For Those Who Are Retired

[H20fwler]

I am getting close to retiring and am enjoying work less and less.
The only reason I haven’t retired yet is because we are building a house next spring and I want to be ready for any unknowns.
Going to have to make payments on around half the expense of building the house but wife’s income should easily make the payment. She will be working at least eight more years and I will jump on her insurance.
Plan is to try and pay the remaining debt off on new house in five or so years. All of her income can go towards it.
I am 61

A big question I have is on SS.
Is it true that after around 24K of annual income from my retirement, SS payment gets dropped $1 for every $2 retirement money I draw over that amount?

Is it better to just wait to sign up for SS until I reach the retirement age of 65 or 67 whatever it is for me to get the full benefit?
Is there still a limit I can take out of my retirement savings or be penalized if I wait to receive SS?

My 401K is very healthy and I plan on rolling it along with my pension into an IRA as soon as I retire.
I would like to take a decent draw on it every month while leaving it to grow in the market.
But the thought of having the SS payment I have paid into all my life getting lowered because I’ve saved well just sounds ridiculous.


Is there any way to circumvent that if it is true?

Best case scenario is me retiring in a year and half, worse case could be I just get fed up and do it soon.

How have you guys done it and what pitfalls were unexpected?

 

[SwampCat]

I retired from my main job at 57 and started SS at 62. My sideline job I never made more that 13,000 salary and took any extra as profit. I was never penalized on SS. In fact, as long as I am paying into SS, they readjust upward a little every year. Am 70 now, and will start minimum distributions n three years - I hope

 

[swat1018]

I got this from my broker. It may not answer all of your questions, but I learned a lot of things about SS that I didn't realize.

 

[rocksnstumps]

You may get a smattering of replies on a forum like this but an excellent resource to ask these type of questions and do a search of topics is another forum early-retirement.org

A lot of the folks discussing ER over there are in the late 50s to early 60s demographic and they cover a broad range of questions. Sure there are some folks much younger talking about FIRE (financial independence retire early) in their 30s or 40s but mostly a minority.

Give it a look. I've joined mostly to avoid the annoying pop up ads but don't post any.

 

[Westwind]

How Maximize My Social Security Works | Maximize My Social Security

I have heard Terry Savage talk about this on the radio a lot. I have a lot of confidence in her- she has helped a lot of people for free on her site. The also teamed up with the owner of the owner of this site Larry Kotlikoff to fight the IRS on behalf of people who were overpaid by social security and the administration tried to claw back their meager benefits.

The maximize your social security is under $50 i believe.

Hang in there. My wife is retiring in the fall. She is really ready to be done too.

 

[homerj]

Money from investments, dividends, and capital gains is not considered earned income. Therefore it doesn't reduce your SS payment.

 

[Brian662]

I could be wrong, but I think that income from retirement accounts such as 401k or IRA doesn't count towards the income restrictions when drawing your SS.

If I am wrong about that, I will start putting more into Roth accounts than I do now(currently putting 50% into Roth).

 

[Badgers80]

I’ll try to help ya out a bit. Enjoy this stuff sometimes.

Brian is right, your SS benefit isn’t reduced based on retirement account withdrawals or any non-earned income (capital gains, interest, etc.). If you happen to continue having earned income from a W-2 job or self employment and you take SS, your benefit would be less/withheld and you’d get your benefit recalculated when you reach full retirement age.

Your total income from your wife’s job and any income from retirement account withdrawals does affect the percentage of SS benefit you’re taxed on (0, 50, or 85%), but the thresholds are low so you’d be taxed on 85% of your SS benefit anyway likely.

Your question about taking SS at 62 vs 67 (full benefit age) - your account on the SS website should tell you how much your benefit would be for now vs full retirement age. You could do the math and see which one gives you a better answer depending on your timeline. Taking it at 62 gets you about 70% of what you’d get at 67. It sounds like waiting might be a better option math wise given your wife continuing to work and your healthy accounts.

No limit to what you can take out of your retirement accounts when you’re taking SS or before.

 

[H20fwler]

You may get a smattering of replies on a forum like this but an excellent resource to ask these type of questions and do a search of topics is another forum early-retirement.org

A lot of the folks discussing ER over there are in the late 50s to early 60s demographic and they cover a broad range of questions. Sure there are some folks much younger talking about FIRE (financial independence retire early) in their 30s or 40s but mostly a minority.

