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Old 09-05-2016, 02:51 PM
 
Location: Central Massachusetts
4,800 posts, read 4,846,832 times
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Quote:
Originally Posted by selhars View Post
I'm getting more confused, the more I read.

Is the issue which is best to allow one to live the lifestyle one would like -- OR -- which option means the person gets the most money whether one spends it or not, and "leaves no money on the table" so to speak, meaning does BETTER than break even?

If I can live the lifestyle off just my pension, and delay until 70 (still not touching my 401K or Roth), does it matter whether I delay or not?

If I claim at FRA, I'd get the money and bank/invest it….if I wait until 70 I have a bigger Soc Sec. check. And sure I could die at 71, and not "break even" -- so my heirs are out that money. But if I've lived as I wanted, that "lost money that I and my heirs never got" seems to be the only "downside."

So let me ask this question: IF a person can live off just their pension, not touching other accounts, and not needing the Soc Sec. -- is it best to delay until 70? -- if they're willing to accept they/their heirs could lose (never get) that money. OR, should they take the FRA amount and bank/invest it? Again I'm NOT talking about money that's needed to live -- NOR or we talking about tapping accounts or drawing down to delay…….


I am confused here too. If you are living on pension income and not touching 401k up to age 70 your heirs will have a chance at more. Because at age 70 1/2 you are going to need to tap that money (Non-Roth accounts) in RMD. Still your heirs will probably still have money when you are gone. You will by default having not taken any out of your Non-Roth accounts and reached 70 taken SS at your max and added in tax deferred income put yourself up for a larger tax hit.

If you have Roth that is the last account to draw from. It could be used in inheritance and it could be use to lower a tax burden for a year or two.
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Old 09-05-2016, 04:03 PM
 
1,040 posts, read 485,060 times
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Quote:
Originally Posted by mathjak107 View Post
because of the fact your portfolio can vary . if it goes up great , but if it drops the ramifications can be a lot worse while delaying . you need a nice healthy cushion for emergency's and unexpected large expenditures .

the big advantage to delaying is the fact you can spend more while younger and healthier from your assets while delaying . if you do not have that healthy cushion to spend more part of that benefit is lost out on .

delaying is really for those who can afford to have that choice .

kitces did a very interesting article on delaying


https://www.kitces.com/blog/how-dela...money-can-buy/
My "plan" is to draw down 5% starting at age 54 or 55. Delay until 70 at which point SS will cover needs so drawdown will be less than 1%. When I plug those numbers into Firecalc it yields a 100% success ratio and in Schwab retirement planner outs me at a 95%+
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Old 09-05-2016, 04:15 PM
 
71,550 posts, read 71,712,424 times
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just don't deplete to much drawing down delaying . if you have the assets to do it safely then great . never try to rule out uncertainty and bad crap from happening . rather plan for it and allow for it .

our first year in retirement was last year and we got whacked with a 20k plus dental bill for the two of us and a flat market just up 1% so we burned principal year one too...
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Old 09-05-2016, 04:25 PM
 
1,040 posts, read 485,060 times
Reputation: 1435
Quote:
Originally Posted by mathjak107 View Post
just don't deplete to much drawing down delaying . if you have the assets to do it safely then great . never try to rule out uncertainty and bad crap from happening . rather plan for it and allow for it .

our first year in retirement was last year and we got whacked with a 20k plus dental bill for the two of us and a flat market just up 1% so we burned principal year one too...
I hear ya. I mean, if in the first couple years of retirement we have a 2000-2002 scenario it won't be good, but keeping 2 years expenses in cash I should whether the storm..to be honest, I'm just so done with working ..I don't hate my job, but I'm just done...lol
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Old 09-05-2016, 06:39 PM
 
Location: RVA
2,165 posts, read 1,265,978 times
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Matts answer as to whether it makes sense to delay or not, if you actually have absolutely no direct "need" tonuse it to live nor requirements from savings to delay is spot on. You are trading risk for assurance, longevity against death. There is no correct answer as to what is ABSOLUTELY correct.

