We did similar. With the money I saved selling my house in 2021 and purchasing my current home with no mortgage, we purchased 2 annuities with fixed time frames of 5 and 6 years at relatively high interest rates that will kick in next year and the year after. Plus we’ll start taking 4% from my 401k once I turn 59.5. This will cover us until I’m 65 and wife is 67. We’ll get my SS at 65, spousal adds 50% more, and then my pension from my 30 years at company a is also added. Oh and my wife has a state employees pension she already gets since she’s 60 that we’ll sort of blend in to her spousal ss benefits. Plus of course my 401k will continue paying out. I feel very confident
I think this is the best strategy for us.... spending down our savings while young, ie before 70, and post-70 living off pension/SS income. If we don't spend the money, we can always gift it and help out our 2 kids while they are relatively young with all the expenses that come in their 20's, 30's and 40's. Give them the head-start we didn't have
Very good video. One reason I am going to wait until 70 is that at the most 85% of SS is taxable, meaning at least 15% will be tax free and in my state 100% tax free. Waiting means this tax free income will be the highest and get the largest COLA.
I'm 59, and I am planni ing on retirement at 65. Currently I sock away half my salery into roth Ira as well as roth 401k. I max out both. At 65 when I get medicare I can retire and take from my Ira just enough to cover the standard deduction so I'll pay no taxes, and live off of my roth ira. At 70 I'll collect social security.
Very informative presentation. I plan to retire sometime between 60 and 62 and live on investments until 70, and probably also do 1 or 2 Roth conversions in the early years as well. I'll stick to this plan as long as my health and vitality remain strong. If my health deteriorates unexpectedly, I will adjust, but I expect to live a long healthy life (knock wood). Even though I have a pretty clear idea of what I will do, I still plan to consult a fiduciary as I close in on retirement. A set of expert eyes certainly can't hurt.
I plan on delaying taking S.S and taking withdraws from my IRA but willing to change my strategy if we enter into a bear market. I will look to avoid making large withdraws when the market is down and most likely adjust to taking S.S and presering my savings.
Great video ... for me, i want to do all i can to see to it my wife will be in as good as a position as possible if i were to prematurely pass ... planning on using this strategy, but will also consult a PROFESSIONAL to make sure i take full advantage of the strategy. Thank you !
when I stop working I should have enough in savings and after tax accounts to defer social security for 2-3 years possibly longer, and not have to touch my tax deferred accounts. Some factors will impact this, including my health (so far so good, but I know that can change in an instant), my work status (I could be laid off before I'm ready), financial needs, change in asset value in my tax deferred accounts, etc. I don't want to deplete my savings because I want to have at least 1 year of funding living expenses for down markets, so I don't have to sell anything at a loss. Also, in up markets I want to be taking some profits out of tax deferred accounts to offset future RMDs. It's a balancing act: deferring social security, deferring withdrawals from investment accounts (after tax and tax deferred) to maximize growth, minimize loss, and minimizing future RMDs, while having enough cash to cover 1-2 years of living expenses in down market years.
Thanks for the video. In our case I will be retiring in June 2024 at 67 1/2 and will be taking SS at 70. So for the first 3 years we will frugal basically testing our spending budget. These 3 years I will be working for a boating club earning about $20,000 per year as a part time job. Once we start getting our SS we can start to spend a little more. We also are using the bucket system Bucket1 - 3 years of spending in money market funds to get us to when we start getting SS Once we start getting SS the amount needed to cover 3 years of spending will be reduced. Bucket2 - Enough income from SS and dividend ETFs to live well. Bucket3 - The remainder in Growth ETFs for long term growth. I do not like bonds so I have no bonds. The plan does the following 1. Protects us from a 3 year down market Bucket1 2. Protects us from a longer down market Bucket2 (Max SS and Dividends) 3. Protects us when one of us dies (Max SS) 4. Protects us from living a long life. (Max SS and growth stocks - bucket3) The downside is we will not maximize our returns if the market does well.
Another option you may consider. Since you are at FRA you can receive your full benefits Let’s Assume your joint SS income would be around $50,000 With the $20,000 from your part time job you would still have $0 Federal tax.Since you live frugal as you say you could let your investments just ride the waves.
