Married senario makes SS is a life insurance policy in case you or your spouse lives longer than average. Spend down Pretax money, Especially in Jerry's case. Convert to Roth at the top of your bracket. Do NOT spend down after tax..These are taxed at a lower rate. You will then leave more tax free to your heirs in the future as Taxes will likely increase. Thank you.
Yes. I plan on delaying to 70 to maximize the survivor benefit but have my spouse claim earlier. That will give me 8 years to live off my IRA and lower the future RMDs. Each person has their own unique situation.
Yes if you need a Roth. I already have more tax free or high basis assets than I will ever touch, primarily life insurance and municipal bonds. I prefer my brokerage account over a Roth. It allows me to invest in assets that cause issues when held within an IRA, primarily MLPs. I also do not sell my stocks other than to harvest losses which you cannot do with an Roth and my heirs will get a step up in basis and can continue to hold the assets as invested without a need to withdraw them in 10 years.
@@keithmachado-pp6fvyou are referring to the 62/70 where the lower income (normally lady, younger, stayed home to raise the kids for a paid of time) takes at 62 age the hight wage rather defers so when he passes, the lady gets the highest SS for the remainder of her life.
Yes this guy is wrong! You will have higher RMD's, less SS money, and it will be 85% taxed due to a lower provisional income. Also, if married you might have screwed over your spouse since they will lose most of their possible SS survivor benefit.
Very good video. One item not covered is that 85% of SS income is the most taxed for federal purposes and zero in many states, so compared to other income such as IRA withdrawals, having more SS income is beneficial (making deferring to 70 maximizing the payment and COLA). For me SS will be taxed at 20% vs 30% for other income (combined fed and state).
I am 66.6. If I wait 3.5 years, I will draw $900. more a month. This is like having an additional $270k in the bank with a yield of 4% yield. I would feel like an ignominous fool if I lived to 70 and left $900 on the table.[Also wife is 12 years younger than I.]
This is pretty much the same situation that I'm in. COLAs are great..... but that near 8% increase every year, along with any COLA...IS a very good raise. But, I doubt that I can last more than two years.... (68 1/2) I know my wife is pushing me to start before that. MY health may not allow me to make it to my early 70s, too. Plenty of things to think about. I could use the extra money! BTW..... I don't get 8% increase every year that I wait. My math shows only around a 7% increase each year, to age 70.
That goes for a lot of things. A 401k is bad if you die before you retire That being said I plan to live a long time and save heavily and I am going to wait for 70 for Social Security (but not to retire).
This is misleading. It is entirely dependent on assumptions. Yes, if you could guarantee a 8.5% return on the 401k you’d be better off taking SS early. But you might get a 5% return, in which case taking SS at 70 would be best. Taking SS at 70 offers insurance against the real risk that 401k returns will be low.
Your analysis is not complete. Having more in tax deferred vs taxable accounts will not change the math in your examples. Both had enough in the two account types to manage their taxes by withdrawing from a combination of both.
Factoring combined life expectancy for a couple increases the utility of delaying SS enough for me. It also allows room for things like Roth conversions that minimizes the RMDs.
Great analyses - the big assumption (and anyone can run their estimated SS benefit for themselves) on the use of funds at 62 vs 67 vs 70, either earning an average of 8% outside of SS compared to the higher values later on (5 or 8 years later). I calculated this comparison only yesterday, and in my own SSA projections there is NO scenario where later is better (all the way out to me living until 99). Of course YMMV, I next need to run some tax scenario calculations, RMDs really skew things (and Roth conversions are very likely in my future).
I don't get how taking more money out of a taxable 401K later while taking SS earlier would ever lead to lower taxes.... HOW? he will have a much lower "provisional " income due to a smaller SS Check, and he will be needing more than the amount that will trigger 85% of his SS to be taxed plus the taxes from the other money sources. I don't see it. He will be hit with higher RMD's due to keeping the 401K money in the account later in life, plus have 85% of SS taxed, and the SS amount will be smaller.
@@Satjr35031 So this couple is taking SS at 62 and getting $2500 per month x2.... yeah sure, that is basically impossible. the Average benefit at FRA of 67 is currently $1800, and taking it at 62 would be reduced by over 30%... so explain how many people you think could possibly have a benefit that big at 62? We are talking about most people here a not a couple that both people that made $160000 per year maxing out their lifetime benefit.
I am interested to know how a pension would affect this scenario. I am forced to contribute to SS AND my teacher pension. They both have a cost of living adjustment. How will this affect my taxes when I start receiving both benefits? My state includes SS and pensions in earned income.
I hope you realize that isn’t even remotely true. If you've lived long enough to actually be eligible for SS, the life expectancy at that point for the average person is far past 75.
That's true if you are talking about babies. It is not at all true if talking about someone of retirement age. Most adults, even most 67 year olds, do not die by 75. The average 67 year old male has a life expectancy of 18 more years and a female 20 more years (all IIRC, I might be off a year or two).
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Married senario makes SS is a life insurance policy in case you or your spouse lives longer than average. Spend down Pretax money, Especially in Jerry's case. Convert to Roth at the top of your bracket. Do NOT spend down after tax..These are taxed at a lower rate. You will then leave more tax free to your heirs in the future as Taxes will likely increase. Thank you.
Yes. I plan on delaying to 70 to maximize the survivor benefit but have my spouse claim earlier. That will give me 8 years to live off my IRA and lower the future RMDs. Each person has their own unique situation.
It may make financial sense to spend taxable first and convert more of the pretax to Roth.
Yes if you need a Roth. I already have more tax free or high basis assets than I will ever touch, primarily life insurance and municipal bonds. I prefer my brokerage account over a Roth. It allows me to invest in assets that cause issues when held within an IRA, primarily MLPs. I also do not sell my stocks other than to harvest losses which you cannot do with an Roth and my heirs will get a step up in basis and can continue to hold the assets as invested without a need to withdraw them in 10 years.
