Got an S.S. question, please?

[Travelover]

The only reason to delay taking SS is if you have to wait for Medicare age to stop working. If you are going to stop working at 62 and you won't have an income that exceeds the maximum you might as well apply for SS...........

One reason to delay is to increase the benefit to your surviving spouse. My wife is taking hers at 62, I'll take the spousal benefit only until age 70, then take mine, which grows in the meantime. When I die, she gets bumped up to my increased SS. There are different rules for people younger than me (65), so they cannot not do the restricted spousal benefit only, but the higher benefit for the survivor still holds.

 

[California]

One reason to delay is to increase the benefit to your surviving spouse. My wife is taking hers at 62, I'll take the spousal benefit only until age 70, then take mine, which grows in the meantime. When I die, she gets bumped up to my increased SS. There are different rules for people younger than me (65), so they cannot not do the restricted spousal benefit only, but the higher benefit for the survivor still holds.

This is a good example why one should study options then get a review by a pro advisor before choosing when/how to start SS.

Different people will have different retirement scenarios.

* Failing health or short life expectancy, front-load it and get maximum payout as soon as possible.

* Need to provide for a spouse who never paid into SS but will depend on survivor benefits after you are gone? There's an option for that.

* Both of you will get approximately equal benefits upon retirement but one will work several years more? Consider the plan Travelover described.

* Have adequate pension and savings, and want to leave an inheritance to the kids? I don't know if drawing SS early, or at 70, works best for this. Possibly living on SS now and leaving IRA's to grow for the kids to inherit might maximize what they receive. Also, in this scenario of preserving wealth for the next generation, assigning savings and property into a revocable Trust will simplify settling your estate.

It's a classic saying by retirement planners that people spend more time planning a vacation than they do planning their retirement. It is worthwhile to spend some time, and perhaps money on a consultant, to work out how to maintain your income after you retire. Then fine-tune the plan every few years as circumstances change.

 

[3Ts]

I agree about planning ahead and getting some advise. However, be sure you get a good advisor! I've had 4 and they have all turned more money into less money. With the last one, we set up a college fund for my son with a date that it would mature and we could cash it in to pay for college. When it came time, the CFP said that there would be a substantial penalty for cashing it in early. :shocked::smiley_aafz: After that I got educated on finances and did my own investing and have done better than all the financial planners have. What I learned from this is that there is nobody more interested in your well being than yourself.

 

[TractorGuy]

One reason to delay is to increase the benefit to your surviving spouse. My wife is taking hers at 62, I'll take the spousal benefit only until age 70, then take mine, which grows in the meantime. When I die, she gets bumped up to my increased SS. There are different rules for people younger than me (65), so they cannot not do the restricted spousal benefit only, but the higher benefit for the survivor still holds.

In my case I waited to 65. I was keeping our insurance through my job until we reached medicare age. I took the reduced amount option that allows my wife to receive my pension until she dies. She will have two pensions and also be able to get my higher rate SS. I assumed she would outlive me so when she retired I told her to take the full amount retirement. She actually chose and option that would have let me get her pension if she died within 10 years but the amount difference was only like $20 per month. That 10 years has come and gone and she recently took out a term life to give me a 100 grand if she dies before me. I expect that money is being thrown out the window but it would come in handy if by some chance she dies first.

 

[dmccarty]

This is a good example why one should study options then get a review by a pro advisor before choosing when/how to start SS....

* Have adequate pension and savings, and want to leave an inheritance to the kids? I don't know if drawing SS early, or at 70, works best for this. Possibly living on SS now and leaving IRA's to grow for the kids to inherit might maximize what they receive. Also, in this scenario of preserving wealth for the next generation, assigning savings and property into a revocable Trust will simplify settling your estate.

First time in one of the TBN retirement conversations where I have seen this mentioned.

We have a decent amount of money in retirement savings. One reason we will almost certainly take SS payments ASAP is to REDUCE the amount of money we take out of OUR savings. Defined pensions and SS take your money over a lifetime to pay for your retirement, but if you die before retirement or early in retirement, your family is left with NOTHING. At best, one has setup things up with PRSO and SS to help the surviving spouse but the children get nothing from a defined pension or SS. We want to use SS payments to INCREASE what we have saved for decades so we can pass that on to the family.

