The math may be the math, but some of us have other factors at play. Do you have other earned income, maybe a part-time job, that you want to continue doing before your full retirement age? How are you and your spouse going to pay for and get medical insurance before age 65, will you need to keep income down to get better insurance premiums? How much other income do you have - pension payments, IRA’s, investment income, etc.? These other issues can change a person’s decision.
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What do you mean by under current law, SS will take a haircut? There could definitely be reasons to start SS earlier, rather than later, if by law, people will start to get their benefits cut.
when SS officially runs out of money (~2034), by law it has to reduce payouts to every beneficiary. Right now the forecast is an approx 23% reduction to benefits, absent Congressional action.
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Good to read that it is in 10 years. I thought the SS Trust Fund would be empty in eight years so this is an improvement!
I think some people will look at the proposed benefit reduction and claim earlier than they would have otherwise. Of course this will result in an earlier depletion of the Social Security trust fund.
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I’m not sure if you were replying to me or someone else, but yes, all those other things do need to be considered. Which is why the amount of SS benefits, and when to take them, is just one aspect of our retirement planning. We’ll be able to maintain our current employer-sponsored health insurance after we’ve retired, so that’s helpful, and we’ve been saving through a few different vehicles.
Right now I know there’s a lot of decisions to make in the next 5-10 years, so we’re in the really early stages of gathering information and, in some cases, just trying to figure out what the questions are. I’d ideally like to retire in 8 years (at 57) and I’d guess my husband will retire about the same time (at 66) but who knows. So my goal for now is to just try to figure out what variables are out there, and how they could affect that plan to make it more, or less, realistic.
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It’s smart to start thinking about the future. Your situation somewhat similar to ours (12 years ago). We started taking retirement planning classes at the community college (2 or 3 nights each, different financial advisors) every few years. It forced us to pull together our numbers, paperwork etc.
If I could change one thing, we would have switched from traditional 401k to Roth somewhere along the way. It seemed better to have “all same”, not have to track which accounts taxable. Seemed a pay now / pay later tradeoff. But in retirement it can be helpful to have untaxable 401k/IRA money available.
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And of course, that decision can also impact current taxes because the switch will increase taxable income. You have to be careful not to jump up to the next tax bracket. Always something to consider!
One good thing about starting to look into things early is that you can start tracking expenses if you don’t currently do that. Knowing your expenses is an important part of retirement planning. People often ask if they “have enough,” but they need to know how much they need.
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Yes, each household has different needs and expenses. That can vary a lot after retirement too, especially if a lot of travel and high ticket expenses are planned. My sibs have really stepped up international travel in retirement.
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It’s too much of a dilemma for me to think about now. I guess there’s a right answer there somewhere. Open Social Security says I should take it in a few months at age 62 and my husband at FRA. We both get the max benefit, but I’m six months older than him.
We don’t actually need it, but it would be less money that we have to withdraw from 401K’s. But we’re going to withdraw up to the 24% tax rate regardless. Part of my hesitation is that we already get income that we cannot change or push into another year for tax purposes (pensions), so do I want to add another inflexible benefit? Yet, the money would be nice. Then again, the less you withdraw/convert to Roth now, the bigger the RMDs you’ll have to take.
Maybe there is no right answer, but I don’t want to do something I’ll regret.
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Don’t forget about IRMAA…
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I was thinking that was a consideration, but then I realized that we are likely stuck in an IRMAA bracket with no way of getting out of it. If every year we withdraw from our 401K enough to stay at a certain federal tax level (for now, the goal is to have income that keeps us in the 24% bracket but not in the 31%), it’s really just a matter of how much we need to take out, less if I get SS, if that makes any sense. It just seems like a difference of about $100 a month each anyways.
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Yes, the tax hit will be yours; or your kids’, and probably a bigger one if you leave a lot in your 401s that your kids inherit and have to deplete within 10 years while they are fully earning a salary.
I’m getting the SS (widow benefits, changing to my own higher one next month), and pensions, and IRMAA hits. But this doesn’t impact my desired standard of living, so I’ll take the hit to spare my kids if I can.
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And then there are those of us who can’t imagine hitting the IRMMA levels of income!
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It’s a good thing, and a bad thing, actually. I feel like instead of a pension, maybe I would have preferred our company to contribute more to our 401K, because then we would have more control about when we utilized our retirement funds and what levels of taxes we would pay. With a pension, it’s next to impossible to avoid taxes, and that is one of the largest expenses in retirement for many.
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That’s why I pushed for the 50/50 option on the pension.
Had the option to have 50% as a fixed monthly amount and 50% as a lump sum to invest.
Of course the stock market went down right after we got the payout but it’s going up again.
Not everyone has that option. We are lucky to have.
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Interesting. My H will get the information at the end of the year about his small pension. They said they won’t send until they can provide the interest rate. We will probably take the monthly cash flow option, with it continuing until both of us pass away. Don’t yet know what that amount will be.
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That seems like a great option to take. Wish we would have had that choice!
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Us too. That is a great choice!
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I was on “new plan” (reduced benefits since the good old days when my father worked at same company). Had choice of cash (a little over a year’s salary), monthly “pension” payments, or I think a mix. I opted for the pension, 50% survivor benefit. Pros/cons to every option. I just like knowing there is a set small-ish payment, regardless of the market of my lifespan.
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