Yes, disproportionately large relative to our income. We recently sold a parcel of land to a preservation land trust for less than appraised value, generating a very large charitable contribution deduction. We can only deduct it in the amount of 30% of our AGI per year, and we have a total of 6 years to utilize it. So we’ll have similar or larger itemized deductions for a few more years.
Better yet, our kids are partners in the ownership entity and are getting similar deductions, and the deductions are more valuable to them than to us because they’re paying New York City and State taxes and higher federal ordinary income rates.
It was a great move. We made a good profit on the sale, we preserved some environmentally significant land, and the tax benefits are nice icing on the cake.
I’m editing to clarify why the charitable contribution deduction is more valuable for the kids than for us. They both have good jobs and are paying taxes at marginal rates around 50% between federal, city, and state.
We’re retired in a state with no income tax and our marginal rate rarely goes over 22%.
So a $100,000 deduction is worth roughly $50,000 to them and at most $22,000 to us.
On the ‘increased spending after retirement’ - I’m looking at that and getting a bit nervous. Planning to rent a house near the ski slopes for two months, then drive cross country, then go to family wedding in Europe, and deal with big increase in healthcare costs (since pre-Medicare).
H is fine with all this but I’m the one that (apparently) looks at the granular costs (he prefers to research stocks). Talking to a financial planner in a month so am definitely running all this by him.
I’m also definitely lining up part-time working and hoping H will at some point consider that too…
SS was set up in part to assist with survivor benefits, disability, children under age 18/19. The benefit workout for two benefit earners is what it is. If you survive a long time, the system will pay out in your favor.
DH and I both have life insurance policies which give the survivor a tax-free boost.
I don’t have any qualms about someone having a benefit from a prior spouse if they were married for 10 years - typically someone that has had multiple marriages might have a one that provides a better monthly SS benefit.
Lots of things in life are not fair. I am sorry you do not have your husband with you in retirement.
With our FA, we have a way to run the numbers for one-time expenses vs a permanent part of the budget. Is this year’s spending a one-time expense, or are you going to have those big-dollar expenses every year? Health-care costs will be recurring, but I’m guessing that you won’t have a family wedding in Europe every year.
One thing I heard is that part of the reason people have trouble spending in retirement, especially early retirement, is because they are afraid this is the beginning of an avalanche and once they start spending they’ll never stop. I vote to allow yourself to “splurge” that first year after running the numbers with FA and learning that it’s doable. Sounds like a great time!
I was going to make similiar comments. Splurging can be ok, if affordable. Much better to rent in a special year that commit to a vacation home that will become a continuous expense. When we do splurgy travel, we understand that we may not always be able to do it (due to tbd future medical expenses / mobility restrictions).
There was a time where our FA said … hey, if you wanted to spend $xyz on that, go for it. If you were wanting to do it every year, my answer might be different.
@Jolynne_Smyth - It is probably to your advantage that the market is up. It is good your FA will be aware of those expenses, might advise pulling some extra funds aside ahead of time.
Keep in mind that with state insurance plans (obama care), the premiums depend upon income. Your part-time job income could make the premiums jump significantly. Factor that into your calculations. BTW our income in those bridge the health insurance years (so after retirement but before Medicare), was higher every year vs what I had estimated on the state site. I have a part-time job and our investments did well. We ended up with a huge tax bill each year that corrected our low premiums (the subsidy we received was too high and we had to return some of it each year.)
Yes, it was hard for me to go from save to spend. We are still bridging between my husband’s retirement at 60 and our getting SS (this year and next based upon our ages). I had to tell myself this is what you saved for, to live off this money in your golden years. I had the same issue when I was paying college tuition. Telling myself, these savings were earmarked to pay tuition, so don’t worry about the spending.
I’m curious if others think the news about SS going broke sooner rather than later will make more people apply now so at least they get something? Thus hastening the financial issues? I’m pretty sure it’ll get “fixed” - politically it would be a nightmare if not - but I’m still considering taking it a year or two earlier than planned (65 vs 67) myself. I’m not 65 yet though so time to think about it.
I took SS at age 62. At the time, I was subject to wep and gpo, and my benefit was about $120 a month. I decided to enjoy that $120 a month for the three years before I was eligible for Medicare. Of course, I never expected to see the WEP and GPO repeal, so I do have a %penalty on my SS (now collecting with spousal tip-off).
But I think I would make the same decision now.
ETA! DH waited until age 70, but he collects the maximum, and it made sense to wait. Plus he was working until he was 68 full time.
My husband will be starting his this year even though he is still working because there will no longer be a reason to wait, not because he is concerned about insolvency of SS. It kind of doesn’t feel right to apply while still working because we are not starving but it is his money.
It’s nice that once you reach FRA you can start to collect even when still working (no income cap). DH still wants to wait. For now when we pay his Medicare premium we reimburse ourselves with our HSA
I have no intention of waiting until 70. I know that your benefit can grow if you work between 65 and 67 while collecting, but I’m unclear if it continues to grow after 67 - I think not since the amount you can earn is unlimited at that point? And you’ve reached full retirement age? I really have to sit down with all of this at some point!
Sorry, my response probably didn’t make a whole lot of sense.
I was replying to @jym626 who was replying to @BunsenBurner. It was a reason why mister BB wouldn’t be waiting anymore. If he had maximized his benefit
But I could be wrong with the percentage but your benefit will grow 8% a year from age 67 to 70. After 70 that’s the max you can draw.
Yes but @BunsenBurner said he was planning to start now. Once you reach full retirement age, you can start to draw your Social Security, regardless of how much income you earn. If he wants to draw now, as long as he is over his full retirement age, that’s certainly his choice, especially if there’s concern that there may be a means test or potential that people won’t get 100% of their amount down the road.
Once you start collecting at your FRA but before reaching 70, you will get annual COLA, but not the guaranteed 8% a year for delaying until 70. Also, because you will still be paying into SS while working, your work record will get updated with the $$ you made after starting SS. The SS benefit will be recalculated based on the 35 highest years of earnings and may go up if your new annual earnings replace a lower amount in one of those 35 years - but not indefinitely! Sorry if this is as clear as mud.
And I think I wasn’t clear either! I think I was asking a question really tangential to your response. Sorry about that. I believe credits continue to get added to your benefit if you continue working even if you’ve already claimed. So if your benefit is $xx when you collect at 65, but you continue working your benefit is increased even though you already claimed it. If that makes sense. But I’m totally confused when and how this happens. Like I said I need to spend some time with this.
No that makes sense and answers the question I was asking! Since my highest income years were paying into a pension, not SS, the calculation may actually work in my favor.
