Do you do analysis of retirement plans? When I went to your website it said that you only work with people that want you to manage their assets? I thought your business was about financial plan analysis?
@@foundryfinancialAhhh gotcha. That's too bad. I can't use an US based retirement manager because I will be retiring outside the US, and by law I can't invest in ETF or index funds... has to be individual stocks or bonds. I have a plan that I've been working and it looks pretty good. I'm really looking for someone to double check behind me and give me a thumbs up or point out things I may have missed.
@kirks4983 great question. She claims at age 67, but it’s her benefit until Phil claims and then it switches to the higher spousal. Because she waits till age 67 there’s no reduction when she flips to his.
I am 71 years old and started SS at 70. I did not take break-even or longevity into my analysis. I just wanted to make sure my 5-year younger wife would always have enough income to be comfortable. Easy decision...
80% of retirees die with most retirement savings intact. Social Security won't get depleted. No inheritance to pass on. If she just put out interest gains or 4% she'll be fine.
@@b.coxemba6799 Yes, she will be fine. The decision was made several years ago to delay SS to 70. Income is now sufficient no matter what happens to other savings. Thanks for the comment.
Most base this decision on their health. My dad retired at 62 and took the hit to his SS, my mom retired at her FRA. Dad’s decision was based on his physical decline as his bicep ripped away and after 2 surgeries did not heal properly in his demanding tool&die job. My mom worked a desk as a insurance executive. Her health was much better. Dad’s quality of life has been much better at 74 now.
Great video. I retired at the height of the pandemic at 63 and took SS right away. It solved all my cash flow problems, short term and long term. My portfolio had just been kicked in the nuts and using it to bridge my expenses to FRA seemed kind of dumb. There are just too many variables with large uncertainties to calculate the right answer. I learned years ago that going in the right direction is often the best you can do.
my plan exactly. if walstreet wiseguys tank the market, tug Uncle Sam's coat, ask for my SSI suspension/ withdrawal of SSI always available if I was too hasty
People continually equate the age of retirement with the age of collecting social security. You can retire at any age as long as you have adequate finances. And then you can collect social security at a later time to maximize the monthly checks.
@@trainsplanesandotherthings5187 There is no reason to not retire a millionaire in the US unless you were hit with some really bad luck most of your life. Making poor decisions is not the same as bad luck.
@@tonylevine2716 Lots of people make very poor financial choices. They spend to see a Taylor Swift concert instead of putting money into their retirement account. They insist on their daily Starbucks rather than pay the dentist at the time of service instead of financing over time. For some, getting their first apartment means they "need' to buy new furniture. As a single mom of 3 whose top pay was 60k over 20 years, I can testify that early retirement IS possible if you live below your means - whatever that may be - when you are younger.
@@mnotlyon You are exactly right. Been divorced twice, supported 5 children over 41 years. Still retired a millionaire. It all depends on what sacrifices you make. Spent 18 months homeless working 7 days a week because I had 50% going to child support, 20% going to taxes and 30% going to back taxes when I found out how my second ex-wife maximized her tax return by filing separately after having a CPA prepared a joint return for us. I was left being a non-filer for several years.
With a paid off mortgage I can live on less than $2000 a month. Social Security will fund my frugal lifestyle. My investments will grow until I am forced to withdraw at 73. If I pass away before then, my heirs will benefit from my savings. Social Security will die with me.
dunno; if market is high, you can spare a dime to insure income long term by delaying SSI. If market's low, obviously take SSI rather than the wallstreet shakedown.
I have 5 successful children the last thing they need is more taxable income when I pass. They will be giving away half my hard earned money to taxes. Just something to think about.
Yep. I did that. The best thing I ever did. I retired at 65. Then, I lived off 401k/IRA. I paid off all my debts. Then, I filed for social security af 68.5 years old. Now, at 69.5 years old. Social now pays for all my frugal expenses each month. Low financial stress in old age is good for health. Fortunately, I'm in good health. But, I do force myself to go to the gym 4 days a week and for 4 hours each one of those days, 3 hours on threadmill for zone 2 and VO2Max training, and 1 hour on weights. I don't drink and I don't smoke. And I have a great diet. I love life, with lots of projects and new hobbies all the time. I hope to live to 120 and beyond!
Nice discussion. For the not so wealthy, trying for one larger SS check just makes a lot of sense. Knowing that this is more true while drawing from the portfolio, makes it even more desirable.
The Question is what is wrong with this country, when retirement is so complicated.... one has to figure out all these strategies, Pull your money out to early or too late you get fined... on and on..
One consideration is growth. Typically 401K will be balanced to minimize risk, maximize income toward retirement age, so a Rate of return could be 5%-7%. A delay in SS per year will give you about 8% increase per year. Also there is COLA. The 401K does not have a COLA. Taxes are interesting, If income is less than $44K, then only 50% of SS is taxable. So limiting the 401K to $44K and maximizing SS will get you close to the $8K per month income. You can fill in the gap with Roth to reach the $8K per month.
I thought 401k distributions are considered passive income and not earned income when it comes to taking into account early SS and the 50% taxable thingy?
The only reason I'd wait to draw SS is if I had other taxable income. The stock market has better returns than waiting on SS, and I can pass those investments on to my heirs. I can't do that for SS. My taxable income at 62 will be near 0 if they don't take away the large standard deduction, so I'll be taking SS as early as I can to protect my investments.
I'm taking SS early to supplement my military retirement, and my 401k will bridge the difference in my monthly expenses. Can't leave SS to your hiers, but 401k and IRA's you can. I don't want to worry about the ups and downs of the markets. I want to enjoy my go-go years with my better half while we still can.
a surviving spouse may receive a higher Social Security benefit if the deceased spouse delayed receiving benefits until age 70. This is because survivor benefits include any delayed retirement credits the deceased spouse earned. Between full retirement age and age 70, Social Security benefits increase by 8% annually due to delayed retirement credits. For example, if a spouse dies before reaching age 70, their survivor benefit may be about 20% larger than if they had started receiving benefits at full retirement age
It’s definitely not an easy decision! It’s so individual and there’s a lot of factors to be considered, most importantly, when your expiration date comes. Nice job putting the math out there for people to consider.
I plan to take SS at 62 no matter what, but your video did a nice job showing the ancillary benefits of waiting. My wife will probably keep working until at least 65, so we can wait on hers
Thanks for the great content! I am happy that I had good tax diversification when I retired - I was able to delay Social Security to 70 AND do Roth Conversions.
thank you for the video ... I retired last month with a similar situation ... One thing you did that I really liked was keep it relatively simple ... i.e. social security with a 401k only ... in doing my stress tests I did not concern myself with SS being reduced ... I do not see politicians ever cutting it and then have to face voters ... I do not consider that very likely ... The one stress test I accounted for which you failed to do completely is what if one spouse dies prematurely and the other lives into their 90's ... (this is what happened to my parents) ... this meant having only one SS income as well as loosing the MARRIED FILING JOINTLY tax advantage ... My WORST case scenario is where I would die in early 60's and wife would live into her 90's ... with just a modest portfolio my first concern is will she have sufficient funds if I am no longer alive ... For me, the time which makes most sense to take social security is anywhere from ages 65-67 ... how the stock market is behaving will determine when I begin ... by delaying the SS the SS COLA will help counter the effects of inflation ...