I was never rich, but 26 out of my best 35 earnings years exceeded the SS threshold and the other 9 years were close. My max benefits for any retirement age are only $60 less than the max allowable. I retired at 65 and am using savings to delay my benefits as close to 70 as possible. At that point my, wife & I will be receiving close to $85,000 annually from SS. Since this will be our only source of income we will not have to pay any income tax. And without a mortgage, car payments, credit card debt or any other debts, we should be able to be comfortable in retirement and not have any worries about money.
I would take it at 67 Probably gives you around $76,000 That’s close to $220,000 more than waiting till getting close to 70.before you draw. Do the math you are only gaining around $9,000 a year waiting will take you 20 years to reach around $200,000 with COLA increases
This can be a great strategy for those with modest portfolios and minimal legacy goals. We are doing a slightly customized version of this. Obviously if you need to work to delay SS, it is a completely different discussion, however maximizing the higher earner check has huge advantages for most, so there are some in between strategies. From a risk perspective, maximizing SS and spending down the portfolio to do so has numerous advantages. Social security despite all the issues is still the least risky and highest returning low risk asset out there, and it is a pretty sure thing for current retirees
Great video, appreciate review of both positives and negatives of this strategy. Biggest difficulty now is locking in losses ... we have 2 years expenses saved in cash so will spend that until market comes back, then use 401k bridge. in those 2 years will do roth conversions also. We've been giving our kids their inheritance "up front" in yearly gifting so that's not as big a concern.
One important variable to back of napkin analysis is life expectancy. To me, a desirable bridge strategy for those who saved for retirement while working when comparing 62 to 67 is to work longer. If one may work just 2 more years until 64 to retire and claim SS, the SS break even taking into account the earnings for those 2 add’l years would be much closer to a healthy person’s life expectancy. One who prioritized retirement savings while working may then also be in a great spot to have retirement income between 70-100% with inflationary adjustments of their final salary until their life expectancy date of death. If one lives longer, they will likely still be ok and way better off than most.
Yes, that strategy of adding two years can be really helpful. That's a great reminder that it doesn't have to be all-or-none (you don't necessarily have to wait until 70, for example). Those two years might enable you to save more for retirement, pay for a few nice vacations while you wait to retire, and reduce the number of years you'll fund for retirement-plus the potential benefit increase you mentioned. Thanks for watching!
That's a good question, and I don't have a good answer that can be applied generally. I'll have to think more about that and see if there are some guidelines that people can follow.
The answer depends on your risk tolerance level and goals. My plan is to have a 6 year bridge. Since I'm very concerned about sequence of return risk and would like to travel early on: -5 years of living expenses + some vacay $ stashed in a cash-like fund. -For Year 6, 50% of living expenses + vacay $ in a cash-like fund. If the market helps out by giving greater than inflation rate returns, will probably go on longer vacations during these years. Or, refill some of the cash bucket. If it's the case, I'm OK with spending 100% of the money saved above as hopefully it has done its job of getting me to the end of the bridge. And then am on Easy Street of much larger SS checks.
@@i-postm4943Great strategy! What is the percentage of the bridge account to your total retirement account? Do you have a separate emergency fund as well?
If I took Soc at 62 $1600 x 3 = $50,000 then take Soc at 65 >$2000 my IRA wud still have >$300K Unless market Totally Crashes... ? I think Bridge is good strategy? I just wish I had put more money in my Cash Bucket? Wish have to tap into IRA 58/42 STOX AND bonds both Down 20% I am 60 Single in good health, will have Pension ot $1840 fixed, will not grow.
@@ApproachFinancial thank you! I've learned so much about SS watching your videos. My goal is to retire in 7 years about 10 years before I qualify for Medicare. I plan to delay my SS as long as I can. Although, so much life can happen in that time so I'm just trying for maximum flexibility at this stage.
