Social Security Calculations and a huge surprise!

[Slothead56]

This confirms my calculations…get in asap. Thanks.

But….what about the tax ramifications? My wife is younger, has a very good job and my understanding is 85% of your SS benefit is taxed at the combined HH rate. That is ridiculous.

Am I right on this? Any way around it?

[DCCougar]

Originally Posted by Cypress Knee

Yee-Hah! AGF Classifieds here I come!

Haha! Good plan!

[Glennwillow]

Originally Posted by Cypress Knee

...Here was a pleasant surprise. After applying for the SS benefits I received a letter from the Social Security Administration stating that I had deferred vested benefits of $500 a month from a long-forgotten previous employer. Since that company had been acquired by a much larger company that eventually spun out several different companies in stock offerings coupled with the fact that I thought I was an independent contractor, this news caught me by surprise. I called the number on the form. Sure enough, nobody knew anything, but I persisted and after over twenty phone calls finally reached someone who told me, “I have your file. Your benefits started when you turned 65 but we couldn’t find you. I am sending you the paperwork to start this pension ASAP, and you will get a lump sum deposit for the months that you have not been paid.”

Yee-Hah! AGF Classifieds here I come!

Good for you, Jim! That is wonderful! I'm sure you deserve this!

- Glenn

[GCWaters]

Originally Posted by Slothead56

This confirms my calculations…get in asap. Thanks.

But….what about the tax ramifications? My wife is younger, has a very good job and my understanding is 85% of your SS benefit is taxed at the combined HH rate. That is ridiculous.

Am I right on this? Any way around it?

Short answer is, it depends:

https://www.ssa.gov/benefits/retirem...ner/taxes.html

[Mandobart]

I've been running numbers for a few years on my retirement. The bottom line for me is if I live to be 85 the total dollars from SS is larger the longer I wait to draw, however, my total capital will be higher if I start drawing SS sooner vs later, because my investments are growing rather than being withdrawn for living expenses.

My retirement income will be mostly a state pension, 401k and 457 withdrawals, and SS.

My pension and SS are monthly amounts calculated on my working income, years of service, age when I start drawing, etc. They are both subject to COLA's as the years go by. They start when I decide to begin drawing and keep going until I die - they don't run out or empty. The longer I wait to begin drawing them the higher the monthly benefits will be.

My 401k and 457 accounts will have a certain value that will vary with the market. Once I stop working my employer and I stop contributing to them. When they are exhausted, they're done. They do continue to grow if invested wisely.

My financial advisor recommends my wife and I both start drawing SS at 62 vs FRA (67) to help preserve the 401k/457 nest egg. She is a fiduciary and tells me our total assets will be in a better position by doing this.

[Mr. Jelly]

Originally Posted by Mandobart

She is a fiduciary and tells me our total assets will be in a better position by doing this.

A story on finacial advice that we dealt with was our tax person informed us we could take out $X amount from our IRA and we wouldn't be taxed. Then C-19 came along and the government sent us a check. Guess what come tax time we had to pay it back in taxes because it put us over the edge.

[dirkronk]

My wife (3 yrs older than I) and I both waited until 70 to take SS retirement benefits. When she applied for hers, the SS advisor informed us that I could apply for spousal benefits at the same time without having it impact my own retirement benefits. (This rule no longer applies for folks born 1954 and later...sorry.) Thus, my "surprise" was added $ to our income (which basically paid for my Medicare monthly premiums) for those three years until I topped out at 70 last year and filed following my own "official" retirement.

Since neither of us has a corporate or state/federal pension, our retirement income depends on SS, her (and soon my) RMDs from our IRAs and my 401(k), and results from our taxable investments. So the added $ for those 3 years was welcome. Plus, the added 8% per year earned by deferring "full" SS benefits as long as possible was more than I could have comfortably gotten via bank CDs and/or bond investments, so I kept a much higher percentage in equity investments from full retirement age (FRA) to age 70. Result: we both have higher SS benefits now AND our total net worth is significantly higher than it would have been if we'd started taking benefits at 62 or at 66 (our FRA), given our tax situation while both of us worked.