Yes. Definitely a huge disadvantage for those of us who are single. Gotta admit I am envious of a dear friend. Not only did they have two hefty incomes - and got to enjoy the benefits and luxuries that come with it - but even though we are the same age, her husband passed several years ago and she gets his SS benefits. We are both single, same age, same profession, but she is STILL being "rewarded" for being married.
I will retire at 62, with Social Security and a Pension at $60,000 per year plus dividend paying stocks at 15k per year., non retirement stocks...I have money in my 401k and will let that grow and/or will take some out of it for big expenses only. Every retiree must pay attention to Inflation and urge policies that curb Inflation to a more reasonable rate of 2-3% per year .
Great video. I would suggest out of control spending is a bigger risk than inflation. With my rate of spending, I haven't noticed a significant change in high inflation periods.
Your scenario very closely aligns with my situation. Wife is 62 drawing SS, I'm 59 working for 2.5 yrs yet. Was planning on taking SS at 62. But! We have 882K in 401k and IRAs. I'm determined to try to break through the million dollar mark by 62 or I won't retire until I do. So I've been putting some thought into drawing on the investments and retirement but wait to claim SS at a later date. It seems like that plays out well with your example.
Good luck ... if you can, i urge you to consider delaying as long as possible ... for me age 67 makes most sense ... the one issue i most want to account for is what happens if i die early ... me delaying social security will make my wife's situation better if i pass early ...
With an 8% return, you will hit the million dollar mark in two years. There are any number f videos talking about how getting to 100k is 25% of the way to a million dollars. It takes about 8 years to get to 100k; the jump from 900k to a million is about 1.5 to 2 years.
@@damondiehl5637 But many have lowered their overall risk since they are nearing retirement so cannot expect 8 percent returns and therefore need to allot more time for that big jump.
Liked this analysis. I would add, however, that I’m not sure why you’d analyze 60/40 in both scenarios. Delaying SS is essentially taking funds out of your retirement account to buy a (great-yielding) bond. If you are comfortable with 60/40 drawing SS at 62, you should be comfortable with a much more aggressive portfolio when drawing SS at 70. Would be interesting to see how the “die earlier” scenario looks if you made this adjustment.
For me it’s simple. It’s an insurance. I’m not using it to get rich but to protect my downside. If I have to use it I can trigger it after 62 and if not, it is an option when things get bad.
Nice Video, would like to see another version when spouses are different ages, say 4 years apart. This also impacts Medicare vs ACA, which then impacts IRMAA. Also same use case, with both spouses claiming at 70 (4 years apart)
The first true analysis of when to take social security, taking into account the opportunity cost of using up your savings. I guess Right Capital already calculated the optimal age.
I made that mistake when I was younger. I listened to standard advise and put as much into a 401k as I could afford. That's pretty good sized mistake. Long term capital gains has much better tax advantages than a standard retirement account.
This is a good question. I"m 60 and retired. I live off rental income, side hustle income and about 500.00 a month from my savings account when necessary. My monthly expenses are pretty low. I don't have a mortgage and I'm debt free. Because of having low monthly expenses, SS can cover all of my monthly expenses and leave me about 600.00 a month left over even if I take it at 62. I have about 500k in various investments. I will be selling the rental property within the next few years and investing the profits, I was thinking about taking SS between 63 and 64 and living solely off SS. If I do this, my investments and savings hopefully will last a lot longer.
@@notyet2345 You're going to take a large tax hit when you sell your real estate. However, if you live in the house for at least two years before you sell, it becomes your residence. You are exempt from capital gains tax on your residence up to $500,000. This is HUGE tax savings. You might consider selling your current house, then moving into one of your rentals. rinse and repeat every 2 years to save HUNDREDS OF THOUSANDS on taxes. Talk to your tax adviser to help make a plan, and tell them about this strategy. Many advisers don't think of this as an option. If you wanted to keep your current home, you could consider renting it while you move into the others, and move back into it when the others are gone.
I did the math. For a given retirement age (I chose two, 62 and 65) I assumed how much money from SSI I would receive. Then I assumed I would have to replace this SSI income with money from my 401K also taking into account the loss of investment income I would lose by using my 401K. I also included the higher SSI I would receive if I waited. For me, the result showed I would be better off keep my money in my 401K growing vs pulling it out early and using it to delay starting our SSI. Everyone may have different results, but for us, I retired at 65 and immediately started our SSI payments at 65.
the threat to retirement is inflation, taxes, age and longevity, medical cost, personal cost of living, vs economics of the time your retirement, did you invest in a taxable account or tax deferred account, or use a Roth, account in investment, putting money in a Roth you don't worry about tax, the SSI won't really matter if your investments are giving you your cost of living, with a little extra. and besides their are ways to reduce or eliminate tax upon transferring the remainder or your investments to those family members while you are still alive or after you pass. investing in dividends give you income so you don't spend principal. It's more about saving and investing to live in a quality of life you want to be comfortable, not just retirement, when you are too old to do the things you wanted to do when you where younger.
You seem like a nice enough knowledgeable guy. However, a quick look at your topics. Do you do any videos for people who are single and maybe consideration for retirees who are women?
I want maximum monthly income. So I’ll try to fund myself until 70 to take SS with a combination of continuing to work, use of savings, reverse mortgage, to cover the expenses from 63-70.
AMEN! We seem to be the minority on this topic. I too want the max monthly income and can comfortably draw from my savings and 401k to bridge me until age 70. My personal financial planning paid off and my focus is on "living" versus "who knows when I'm going to die, gimme my SS money now!"
Currently 66 but have no plans to take SS before 70. I have 4 years to do some Roth conversions and will fund those 4 years with cash in taxable accounts.
its all according to your circumstances....in my case the answer would be yes....if only because you will get a larger raise every year that cola (cost of living adjustment) which will really make a lot of difference thru the years....
Your comments about living longer than the average are VALID! I don’t recall who or where I read it, but average lifespans are based on the entire life, meaning those that died early on due to accidents, etc, skew the stats down. However, of those that live till 65, the average lifespan shoots upward into the higher than total lifespan numbers.
The taxes are really based on your state and deductions you have. The first $13,610,000 of an estate is exempt from taxes starting in 2024. Also recommend putting your estate/accounts into a trust.
