How to Retire Before Taking Social Security | Bridge the Social Security Gap
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- Опубликовано: 16 ноя 2023
- In this video, we'll examine how to retire before taking Social Security. This is an ideal strategy for many to maximize Social Security retirement benefits.
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New Retirement: go.robberger.com/new-retireme...
Video Description:
Bridging the Social Security gap can help retirees maximize their benefits. For example, you may want to retire in your early 60s but hold off on Social Security until your Full Retirement Age. Or perhaps you want to wait until you are 70 to get the highest benefit possible.
In this video, we'll discuss three topics:
1. How to determine if you can afford to delay Social Security
2. Whether there are any tax strategies to consider
3. How you should invest the money you'll need to spend until Social Security benefits begin
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ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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I’ve been diligently working, saving and contributing towards financial freedom and early retirement, but the economy so far since the pandemic has eaten away most of my portfolio, what I want to know is this: Do I keep contributing to my portfolio in these unstable markets or do I look into alternative sectors.
Just try to diversify your portfolio to other market sectors, that way your investment is balanced and you don’t get to make so much losses.
I’m a contractor, and my job doesn’t permit me the time to properly analyze my holdings/evaluate stocks myself, so I’ve had a fiduciary actively restructuring my portfolio for the past 7 years now to match the present market condition and that’s how I’ve been able to stay afloat, knowing when to buy and sell…maybe you should do the same.
How can I participate in this? I sincerely aspire to establish a secure financial future and am eager to participate. Who is the driving force behind your success?.
Sonya lee Mitchell is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I searched her up, and I have sent her an email. I hope she gets back to me soon. Thank you
Am 58 retiring next year but the thought of retirement gives me weakness. My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you never imagined to happen. It’s so difficult for people who are retired and have no savings or loved ones to fall back on.
If you have no savings you can’t retire. QED
Congratulations. I retired at 60 yo 4 years ago. don't plan taking SSN until I am 66/10 months.
Initially it is frightening. Make yourself a good budget and understand what your costs will be and take not of your savings and income. Make sure you have a good plan for medical. The Obamacare exchanges are in your benefit if you don't have too much income
Excellent detail. You have a gift for teaching.
So do you Joe :)
Thanks Rob. As always, good stuff!
Plan on retiring at 60 and taking social security at 62. Thing that concerns me most is taxes!
Excellent video Rob. I have a suggestion. Do a series of videos on different scenarios in New Retirement. One scenario with X amount of funds in traditional vs X amount in Roth, another one where someone has to take SS early. Kinda like model scenarios to point people in the right direction. You get the idea. Kiddos-Josh
Thanks, Rob Berger, for your creative output of helpful content!
Thanks Rob. I always learn something new from your videos.
this video is another example which demonstrates you are THE BEST ... thank you ... AWESOME video ... i am retiring in a couple months and this video helps A LOT ... thank you VERY MUCH ...
wow... you're timing is perfect for me..
Great video Rob. This is my situation where I want to hold off SS for four years, but have been nervous about drawing from traditional IRAs too soon. I will run this through New Retirement to see tax implications.
Great video. I'm just starting to kick the tires on the free version of New Retirement, and your tips and tricks were very timely!
Good topic. It is all about cash flow
love the idea of holding off on SS (social security) as long as possible but what almost no videos ever address is that u have to pull $ from somewhere while u wait. if u're pulling it from any account where the $ was invested, what are u really gaining? sure, u'll get more SS (assuming u live long enuf to get past the break even point) but u're also sacrificing the gains on the $ u pulled out of investments in order to delay the start of SS.
Very interesting and timely. I'm recently retired and waiting 1 yr till I hit 70 before starting social security.
I have the subscription version of New Retirement and love it! So many variables/factors that you can manipulate to see impacts in real time! Excellent planning tool!
Hi @johnbeeck2540. I just subscribed as well. Nice tool. But do you know how to model living off the dividends from a taxable account. I can’t get it to actually match my cash flow and spending properly. Thanks.
Thanks!
Thank you for supporting the channel!
