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Isn’t that tax bracket $85,000 for singles? I should be able to stay below that number at least until I reach 70 1/2. Then my RMD will put me over. But I have to be careful with IRA withdrawals too. It makes sense to take IRA withdrawals from 65 to 70 and make sure to stay below $85,000, then at 70 my RMD will be lower. It’s such a balancing act.
You might consider a roth conversion if you are making IRA withdrawals prior to RMD's so long as you can stay under the $85,000 adjusted gross income tax bracket, which could be adjusted in future years.
I currently have 50% of my investments in a Roth IRA. It’s a pretty substantial amount of money. I guess I could do a Roth conversion instead of a withdrawal. I don’t know if there would be much of a benefit, since I will probably never spend down my entire Roth account. I plan to withdraw about 3-4% a year from my investments to enjoy my life, so that’s about what my IRA withdrawal would be anyway.
Last edited by organic_donna; 11-22-2018 at 12:30 PM..
You might consider a roth conversion if you are making IRA withdrawals prior to RMD's so long as you can stay under the $85,000 adjusted gross income tax bracket, which could be adjusted in future years.
Also be aware that a look back of two years adjusted gross income is used.
many of us have the problem that if we have sizable savings in traditional 401k's and ira's , odds are our income level in retirement will be higher too . so while our taxable income in retirement certainly fits in the lower tax bracket , there is barely any room left to do a meaningful conversion since anything meaningful over flows the bracket right away.
the irony is those that would benefit the most from the conversions can't do them without over flowing the bracket .
remember too , that the tax gods give us all a gift if we structure properly . for someone delaying ss as an example , they can take up to 24k a year tax free out of traditional investments as a couple just using the standard deduction . a couple can draw over 40k and pay as little as 4% tax too .
you can over fund a whole life policy for decades up to the modified endowment trigger point and pay zero commissions and fees on any excess , yet earn much higher policy rates that they use to lure you in . . you can then borrow out decades of interest tax free in retirement , never pay it back and add tax free money to your retirement income and still have the policy intact .
use the zero capital gains brackets to generate even more retirement income tax free .
so you can see depending on a lot of other parameters converting may actually shoot yourself in the foot as you pay taxes on money that could be had at no to low taxes without converting . .
Last edited by mathjak107; 11-23-2018 at 04:43 AM..
I am turning 64 in December and was married for over 10 years. I missed the date for being grandfathered for filing a restricted application by one year. My ex is 73 and took his social security at 62. If I wait until 66 to file, my social security will be about $2100 a month. I don’t know what my widows benefit would be when my ex dies.
I know his social security number. If I go to a social security office, can they tell me what my survivors benefit would be? What are my options at this point?
In reading some info and looking at charts on the Social Security web site, if your Ex husband now being 73 claimed at 62 that would have been in 2009. Had at that time he paid max into Social Security that would have delivered him a reduced age 62 benefit of $1,769. According to the web site a divorced spouse at their own FRA would be entitled to receive 1/2 of what their divorced spouse would have received at their FRA not 1/2 of a reduced benefit if the Ex spouse claimed before their FRA. If that is the case then your Ex husband would have reached his FRA of 65 in 2012, and the max FRA amount at that time was $2,048 which with all the COLAs since that time in 2019 will grown to $2,550. So you at your FRA could possibly be eligible to get 1/2 or close to it of $2,550 = $1,275.
Now if you work to your FRA of 66 and claim first on your Ex's benefit x 4 years to age 70 you will receive $61,200 in benefits compared to your own of $2,100 x 12 = $25,200 x 4 = $100,800. Doing this initially equals a loss for you of $39,600 in benefits. But at age 70 you will increase your benefit by 32% which turns your $2,100 benefit into a $2,772 benefit increasing your annual Social Security income by $8,384/year. And when you divide that by your initial loss of $39,600 it will take you 4.72 years to breakeven or age 74.7. If you have longevity genes on your side and think you will live a number of years beyond age 74.4 and are not significantly depleting other accounts by taking first the lower benefit it may be worth your while to consider taking the lower benefit first to delay taking your own higher benefit.