I’m currently 52, I’ll be retiring on savings and 401k at 55, and starting SS at 62. By waiting until 65 it will take years to break even. I just don’t see it being worth waiting.
Agree! When I took my dad to the SS office (now this was a while back and he had federal government pension) the difference in waiting from age 62 to 65 was $3 a month. He said I'll take it at 62, who knows if I'll make it to 65. Haha
I plan on retiring at the end of 2025 at age 60. I'll get a pension and also have pre-tax retirement savings. I'm probably getting a p/t job so that will determine my SS strategy. I'll have the 3 income streams (pension, pre-tax, p/t job) and when I end the p/t job, SS will kick in. If I don't get a p/t job, then I'll simply take SS at 62.
66.5 and just started SS, not using and in saving at 5%. I have no debt, married, annuity, 401, savings intact. Thinking about quitting and be full time. Scary times in 2024. Just want to know for myself if the time is right to 100% retire. It is a hard decision..
There are so many more things than just how much money you get when you are Old? It's when you want to Use the money to be able to do what you want while you still can do it? Like Travel? Hike Bike, Camp Hunt Fish ect not just sit in Retirement home in rocking chair?
Did I say there wasn’t? I would completely agree. In fact, I tried to be very clear I’m trying to help you evaluate one specific question. Both scenarios retire at the exact same age.
Bridging. In my opinion, if your financial situation is $800,000 in investments you can take SS at 62 & be able to tie up $600,000 of it to gain interest/dividends. If your financial situation is $150,000 you will probably be better off to use that to delay SS until 70
Personally, I have been surprised to find that the benefit I appreciate most is TIME. I retired 4 years ago at age 57. I love the freedom of choice and the ability to be fully engaged in whatever I choose to do - or not do - with my time rather than rush from one commitment/responsibility to the next. Of course I could have had more money if I waited longer, but I was able to spend lots of time with my mother with dementia while she still knew me before she passed in January. I am available when my daughter tells me my grandson has an unexpected day off school and would I like to come. I can drive to my family 2 hours away and back on a whim for dinner. I get up when I wake up - not wake up because I have to get up. TIME truly is priceless; if the financial piece is reasonably covered, short of global changes that would devastate us all, I say go for it!
Curious, I will receive a pension (public school teacher) and will be unable to collect my husband's social security (or very, very little survivor benefit). He is 8 years older and I have about 5 more years before I can retire with a full pension. We are planning for him to take his retirement at 62 so we can both enjoy the SS whether we use it for travel or reinvest while I am still working. Anyone else in this situation?
I will absolutely take SS the second I'm eligible so I can leave more investments intact. The only thing that would change that is if we had other taxable income. It sounds to me like you will since you'll still be working. You need to talk to a tax professional.
I’m 59 will start ROTH conversions, I believe that 500k I will never touch so that will go to our kids. Then will throttle back ROTH conversions and live off cash at 63-65 to qualify for no Medicare premiums. Then will spend down the before tax account and wait til FRA if not 70 to start SSA. That’s the plan at least.
interesting, our situation is a bit more complex, with pensions, taxable investments, real estate rentals.... But my main concern with pushing SS and our pensions back are they die with us, as in not being able to leave that income to our children. I'd hate to pay down our accounts and leave all that money on the table in case of an early demise.
If you withdraw SS at full retirement age, and even if you don’t need it, at least you’ll have it instead of the US Treasury. If by chance you die, at least that money, and interest earned, will go to your kids…. They can’t collect your delayed SS. Spending down your savings or paying taxes in advance to maximize your monthly SS check in your mid 80’s ( if mid 80 ever comes for you) seems crazy to me.
Everyone's situation is different, but taxes on investments age 62-69 could be a much lower rate than they are 15-20 years later, if the economy takes a downturn in USA, or simply if some politicians decide to raise tax rates. I'm fortunate that my mom took her SS early, because she ended up passing away at 73, but if she had somehow lived to 90 she would have run out of money somewhere in her early 80s. Around 65-67 may be the sweet-spot for people who have limited investments but are in good health. I'm hoping / planning to have enough in investments to be able to wait until 70 for SS, but I wouldn't hesitate to take it at 67, even if my health is still very good at that age, if I needed to. Health plays a big part, I believe, but taking SS at 62 seems very risky to me, if there's any decent chance of living to 90, under most circumstances. It may provide a higher average $ to leave to heirs, if you run it 100 times, but there would also likely be a higher % of running out of money, needling care, and leaving nothing.
How can you prepare any plan with uncontrolled inflation? I don't think that it is possible and most planners that I have seen don't really address this possibility.
Inflation exists, and we can't control it. I have taken steps to mitigate its effects though. 90% of my retirement income will come from real estate inside my ROTH. Real estate is less prone to inflation, and the ROTH protects me from taxes (until they change it). The other 10% in in Bitcoin. Bitcoin is risky, that's why it's a small portion, but it should be more inflation resistant than the US dollar.
My wife is 72, I'm 66, we both retired two years ago, after a health challenge and realizing that "Time is the ultimate currency" . Our home is paid off, and we have an investment condo that pays for itself with rental income. My wife is collecting her max SS, while I'm doing a small draw from my 401k. We plan to continue to do this until I'm 70, and will collect my max SS.
I mostly agree if that person is a good manager of their finances. The exception may be if they're still working. The added taxes may cause that to blow up.
Absolutely, I calculated it, I don’t remember exactly, but I would be something like 73 before I break even. Who knows if I even live that long. A bird in the hand is always worth two in the bush.
No! Do the math. I did to find my break-even point for waiting to take contributions. I took mine at 68 years of age instead of 70. My break-even point where I would benefit by waiting to take at 70 would be when I reach 83-1/2 years old. Without doing the math on your situation, I imagine your break-even point will be around 72 yrs of age. After that you’d be losing out on an addition $400-$600/months the rest of your life. I would never take it at 62 UNLESS in bad medical condition. Financial common sense says to wait and capitalize on a more lofty monthly payout for life.
This is math 101. And the chances of a male living to be 95 who was born in 1960 is less than 20%. If you were asked to bet your assets on a plan based on a LESS THAN 20% probability of outcome - you would go all in?!? And it's why these financial plans are worthless in a mathematical sense.
Perhaps 20% living to 95 is high, but I'd believe 20% of 60 yr old men will live to 90 soon. Looks like average life expectancy for 60 yr old American man is currently 82. If average will be 22 more years, I believe close to 20% will live 30.
My dad lived to be 96 and started drawing at 62. He left a lot of money on the table, but he had no idea he would live to that age. My mother died at 81. I'm eligible for my FRA SS this year. I'm thinking I may wait til my max at 70. I don't have a spouse to consider in my decision.