One downside to holding off on SS - if you dont outlive the breakeven point you lost the money from your asset base that you could have left to your heirs. Instead you used that money to fund the larger ss payment that goes away.
Couldn't his analysis include taking SS at 62 and retiring at 58 so you are bridging the gap for those 4 years?
I'd suggest that the general orthodoxy is to delay SS as tolerable. He qualified the demo data. Most important to me is to leave the the largest SS benefit to the surviving spouse. Everybody is different for sure
@@michaell6580 I came here to say this. If you're married, it becomes about ensuring your spouse gets taken care of if you die first (assuming you were the higher wage earner). So our plan is for me to wait until 70 but spouse can start between 62 and 65.
Very good video. Put this one in the classics folder along with UST ibond strategies. Thanks
I retired at 56. Plan to draw SS at 70. I did most of my planning with firecalc and just used historical returns and inflation rates. I just treated taxes as an expense that's part of my budget. Yes, I do intend to make changes to try to minimize my taxes, but I didn't construct a specific plan for it.
the goverment would love for you to wait till 70
I would not wait till 70.
@@charliesult4171- Delaying SS is the cheapest way to buy an annuity. And this one is actually inflation adjusted, unlike ones offered by insurers.
@@suzyg7270- That's fine. Not everyone can afford to. I consider it to be cheap longevity and senility insurance. Plus it gives me more room for Roth IRA conversions before hitting the Social Security tax torpedo.
I retired 2 years ago at 63 and am using deferred compensation from my prior job (A rated company) to bridge until SS at 70. This lowered my prior taxable income and was able to invest the funds in various mutual funds which enabled the funds to grow. When I got closer to retirement, I moved the funds to a Stable Value fund which is very secure. Now that I am in retirement, the thought that concerns me the most is what if we have low stock returns for a prolonged time period like the lost decade in which the S&P was negative (-0.9%) for 10 long years from 1999-2009.
The TIPS ladder is intriguing, but I would need one that's 14 years long. That's a long runway to keep money out of the market where I expect returns will be better over that timeframe.
Rob, Thanks. Is the transfer approach you showed equal to or different from Roth conversions?
fortunately I have a nice federal pension, won't take SS until FRA and wife has a smaller fed pension plus SS with no debt, won't touch IRA/TSP, will continue to do roth conversions though
Does projection lab do the same type of tax analysis scenarios (ex transferring traditional Ira example he showed) as New Retirement?; great video
Perfect timing; I'll be retiring with a pension 6-7 years before I'm eligible to take Social Security, and I want to optimize those early years with the lower tax brackets. Empower has provided a nice "big picture" perspective to get me where I am today, but it's time to get familiar with New Retirement so that I can drill down into the nitty-gritty details.
Direct indexing. Have you ever discussed this Bob Berger?
Thanks Rob, helpful ideas! For me, one of the other key variables in the puzzle is what impact my bridge withdrawals will have on my ACA health insurance premiums prior to qualifying for Medicare.
Exactly, rarely do these you tubers go into the cost of obama care if you retire say at age 61.
Also the subsidies for such health care are directly reflective on your annual income. This can greatly affect things like roth conversions.
Thank you! I was hoping the video would discuss this.
Am I missing something? Does SIMPLE & Traditional IRA withdrawal not effect your income for ACA? It makes about $1,000 per month difference in my ACA health insurance if I take too much out of traditional IRA or am I misinterpreting the rules? I was COVIDed out of work when I was 60 and am fortunate to have both IRA and Non-IRA savings so I'm living on my cash. I am going to take Social Security & Medicare this year when I am 65 then augment with cash and a little IRA and keeping income under the social security penalty limit. Am I crazy?
@@MajicFeet Sounds to me like you got it right. Traditional IRA withdrawals treated as income for calculating ACA, thresholds, any Roth withdrawals not counted. Is this what you mean in your question (Directed at Rob I assume.)?