However, if you live to 80 and beyond, you will have more after tax spendable income per year. If you live frugal (and without offending anyone, I mean frugal for people that have the actual choice to delay filing and can afford it) at under 42k per year (married) where you pay zero taxes from 62 until 70.5, and always intend to live that way (even though that absolute number has not changed in 25+ odd years, regardless that inflation has reduced that amount from a "nice" retirement to a barely adequate for many), then it probably makes no difference, except you will have more taxes to be paid on your RMDs, which will be larger. And will push you from zero in to tax torpedo land of unknown tax rates,
dependent on how large tour RMDs are.

So for selhars, I can not imagine a scenario where what you describe is an actual situation. If one is so wealthy, that there is no use for the SS income, then the tax advantages are miniscule.

For DIMA, I really fail to understand why you keep bringing up the 13.3 year break even point. Seriously, I don't understand it. Its not JUST a math problem, but a risk adverse lower taxed income when you need it most later in life vs a nest egg that unless it is in the millions makes no never mind in the equation.

Matt loosely uses 33% as the most he would reduce his savings such that 67% is left for "all things retirement might throw at you" that income doesn't cover. Without stating a number, it still means roughly something better than $700k saved. Because a third of that is $233k or roughly what is the most it could cost you to delay from 62 to 70. I pretty much agree with that. Will $470k cover ANYTHING that could be thrown at you? Nope, no way. 10 times that..yes. So what we are talking about here are savings that cover the majority of things that could seriously degrade your retirement. And even a million is a sparse number for someone in their 50s today, wondering about the real cost of LTC in 30-35-40 years from now.

So what makes sense is to use enough savings that still leaves you with a comfortable "enough". Its the "enough" part that is entirely dependent on what you believe it is. Plenty on here have zero. Pretty safe to say thats not enough. But they have no choice, so they will play the cards dealt to them. Not being judgmental at all. It is the reality of the situation. They have to make that work. Some feel 100k is enough...200k...$1M...etc, etc.

Personally, I never intend to be a Medicaid recipient ever. My choice. I don't want to live big, or my definition of big anyway. But I will live well and comfortable with choices, if I can. My number for savings, with home paid for, and a decent pension, is about the $700k number. Had I no pension, I would peg that number at more like $1.5M. Just my calculations to take care of my wife and me. By delaying SS until 70, there is SOME risk because of reducing that number by 1/3, lets say. But as Matt loves to say, the compounding growth of the tax advantaged income from a 70% larger SS check means not having to keep any powder dry once those larger checks start. Because the income of both SS and the forced RMDs, exceeds what one needs to replace what they have been living on for the last 8 years. So while your income continues to grow and exceed what you should need, your savings go untouched for many years after that. And it both grows and get replenished until you need it for that large LTC bill or whatever down the road. Or die. If you lived exactly the way you wanted to when you were young enough to, bit still arranged for an effortlessly COLA increased income, with minimum risk, so there would be no way you could ever be really poor, then breaking even means didly squat.

If you NEED your SS to make things work how you want them, plus a bit of cushion just in case, then don't delay filing. I don't know how else to say it. It's sad. But really, the only people for which delaying is an easy decision is for those that if they HAD TO, could still live fine without it. While I COULD make it work without SS, and I wouldn't want to, it will be a whole lot nicer with an extra taxable COLA increased income of $53k/yr starting at 70.

Last edited by Perryinva; 09-05-2016 at 07:49 PM..
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Old 09-05-2016, 10:06 PM
 
6,880 posts, read 7,278,655 times
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Surely I’m not the. onIy. person. in the country who can live off their pension alone. And one doesn’t have to be wealthy to not NEED the Soc Sec. Perhaps ones expenses are just so low s/he can do it, for whatever reason, and however they do it. That’s why I asked, about delaying Soc Sec if a person doesn’t need the Soc Sec, and also doesn’t need to tap retirement or other accounts.

As a better of fact, that's how I'll do it my expenses will just happen to be low enough (no mortgage, car payment, debt, etc) -- that even with some travel, my pension will likely be plenty for the retirement for the lifestyle I'll likely live. And even if it's not there are other accounts I could tap before any retirement accounts or taking Soc. Sec. And, again, surely I'm not the only one in this situation.

Last edited by selhars; 09-05-2016 at 11:22 PM..
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Old 09-06-2016, 03:04 AM
 
71,550 posts, read 71,712,424 times
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if you have a pension that covers it all than the pay check from work never stops , in effect you never fully retired , so you are not the same as those trying to make it off ss and their own investments .

for those folks they first have to create that pay check in some efficient manner that lasts as long as they do with an acceptable amount of volatility and risk . .

many of the discussions about investing or ss will not apply to those who never have the pay check from working end . technically they may never go in to a decumulation stage .