I've done some calculations. It takes 14 years to break even. So if you take SS at 62 if you live longer than 14 years you lose out on more money if you waited until 70. Thats 14 years of supplemental income. If you dont have a lot of savings, it looks like taking a SS early is the best route as it the break even point is so long and surviving that long with little income does not make sense. Low income also correlates with worst health, so take SS to help keep you healthy. If you lose out on more income 14 years later....oh well, you lived better for 14 years. How many would trade 14 years in there 60s for 14 years in their 80s. What would we pay to be back in our 20s 😂
Is it really worth it to have a retirement plan?? Wouldn't it be better to just save 12K a year in a savings account for retirement or take that 12 K a year and invest it wisely?? I am taking steps and studying to become a back end software engineer which means that I will be making over 90K a year.
isn't that still a plan? Investing wisely can mean many things to many people...does wise mean growth, income or value? Does it mean muni bonds, t bills, etc depending on what you need...SS in itself is an ever changing government program with new rules as does 401k programs
A savings account will get eaten by inflation. It will barely keep up or even lose against inflation. You need to invest on an asset that has a higher rate of return. Funds/stocks are the easiest to manage and can be liquidated easily when necessary. Real estate is another option but comes with a whole other set of headaches.
I am not a financial adviser, or a tax professional and this is not financial or tax advice. My experience is that maxing my 401k was one of the larger mistakes I made. Here's what I wish I had done; 1) invest up to the company match in my 401k 2) max out my roth 3) max out an HSA when I qualify. 4) Invest the rest in a standard brokerage account. (this assumes you are a buy and hold type of investor, and that you do NOT have a ROTH 401k available) Here's why; 1) The company match is worth the taxes you MIGHT have to pay. 2) ROTH is tax free at retirement, and can be used without penalties or taxes within limits before retirement. 3) You're gonna have health care expenses, and why not pay them tax free? 4) There is NO long term capital gains tax on your first $89,250 of GAINS PER YEAR (if you're married). This is MUCH better than a traditional 401k tax treatment. So, during retirement, I'd draw nearly 30k per year from my traditional 401k. This would be tax free because of standard exemptions. Then, I'd take out about 60k of GAINS from my brokerage account that would also be tax free. If needed, I'd pull additional money from my ROTH, and of course pay my medical with the HSA. This gives me a tax free income in excess of 100k per year if I've made good investments.
Almost everyone young should be trying to max out their Roth IRA contributions, IMO. (Max is currently $7000 per year, I believe.) Roth IRA is great even if you are saving to buy a house, but don't know whether it will be 5 or 15 years from now. You can take out contributions without penalty, unlike some other retirement accounts. So say you put in $5000 and invest it. If it grows $5000 (doubles) in 8 years then you can take out the $5000 you put in-- without penalty-- and leave the other $5000 in the Roth IRA to grow until you retire. How to Money podcast has a good episode explaining Roth IRA and why it's great, especially for the majority of people under 35 or so.
Don't forget the power of an employer's match to your 401K contribution. Always maximize the match. In your early earning years you can benefit from Roth contributions, and most 401K plans allow that, also most allow you to split your contribution between pretax and Roth so you can keep income taxes down to a desired top bracket.
No never u dint want to drain your retirement to delay ss *unless u know my date of death) we are retiring nxt year at 63 takung ss at 65.. all my funds are in tax free investments so not worrued about Any tax after 2024..
Bad idea. Every bit of income your roth creates is tax free. Every bit of income your 401k creates is taxable. Draw from your 401k asap, and consider doing a ROTH conversion too. You need to talk to a tax adviser to help you plan this properly. If you do it wrong, they taxes will eat you alive. The ROTH is the last thing you want to draw from.
Did anything surprise you in the analysis?
Do you do analysis of retirement plans? When I went to your website it said that you only work with people that want you to manage their assets? I thought your business was about financial plan analysis?
@@Corgi_Saurusmy job is to create and implement retirement plans, which allows clients to focus on enjoying their retirement.
@@foundryfinancialAhhh gotcha. That's too bad. I can't use an US based retirement manager because I will be retiring outside the US, and by law I can't invest in ETF or index funds... has to be individual stocks or bonds. I have a plan that I've been working and it looks pretty good. I'm really looking for someone to double check behind me and give me a thumbs up or point out things I may have missed.
@kirks4983 great question. She claims at age 67, but it’s her benefit until Phil claims and then it switches to the higher spousal. Because she waits till age 67 there’s no reduction when she flips to his.
No, I’ve been playing with the numbers on my own for years. Everything you said made perfect sense.
I am 71 years old and started SS at 70. I did not take break-even or longevity into my analysis. I just wanted to make sure my 5-year younger wife would always have enough income to be comfortable. Easy decision...
I am looking at it the same way.
80% of retirees die with most retirement savings intact. Social Security won't get depleted. No inheritance to pass on. If she just put out interest gains or 4% she'll be fine.
@@b.coxemba6799 Yes, she will be fine. The decision was made several years ago to delay SS to 70. Income is now sufficient no matter what happens to other savings. Thanks for the comment.
you are a high character person ... good for you for taking care of your BETTER half ... God Bless and best of luck ...
@@July.4.1776That is because we are both good planners. Thanks for the comment.
Most base this decision on their health. My dad retired at 62 and took the hit to his SS, my mom retired at her FRA. Dad’s decision was based on his physical decline as his bicep ripped away and after 2 surgeries did not heal properly in his demanding tool&die job. My mom worked a desk as a insurance executive. Her health was much better. Dad’s quality of life has been much better at 74 now.
I hope your parents are doing well.
Great video.
I retired at the height of the pandemic at 63 and took SS right away. It solved all my cash flow problems, short term and long term.
My portfolio had just been kicked in the nuts and using it to bridge my expenses to FRA seemed kind of dumb.
There are just too many variables with large uncertainties to calculate the right answer. I learned years ago that going in the right direction is often the best you can do.
My portfolio had just been kicked in the nuts?? the stock market is at an all time high. What happened? you made some very poor investing choices??
@@DonaldMainswhere was the stock market June 2020?
my plan exactly. if walstreet wiseguys tank the market, tug Uncle Sam's coat, ask for my SSI
suspension/ withdrawal of SSI always available if I was too hasty
I agree with what you did. No one wants to withdraw from an account that just lost 30%. Drawing on SS was the right move.
@@michealsizemore1 If you are 100% in the market at retirement you will be forced to make a poor decision.
People continually equate the age of retirement with the age of collecting social security. You can retire at any age as long as you have adequate finances. And then you can collect social security at a later time to maximize the monthly checks.
Most People in America can not afford to retire early..
@@trainsplanesandotherthings5187 There is no reason to not retire a millionaire in the US unless you were hit with some really bad luck most of your life. Making poor decisions is not the same as bad luck.