Possibly, but it always depends on the details (which I don't have here). In some cases, a spousal benefit is "unlocked" when the higher-earning spouse claims their benefit. So, you could potentially get a top-off when your spouse eventually claims, but I can't be certain without having the details myself. A good place to verify is directly with the Social Security Administration.
felt like i watched 50 of these kinds of videos before someone actually broke down where the market real (not avg) return would have to be for it to make more sense to claim early & leave your $ invested. the magic # according to the author was 5.5%. iow, if your investments make more than 5.5% then u would be wiser to take SS early, letting your investments grow. historically the market has done well north of that # so it seems this would be wiser for a lot of retirees. all that said, i keep trying to find rationale for waiting as long as possible to take SS simply cuz i like the idea of it. still 5-6 years from retirements but will probably take it early, let my investments grow, doing roth conversions where they make sense, then use a 2-3 bucket strategy when i start to draw down my investments. surely want to have enuf out of the market at any given time so that a sustained downturn doesn't cause undue havoc. now if only we could get CDs/tbills/etc (post-tax) to match/outpace inflation, wouldn't that be wonderful?
The increase comes from multiple factors, and yes, continuing to work and paying into the system can increase your benefit. The size of that increase depends on your earnings history, so it's smart to run what-if scenarios (and enter different income levels-including zero) with the SSA calculator when you're logged in to your account. Sometimes the impact of stopping work a few years early is negligible, but it just depends. You also get increases from being older. For example, after FRA, the increase is 8% per year (broken down monthly, really) until age 70. The increase is generally smaller before FRA.
I like the bridging strategy. You started off the video by using an example of retiring at 62 and drawing down retirement savings by the same amount you would have received at 62. Maybe you should have suggested to first dive in and really understand your monthly expenses. Paying yourself the SS payment out of savings may only be a drop in the bucket to what you really need to live on. Now, if you can live off your social security payment, fine but I seriously doubt it.
I think the drawing down the equivalent SS at 62 will be from the bridge account probably in conservative assets (bucket 1), the rest will come from retirement investments. So if quitting work at age 62 and will claim SS at 67, bridge account will have equivalent of 5 years of SS. This is my understanding of the SS bridge account 😅
This all sounds great if you live long enough. But as they say, if you want to make God laugh, tell God you have made a plan. If your parents and grandparents lived into their 90s, this might have a benefit, otherwise delaying a year or two could be the better choice.
Better yet, retire early and work enough to earn $4,000 to put into a Roth get the maximum form 8880 Saver's Credit and bump up your tax free zone from the standard deduction to $43,500 and use that head room to make decent sized tax free Roth conversions. Over time they really add up at least until the Secure Act 2.0 takes over and ruins the credit in 2027 but I'm hoping for a change in leadership will wipe out this complete fustercluck of an Act.
Maybe for you. Not for me. I’m going to maximize mine by waiting until 70. Every one of us is in different situations. Justin laid it out quite well in this video.
Yes, it can be pretty freaky to make these really important decisions with limited information and forge out into the unknown. The best we can do is take a step forward, get new information, adapt whenever possible, and repeat. Until they come out with a better crystal ball, I think that's all we've got.
We did similar. With the money I saved selling my house in 2021 and purchasing my current home with no mortgage, we purchased 2 annuities with fixed time frames of 5 and 6 years at relatively high interest rates that will kick in next year and the year after. Plus we’ll start taking 4% from my 401k once I turn 59.5. This will cover us until I’m 65 and wife is 67. We’ll get my SS at 65, spousal adds 50% more, and then my pension from my 30 years at company a is also added. Oh and my wife has a state employees pension she already gets since she’s 60 that we’ll sort of blend in to her spousal ss benefits. Plus of course my 401k will continue paying out. I feel very confident
I think this is the best strategy for us.... spending down our savings while young, ie before 70, and post-70 living off pension/SS income. If we don't spend the money, we can always gift it and help out our 2 kids while they are relatively young with all the expenses that come in their 20's, 30's and 40's. Give them the head-start we didn't have
Very good video. One reason I am going to wait until 70 is that at the most 85% of SS is taxable, meaning at least 15% will be tax free and in my state 100% tax free. Waiting means this tax free income will be the highest and get the largest COLA.