@@keithmachado-pp6fv Good point on MLPs in IRAs.. I had large gains on 3 out of 5. I got rid of all. Laws changed. Not worth the hassle
@@keithmachado-pp6fvyou are referring to the 62/70 where the lower income (normally lady, younger, stayed home to raise the kids for a paid of time) takes at 62 age the hight wage rather defers so when he passes, the lady gets the highest SS for the remainder of her life.
I'm curious why the withdrawals in the early years aren't taken from the 401k to minimize RMDs later.
Yes this guy is wrong! You will have higher RMD's, less SS money, and it will be 85% taxed due to a lower provisional income. Also, if married you might have screwed over your spouse since they will lose most of their possible SS survivor benefit.
If you lucky to be healthy at 70 with no terminal illness / disability / chronic pain etc…
Live Life
Nothing is granted
Very good video. One item not covered is that 85% of SS income is the most taxed for federal purposes and zero in many states, so compared to other income such as IRA withdrawals, having more SS income is beneficial (making deferring to 70 maximizing the payment and COLA). For me SS will be taxed at 20% vs 30% for other income (combined fed and state).
I am 66.6. If I wait 3.5 years, I will draw $900. more a month. This is like having an additional $270k in the bank with a yield of 4% yield. I would feel like an ignominous fool if I lived to 70 and left $900 on the table.[Also wife is 12 years younger than I.]
This is pretty much the same situation that I'm in.
COLAs are great..... but that near 8% increase every year, along with any COLA...IS a very good raise.
But, I doubt that I can last more than two years.... (68 1/2) I know my wife is pushing me to start before that.
MY health may not allow me to make it to my early 70s, too.
Plenty of things to think about.
I could use the extra money!
BTW..... I don't get 8% increase every year that I wait.
My math shows only around a 7% increase each year, to age 70.
No one knows how long they will live. If one does not make it to age 70, all those years one put into the system is a total waste.
That goes for a lot of things. A 401k is bad if you die before you retire
That being said I plan to live a long time and save heavily and I am going to wait for 70 for Social Security (but not to retire).
Double your retirement money like I did! Just fold your cash in half!!!😂
I get the overall point of the video but it seems overly simplified, e.g. wouldn't the cost basis of the taxable accounts be a significant factor?
Why take anything from the taxable account?
What about capital gains in the taxable account?
This is misleading. It is entirely dependent on assumptions. Yes, if you could guarantee a 8.5% return on the 401k you’d be better off taking SS early. But you might get a 5% return, in which case taking SS at 70 would be best. Taking SS at 70 offers insurance against the real risk that 401k returns will be low.
SS is also likely your only inflation adjusted asset that is also guaranteed
But....Jerry Seinfeld diesnt need any SS! Lol.😅😂
Your analysis is not complete. Having more in tax deferred vs taxable accounts will not change the math in your examples. Both had enough in the two account types to manage their taxes by withdrawing from a combination of both.
Factoring combined life expectancy for a couple increases the utility of delaying SS enough for me. It also allows room for things like Roth conversions that minimizes the RMDs.
I started collecting Social Security disability at 37. Social Security administration is so dysfunctional. It is embarrassing.😊
Great analyses - the big assumption (and anyone can run their estimated SS benefit for themselves) on the use of funds at 62 vs 67 vs 70, either earning an average of 8% outside of SS compared to the higher values later on (5 or 8 years later).
I calculated this comparison only yesterday, and in my own SSA projections there is NO scenario where later is better (all the way out to me living until 99).
Of course YMMV, I next need to run some tax scenario calculations, RMDs really skew things (and Roth conversions are very likely in my future).
These scenarios also assume you have heirs you are trying to pass on a maximum amount of funds to. Most people are not going to live until age 95.
I don't get how taking more money out of a taxable 401K later while taking SS earlier would ever lead to lower taxes.... HOW? he will have a much lower "provisional " income due to a smaller SS Check, and he will be needing more than the amount that will trigger 85% of his SS to be taxed plus the taxes from the other money sources. I don't see it. He will be hit with higher RMD's due to keeping the 401K money in the account later in life, plus have 85% of SS taxed, and the SS amount will be smaller.
Look at it this way You could have a 73 year old couple with $60,000 in SS and have to take out a RMD of $20,000 this year and still no Federal tax.
@@Satjr35031 So this couple is taking SS at 62 and getting $2500 per month x2.... yeah sure, that is basically impossible. the Average benefit at FRA of 67 is currently $1800, and taking it at 62 would be reduced by over 30%... so explain how many people you think could possibly have a benefit that big at 62? We are talking about most people here a not a couple that both people that made $160000 per year maxing out their lifetime benefit.
Having so much deferred tax accumulation is ludicrous IMO. And the analysis doesn’t factor in sequence of return risk.
I am interested to know how a pension would affect this scenario. I am forced to contribute to SS
AND my teacher pension. They both have a cost of living adjustment. How will this affect my taxes when I start receiving both benefits? My state includes SS and pensions in earned income.
The break even is closer to 90 vs mid 80’s if you are getting a conservative 4 to 5% on your investments.
3 years that you weren't collecting? Try 8 years that you weren't collecting.
Good point
Most people are dead by 75... 😢
Exactly
I hope you realize that isn’t even remotely true.
If you've lived long enough to actually be eligible for SS, the life expectancy at that point for the average person is far past 75.
That's true if you are talking about babies. It is not at all true if talking about someone of retirement age. Most adults, even most 67 year olds, do not die by 75. The average 67 year old male has a life expectancy of 18 more years and a female 20 more years (all IIRC, I might be off a year or two).