@@MajicFeet Yes, Ira withdrawls count as income, as well as social security income. Depending on the state you live in this will have a dramatic effect on your ACA premium. In FL we have decided to stay under $50,000/yr so we can get a $800 subsidy. If you make more than $60-70,000/yr the subsidy becomes smaller and smaller. It is a delicate balance to say the least. My policy would normally be $1300/yr. Since my working field was healthcare i know better than to skimp on coverage. One never knows when the shoe will drop. Better to be prepared. Healthcare can bankrupt you in a hurry.
how can one run out of money at 87 or so if you are receiving social security then? you may not have enough but you are not out of money
Can you discuss doing Roth conversions keeping income below the irmaa threshold. Is this a good idea.
Retire in the Philippines. Live like a King on $3,000/mo.
Unfortunately too many retirees are too old or to beaten up to move overseas. Cut your cars expenses and heath cost and move to a walkable city in Mexico
Greetings from Portland, Rob! Thanks for making a video on this topic. I’ve been planning to model using a SPIA to cover my bridge years until SS, but your video showed me I should compare that against this TIPS ladder option. Not sure how to compare those very different options, or what key aspects of each I should focus on. If you have thoughts about that would love to hear them. (Maybe there is a way to compare such options in one of those retirement planning tools?)
I'd love to hear Rob's response on this as well
Schwab's Tip fund doss not really Pay monthly. Schwab actually put out a statement saying this fund was not for people who needed monthly income. So don't use the fund SCHP in place of Rob's ladder.
If you have no pension, no medical insurance retiring before medicare and social security requires a great nest egg. I had no idea how expensive house repairs medical expenses would be.
I am in the same boat. Trying to figure this out. SS & Medicare is a scam!
Much appreciated. Question: maybe I'm misunderstanding--At 22:03--Is the IBIA real yield "plus" inflation? Wouldn't that be nominal if "plus" inflation? Thanks!
I had the same question. I re-ran that part of the video a couple of times. My understanding was "Real Yield" would be the return plus the inflation piece. Did I get that wrong?
This topic is exactly what I'm working on now, and there's a gap in your discussion that I am trying to figure out in own my plan.
When doing this the tendency is to start with the annual spend/withdrawl, and then testing different withdrawal strategies and then looking at the future tax and estate impact. My gap in knowledge is related to the software - when analyzing the transfers/Roth conversions how do I adjust the annual spend/withdrawal to account for the additional taxes paid? I would assume the software takes this into account, but how can I see where the source of these payments?
So in your example of $72k annual need, I would expect that the taxes are an additional withdrawal. How can we tell the account from which the taxes are paid?
Thanks for what you do - some of the very best retirement content out there.
Rob, I’ve talked to 3 Financial
Planners and all they’ve ALL wanted is the following:
1. Manage all my money for an annual fee 1%-1.5% of my net worth
OR
2. Sell me some BS life insurance or annuity.
Where can I find someone HONEST to advise me on the finer point like you discussed in this video?
Rob recommends Mark Zoril. One time very reasonable fee. You can pay a lower fee annually too to check in with Zoril on occasion.
Well, here I am building excel sheets to help me look at options and I could have used these software applications. Several financial planner videos I have watched said there are no tools except the ones they created. Mmm.
Really good video, love how you slipped in there the massive difference in having money that is taxed differently - I think often people think "I have $1M" and gloss over the fact that if that is in a traditional account that $1M is more like $500k-$750k depending on tax rates - so have $750k in taxable accounts or even better Roth can mean you have more than somebody with $1M in traditional.
At most a couple with a $1 million pretax portfolio will have a marginal tax rate of 12-15%. The effective tax rate will be lower yet. 4% annual withdrawals are $40k if you later add SS for the couple you might get to $100k total taxable income.
So to argue that $1million is only $500-750k after tax is nuts. More like $850-900.
I’m not arguing that taxes don’t matter, but they are minor at the level described. If you have a $3million portfolio, taxes matter a lot more. Obviously as a single person at the same portfolio size, they will be higher also.
My point is to understand when it starts to matter. Many do Roth conversions in the 20%brackets to “save” on future taxes, that is a bad idea unless the portfolio is very large.