It would be very helpful to you to find our what your Ex husband's current benefit is, not sure if Social Security will give you that amount prior to attempting to claim on it, but very possibly they could tell you had he claimed at FRA would that amount have been bigger than what yours will be which will greatly help in making the best claiming decision for you.
a couple of things , nightengale , because a lot of what you posted is no longer allowed for donna . .
donna missed the cut off so all she can ever get is her own benefit today because of deeming . but she can still get a spousal ADDER to her own benefit . she can't claim on any other benefit and leave hers alone to grow . that ship sailed for her . she can never elect to take spousal and let hers grow because she missed the january 1954 cut off for being at least 62 . that would be considered filing a restricted application which is now gone unless you were grandfathered in .
that applies to both current and ex spouses .
what they do now is take 1/2 her husbands fra amount or ex spouse , regardless of when he files and they subtract her fra amount . any difference is added to her own benefit. it can never exceed 1/2 the spouses fra amount ..
so lets say her husbands benefit is 2500 at fra . 1/2 i s 1250.00 ... lets say donna's fra amount is 1000 .... so 1250 less 1000 =250 ... so donna would get 250 added to her 1000 if she was fra .
if donna files early then they would just add that 250 to her early benefit and she would be getting less than 1/2 since she filed early . but the calculation for the adder is still based on both 1/2 the husbands fra amount minus donna's fra amount .
Last edited by mathjak107; 11-23-2018 at 05:26 AM..
for those without their own work record , there is a special calculation for determining early spousal . but again , this is only for those WHO HAVE NO WORK RECORD OF THEIR OWN .
Unless you die early, it is impossible to pay more in FICA taxes than you collect in benefits.
If your average monthly income is $2,000 then you paid 6.2% in taxes, or $124 per month.
Is your monthly benefit $124 or less? Um, no.
You get 90% of the first $895 or $805.50, plus 32% of the next $896 to $5,397 or $353.60 for a total of $1,159 per month.
Is $1,159 greater than or less than $124?
It's greater than, and you're getting 9.3 times more than what you paid in.
If you put that $124 in a bank and got 2% interest, after 35 years you'd have $247.99.
Is $248 more or less than $1,159?
Now, if you invested that $124 in stocks, and it grew at 8% per year, you'd have $1,833, but the problem is you'd have to pick the right stock. If your stock only grew at 6% per year, you'd only have $953 which is less than $1,159.
A bird in the hand is better than two in the bush.
Try being self-employed making into 6 figures. Adjust for inflation. Then get back to me.
When you adjust for inflation, I’d have to live to 100+ to break even. The payout is very progressive. High income people pay in far more than they can ever take out. I have no problem with that as public policy but I’m very aware that my taxes as a 5%er prop up everyone else.
many of us have the problem that if we have sizable savings in traditional 401k's and ira's , odds are our income level in retirement will be higher too . so while our taxable income in retirement certainly fits in the lower tax bracket , there is barely any room left to do a meaningful conversion since anything meaningful over flows the bracket right away.
the irony is those that would benefit the most from the conversions can't do them without over flowing the bracket .
remember too , that the tax gods give us all a gift if we structure properly . for someone delaying ss as an example , they can take up to 24k a year tax free out of traditional investments as a couple just using the standard deduction . a couple can draw over 40k and pay as little as 4% tax too .
you can over fund a whole life policy for decades up to the modified endowment trigger point and pay zero commissions and fees on any excess , yet earn much higher policy rates that they use to lure you in . . you can then borrow out decades of interest tax free in retirement , never pay it back and add tax free money to your retirement income and still have the policy intact .
use the zero capital gains brackets to generate even more retirement income tax free .
so you can see depending on a lot of other parameters converting may actually shoot yourself in the foot as you pay taxes on money that could be had at no to low taxes without converting . .
Of course, everyone has to evaluate their particular circumstances. In general, conversions work best when retired with reduced income and withdrawing from IRA's and prior to rmd's. The key is to be mindful of tax bracket at conversion and projected income when rmd's start. The caveat being no one knows what tax brackets, medicare surcharge brackets, etc. will look like in the future.
Of course, everyone has to evaluate their particular circumstances. In general, conversions work best when retired with reduced income and withdrawing from IRA's and prior to rmd's. The key is to be mindful of tax bracket at conversion and projected income when rmd's start. The caveat being no one knows what tax brackets, medicare surcharge brackets, etc. will look like in the future.
You can do a guesstimate, it’s not completely unknown. It’s called tax planning. It comes reasonably close to the actual tax situation. I do plan on my Excell spreadsheet and TurboTax so that’s why I do Roth conversion now. I will be in higher tax bracket for married filing, much worse in single filing.
What’s really unknown is whether you will be filing single or married in the future. Only God knows.
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