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This always confuses me! I thought if the lower wage earner took before full retirement age, that meant there would forever be a reduction in the amount received while the lower wage earner was living. Such that the half spousal thing would be reduced once the higher earning took theirs and during their lifetimes. That it wouldn’t impact the survivor benefit but that it would result in lower total monthly amount to the lower earning spouse while both were alive.
I am the much lower earner compared to my dh. He is 63 and still working. Plans to work until 65. Our plan has been for me to take at 67 and him to take at 70. My understanding is that provides the highest monthly amount to the lower earning spouse during their lifetime. I do understand there is some sort of breakeven point, but this issue confuses me every. single. time. I wish someone could explain it to me like I’m five.
Additionally, we are currently in a pretty high marginal tax bracket, and we don’t need the money at the moment.
I will say (I may have said it before) that I have similarly situated, lower earner friends considering taking as early as possible for fear that benefits will be reduced in the future.
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My understanding is that you take your own SS while both are alive, if you spouse pre-deceases you, you CAN switch to their SS amount from the time they decided to claim. The most likely scenario that would put strain an a retirement budget is one spouse living for a very long time. In this case you would want the largest guaranteed income for all those years.
Many of us have done the planning and hard work along with a very good investment period that we will be unlikely to be a burden on our children. But if things got so bad that it did happen, taking SS a few years early won’t have moved the needle, but having the largest possible monthly check will help.
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That’s exactly what I have found, about the decision not moving the needle. Yes, the higher earner should wait as long as possible if there is longevity for either spouse, because we want that long-liver to get as much money as possible. But when I ran the Monte Carlo analysis of me, the lower earner, taking SS at various points (now, at 65, at 67 and at 70) and dh taking his at 70, my percent chance of success actually went up a point taking SS immediately. Not a big needle-mover, but I felt like it did give me permission to consider taking it earlier than I had planned. So I did. First check comes next month!
@Hoggirl , have you used the open social security . com website? That website also told me to take now. Now, dh and I are close in age and were close in income when we both worked. Everyone’s MMV.
I have a friend who just yesterday called SS and got lots of good info. Her case is a little complicated. She is still working part time, and her dh died years ago in his 50s. She’s only 58 now and is trying to figure out how to start taking some benefit at 60. It’s complicated. The woman on the phone also gave her some good info about selling her home before the IRMAA look-back. So much to weigh. Good luck, everyone.
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Yeah, there is so much to weigh. In our case, we’re both getting the max SS, so there’s likely a different way to play it.
I also think about the fact that we’re borrowing and paying 6.75% on our HELOC now, and our pension takes a good size drop at age 67. Ugh, too many factors and nothing is obvious.
Edit to add, once I put that HELOC into the equation, it makes me want to take the Social Securitu earlier, to help pay it off!
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If he sits in his recliner a lot and it still is comfortable for him but is looking a little shabby; is it the shopping/buying a new recliner, he doesn’t really care how it looks, his thinking that a furniture item like this should last forever (like you say has some miles left on it), that a really good recliner is going to cost ‘too much’ - but he has the money for it - it isn’t really a ‘big’ purchase based on his nest egg?
He may be tight lipped about other things, but he may be very self-sufficient. DH’s bachelor uncle was very frugal but also retired early - in fact a tad before 59 1/2 and he realized that he could not draw off of his IRA w/o penalty.
My husband was not keen on me drawing at age 62. (originally had it in mind we both should defer to 70). Once the FA agreed with me, he looked at the numbers on open social security and eventually agreed. This way whoever lives longer gets the bigger payout. I think easier to justify in our case, with me being 7 years younger.
To me a big part of the thought process was that in younger years we are healthier, more mobile… want to have money to travel well. Yes, in older years we will need more money for care, but I think we will have that covered via IRAs etc.
I do know a couple where both were deferring to age 70. One kept working past 65, so it was affordable without SS. Alas, the other died at age 69. The SS office did help the widow figure out the best plan going forward.
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It was great that you worked the numbers, had the FA agree, and your DH came around.
My brother (who is now 70) is 13 years younger than his wife, and he had a good situation to retire a little early - as soon as he retired, he got active, quit smoking, and lost 40 pounds (and has kept it off) - his lab work is good and he is on no medication now. I am sure his wife was worried he was going to have a stroke with the stress of his job. It was a bigger financial decision for him - had he worked another year he knew he would have earned $1Million in bonuses from the projects he was in charge of. But you can’t take it with you, and they have a very good nest egg. He didn’t take SS until age 70 because of it ‘earning’ him 8% to delay – that would not have been my decision, but his nest egg is a whole lot bigger than ours. He was stock market savvy in his youth, so I imagine he has continued to be very good with their nest egg and investments.
DH moved his retirement from his career job at 64 1/2, 11 months before I turned 65, but he was emotionally fatigued from his job - working for a non-engineering plant manager who handled DH like a pack mule instead of the racehorse he was in engineering capabilities and what he had done for the company. DH was approved for working 30 hours a week but did not want to handle any differently than retire from FT work due to the boss attitude and strain/push. His boss (who I had worked for when this boss was not over his head) was dumping on DH and DH was better to walk away from it. I agreed with DH for DH’s emotional health - and it turns out he was needed for his parents in another state - his 92 YO dad died a month later (DH at bedside) and his mother died 4 months later – he stayed there for very long stretches and was caretaker for his mom before she went into skilled care. Once his mom was in skilled care, it went well for one or two weeks until her medication stopped working for her hypertensive heart condition (and comorbidities); he returned with her immediate decline and within a week she had died. Because I worked enough hours to qualify for health insurance, we saved $1,000/month from the cost of COBRA each month and switched to Medicare and supplement when I retired 11 months later.
One does need to reflect on what one has in their nest egg and the situation with age/health/desires on the financial and other decisions with retirement.
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How many of us are actually depending only on Social Security to get by in retirement? I’m curious because we’ve spent a lot of time focusing on this issue.
I’m not depending solely on SS, but I would be lying if I said that it’s not an important component of our financial planning.
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Because we worked for it. It’s not the entirely of our retirement but shouldn’t we get something that we paid our entire working career for
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We are not. I even think that we technically could pay all our bills without, but we wouldn’t get to have the kind of retirement we want and planned on.
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