Keep in mind that we are under a progressive tax system so by you applying the top marginal rate to the 100% distribution is wrong .
example
a 750k roth @ a 4% withdrawal rate will be 30k of income,if you add another 50k of social security you will have a combined income of 80k with a zero fed tax bill
VS
A 4% withdrawal in a pre tax l mill portfolio combined with 50k of social security for a gross income if 90k -$3600 (fed tax)= $86400 of after tax spendable income
This equates to a 4% effective rate..
First off, that is ignoring state, local, etc taxes. That thinking also assumes no deferred comp, pension, real estate, etc income. It also ignores say IRMAA/tax torpedo impacts. But yes the amounts definitely differ depending on portfolio size and expected future tax rates. The point is that a dollar amount in a pre-tax retirement account is not the same as that dollar amount in say Roth, and tools like NewRetirement are very good at handling all that for you rather than making incorrect assumptions. I was simply commenting that I appreciate how his example construction illustrated that - in this case via some 20-30% variation in success rates for the same plan.
@@davidmclifton1 We are retired, our portfolio is larger than $1 million, and my wife is drawing SS while I wait. We use New Retirement.
100% agree there are a lot of nuances. But, there is no reason to overstate the tax burden.
My point was simply that a $1 million pre tax portfolio, Will never have anywhere near a 50% effective tax rate. In fact for us New Retirement only recommended Roth Conversions of about $100k over the next 4 years. Taxes do matter, but are often overstated. Doing Roth conversions in higher tax brackets, may not make sense if your income is more modest. Clearly filling low brackets can make sense.
@@randolphh8005 awesome to hear how well it is working for you - I am hopeful to some day hit a similar milestone - congrats!
I rolled a traditional ira to a roth ira that had losing stocks and mutual fund balances, which was a negative balance. How will the irs tax me on this since there was no capital gain? Will i get taxed on the current worth of the stocks at the time of converting?
Interesting result at 14:25 : you reduced your taxes by 21k, but that made almost no difference in your wealth at the end of the day. What is it that one wants to optimize, wealth or taxes paid? This example appears to show they aren't necessarily the same. I think I would be happy in that example to let the government have 21K over the rest of my lifetime, to help (hopefully) younger citizens, infrastructure, etc, if it didn't have a material affect on my estate. Perhaps being too focussed on minimizing taxes isn't always the optimal strategy.
Thus the power and danger of such a powerful tool. It's useful to play around for a few weeks or longer to test different patterns, theories, biases, and strategies to see what works best in your situation. Taxes are VERY high on my priority list and I've used NewRetirement for about five years for this as my main focus. But I have explored several strategies during that time and I've arrived at this conclusion for us. Your mileage may vary.
He’s reducing future RMDs. Taking from the trad up to the standard deduction in those early retirement years is a wise strategy. The cap gains and divs from the taxable account would have very low taxes anyway but in this scenario he’s stretching the taxable principal
Were the scenarios you were running thru New Returement with the free or paid version?
Does New Retirement account for “compound taxes” - i.e., increased income taxes but also additional qualified income taxes due to pushing more dividends, etc. into getting taxed?
Canadian but still helpful. Govt stopped Cdn version of TIPs (RRBs). We have GIC ladders (like CDs) or TBills + bonds. Before firing your advisor educate yourself incl good $ books for your country. Many factors in re-working/planning a portfolio.
Yup, educating oneself & planning is the key. Our government also have a very good retirement income calculator based on your current asset. 🇨🇦
@@freedomlife3623
We’re a bit past that but will def pass on for any who need it.
Just keep on contributing 15% or more of your paycheck into low cost index funds and get on with your life.
Lift weights, drink water, eat healthy, have sex, jump in the ocean, go running outside, and absolutely never ever stop investing. You do that and you'll retire before taking social security.
Good summary Alamo 👍
Doing it!!!!!
Are these tools free???
@Rob Berger. you seem to have a relationship with New Retirement product development. One thing I found cumbersome was that you estimate your medical expenses but there was no good way to say that I wanted those expenses to come out of my HSA until my HSA funds were depleted. I had to create an annual transfer manually as you did in this video for every year and that was cumbersome. Can you advocate to add this feature?