Excellent information. Probably the best explanation for waiting for your Full Retirement Age to take SS. Many great points made here. Thanks.
I'm 59, and I am planni ing on retirement at 65. Currently I sock away half my salery into roth Ira as well as roth 401k. I max out both. At 65 when I get medicare I can retire and take from my Ira just enough to cover the standard deduction so I'll pay no taxes, and live off of my roth ira. At 70 I'll collect social security.
Do you realize SS by itself is non taxable? You could collect $50,000 from your ROTH and another $40,000 from your SS Still no Federal tax.
re-watching this! awesome
Very informative presentation. I plan to retire sometime between 60 and 62 and live on investments until 70, and probably also do 1 or 2 Roth conversions in the early years as well. I'll stick to this plan as long as my health and vitality remain strong. If my health deteriorates unexpectedly, I will adjust, but I expect to live a long healthy life (knock wood). Even though I have a pretty clear idea of what I will do, I still plan to consult a fiduciary as I close in on retirement. A set of expert eyes certainly can't hurt.
Sounds very reasonable, thanks for watching and sharing your view!
I plan on delaying taking S.S and taking withdraws from my IRA but willing to change my strategy if we enter into a bear market. I will look to avoid making large withdraws when the market is down and most likely adjust to taking S.S and presering my savings.
Thanks Justin. Excellent content. This helps to bolster my confidence in this strategy.
Glad it was helpful!
Great video ... for me, i want to do all i can to see to it my wife will be in as good as a position as possible if i were to prematurely pass ... planning on using this strategy, but will also consult a PROFESSIONAL to make sure i take full advantage of the strategy. Thank you !
Great video! Nice to see what I have been following for 2 years.
Glad to hear it, thanks. Sometimes people figure this out on their own, and that's great it's working for you.
Great information! I am 58 years old and may go this way I just need to tweek some things.
when I stop working I should have enough in savings and after tax accounts to defer social security for 2-3 years possibly longer, and not have to touch my tax deferred accounts. Some factors will impact this, including my health (so far so good, but I know that can change in an instant), my work status (I could be laid off before I'm ready), financial needs, change in asset value in my tax deferred accounts, etc.
I don't want to deplete my savings because I want to have at least 1 year of funding living expenses for down markets, so I don't have to sell anything at a loss. Also, in up markets I want to be taking some profits out of tax deferred accounts to offset future RMDs.
It's a balancing act: deferring social security, deferring withdrawals from investment accounts (after tax and tax deferred) to maximize growth, minimize loss, and minimizing future RMDs, while having enough cash to cover 1-2 years of living expenses in down market years.
Excellent and helpful content, thanks very kindly, Justin!
Thanks for the feedback, David!
@@ApproachFinancial My pleasure, Justin.
Thanks for the video.
In our case I will be retiring in June 2024 at 67 1/2 and will be taking SS at 70.
So for the first 3 years we will frugal basically testing our spending budget.
These 3 years I will be working for a boating club earning about $20,000 per year as a part time job.
Once we start getting our SS we can start to spend a little more.
We also are using the bucket system
Bucket1 - 3 years of spending in money market funds to get us to when we start getting SS
Once we start getting SS the amount needed to cover 3 years of spending will be reduced.
Bucket2 - Enough income from SS and dividend ETFs to live well.
Bucket3 - The remainder in Growth ETFs for long term growth.
I do not like bonds so I have no bonds.
The plan does the following
1. Protects us from a 3 year down market Bucket1
2. Protects us from a longer down market Bucket2 (Max SS and Dividends)
3. Protects us when one of us dies (Max SS)
4. Protects us from living a long life. (Max SS and growth stocks - bucket3)
The downside is we will not maximize our returns if the market does well.
Another option you may consider. Since you are at FRA you can receive your full benefits Let’s Assume your joint SS income would be around $50,000 With the $20,000 from your part time job you would still have $0 Federal tax.Since you live frugal as you say you could let your investments just ride the waves.
