We are employing the delay strategy. I’m 61 and my wife is 66. Both of us are recently retired. We will use our low tax years to perform Roth conversions. We are time-segmenting cash flow for the next 4 years until my wife starts SS to mitigate sequence of returns risk. Currently our withdrawal rate is 6%. (I know, way too high). But after we are both taking SS the withdrawal rate drops to 2%. I think we have a solid plan and am confident. However, switching from saver to spender has been the biggest challenge.
We are also delaying SS until at least FRA. I don't know what our savings withdrawal rate is but with the stock market going so well we have more savings now than when we retired.
@@dancurran8977 you may want to look into a financial planing software like Boldin (formerly New Retirement) or have a financial planner provide a one-time assessment and financial plan. The decumulation phase can be complex.
I am going to wait until 70 for the exact reasons you state. It’s over $1000 more per month in a fixed income plus cola if I wait. I’ll take the money from my IRA once I have no income. My initial withdraw rate will be 6%, but will drop to 2% after I hit 70.
If you intentionally draw down the IRA to defer SS, you better be careful in how the IRA is invested. Too much risk/stock market exposure could lead to a down market sequence of return problem.
I have about the same amount in your example. 300K, no house lifelong renter, age 60. Under $2500 a month expenses, that is with a small car payment. I plan to move to a lower cost of living area eventually. I am an active trader, I generate more than my basic expenses with options trading. I also invest in high dividend etf, bdc, cef, reits, etc, that generate enough income to more than cover my expenses. I keep 2 years cash, to cover getting to social security at 62, but plan to keep delaying every 2 years until 67-70. Would only take social security early to preserve my portfolio in a major market crash and keep a roof over my head. I would love to collect at 70, that would give me 3 income streams that cover my expenses. I look at when to collect social security solely on a survival basis. Don't care about break even or maximizing anything. I just don't want to be homeless, especially elderly and homeless.
you need to do the math. Of coarse we can only use historic returns. My Financial advisor did a comparison if I take at 65 vs 67 and my break even is 90 based because he used lost growth by taking less from my IRA and Roth.
I worked in health care. I saw many patients in their 80s. Many were unhealthy, but I would see them year after year. You are likely to live longer than you think. Hint: use healthcare services. Be proactive in taking care of your health.
My advisor is having me take SS at 70 so I can max out my standard tax deduction every year to gradually convert my traditional IRA funds to Roth tax-free. So I’m drawing out of my Roth tax-free, converting my Traditional to Roth a little at a time tax-free so hopefully by 70 when I have to take the SS and minimum IRA draws, I’ll have no taxable income left.
Yet again you bring up some good points, Dan. Especially the waiting on drawing SS because your SS money is in such a favorable tax status. I would tip you but you don’t have that option on the toolbar like most other TH-camrs. For me, I’m drawing SS as a survivor and letting my own account go till 70 like you advocated in another video. I just have a few hangups to get around like being wed at age 60. I may have navigated around that as have just divorced and remarried earlier this year. Am now applying. Still nervous this goes through until I see the check in the mail lol. Am still working till this time. Hey! I can always suspend it, till I quit work. 😊
I got it (benefits)! It works to apply after becoming eligible by divorcing after 60 if making the mistake of remarrying before 60. Of course we shortly thereafter remarried. Sounds unethical, doesn’t it? But it works. I got the idea from one of your videos from a year or so ago. Thank you for leading me down the dark side path lol.
You hit the nail on the head. We don’t like to see the values decrease. It’s the reason we don’t do Roth conversions even though they save taxes and we know the IRS will ultimately get a piece of our balance.
One item when you compare a lump sum vs annuity which is essentially what we are talking about when we compare delayed SS vs allowing investments to grow is the power of compound interest if you get high returns in the early years. Example. If the age 90 break even return needed is 5% but you get 6% in the first 2 years, the break even for the remaining period is now lower. Conversely if you only get 4% you will need more than 5% the rest of the way. Therefore in a high interest environment, if you invest in fixed income, the lump sum or the SS early to stay invested can be beneficial since the high risk free rates likely will not be available in 5 years if you delay.
You stated early on that this is looked at through the lens of NEEDING the money. That being the case, the "break even point" is completely inconsequential because you cannot afford to live on your SS benefit per month at age 65, so you are not losing out on money by not taking SS early, simply because you have to spend it all - and more - just to cover monthly expenses because it's not enough. If you delay 5 more years until 70 to get at least 36% more AND the SS benefit becomes more than enough to cover the monthly expenses, you have gained some "financial freedom" every month and you did not lose 5 years of collecting SS from age 65. On the other hand, if you could take SS early and INVEST all of that money, then I would say that you probably should take SS early.