I wish NewRetirement figured those "transfers" for you like it does for Roth conversions. The idea to have taxable, tax deferred, and tax free as you enter retirement is to mix and match to your advantage
What does a pessimistic return of 4% mean - is that a mean over many years, or is that the worst return in any given year. Certainly a yearly return could be much worse than that, so I presume it's some sort of long term average? I'd think that what those values mean in detail matters a lot in a monte carlo simulation
Yes, that's an average of 4% over the 30 year planning period. It has never happened before, but could be useful for a doomsday scenario.
New Retirement, and probably other similar programs, doesn't adjust for the Windfall Elimination Program and the Government Pension Offset when a married couple has at least one person who earned a government pension form an entity that did not pay into the social security system. New Retirement assumes that a spouse can collect social security based on the other partner's SS earnings. That is not accurate. So even if you say the spouse will only collect $10 a month in social security, the program assumes a larger amount.
Hey Rob, does either New Retirement or Empower allow for EU bank accounts to be connected? Thanks JP
Still not clear where the ishares ibonds ladder should be. In the taxable account or traditional ira?
Inside theIRA. Go to the transcript at 20:15. Rob mentions laddering with I Bonds in the IRA.
I bonds will be taxed on the annual increase in value based on inflation so tax-deferred is better than in a taxable account.
Who has 100000 dollars sitting in their chequing or savings account making hardly any return? Would it not be smarter to invest in an open or closed gic.
What you might want to also consider is if you can figure a way to have a MAGI under $22,000 you'll probably qualify for medicaid which is typically a zero cost medical program , no deductables, no co pays . So maybe depending on your situation it might be wise to just pull some money up to about 20K in taxable sources , then for the remainder of what you need to live on pull that from the roth. Then lets say you're 58 you've retired you've got essentially free medical through age 65 IF you can swing the numbers.. Assets don't count just income reported as MAGI
You probably don't want Medicaid. Providers know it pays poorly so many specialists and practices don't accept it (I never did, nor did 90+% of my colleagues). With Medicaid, you are limited to a small percentage of providers who accept it and you probably won't like it. From someone with 25 years of professional practice.
@@RColorado007 How about medicare compared to private insurance? Is medicare disliked by providers compared to private insurance or is it treated at par? Thanks.
@@pathkris2984Pretty much all doctors take Medicare but few take Medicaid due to poor reimbursement rates.
But Medicare does not pay for nursing home care past 90 days for rehab and Medicaid does. So, there is that.
Unfortunately I don't like using online tools that require me to enter detailed financial information into them. Who knows where my information ends up and is used or passed on. I don't believe anybody's privacy stuff, particularly growing internet company's. You indicate the tools you used are this type of entity. Need to know how to do this stuff yourself using simple tools that you can manage yourself.
Agreed!!!!! I do everything myself. Use Excel. No issues.
🤘
"Full Boat" = > (poker slang) A full house. I wondered what Rob Berger might be doing while not educating us.
What about healthcare.
Hey Rob, do you still think you were right telling innocent retirees to keep their money in BND in early 2022, late 2022, 2023? Ha, ha.
We Are in Unchartered Financial Waters! every day we encounter challenges that have become the new standard. Although we previously perceived it as a crisis, we now acknowledge it as the new normal and must adapt accordingly. Given the current economic difficulties that the country is experiencing in 2024, how can we enhance our earnings during this period of adjustment? I cannot let my $680,000 savings vanish after putting in so much effort to accumulate them.
I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value. I would be happy if you could advise me based on how you went about yours, as I am ready to go the passive income path.!!
I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an email shortly.
Fill that 0% long term federal capital gains bracket if you can too.
DR is a dinosaur 🦕
sucks to be middle class and deal with all this headache. affluent people won't bother with this because they'll have more than enough. poor people won't bother because they know they'll have to get by with whatever comes their way. lucky people die before they retire.
Do either of these tools harvest and sell my data?
This is my exact worry. @Robberger I would never expose my accounts to an outside party that could use that information in a nefarious way. I would be careful about recommending tools that “link” to our financial accounts.