That is not to say, we will not spend the money as we see fit, because we will. :thumbsup::laughing::laughing::laughing: But the plan is to live off the interest and increase the wealth of the family.

It's a classic saying by retirement planners that people spend more time planning a vacation than they do planning their retirement. It is worthwhile to spend some time, and perhaps money on a consultant, to work out how to maintain your income after you retire. Then fine-tune the plan every few years as circumstances change.

Sad but true that is. :confused3:

Over the years I have built a spreadsheet with multiple retirement models. That sounds really fancy but it is simple math. The spreadsheet is a bit complicated but the math is not.

I simply started with how much money we have in our retirement accounts and then figure out how much money we would have at various retirement ages if we save a certain amount of money each year.

At first, I did this with different rates of returns which is just too complicated and eventually just settled on using the historical long term 10% gain in the market.

The "models" I have settled on are pretty simple at this point. How much retirement money will we have at various retirement ages if the investment grows by 10% and if we invest certain amounts each year. The variability is how much we can invest. The "models" are simple ideas. I continue with the current job and savings rate, I get laid off and can no longer save for retirement, I get laid off and can only contribute a little, or I somehow could maximize under tax rules the amount to save for retirement.

Built into the models are my SS income at age 62. We don't count the wife's SS income so it will act as a buffer for Ah Ohs.

Healthcare is the big variable. We have an HSA account that we are trying to build up and I do have some money from when my company stole our pension benefits decades ago. They paid penny's on the dollar for retirement health care payments but it is enough that we SHOULD be able to pay for high cost health care premiums until Medicare kicks in at 65.

Later,
Dan

 

[Travelover]

........... One reason we will almost certainly take SS payments ASAP is to REDUCE the amount of money we take out of OUR savings. ............


............ They paid penny's on the dollar for retirement health care payments but it is enough that we SHOULD be able to pay for high cost health care premiums until Medicare kicks in at 65.

Later,
Dan

If you retire before Medicare age, one reason not to take SS right away is to keep your taxable income below the ACA (Obamacare) thresholds. Depending on your other income, living off after-tax money can qualify you for big health care subsidies.

A second consideration is if you have a lot in IRAs or 401(k)s, you start required minimum distributions (RMDs) at age 70 1/2. This can throw you into a higher tax bracket, so it can be advantageous to spend down pre-tax money in IRAs to minimize the tax torpedo from RMDs. That torpedo is even worse for a widow, as they get bumped into a higher tax bracket.

 

[California]

A second consideration is if you have a lot in IRAs or 401(k)s, you start required minimum distributions (RMDs) at age 70 1/2. This can throw you into a higher tax bracket, so it can be advantageous to spend down pre-tax money in IRAs to minimize the tax torpedo from RMDs.

I sorta missed on that element of planning. After the house was paid off, kids gone, and now we both have RMD's, we have some income we don't really need month to month. In hindsight it might have been better to structure things so we could leave money untouched until needed for a big cost such as a car. But I can't complain. Heavy saving anticipating the kids college, coincidentally during the boom in the stock market in the 90's, put me way ahead of where I expected to be at this age.

 

[Travelover]

I sorta missed on that element of planning. After the house was paid off, kids gone, and now we both have RMD's, we have some income we don't really need month to month. In hindsight it might have been better to structure things so we could leave money untouched until needed for a big cost such as a car. But I can't complain. Heavy saving anticipating the kids college, coincidentally during the boom in the stock market in the 90's, put me way ahead of where I expected to be at this age.

The good news is that you don't have to spend RMDs, just pay taxes on the withdrawals. So, you can invest the extra cash into a slush fund for cars, etc and leave the rest to your heirs.

 

[California]

Article - Q&A - today on SS benefits.

3 Reasons to Claim Social Security Early

 

[teejk]

I sorta missed on that element of planning. After the house was paid off, kids gone, and now we both have RMD's, we have some income we don't really need month to month. In hindsight it might have been better to structure things so we could leave money untouched until needed for a big cost such as a car. But I can't complain. Heavy saving anticipating the kids college, coincidentally during the boom in the stock market in the 90's, put me way ahead of where I expected to be at this age.

That RMD factor should not be ignored. You cannot escape taxes on it but you can certainly manage around the tax brackets to save some money.