Why not? 🤔
@@tonylevine2716 Lots of people make very poor financial choices. They spend to see a Taylor Swift concert instead of putting money into their retirement account. They insist on their daily Starbucks rather than pay the dentist at the time of service instead of financing over time. For some, getting their first apartment means they "need' to buy new furniture. As a single mom of 3 whose top pay was 60k over 20 years, I can testify that early retirement IS possible if you live below your means - whatever that may be - when you are younger.
@@mnotlyon You are exactly right. Been divorced twice, supported 5 children over 41 years. Still retired a millionaire. It all depends on what sacrifices you make. Spent 18 months homeless working 7 days a week because I had 50% going to child support, 20% going to taxes and 30% going to back taxes when I found out how my second ex-wife maximized her tax return by filing separately after having a CPA prepared a joint return for us. I was left being a non-filer for several years.
With a paid off mortgage I can live on less than $2000 a month. Social Security will fund my frugal lifestyle. My investments will grow until I am forced to withdraw at 73. If I pass away before then, my heirs will benefit from my savings. Social Security will die with me.
Excellent points you made. Thank you.
dunno; if market is high, you can spare a dime to insure income long term by delaying SSI. If market's low, obviously take SSI rather than the wallstreet shakedown.
I have 5 successful children the last thing they need is more taxable income when I pass. They will be giving away half my hard earned money to taxes. Just something to think about.
13:24 I’m 64, and looking to retire as soon as possible. Your videos are so helpful in sparking questions that I’ve never thought about. Thank you!
Yep. I did that. The best thing I ever did.
I retired at 65. Then, I lived off 401k/IRA. I paid off all my debts. Then, I filed for social security af 68.5 years old. Now, at 69.5 years old. Social now pays for all my frugal expenses each month. Low financial stress in old age is good for health.
Fortunately, I'm in good health. But, I do force myself to go to the gym 4 days a week and for 4 hours each one of those days, 3 hours on threadmill for zone 2 and VO2Max training, and 1 hour on weights. I don't drink and I don't smoke. And I have a great diet.
I love life, with lots of projects and new hobbies all the time. I hope to live to 120 and beyond!
Nice discussion. For the not so wealthy, trying for one larger SS check just makes a lot of sense. Knowing that this is more true while drawing from the portfolio, makes it even more desirable.
Wonderful analysis. This has been my test when interviewing potential financial advisors. Thank you for calling it straight!
Thanks!
The Question is what is wrong with this country, when retirement is so complicated.... one has to figure out all these strategies, Pull your money out to early or too late you get fined... on and on..
One consideration is growth. Typically 401K will be balanced to minimize risk, maximize income toward retirement age, so a Rate of return could be 5%-7%. A delay in SS per year will give you about 8% increase per year. Also there is COLA. The 401K does not have a COLA.
Taxes are interesting, If income is less than $44K, then only 50% of SS is taxable. So limiting the 401K to $44K and maximizing SS will get you close to the $8K per month income. You can fill in the gap with Roth to reach the $8K per month.
I thought 401k distributions are considered passive income and not earned income when it comes to taking into account early SS and the 50% taxable thingy?
@@Darwinq84 that is only on the income test for early SS. It is still taxable for regular income. After 67 the earned income test goes away
The only reason I'd wait to draw SS is if I had other taxable income. The stock market has better returns than waiting on SS, and I can pass those investments on to my heirs. I can't do that for SS. My taxable income at 62 will be near 0 if they don't take away the large standard deduction, so I'll be taking SS as early as I can to protect my investments.
THIS is exactly my situation! I ve been a freelancer and so is my wife. This is exactly what we wanted to know. YOU ARE THE BEST!
Glad it was helpful!
I'm taking SS early to supplement my military retirement, and my 401k will bridge the difference in my monthly expenses. Can't leave SS to your hiers, but 401k and IRA's you can. I don't want to worry about the ups and downs of the markets. I want to enjoy my go-go years with my better half while we still can.
Enjoy your retirement!
Thanks!
VA disability too? If so, take SS early and invest it.
I like the idea taking SS later as an inflation mitigation plan.
a surviving spouse may receive a higher Social Security benefit if the deceased spouse delayed receiving benefits until age 70. This is because survivor benefits include any delayed retirement credits the deceased spouse earned. Between full retirement age and age 70, Social Security benefits increase by 8% annually due to delayed retirement credits. For example, if a spouse dies before reaching age 70, their survivor benefit may be about 20% larger than if they had started receiving benefits at full retirement age
It’s definitely not an easy decision! It’s so individual and there’s a lot of factors to be considered, most importantly, when your expiration date comes.
Nice job putting the math out there for people to consider.
Thanks, Chris! Yeah, there are so many unknowns - it’s tricky.
I plan to take SS at 62 no matter what, but your video did a nice job showing the ancillary benefits of waiting. My wife will probably keep working until at least 65, so we can wait on hers
Great content and clearly explained planning information.
Thanks!
Thanks for the great content! I am happy that I had good tax diversification when I retired - I was able to delay Social Security to 70 AND do Roth Conversions.
That’s my plan
thank you for the video ... I retired last month with a similar situation ...
One thing you did that I really liked was keep it relatively simple ... i.e. social security with a 401k only ...
in doing my stress tests I did not concern myself with SS being reduced ... I do not see politicians ever cutting it and then have to face voters ... I do not consider that very likely ...
The one stress test I accounted for which you failed to do completely is what if one spouse dies prematurely and the other lives into their 90's ... (this is what happened to my parents) ... this meant having only one SS income as well as loosing the MARRIED FILING JOINTLY tax advantage ... My WORST case scenario is where I would die in early 60's and wife would live into her 90's ... with just a modest portfolio my first concern is will she have sufficient funds if I am no longer alive ...
For me, the time which makes most sense to take social security is anywhere from ages 65-67 ... how the stock market is behaving will determine when I begin ... by delaying the SS the SS COLA will help counter the effects of inflation ...
Yes. Definitely a huge disadvantage for those of us who are single. Gotta admit I am envious of a dear friend. Not only did they have two hefty incomes - and got to enjoy the benefits and luxuries that come with it - but even though we are the same age, her husband passed several years ago and she gets his SS benefits. We are both single, same age, same profession, but she is STILL being "rewarded" for being married.
I will retire at 62, with Social Security and a Pension at $60,000 per year plus dividend paying stocks at 15k per year., non retirement stocks...I have money in my 401k and will let that grow and/or will take some out of it for big expenses only. Every retiree must pay attention to Inflation and urge policies that curb Inflation to a more reasonable rate of 2-3% per year .
Great video. I would suggest out of control spending is a bigger risk than inflation. With my rate of spending, I haven't noticed a significant change in high inflation periods.
