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the tax code gives us all a gift . by delaying ss we can pull out up to 22k a year in never taxed ira money tax free if a couple , or up to 40k and pay as little as 4.50% effective tax .
So are you saying I can withdraw 22K a year from traditional IRA money and not get taxed on it? When we have to take RMDs we won't get taxed on the first 22K? This is why I need to ask my CPA some questions as we start thinking of future tax implications for us
The standard deduction and exemptions wipe that out for a couple . If you are delaying ss and have no other income than you will have no taxable income .
When you are doing your budget, realize that Medicare is not free. You will have to pay premiums. You can pay them directly if you delay SS, or they will take them out of your SS check. In my case, I pay Part B premiums to the gummint, and Part D is rolled into my medicare supplemental insurance, that currently costs me $310/month. I don't know if Part B premiums are cheaper for lower income recipients, but I not only get to pay premiums but get taxed on 85% of what I pay to the gummint.
The key to a happy retirement is to have your income exceed your outgo. Remember, you will need to hire people to do things you used to do. My wife had surgery this year and the yard got away from me, so I hired a yard service to get it into shape.
That was 5 guys x 8 hours x $45/hour, which in other times I would have done myself. One of my old college friends hired a housekeeping service to do her house, because it was more than she could do any more. You will spend more money on services even before you move to assisted living where they cook your meals and do your laundry.
If you died would you know the difference between breaking even or not? I bet neither would your heirs. What if you died before even retiring?
the reality is there are no ramifications to not breaking even . the ramifications are all from running out of money before you run out of time or are forced to live a lessor lifestyle than you desired . the most meaningless question is always what if i die ? the most meaningful question is always what if i live .
that does not mean the answer is always to delay , but it does mean we all should be planning for what if we live . what if i die requires other arrangements like life insurance and funeral plans , that is how we deal with the what if i die question .. . annuity's and delaying ss are all about what if i live .
I think the people doing the "break even" calculations are living a fantasy. If they are so well to do that giving up a big hunk of their benefits won't make a difference, they should just retire whenever they want. They can start penalty-free withdrawals from their tax deferred accounts at 55, so why not? If they clean out their 401k/IRA accounts, they can collect SS tax-free, and that really moves the "break even" point closer. By their logic, there is no point to dying with money in the bank, so spend that first.
As someone here pointed out, the real reason people file early is that they need the money. They lose their jobs or their health, and early SS is their lifeline out of penury. I used "catch up" provisions to put another $35k a year into tax deferred savings the last three years before I retired. The mortgage was paid off, my pension guarantees that my SS will always be taxed, so why not? My dad died at 80 thanks to 65 years of Camel straights, his father lived to be 98. My mother lived to be 95. I have Rolls Royce medical insurance. Waiting to FRA was a no-brainer.
I spent my first 25 years doing construction work, and changed careers in my 40s because my body was already wearing out. If I had been stuck in construction for the next 20 years, you bet I would have taken early retirement, and been glad of it. I saw guys getting up and going to work every day who were so deformed with arthritis they should have been in a wheelchair. Raising the retirement age has really screwed over blue collar workers, but what else is new?
we are delaying to cut dependency on markets and rates . everything else is a moot point to us .
we rather give up 8 years of our own money in exchange for decades of living more off their money with less emphasis on markets and sequence risk . it is the best annuity that amount of money can buy . for what we lay out you couldn't find a better deal .
The standard deduction and exemptions wipe that out for a couple . If you are delaying ss and have no other income than you will have no taxable income .
How much can a single person withdraw from a traditional IRA without paying taxes (same scenario as saralvr, except for a single person, not a couple?)
Part of the problem with discussing delaying and whether it makes sense is no one gets to see true inflow/outflow, taxes paid, net after tax income, per year for their particular situation. Math scares a lot of people, or you have garbage in garbage out calculations. An experienced retirement financial advisor (not an investment advisor) can intelligently decipher the correct ways to use such tools. Even mathjack, whom we all mostly agree is on top of his finances, went to see Fidelity and have an independent evaluation plotted. People do more research buying a new car or planning a vacation than they do their retirement finances. One can not know what they are not aware of...because they are not aware of it to even look for it. Until I had multiple iterations of the scenarios with actual after tax cash flows by filing at different ages, did I realize how much I was foregoing by filing too early. In my particular case it was very significant.
When social security release a average check amount ie $1341, I would think it does not include the medicare premium deducted. If a person has other supplements for medicare are they taken out of the SS check as well? Seems like that $1341 can be reduced to less than $1000 or more.
They can start penalty-free withdrawals from their tax deferred accounts at 55, so why not? If they clean out their 401k/IRA accounts, they can collect SS tax-free, and that really moves the "break even" point closer. By their logic, there is no point to dying with money in the bank, so spend that first.
I'd take Soc Sec before dipping into MY retirement accounts. I just like having "my own."
Besides, I may want to buy into a Continuing Care Retirement Community, so I can't spend below the amount needed to do that.
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