I was never rich, but 26 out of my best 35 earnings years exceeded the SS threshold and the other 9 years were close. My max benefits for any retirement age are only $60 less than the max allowable. I retired at 65 and am using savings to delay my benefits as close to 70 as possible. At that point my, wife & I will be receiving close to $85,000 annually from SS. Since this will be our only source of income we will not have to pay any income tax. And without a mortgage, car payments, credit card debt or any other debts, we should be able to be comfortable in retirement and not have any worries about money.
I would take it at 67 Probably gives you around $76,000 That’s close to $220,000 more than waiting till getting close to 70.before you draw. Do the math you are only gaining around $9,000 a year waiting will take you 20 years to reach around $200,000 with COLA increases
Great information, thanks.
This can be a great strategy for those with modest portfolios and minimal legacy goals.
We are doing a slightly customized version of this.
Obviously if you need to work to delay SS, it is a completely different discussion, however maximizing the higher earner check has huge advantages for most, so there are some in between strategies.
From a risk perspective, maximizing SS and spending down the portfolio to do so has numerous advantages.
Social security despite all the issues is still the least risky and highest returning low risk asset out there, and it is a pretty sure thing for current retirees
Seems like a good strategy for single folks with no heirs to leave money too.
Thakyou for Great Information
Great video, appreciate review of both positives and negatives of this strategy. Biggest difficulty now is locking in losses ... we have 2 years expenses saved in cash so will spend that until market comes back, then use 401k bridge. in those 2 years will do roth conversions also. We've been giving our kids their inheritance "up front" in yearly gifting so that's not as big a concern.
Great to hear, thanks. And yes, giving during life can be satisfying.
Thanks for the video!
Thanks for watching, Dan!
Great information
Glad it was helpful!
One important variable to back of napkin analysis is life expectancy. To me, a desirable bridge strategy for those who saved for retirement while working when comparing 62 to 67 is to work longer. If one may work just 2 more years until 64 to retire and claim SS, the SS break even taking into account the earnings for those 2 add’l years would be much closer to a healthy person’s life expectancy. One who prioritized retirement savings while working may then also be in a great spot to have retirement income between 70-100% with inflationary adjustments of their final salary until their life expectancy date of death. If one lives longer, they will likely still be ok and way better off than most.
Yes, that strategy of adding two years can be really helpful. That's a great reminder that it doesn't have to be all-or-none (you don't necessarily have to wait until 70, for example). Those two years might enable you to save more for retirement, pay for a few nice vacations while you wait to retire, and reduce the number of years you'll fund for retirement-plus the potential benefit increase you mentioned. Thanks for watching!
Love your videos
What amount (either percentage or dollar amount) would you recommend not falling below when implementing this strategy ???
That's a good question, and I don't have a good answer that can be applied generally. I'll have to think more about that and see if there are some guidelines that people can follow.
The answer depends on your risk tolerance level and goals.
My plan is to have a 6 year bridge.
Since I'm very concerned about sequence of return risk and would like to travel early on:
-5 years of living expenses + some vacay $ stashed in a cash-like fund. -For Year 6, 50% of living expenses + vacay $ in a cash-like fund.
If the market helps out by giving greater than inflation rate returns, will probably go on longer vacations during these years. Or, refill some of the cash bucket.
If it's the case, I'm OK with spending 100% of the money saved above as hopefully it has done its job of getting me to the end of the bridge. And then am on Easy Street of much larger SS checks.
@@i-postm4943Great strategy! What is the percentage of the bridge account to your total retirement account? Do you have a separate emergency fund as well?
Great job! Thank you!
Thank you for watching and chiming in!
If I took Soc at 62 $1600 x 3 = $50,000 then take Soc at 65 >$2000 my IRA wud still have >$300K Unless market Totally Crashes... ? I think Bridge is good strategy? I just wish I had put more money in my Cash Bucket? Wish have to tap into IRA 58/42 STOX AND bonds both Down 20% I am 60 Single in good health, will have Pension ot $1840 fixed, will not grow.
good stuff!
Thanks for the kind words!
This is exactly what I planned to do! Had no idea it was an official strategy lol. I think for tax reasons I'm going to have to. I'll be 401k heavy.