Give it a look. I've joined mostly to avoid the annoying pop up ads but don't post any.

Thanks

I got this from my broker. It may not answer all of your questions, but I learned a lot of things about SS that I didn't realize.

Thanks

I could be wrong, but I think that income from retirement accounts such as 401k or IRA doesn't count towards the income restrictions when drawing your SS.

If I am wrong about that, I will start putting more into Roth accounts than I do now(currently putting 50% into Roth).

A Roth only lets me put 8K a year until I retire I think, after I retire I think I can roll 200K a year into Roth IRA and pay the 24% but after that it's tax free?

I’ll try to help ya out a bit. Enjoy this stuff sometimes.

Brian is right, your SS benefit isn’t reduced based on retirement account withdrawals or any non-earned income (capital gains, interest, etc.). If you happen to continue having earned income from a W-2 job or self employment and you take SS, your benefit would be less/withheld and you’d get your benefit recalculated when you reach full retirement age.

Your total income from your wife’s job and any income from retirement account withdrawals does affect the percentage of SS benefit you’re taxed on (0, 50, or 85%), but the thresholds are low so you’d be taxed on 85% of your SS benefit anyway likely.

Your question about taking SS at 62 vs 67 (full benefit age) - your account on the SS website should tell you how much your benefit would be for now vs full retirement age. You could do the math and see which one gives you a better answer depending on your timeline. Taking it at 62 gets you about 70% of what you’d get at 67. It sounds like waiting might be a better option math wise given your wife continuing to work and your healthy accounts.

No limit to what you can take out of your retirement accounts when you’re taking SS or before.

Good info.
If my wife and I do not file jointly I wouldn't claim any of her income correct?
The 62 vs 67 thing totally would be on my life expectancy and men in my family don't seem to live into their 70's.



Appreciate all the reply’s!

 

[Brian662]

A Roth only lets me put 8K a year until I retire I think, after I retire I think I can roll 200K a year into Roth IRA and pay the 24% but after that it's tax free?

Yeah, there are tighter restrictions for a Roth IRA, but I'm fortunate my employer offers a Roth 401k option and I split my contributions 50/50 between Roth and traditional, my wife does the same. It offers much more flexibility for tax purposes later in life.

As far as how much you can roll into a Roth, I think that's something you should look into as well, even while you are working. Depending on your expected tax bracket, it may be beneficial to "fill the bucket" of whatever bracket you're in currently with a Roth conversion. You can either pay for that conversion with cash on the side (for instance a brokerage acct) or by selling assets in your fund. Lots of factors for this, likely should talk to a professional about the possibilities before executing this move as everyone's situations are a little different.

 

[Kdog]

First congrats and the upcoming retirement!

Figure out how long it would take you to make up the difference from taking SS @ 62 VS @ 67. It won't take long to decide which way to go but the break even point is at age 78-79.

 

[b116757]

One thing about SS is once your gone so is the money so waiting may or may not be a good idea if you wait and draw at 67 for one month then die did you get your moneys worth out of the system? So depending on your health it may make more sense to take it early at the reduced rate so your able to draw something versus nothing I understand none of us have a crystal ball and it’s very difficult not to look at our own mortality without rose colored glasses on. I believe the break even point of waiting is something close to 78 years 8 months so unless your health and family history tell you your lifespan is beyond that age don’t wait. My family history says that I likely will never see that ripe old age so for me waiting is likely a waste of money.

What Is the Break-Even Age for Social Security?

Calculating your break-even age can help you determine which Social Security claiming strategy will pay the highest total benefits over your lifetime.

www.aarp.org

 

[T-Max]

I'm living that right now. My stepmom contributed her whole life to SS and died at 62 before she drew a dime. My dad does get a bump to his as the surviving spouse (she made more than he did), but the bulk of it is just gone. Everyone has to decide what is best for them, but after seeing what I have I will draw it as soon as possible. Of course, it will be "extra" money anyway if everything continues to plan.

 

[Badgers80]

Good info.
If my wife and I do not file jointly I wouldn't claim any of her income correct?
The 62 vs 67 thing totally would be on my life expectancy and men in my family don't seem to live into their 70's.