Last edited by mathjak107; 09-06-2016 at 03:50 AM..
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Old 09-06-2016, 04:13 AM
 
Location: RVA
2,165 posts, read 1,265,978 times
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No, selhars, you are by far not the only one that can live off pension alone from 62 -70. There are still quite a few. My BIL is retired LEO. and his pension is 100% of the aversge of his last highest 36 months out of 72. At 57, though, his medical for his wife and self is $1200/mo. And rises each year.

But as I said above, in that scenario, you will pay less taxes for more income that does not require market performance dependence if you delay your filing until 70, AND rollover from tIRA to Roth to maximize your lower tax bracket during those years. Once you file for SS and are forced to take RMDs, (assuming you have tIRA/401k) coupled with your pension, you get thrust in to the highest tax bracket you would be in since retiring, for which there is not much you can do, especially as most retirees will have no mortgage or business writeoffs against that income. If your savings continue to compound and grow aggressively, your RMDs will only increase and possibly propel you to higher brackets from there. It's a great problem to have, don't get me wrong, but I don't know too many (any actually) that want to pay more taxes than they have to. How much exactly you will save depends on many factors (how big is pension, COLA or not, how big is IRA, where you live in retirement, single or married, mortgage or not etc). If you are in the 35 or 38% and up tax brackets, before and after retirement, then you are way out of my league, and I don't know it there are other ways to shelter your income from taxes at that level. 3 or 4k in extra taxes may not be worth the trouble at that level. I wouldn't know!

Last edited by Perryinva; 09-06-2016 at 04:25 AM..
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Old 09-06-2016, 04:17 AM
 
71,550 posts, read 71,712,424 times
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having choices is always the best position to be in
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Old 09-06-2016, 04:27 AM
 
Location: R.I.
977 posts, read 605,084 times
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Quote:
Originally Posted by selhars View Post
Surely I’m not the. onIy. person. in the country who can live off their pension alone. And one doesn’t have to be wealthy to not NEED the Soc Sec. Perhaps ones expenses are just so low s/he can do it, for whatever reason, and however they do it. That’s why I asked, about delaying Soc Sec if a person doesn’t need the Soc Sec, and also doesn’t need to tap retirement or other accounts.

As a better of fact, that's how I'll do it my expenses will just happen to be low enough (no mortgage, car payment, debt, etc) -- that even with some travel, my pension will likely be plenty for the retirement for the lifestyle I'll likely live. And even if it's not there are other accounts I could tap before any retirement accounts or taking Soc. Sec. And, again, surely I'm not the only one in this situation.

Consider yourself very fortunate if you have a pension large enough to cover all your expenses and have money left over for extras like travel. I will be a FERS retiree with a pension of around $30,000. I too have no mortgage and no other major debt, and to cover all my basic expenses I will need $35,000 net annually and another $5100 as of today's premiums for health, dental, vision, and Medicare B = $40,100.

Obviously my pension will not cover my expenses, and with my goal of 75% gross income replacement for a potential 30 year retirement to make that happen I will be deferring taking my SS at 70 instead of at my FRA of 66.6. I do have the opportunity to claim a widow's survivor benefit which I will at my FRA, but it is significantly less than what my own would be but does soften the blow a bit of the larger amounts I need to withdraw from my TSP/401K account those 3 years to make up the income gap. When my higher SS benefit kicks in at age 70, I will drop my TSP/401K withdrawals to 4%, and with all my funds in that account being in the low risk G fund with historical growth of 2%, if I should live to age 97 there should be around money left in that account. If I chose to take my own SS benefit at FRA, I would need to take larger amounts over a longer period of time from my TSP/401K and very likely that account will be entirely depleted by age 87.

Do I think I will live to 97 probably not, but I want to cover that possibility because I want enough income to be able to keep my doctor and my health insurance, pay my bills, some extra to splurge here and there, and have enough income in my later years to cover any home care assistance I may need.

We all have different financial goals for retirement and have to choose the right path to reach our individual goals. Hopefully we all choose the right path
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