Sometimes people figure it out on their own-and you are one of those people! Thanks for watching.
@@ApproachFinancial thank you! I've learned so much about SS watching your videos. My goal is to retire in 7 years about 10 years before I qualify for Medicare. I plan to delay my SS as long as I can. Although, so much life can happen in that time so I'm just trying for maximum flexibility at this stage.
The assumption is that SS will be there by say 65 or 67 (FRA)
Question...As a spouse will my small social security check I am already receiving be larger when he retires and gets his check?
Possibly, but it always depends on the details (which I don't have here). In some cases, a spousal benefit is "unlocked" when the higher-earning spouse claims their benefit. So, you could potentially get a top-off when your spouse eventually claims, but I can't be certain without having the details myself. A good place to verify is directly with the Social Security Administration.
felt like i watched 50 of these kinds of videos before someone actually broke down where the market real (not avg) return would have to be for it to make more sense to claim early & leave your $ invested. the magic # according to the author was 5.5%. iow, if your investments make more than 5.5% then u would be wiser to take SS early, letting your investments grow. historically the market has done well north of that # so it seems this would be wiser for a lot of retirees. all that said, i keep trying to find rationale for waiting as long as possible to take SS simply cuz i like the idea of it. still 5-6 years from retirements but will probably take it early, let my investments grow, doing roth conversions where they make sense, then use a 2-3 bucket strategy when i start to draw down my investments. surely want to have enuf out of the market at any given time so that a sustained downturn doesn't cause undue havoc. now if only we could get CDs/tbills/etc (post-tax) to match/outpace inflation, wouldn't that be wonderful?
But don’t the higher SS payouts assume you are continuing to work and pay SS tax?
The increase comes from multiple factors, and yes, continuing to work and paying into the system can increase your benefit. The size of that increase depends on your earnings history, so it's smart to run what-if scenarios (and enter different income levels-including zero) with the SSA calculator when you're logged in to your account. Sometimes the impact of stopping work a few years early is negligible, but it just depends.
You also get increases from being older. For example, after FRA, the increase is 8% per year (broken down monthly, really) until age 70. The increase is generally smaller before FRA.
I like the bridging strategy. You started off the video by using an example of retiring at 62 and drawing down retirement savings by the same amount you would have received at 62. Maybe you should have suggested to first dive in and really understand your monthly expenses. Paying yourself the SS payment out of savings may only be a drop in the bucket to what you really need to live on. Now, if you can live off your social security payment, fine but I seriously doubt it.
I think the drawing down the equivalent SS at 62 will be from the bridge account probably in conservative assets (bucket 1), the rest will come from retirement investments. So if quitting work at age 62 and will claim SS at 67, bridge account will have equivalent of 5 years of SS. This is my understanding of the SS bridge account 😅
This all sounds great if you live long enough. But as they say, if you want to make God laugh, tell God you have made a plan. If your parents and grandparents lived into their 90s, this might have a benefit, otherwise delaying a year or two could be the better choice.
Better yet, retire early and work enough to earn $4,000 to put into a Roth get the maximum form 8880 Saver's Credit and bump up your tax free zone from the standard deduction to $43,500 and use that head room to make decent sized tax free Roth conversions. Over time they really add up at least until the Secure Act 2.0 takes over and ruins the credit in 2027 but I'm hoping for a change in leadership will wipe out this complete fustercluck of an Act.
Social security is your money, you and your employer combined contribution, if you long enough, you might be able to tap into uncle Sam's pocket.
just take it at 62 .... its not worth it to wait
Maybe for you. Not for me. I’m going to maximize mine by waiting until 70. Every one of us is in different situations. Justin laid it out quite well in this video.
It is for me, I want those years until 70 to manage my future RMDs
@@srconrad You either have to work until 70 or spend down your assets. Social security cannot be inherited but your assets can be inherited.
Vaguely right but precisely wrong? Yikes!
Yes, it can be pretty freaky to make these really important decisions with limited information and forge out into the unknown. The best we can do is take a step forward, get new information, adapt whenever possible, and repeat. Until they come out with a better crystal ball, I think that's all we've got.