Problem is you can only make $21,000 a year before they reduce your monthly benefit by $1 for every $2 you earn above the limit. So you can’t invest all your SS because you can’t get all of it. The monthly payment is 30% lower than FRA so you would need to be a good investor.
Thanks for this update. I’ve committed to spending down my IRA til 69.5. That seems to be my psychological threshold for hyperventilating about my IRA withdrawals. I’ll look at my situation again when I get there in January’26 to see if I want to take the last six months worth. I may call you. Or Tony. Isn’t he a therapist?
It's not easy! We'd love to hear an update. Tony isn't a therapist. His job is to keep Dan from getting too boring. Some call him a therapist, some call him nothing but noise, and others call him eye candy.
Whether you need it to live or not does not change the math. Yes, if you can’t eat without SS that is one thing. But otherwise, if you can pull from an IRA, that is the same math as someone who does not need SS or the IRA to live. In both cases there is money being spent that is not invested and you can calculate that lost rate of return.
@@markmarcarian9058 in this scenario, they save whatever they don't spend. But they spend everything while delaying SS. However, when they turn 73 (and RMDs start) their draw down does NOT accelerate. Since they delayed SS, their IRA was decreased to bridge this gap. Therefore, the income needed from the IRA was reduced as SS was higher and the IRA & RMD was a lower dollar amount.
300k in savings? Wouldn’t the Average person have that money conservatively invested in a retirement account easily earning on average of 6-7 percent? Your less than 4% interest rate seems to low for anyone remotely trying to do what’s best
So, ....I have 47 years, (Will be 48 years once my 2024 $$$ are added), of earned wages on my SS record, so my best 35 years are already calculated. 2024 is a high year for me, so will be included in there. I'm 64 and still working full-time, and haven't claimed ss yet; want to wait till FRA 67 in Nov 2027. If i were to take off 1, maybe 2, maybe 3 years and live off my ira and didn't touch ss, will it still grow in monthly increments (+ colas), up to the FRA? Or is this about delaying AFTER fra? I know delaying after FRA is called DRC- Delayed Retirement Credits.
Pull the bandaid on the ordinary income tax withdrawals as quickly as possible… do yourself a favor and move to capital gains tax treatment paired with volatility buffer as soon as possible. As long as you have ordinary income you’re losing the lower capital gains space in the brackets, under TCJA 0% !! In retrospect, wish I’d never put a dime in qualified plans… could have otherwise been in the 0% / 15% brackets with a single digit effective tax rate years ago and perpetually.
@@bilo6832 better than traditional, but I’m not a fan. I want to (1) use leverage on investments, (2) deduct investment finance expense (4952), (3) avoid prohibited transactions/disqualified persons limitations and (4) harvest tax losses. My tax free bucket is life insurance with no upper limit - better than an irrevocable trust (no probate, no estate tax while having access). Move all investment gains through the lower cap gains tax treatment into cash value as quickly as possible, leverage and repeat.
Taxes must be the first thing considered. I'm a single person going on 68 who has not yet claimed SS. My self employment income is low enough (on paper) to qualify me for a 100% property tax exemption. The moment I take SS all of that goes away. With my projected self-employment income and a slow trickle from the very low interest IRA account I can keep this situation going until I turn 70. At that time I will get slammed with income tax but my SS will approach 50K a year. My housing expenses including mortgage are about $2k a month, which means I will have over $2k of discretionary income per month. So even with a possible 20% cut in benefits when the well runs dry I will be OK.
We go into more detail and show the math in this video: th-cam.com/video/j7x4DSK8uBk/w-d-xo.html
When it costs $30-40,000 to reroof your house, $10,000 for new HVAC etc, that spend down is terrifying.
We are employing the delay strategy. I’m 61 and my wife is 66. Both of us are recently retired. We will use our low tax years to perform Roth conversions. We are time-segmenting cash flow for the next 4 years until my wife starts SS to mitigate sequence of returns risk.
Currently our withdrawal rate is 6%. (I know, way too high). But after we are both taking SS the withdrawal rate drops to 2%.
I think we have a solid plan and am confident. However, switching from saver to spender has been the biggest challenge.
We did a podcast on the "problem" of switching from saving from spending: th-cam.com/video/22FgQiep87g/w-d-xo.htmlsi=tl16D30mLjOjyyBG
@@Dolphinfinancialgroupfl thanks. I did watch that video before. “Luckily” my wife has no problem spending down our assets. 🤣
We are also delaying SS until at least FRA. I don't know what our savings withdrawal rate is but with the stock market going so well we have more savings now than when we retired.