Your scenario very closely aligns with my situation. Wife is 62 drawing SS, I'm 59 working for 2.5 yrs yet. Was planning on taking SS at 62. But! We have 882K in 401k and IRAs. I'm determined to try to break through the million dollar mark by 62 or I won't retire until I do. So I've been putting some thought into drawing on the investments and retirement but wait to claim SS at a later date. It seems like that plays out well with your example.
There are a lot of variables, but it can often be the smart decision - although there is some market risk on the front end.
Good luck ... if you can, i urge you to consider delaying as long as possible ... for me age 67 makes most sense ... the one issue i most want to account for is what happens if i die early ... me delaying social security will make my wife's situation better if i pass early ...
With an 8% return, you will hit the million dollar mark in two years. There are any number f videos talking about how getting to 100k is 25% of the way to a million dollars. It takes about 8 years to get to 100k; the jump from 900k to a million is about 1.5 to 2 years.
If you are relying on SS to fund your retirement, you already messed up!
@@damondiehl5637 But many have lowered their overall risk since they are nearing retirement so cannot expect 8 percent returns and therefore need to allot more time for that big jump.
Liked this analysis. I would add, however, that I’m not sure why you’d analyze 60/40 in both scenarios. Delaying SS is essentially taking funds out of your retirement account to buy a (great-yielding) bond. If you are comfortable with 60/40 drawing SS at 62, you should be comfortable with a much more aggressive portfolio when drawing SS at 70. Would be interesting to see how the “die earlier” scenario looks if you made this adjustment.
Yeah. I was just going fairly conservative, but that’s definitely a possible adjustment and could make a significant difference.
Brilliant comment. I took SS early and I’m 95% SP500, 5% cash.
To reduce risk bought a smaller motorcycle.
For me it’s simple. It’s an insurance. I’m not using it to get rich but to protect my downside. If I have to use it I can trigger it after 62 and if not, it is an option when things get bad.
Nice Video, would like to see another version when spouses are different ages, say 4 years apart. This also impacts Medicare vs ACA, which then impacts IRMAA. Also same use case, with both spouses claiming at 70 (4 years apart)
This is our complication as well. Can't draw much without driving health insurance costs through the roof! So it's wait until she's on Medicare.
The first true analysis of when to take social security, taking into account the opportunity cost of using up your savings.
I guess Right Capital already calculated the optimal age.
I hadn't thought about the tax implications. I'm glad I saw this video before I meet with my advisor.
I made that mistake when I was younger. I listened to standard advise and put as much into a 401k as I could afford. That's pretty good sized mistake. Long term capital gains has much better tax advantages than a standard retirement account.
This is a good question. I"m 60 and retired. I live off rental income, side hustle income and about 500.00 a month from my savings account when necessary. My monthly expenses are pretty low. I don't have a mortgage and I'm debt free. Because of having low monthly expenses, SS can cover all of my monthly expenses and leave me about 600.00 a month left over even if I take it at 62.
I have about 500k in various investments. I will be selling the rental property within the next few years and investing the profits, I was thinking about taking SS between 63 and 64 and living solely off SS. If I do this, my investments and savings hopefully will last a lot longer.
Your question will be less about making the plan work (congrats on that) and more about tax optimization. A great problem to have.
@@foundryfinancial thx. It’s nice to know i’m on the right track.
@@notyet2345 You're going to take a large tax hit when you sell your real estate.
However, if you live in the house for at least two years before you sell, it becomes your residence. You are exempt from capital gains tax on your residence up to $500,000. This is HUGE tax savings.
You might consider selling your current house, then moving into one of your rentals. rinse and repeat every 2 years to save HUNDREDS OF THOUSANDS on taxes. Talk to your tax adviser to help make a plan, and tell them about this strategy. Many advisers don't think of this as an option.
If you wanted to keep your current home, you could consider renting it while you move into the others, and move back into it when the others are gone.
I'd rather minimize risk than to maximize lifetime income. They're not the same.
I did the math. For a given retirement age (I chose two, 62 and 65) I assumed how much money from SSI I would receive. Then I assumed I would have to replace this SSI income with money from my 401K also taking into account the loss of investment income I would lose by using my 401K. I also included the higher SSI I would receive if I waited. For me, the result showed I would be better off keep my money in my 401K growing vs pulling it out early and using it to delay starting our SSI. Everyone may have different results, but for us, I retired at 65 and immediately started our SSI payments at 65.
the threat to retirement is inflation, taxes, age and longevity, medical cost, personal cost of living, vs economics of the time your retirement, did you invest in a taxable account or tax deferred account, or use a Roth, account in investment, putting money in a Roth you don't worry about tax, the SSI won't really matter if your investments are giving you your cost of living, with a little extra. and besides their are ways to reduce or eliminate tax upon transferring the remainder or your investments to those family members while you are still alive or after you pass. investing in dividends give you income so you don't spend principal. It's more about saving and investing to live in a quality of life you want to be comfortable, not just retirement, when you are too old to do the things you wanted to do when you where younger.
Most of my retirement is real estate inside a ROTH. This helps protect against inflation and taxes.
You seem like a nice enough knowledgeable guy. However, a quick look at your topics. Do you do any videos for people who are single and maybe consideration for retirees who are women?
Hey brother can you maybe do a video on the 72t retirement option to get your IRA a little sooner than waiting till 59.5 thanks
That’s actually a great topic. I’ll add it to the list.
I want maximum monthly income. So I’ll try to fund myself until 70 to take SS with a combination of continuing to work, use of savings, reverse mortgage, to cover the expenses from 63-70.
AMEN! We seem to be the minority on this topic. I too want the max monthly income and can comfortably draw from my savings and 401k to bridge me until age 70. My personal financial planning paid off and my focus is on "living" versus "who knows when I'm going to die, gimme my SS money now!"
I was surprised by the difference in probability of success. I can plan for age 95 but sure hope I go sooner.
Now, that probability of success would probably drop with a more conservative portfolio. There are so many variables.
Currently 66 but have no plans to take SS before 70. I have 4 years to do some Roth conversions and will fund those 4 years with cash in taxable accounts.
its all according to your circumstances....in my case the answer would be yes....if only because you will get a larger raise every year that cola (cost of living adjustment) which will really make a lot of difference thru the years....
Right. That inflation protection is important.
Your comments about living longer than the average are VALID! I don’t recall who or where I read it, but average lifespans are based on the entire life, meaning those that died early on due to accidents, etc, skew the stats down. However, of those that live till 65, the average lifespan shoots upward into the higher than total lifespan numbers.
The taxes are really based on your state and deductions you have. The first $13,610,000 of an estate is exempt from taxes starting in 2024. Also recommend putting your estate/accounts into a trust.
If your money is in an IRA, your heirs are taxed when they withdraw the money -no matter the size of the estate. But, I completely agree on the trust.
@@foundryfinancial good to know so that does limit the taxes significantly since you probably don't have all your money in an IRA.