Actually, my wife loves her work and she's still doing it (on a half-time basis). I've had no luck convincing her that we'd be equally well off -- possibly better, taxwise -- if she'd fully retire, since her yearly income makes us cruise uncomfortably close to the next higher tax bracket.

Go figure.

Dirk

[121]

It's tricky when to take SS.
How long will SS actually be solvent ?

[Mr. Jelly]

Originally Posted by 121

It's tricky when to take SS.
How long will SS actually be solvent ?

Believe me you will know if it ever gets serious. And even then you will have plenty of time to make your decisions. It's largely hyperbole. But they will lower SS by increasing the retirement age. IMO

[brad4d8]

Originally Posted by Gdjjr

I took my SS at 62- because I could and I'm not a fortune teller
I'm 73 now and don't regret it one iota!

I'm with you. I took SS as soon as I was eligible for full payment with no penalty for working full time. I enjoyed a few years of double income, and might still be doing so if health hadn't forced me to retire before I planned. I'm also 73.

[Mandobart]

Originally Posted by Mr. Jelly

Believe me you will know if it ever gets serious. And even then you will have plenty of time to make your decisions. It's largely hyperbole. But they will lower SS by increasing the retirement age. IMO

If SS goes away the US will truly be in dire straits, and pensions, stock market and other investments will likely go down the toilet as well. FRA will certainly rise as it has been doing for years already. I think we’ll eventually see “means testing” where people like me who have a comfortable retirement from other sources will have our SS benefit reduced (taxed) to further supplement those who have nothing else.

I’ve always considered SS to be a “maybe” helpful supplement vs a required source of funds for sustaining my life. People like me have potentially created this self-fulfilling prophecy where, by preparing for no SS, we’ve made it likelier we won’t have SS….

[Stringmaster]

Originally Posted by dirkronk

My wife (3 yrs older than I) and I both waited until 70 to take SS retirement benefits. When she applied for hers, the SS advisor informed us that I could apply for spousal benefits at the same time without having it impact my own retirement benefits. (This rule no longer applies for folks born 1954 and later...sorry.) Thus, my "surprise" was added $ to our income (which basically paid for my Medicare monthly premiums) for those three years until I topped out at 70 last year and filed following my own "official" retirement.

Since neither of us has a corporate or state/federal pension, our retirement income depends on SS, her (and soon my) RMDs from our IRAs and my 401(k), and results from our taxable investments. So the added $ for those 3 years was welcome. Plus, the added 8% per year earned by deferring "full" SS benefits as long as possible was more than I could have comfortably gotten via bank CDs and/or bond investments, so I kept a much higher percentage in equity investments from full retirement age (FRA) to age 70. Result: we both have higher SS benefits now AND our total net worth is significantly higher than it would have been if we'd started taking benefits at 62 or at 66 (our FRA), given our tax situation while both of us worked.

Actually, my wife loves her work and she's still doing it (on a half-time basis). I've had no luck convincing her that we'd be equally well off -- possibly better, taxwise -- if she'd fully retire, since her yearly income makes us cruise uncomfortably close to the next higher tax bracket.

Go figure.

Dirk

I’m confused on the spousal benefits thing—my wife was born in 1953 and me in 1954. My SS benefits are going to be greatly reduced due to the Windfall provision, and even the full amount are considerably less than her benefits. Does the spousal benefit mean that I could draw the same amount that she qualifies for, and that my benefits would be voided?

[GCWaters]

Originally Posted by Stringmaster

I’m confused on the spousal benefits thing—my wife was born in 1953 and me in 1954. My SS benefits are going to be greatly reduced due to the Windfall provision, and even the full amount are considerably less than her benefits. Does the spousal benefit mean that I could draw the same amount that she qualifies for, and that my benefits would be voided?

In general, you can draw your own benefit or 50% of your spouse's, whichever is larger....

[Stringmaster]

Originally Posted by GCWaters

In general, you can draw your own benefit or 50% of your spouse's, whichever is larger....

Thank you!

[GCWaters]

Originally Posted by Stringmaster

Thank you!

The '53/'54 birthdays could potentially complicate things, but unless you were born on January 1, '54, I don't think they will.

The SS web pages are helpful, but complicated. I recommend "Social Security for Dummies" and "Medicare for Dummies" to anyone getting ready to retire--very clearly written and very helpful!!