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Old 12-18-2009, 02:57 AM
 
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heard a fellow yesterday on the ray lucia radio show who called in and was one of those soles that actually paid back all the early ss he got so he can lock in the higher rate.
now thats a fairly common idea at this point.

but heres the best part... the tax credits he got for over paying his taxes all the years he collected left him with a negative income for the year.

normally there is no carry over its just you pay nothing in taxes.

so in the smartest of moves he is going to convert his ira's to roths and use up all that negative income in a phenominal way.

what a great idea..........


not only is he increasing his payment by 960 bucks a month but he just got a tax free conversion on his ira.....

Last edited by mathjak107; 12-18-2009 at 03:23 AM..
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Old 12-18-2009, 08:13 AM
 
Location: Indiana
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Quote:
Originally Posted by mathjak107 View Post
so in the smartest of moves he is going to convert his ira's to roths and use up all that negative income in a phenominal way.
Got little lost here. Can you elaborate?

BTW, interesting info in the first part of your post. And very useful, of course. Seems like it's OK, to start early SS drawing, then at 66 one just needs to assess his/her health, and if good, then just to return the early SS payments, hence boost the SS income.
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Old 12-18-2009, 08:54 AM
 
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IF you paid taxes all those years on your social security and you pay it all back to get the higher benefit they let you deduct the social security income from current income that you paid taxes already on.....

if the credit is more than you made that year then you have negative income.

the beauty is if you convert to a roth thats counted as income. the negative income is subtracted from the conversion income and you owe way less or better still maybe nothing on the conversion.....

brilliant move......
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Old 12-18-2009, 10:54 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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I agree it is a great idea, but also check on your health status (as mentioned). Maybe buy a 10-15 yr term life insurance policy with some of the early payments to assure you will end up 'ahead of the System' in case of early demise shortly after you 'pay-back' SS.

I think it is a 7-10 yr recovery period AFTER you pay back; depending on circumstances (taxes, payout amt. span of time in early withdrawals.)
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Old 12-18-2009, 11:04 AM
 
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its far less if you have tax credits from paying taxes on the social security and do the roth conversion ..... that fellow almost made back every thing he paid back to social security on the credit towards the roth conversion....

if he didnt do that he would have just lost the difference when it turned his income negative for the year. it worked out brilliantly

it may be a 7 year pay back or so if you pay it back but if your married you got 2 horses running in that race for the price of one. odds are one of you will make out and live long enough.


to me i would be more interested in spending alot more while i was younger and healthy then i otherwise would because i would have the security of knowing we will be refilling our savings later on with almost double the payments if we live...

i can increase my early withdrawls big time early on and thats a plus for us....i dont have to worry about withdrawing to much and running low on dough later on with that whopper of a payment coming in when we take full ss later on..

if we dont live then its not an issue about breaking even is it????? ha ha ha
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Old 12-18-2009, 05:05 PM
 
Location: Central California
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Another way to look at the SS buyback is to compare it with the price of buying an annuity that gives you the same COLA Payout.

From what I've heard the price difference is pretty big, but someone smarter than me would have to run the actual figures. Makes you wonder how much profit the insurance company makes when they sell you an annuity.
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Old 12-18-2009, 05:18 PM
 
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its actually the cheapest annuity around for the amount of money you get and the cola adjustment... it now becomes an amazing deal if you can do a roth conversion and get back instantly most of the money you just handed them.

this could be one of the biggest tax loopholes... i still really need to see the tax form to make sure that is how the payback is handled. i always thought you had to do amended returns for the ss you pay back but this fellow said no , its a subtraction off current income.


think about it, normally you would hand social security back say 80,000 bucks and they give you the larger payment... you also would spend tens of thousands of dollars converting equal amounts into a roth...

here you take the money you would have spent on the conversion anyway, give it to ss and they give you that bigger payment anyway...it sounds almost to good.

Last edited by mathjak107; 12-18-2009 at 05:35 PM..
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Old 12-18-2009, 07:49 PM
 
Location: SoCal desert
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Dateline (or 60 Minutes or 20/20 or one of those ) did a segment on this topic within the last 3 months.
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Old 12-19-2009, 08:32 AM
 
Location: Great State of Texas
86,093 posts, read 72,469,891 times
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Quote:
Originally Posted by mathjak107 View Post
IF you paid taxes all those years on your social security and you pay it all back to get the higher benefit they let you deduct the social security income from current income that you paid taxes already on.....

if the credit is more than you made that year then you have negative income.

the beauty is if you convert to a roth thats counted as income. the negative income is subtracted from the conversion income and you owe way less or better still maybe nothing on the conversion.....

brilliant move......
Wow..excellent info. I plan to take early and then pay back to get full benefits....this just adds a little icing to that cake for the year you pay it back.
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Old 12-19-2009, 09:19 AM
 
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we still have to confirm the payed back ss is deducted off the years income like the guy on the radio said and not as amended returns..... if we have any retirees with some time and want to call the irs during the week and confirm feel free.
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