I’m currently 52, I’ll be retiring on savings and 401k at 55, and starting SS at 62. By waiting until 65 it will take years to break even. I just don’t see it being worth waiting.
Agree! When I took my dad to the SS office (now this was a while back and he had federal government pension) the difference in waiting from age 62 to 65 was $3 a month. He said I'll take it at 62, who knows if I'll make it to 65. Haha
@@colleenhouse7869 yeah my grandpa took it at 62 and died in a car wreck at 64. If he had waited, he would’ve gotten nothing.
I plan on retiring at the end of 2025 at age 60. I'll get a pension and also have pre-tax retirement savings. I'm probably getting a p/t job so that will determine my SS strategy. I'll have the 3 income streams (pension, pre-tax, p/t job) and when I end the p/t job, SS will kick in. If I don't get a p/t job, then I'll simply take SS at 62.
66.5 and just started SS, not using and in saving at 5%. I have no debt, married, annuity, 401, savings intact. Thinking about quitting and be full time. Scary times in 2024. Just want to know for myself if the time is right to 100% retire. It is a hard decision..
Can I get the link to do the calculations
foundryfinancial.typeform.com/rightcapital
I thought a person couldn’t file for spousal benefits until the spouse claimed. In your example Clare claimsT age 67, 3 years before her husband.
You are correct. I wasn’t clear. She can take her own and then switch to the spousal.
There are so many more things than just how much money you get when you are Old? It's when you want to Use the money to be able to do what you want while you still can do it? Like Travel? Hike Bike, Camp Hunt Fish ect not just sit in Retirement home in rocking chair?
Did I say there wasn’t? I would completely agree. In fact, I tried to be very clear I’m trying to help you evaluate one specific question. Both scenarios retire at the exact same age.
Great video!! Thank you!!
Thanks!
I like to maximize my networth. Take SS early.
Use margin to grow your assets and pay it with social security
Is this a joke? Leveraging for retirement funds is not bright.
Bridging. In my opinion, if your financial situation is $800,000 in investments you can take SS at 62 & be able to tie up $600,000 of it to gain interest/dividends. If your financial situation is $150,000 you will probably be better off to use that to delay SS until 70
Actually working as long as can seems best option financially
But then miss out on experiences like traveling
Personally, I have been surprised to find that the benefit I appreciate most is TIME. I retired 4 years ago at age 57. I love the freedom of choice and the ability to be fully engaged in whatever I choose to do - or not do - with my time rather than rush from one commitment/responsibility to the next. Of course I could have had more money if I waited longer, but I was able to spend lots of time with my mother with dementia while she still knew me before she passed in January. I am available when my daughter tells me my grandson has an unexpected day off school and would I like to come. I can drive to my family 2 hours away and back on a whim for dinner. I get up when I wake up - not wake up because I have to get up. TIME truly is priceless; if the financial piece is reasonably covered, short of global changes that would devastate us all, I say go for it!
Not correct I believe spouse can not collect spousal until main worker is colllecting
They can claim their benefit and then switch. I just wasn’t clear enough. It does reduce their benefit slightly, but not fully.
The perfect answer is to focus on building multiple income streams for when you retire.
What multiple income streams are you building?
Why was income zero when they were taking 401k distributions? Maybe I missed something, but that should be taxable income while delaying SS income?
Exactly my view... at 67 RMA, w/drw for 401k. Hold out till 70 to max out my $$
In one of your videos, you said access to Right Capital is free. How do I get access? Thanks.
foundryfinancial.typeform.com/rightcapital
What if you take it at 62, draw off your retirement, while using your ss check to reinvest in the market?
I have a whole video where I explore that.
Curious, I will receive a pension (public school teacher) and will be unable to collect my husband's social security (or very, very little survivor benefit). He is 8 years older and I have about 5 more years before I can retire with a full pension. We are planning for him to take his retirement at 62 so we can both enjoy the SS whether we use it for travel or reinvest while I am still working. Anyone else in this situation?
I will absolutely take SS the second I'm eligible so I can leave more investments intact. The only thing that would change that is if we had other taxable income. It sounds to me like you will since you'll still be working. You need to talk to a tax professional.
I’m 59 will start ROTH conversions, I believe that 500k I will never touch so that will go to our kids. Then will throttle back ROTH conversions and live off cash at 63-65 to qualify for no Medicare premiums. Then will spend down the before tax account and wait til FRA if not 70 to start SSA. That’s the plan at least.
interesting, our situation is a bit more complex, with pensions, taxable investments, real estate rentals.... But my main concern with pushing SS and our pensions back are they die with us, as in not being able to leave that income to our children. I'd hate to pay down our accounts and leave all that money on the table in case of an early demise.
If you withdraw SS at full retirement age, and even if you don’t need it, at least you’ll have it instead of the US Treasury. If by chance you die, at least that money, and interest earned, will go to your kids…. They can’t collect your delayed SS. Spending down your savings or paying taxes in advance to maximize your monthly SS check in your mid 80’s ( if mid 80 ever comes for you) seems crazy to me.
Everyone's situation is different, but taxes on investments age 62-69 could be a much lower rate than they are 15-20 years later, if the economy takes a downturn in USA, or simply if some politicians decide to raise tax rates.
I'm fortunate that my mom took her SS early, because she ended up passing away at 73, but if she had somehow lived to 90 she would have run out of money somewhere in her early 80s.
Around 65-67 may be the sweet-spot for people who have limited investments but are in good health. I'm hoping / planning to have enough in investments to be able to wait until 70 for SS, but I wouldn't hesitate to take it at 67, even if my health is still very good at that age, if I needed to.
Health plays a big part, I believe, but taking SS at 62 seems very risky to me, if there's any decent chance of living to 90, under most circumstances. It may provide a higher average $ to leave to heirs, if you run it 100 times, but there would also likely be a higher % of running out of money, needling care, and leaving nothing.
How can you prepare any plan with uncontrolled inflation? I don't think that it is possible and most planners that I have seen don't really address this possibility.
Inflation exists, and we can't control it. I have taken steps to mitigate its effects though. 90% of my retirement income will come from real estate inside my ROTH. Real estate is less prone to inflation, and the ROTH protects me from taxes (until they change it). The other 10% in in Bitcoin. Bitcoin is risky, that's why it's a small portion, but it should be more inflation resistant than the US dollar.
My wife is 72, I'm 66, we both retired two years ago, after a health challenge and realizing that "Time is the ultimate currency" . Our home is paid off, and we have an investment condo that pays for itself with rental income. My wife is collecting her max SS, while I'm doing a small draw from my 401k. We plan to continue to do this until I'm 70, and will collect my max SS.
I wish you'd use more practical numbers. Your examples show they shouldn't have any money problems
Time after time the MATH shows SS at age 62 is the best way to go...........
Not for everybody.