You can't file as married filing separately and get a better answer. The IRS knows people want to go that route, so if you're married and live together but file married filing separately, you automatically are placed into being taxed on 85% of your social security income.

You would take all of your combined income plus 50% of your social security benefit. For MFJ, if this is between $0-$32k, 0% of your SS income is considered income & taxed. Between $32k-$44k, 50% is taxed. Above $44k, 85% is taxed.

Not a bad play to take it at 62 if expectancy is less than 78/79 it seems.

 

[Westwind]

We are living longer and living healthy longer from 1970-2024 especially if you take opioids and hiv and one other thing out of the mix. My dad smoked like a chimney for a lot of years and really liked to drink a beer. He is in his early 80’s. Doing pretty good. I’m more active and would like to think healthier than he was at my age. I hope to live healthy longer.

To me though, even if I live longer, I feel like the money I will get taking ss early will be better spent when I am younger and more active. Could be wrong.

Terry Savage says most people are better off waiting. I’m not sure the kind of folks that are on this board are “most people” and everyone has to make their own call.

 

[homerj]

You can't file as married filing separately and get a better answer. The IRS knows people want to go that route, so if you're married and live together but file married filing separately, you automatically are placed into being taxed on 85% of your social security income.

You would take all of your combined income plus 50% of your social security benefit. For MFJ, if this is between $0-$32k, 0% of your SS income is considered income & taxed. Between $32k-$44k, 50% is taxed. Above $44k, 85% is taxed.

Not a bad play to take it at 62 if expectancy is less than 78/79 it seems.

Any changes coming to SS taxation from the BBB?

 

[Badgers80]

Any changes coming to SS taxation from the BBB?

Nothing SS specific, but those 65+ get an additional $6k "senior deduction" for single filers and $12k for married filing joint. That's on top of the additional standard deduction that those 65+ currently receive. The new deduction begins phasing out at $75k modified adjusted gross income for single & $150k for married filing joint. It's completely phased out at $175k & $250k. For the 2025-2028 years.

 

[H20fwler]

We are living longer and living healthy longer from 1970-2024 especially if you take opioids and hiv and one other thing out of the mix. My dad smoked like a chimney for a lot of years and really liked to drink a beer. He is in his early 80’s. Doing pretty good. I’m more active and would like to think healthier than he was at my age. I hope to live healthy longer.

To me though, even if I live longer, I feel like the money I will get taking ss early will be better spent when I am younger and more active. Could be wrong.

Terry Savage says most people are better off waiting. I’m not sure the kind of folks that are on this board are “most people” and everyone has to make their own call.

You make a really good point.
I’ve thought about the same, need to be healthy enough to enjoy retirement as far as vacationing and being active.
Do what you want to do early while you are still able to do it is a real factor in retiring younger if it’s financially feasible.

 

[hunts_with_stick]

You may get a smattering of replies on a forum like this but an excellent resource to ask these type of questions and do a search of topics is another forum early-retirement.org

A lot of the folks discussing ER over there are in the late 50s to early 60s demographic and they cover a broad range of questions. Sure there are some folks much younger talking about FIRE (financial independence retire early) in their 30s or 40s but mostly a minority.

Give it a look. I've joined mostly to avoid the annoying pop up ads but don't post any.

Interesting. I am hoping to retire in 9 years, God willing.

 

[Telemark]

You make a really good point.
I’ve thought about the same, need to be healthy enough to enjoy retirement as far as vacationing and being active.
Do what you want to do early while you are still able to do it is a real factor in retiring younger if it’s financially feasible.

This is a huge factor in how I live my life. I have taken 6 weeks off to have a summer vacation. I was lucky that my investments moved up, but I haven't traded much at all this summer.

This was one of the best years of my life. I was able to spend a lot of time with my family and make a lot of memories.

I did lose out on a lot of opportunities to make easy money, but my memories from this summer are worth more than what I would have earned.

I will definitely be trying to wring as much profit as I can from the market when I get back to work, but for now I'm focusing on my family.

I know this doesn't answer your questions about retirement payments and taxes, but I have some advice for that too:

Pay the $500 and ask a tax lawyer. The info you get here will help you make a concise list of questions for your lawyer. But ultimately, for your own peace of mind, pay the lawyer and get the real answers. You'll be glad you did.