@@dancurran8977 you may want to look into a financial planing software like Boldin (formerly New Retirement) or have a financial planner provide a one-time assessment and financial plan. The decumulation phase can be complex.
I am going to wait until 70 for the exact reasons you state. It’s over $1000 more per month in a fixed income plus cola if I wait. I’ll take the money from my IRA once I have no income. My initial withdraw rate will be 6%, but will drop to 2% after I hit 70.
If you intentionally draw down the IRA to defer SS, you better be careful in how the IRA is invested. Too much risk/stock market exposure could lead to a down market sequence of return problem.
@@stevemlejnek7073 Indeed, Sequence Risk is a real issue that most retirees must consider. th-cam.com/video/gfvvXsVMs2c/w-d-xo.htmlsi=6sQBZeanUovrgL7O
It’s accelerating sequence risk
I have about the same amount in your example. 300K, no house lifelong renter, age 60. Under $2500 a month expenses, that is with a small car payment. I plan to move to a lower cost of living area eventually. I am an active trader, I generate more than my basic expenses with options trading. I also invest in high dividend etf, bdc, cef, reits, etc, that generate enough income to more than cover my expenses. I keep 2 years cash, to cover getting to social security at 62, but plan to keep delaying every 2 years until 67-70. Would only take social security early to preserve my portfolio in a major market crash and keep a roof over my head. I would love to collect at 70, that would give me 3 income streams that cover my expenses. I look at when to collect social security solely on a survival basis. Don't care about break even or maximizing anything. I just don't want to be homeless, especially elderly and homeless.
you need to do the math. Of coarse we can only use historic returns. My Financial advisor did a comparison if I take at 65 vs 67 and my break even is 90 based because he used lost growth by taking less from my IRA and Roth.
I worked in health care. I saw many patients in their 80s. Many were unhealthy, but I would see them year after year. You are likely to live longer than you think.
Hint: use healthcare services. Be proactive in taking care of your health.
Healthcare services seem apt to kill. Ive seen a lot of bad things in that setting
My advisor is having me take SS at 70 so I can max out my standard tax deduction every year to gradually convert my traditional IRA funds to Roth tax-free. So I’m drawing out of my Roth tax-free, converting my Traditional to Roth a little at a time tax-free so hopefully by 70 when I have to take the SS and minimum IRA draws, I’ll have no taxable income left.
Listen to that advisor. He sounds like a good one.
Everything in your house costs way more than before to replace like the roof and HVAC. I really hate this idea to spend down 200k.
Get a condo.
One benefit of waiting that may have been discussed is to have the maximum amount of funds available on stable basis for long term care
Move to Thailand.
Yet again you bring up some good points, Dan. Especially the waiting on drawing SS because your SS money is in such a favorable tax status.
I would tip you but you don’t have that option on the toolbar like most other TH-camrs.
For me, I’m drawing SS as a survivor and letting my own account go till 70 like you advocated in another video. I just have a few hangups to get around like being wed at age 60. I may have navigated around that as have just divorced and remarried earlier this year. Am now applying. Still nervous this goes through until I see the check in the mail lol. Am still working till this time. Hey! I can always suspend it, till I quit work. 😊
I got it (benefits)! It works to apply after becoming eligible by divorcing after 60 if making the mistake of remarrying before 60. Of course we shortly thereafter remarried. Sounds unethical, doesn’t it? But it works. I got the idea from one of your videos from a year or so ago.
Thank you for leading me down the dark side path lol.
You hit the nail on the head. We don’t like to see the values decrease. It’s the reason we don’t do Roth conversions even though they save taxes and we know the IRS will ultimately get a piece of our balance.
Too many unknowns to pay taxes early.
One item when you compare a lump sum vs annuity which is essentially what we are talking about when we compare delayed SS vs allowing investments to grow is the power of compound interest if you get high returns in the early years. Example. If the age 90 break even return needed is 5% but you get 6% in the first 2 years, the break even for the remaining period is now lower. Conversely if you only get 4% you will need more than 5% the rest of the way. Therefore in a high interest environment, if you invest in fixed income, the lump sum or the SS early to stay invested can be beneficial since the high risk free rates likely will not be available in 5 years if you delay.