I mostly agree if that person is a good manager of their finances. The exception may be if they're still working. The added taxes may cause that to blow up.
Absolutely, I calculated it, I don’t remember exactly, but I would be something like 73 before I break even. Who knows if I even live that long. A bird in the hand is always worth two in the bush.
No! Do the math. I did to find my break-even point for waiting to take contributions. I took mine at 68 years of age instead of 70. My break-even point where I would benefit by waiting to take at 70 would be when I reach 83-1/2 years old. Without doing the math on your situation, I imagine your break-even point will be around 72 yrs of age. After that you’d be losing out on an addition $400-$600/months the rest of your life. I would never take it at 62 UNLESS in bad medical condition. Financial common sense says to wait and capitalize on a more lofty monthly payout for life.
I take social security at 62 and invest it in VOO while I draw from my 401K.
You should back test VOO between 2000-2013. Careful you don’t fall to recency bias.
Not at retirement yet but, planning. I want to payoff debt now by using my 401K, is that a good ideal?
No!
Don't do it unless you have over 5 plus years to pay it off. I did it earlier and moved on and stop the debt.
This is math 101. And the chances of a male living to be 95 who was born in 1960 is less than 20%. If you were asked to bet your assets on a plan based on a LESS THAN 20% probability of outcome - you would go all in?!? And it's why these financial plans are worthless in a mathematical sense.
Duh, that’s what he just said.
@@Toomanydays No he didn't. He went right back to using 95 and blowing off the age 80 - which should be the starting point.
Male living to 95 is 20% ? That sounds very optimistic.
Perhaps 20% living to 95 is high, but I'd believe 20% of 60 yr old men will live to 90 soon.
Looks like average life expectancy for 60 yr old American man is currently 82. If average will be 22 more years, I believe close to 20% will live 30.
My dad lived to be 96 and started drawing at 62. He left a lot of money on the table, but he had no idea he would live to that age. My mother died at 81. I'm eligible for my FRA SS this year. I'm thinking I may wait til my max at 70. I don't have a spouse to consider in my decision.
Are you a fee only financial advisor?
I am a fiduciary, independent, fee-based advisor. I’m paid my clients - not some fund company.
Are you fee based for AUM?
@anthonyvanburen3998 we charge based on AUM.
@@foundryfinancial okay thank you- I will check out your website.
@@foundryfinancialCan you explain fee-based vs fee-only ? Thanks.
I've done some calculations. It takes 14 years to break even. So if you take SS at 62 if you live longer than 14 years you lose out on more money if you waited until 70. Thats 14 years of supplemental income. If you dont have a lot of savings, it looks like taking a SS early is the best route as it the break even point is so long and surviving that long with little income does not make sense. Low income also correlates with worst health, so take SS to help keep you healthy. If you lose out on more income 14 years later....oh well, you lived better for 14 years. How many would trade 14 years in there 60s for 14 years in their 80s. What would we pay to be back in our 20s 😂
Is it really worth it to have a retirement plan?? Wouldn't it be better to just save 12K a year in a savings account for retirement or take that 12 K a year and invest it wisely?? I am taking steps and studying to become a back end software engineer which means that I will be making over 90K a year.
isn't that still a plan? Investing wisely can mean many things to many people...does wise mean growth, income or value? Does it mean muni bonds, t bills, etc depending on what you need...SS in itself is an ever changing government program with new rules as does 401k programs
A savings account will get eaten by inflation. It will barely keep up or even lose against inflation. You need to invest on an asset that has a higher rate of return. Funds/stocks are the easiest to manage and can be liquidated easily when necessary. Real estate is another option but comes with a whole other set of headaches.
I am not a financial adviser, or a tax professional and this is not financial or tax advice. My experience is that maxing my 401k was one of the larger mistakes I made. Here's what I wish I had done;
1) invest up to the company match in my 401k
2) max out my roth
3) max out an HSA when I qualify.
4) Invest the rest in a standard brokerage account. (this assumes you are a buy and hold type of investor, and that you do NOT have a ROTH 401k available)
Here's why;
1) The company match is worth the taxes you MIGHT have to pay.
2) ROTH is tax free at retirement, and can be used without penalties or taxes within limits before retirement.
3) You're gonna have health care expenses, and why not pay them tax free?
4) There is NO long term capital gains tax on your first $89,250 of GAINS PER YEAR (if you're married). This is MUCH better than a traditional 401k tax treatment.
So, during retirement, I'd draw nearly 30k per year from my traditional 401k. This would be tax free because of standard exemptions. Then, I'd take out about 60k of GAINS from my brokerage account that would also be tax free. If needed, I'd pull additional money from my ROTH, and of course pay my medical with the HSA. This gives me a tax free income in excess of 100k per year if I've made good investments.
Almost everyone young should be trying to max out their Roth IRA contributions, IMO. (Max is currently $7000 per year, I believe.)
Roth IRA is great even if you are saving to buy a house, but don't know whether it will be 5 or 15 years from now. You can take out contributions without penalty, unlike some other retirement accounts. So say you put in $5000 and invest it. If it grows $5000 (doubles) in 8 years then you can take out the $5000 you put in-- without penalty-- and leave the other $5000 in the Roth IRA to grow until you retire.
How to Money podcast has a good episode explaining Roth IRA and why it's great, especially for the majority of people under 35 or so.
Don't forget the power of an employer's match to your 401K contribution. Always maximize the match. In your early earning years you can benefit from Roth contributions, and most 401K plans allow that, also most allow you to split your contribution between pretax and Roth so you can keep income taxes down to a desired top bracket.
There’s still the mandatory withdrawal that has to happen.
You need to consider doing a ROTH conversion. Be careful though, if you do it all at once the tax hit will be insane.
You can leave your IRA to heirs.
You cannot leave your SS to anyone.
I'm getting tired of reading all the obituaries of folks I knew that passed away in their sixties.
No never u dint want to drain your retirement to delay ss *unless u know my date of death) we are retiring nxt year at 63 takung ss at 65.. all my funds are in tax free investments so not worrued about Any tax after 2024..
Maybe the best hedge against inflation is your vote. Jus sayin
You can't vote out the Fed. They're not part of the government. They are private bankers soaking the wealth out of the country.
I’d rather touch my Roth before withdrawing from 401k
That’s the inverse of common advice. Why do you use this strategy?
Bad idea. Every bit of income your roth creates is tax free. Every bit of income your 401k creates is taxable. Draw from your 401k asap, and consider doing a ROTH conversion too. You need to talk to a tax adviser to help you plan this properly. If you do it wrong, they taxes will eat you alive. The ROTH is the last thing you want to draw from.
Should you use real dollars in hope of more promised dollars? 😂
Vote blue , right wingers have a itchy social security finger
SS can not be saved in its present state. It is a ponzi scheme. Do NOT count on the government to take care of you.
Bullchit !!