You stated early on that this is looked at through the lens of NEEDING the money. That being the case, the "break even point" is completely inconsequential because you cannot afford to live on your SS benefit per month at age 65, so you are not losing out on money by not taking SS early, simply because you have to spend it all - and more - just to cover monthly expenses because it's not enough. If you delay 5 more years until 70 to get at least 36% more AND the SS benefit becomes more than enough to cover the monthly expenses, you have gained some "financial freedom" every month and you did not lose 5 years of collecting SS from age 65. On the other hand, if you could take SS early and INVEST all of that money, then I would say that you probably should take SS early.
Problem is you can only make $21,000 a year before they reduce your monthly benefit by $1 for every $2 you earn above the limit. So you can’t invest all your SS because you can’t get all of it. The monthly payment is 30% lower than FRA so you would need to be a good investor.
@@johnurban7333 ........and most people don't have the investment skills to get a good return or avoid losses.
Thanks for this update. I’ve committed to spending down my IRA til 69.5. That seems to be my psychological threshold for hyperventilating about my IRA withdrawals. I’ll look at my situation again when I get there in January’26 to see if I want to take the last six months worth. I may call you. Or Tony. Isn’t he a therapist?
It's not easy! We'd love to hear an update. Tony isn't a therapist. His job is to keep Dan from getting too boring. Some call him a therapist, some call him nothing but noise, and others call him eye candy.
I am forced into it as I have an inherited IRA I need to empty between ages 62 and 70.
Whether you need it to live or not does not change the math. Yes, if you can’t eat without SS that is one thing. But otherwise, if you can pull from an IRA, that is the same math as someone who does not need SS or the IRA to live. In both cases there is money being spent that is not invested and you can calculate that lost rate of return.
Just curious - when this person had to accelerate their draw down at 73, were you assuming they were spending it all or putting it away?
@@markmarcarian9058 in this scenario, they save whatever they don't spend. But they spend everything while delaying SS. However, when they turn 73 (and RMDs start) their draw down does NOT accelerate. Since they delayed SS, their IRA was decreased to bridge this gap. Therefore, the income needed from the IRA was reduced as SS was higher and the IRA & RMD was a lower dollar amount.
It’s Ali’s rope a dope you’re referring to.
300k in savings? Wouldn’t the Average person have that money conservatively invested in a retirement account easily earning on average of 6-7 percent? Your less than 4% interest rate seems to low for anyone remotely trying to do what’s best
So, ....I have 47 years, (Will be 48 years once my 2024 $$$ are added), of earned wages on my SS record, so my best 35 years are already calculated. 2024 is a high year for me, so will be included in there. I'm 64 and still working full-time, and haven't claimed ss yet; want to wait till FRA 67 in Nov 2027. If i were to take off 1, maybe 2, maybe 3 years and live off my ira and didn't touch ss, will it still grow in monthly increments (+ colas), up to the FRA? Or is this about delaying AFTER fra? I know delaying after FRA is called DRC- Delayed Retirement Credits.
Yes, the % of SS you get will increase each month you delay to reach 100% at your FRA.
Pull the bandaid on the ordinary income tax withdrawals as quickly as possible… do yourself a favor and move to capital gains tax treatment paired with volatility buffer as soon as possible. As long as you have ordinary income you’re losing the lower capital gains space in the brackets, under TCJA 0% !! In retrospect, wish I’d never put a dime in qualified plans… could have otherwise been in the 0% / 15% brackets with a single digit effective tax rate years ago and perpetually.
Roth is also a good way to go if you are in the lower tax brackets.
@@bilo6832 better than traditional, but I’m not a fan. I want to (1) use leverage on investments, (2) deduct investment finance expense (4952), (3) avoid prohibited transactions/disqualified persons limitations and (4) harvest tax losses. My tax free bucket is life insurance with no upper limit - better than an irrevocable trust (no probate, no estate tax while having access). Move all investment gains through the lower cap gains tax treatment into cash value as quickly as possible, leverage and repeat.
What about if you get a pension 39k a month?
What type of job did you do to get 39k a month?
@@davJanko8052that has to be per year.
😂
Taxes must be the first thing considered. I'm a single person going on 68 who has not yet claimed SS. My self employment income is low enough (on paper) to qualify me for a 100% property tax exemption. The moment I take SS all of that goes away. With my projected self-employment income and a slow trickle from the very low interest IRA account I can keep this situation going until I turn 70. At that time I will get slammed with income tax but my SS will approach 50K a year. My housing expenses including mortgage are about $2k a month, which means I will have over $2k of discretionary income per month. So even with a possible 20% cut in benefits when the well runs dry I will be OK.
No moola much here in my IRA😂