Use Qualified Accts to Put Off SS?

[Justin Bilyj]

I know I know, it all depends on the retiree, aside from that foundational advice, lets look at Social Security. For high income earners, this is a less important asset, but for mid income earners, this is a huge part of their retirement foundation (37%), so which would be the best sequence of draw-down, taking from qualified accts to delay taking social security, or just taking social security and allowing your qualifed accts to grow tax deferred?
Delaying SS adds 8% a year (correct me if I am wrong), which is a hard number to beat in the volatile market (not for a self directed IRA used to invest in real estate).
Whats your opinion on this matter?

 

[Norwayguy]

I know I know, it all depends on the retiree, aside from that foundational advice, lets look at Social Security. For high income earners, this is a less important asset, but for mid income earners, this is a huge part of their retirement foundation (37%), so which would be the best sequence of draw-down, taking from qualified accts to delay taking social security, or just taking social security and allowing your qualifed accts to grow tax deferred?
Delaying SS adds 8% a year (correct me if I am wrong), which is a hard number to beat in the volatile market (not for a self directed IRA used to invest in real estate).
Whats your opinion on this matter?

True but on death SS ends or at least the smaller social security disappears on the first death in a couple where as the QP balance can pass to beneficiary. Also you do get an increase by waiting but forever lose the distribution from the years you delay there is typically a break even point say delay 3 years you just figure out how many years he would have to survive before the increased benefit catches up.

 

[Justin Bilyj]

The break even point comes around age 78 I have heard.

Good point about SS just ending after death, kinda like a Life Annuity...

 

[beachbum2012]

I signed up for the RICP and am in my 2nd course about income sources where we're now heavily focused on Social Security. Really the only people who should/could be taking Social Security early are retired low-income folks who just don't have any nest eggs to draw down, single people who are in poor health and/or have a family history of dying young, and folks who are very wealthy (say $2M+). For married people it almost always makes sense for the spouse with the larger PIA to wait until at least 69 to claim. For the middle income folks, it's not really about a breakeven age analysis but can be framed in several other ways:

- It's a joint and survivor life annuity, where the surviving spouse continues the larger benefit
- It's cost of living adjusted, which is something most pensions don't have and you can't find the same cost-effective COLA adjustments in commerical annuities.
- The savings on an after-tax basis can be pretty substantial by drawing down a 401K/IRA and using this to bridge the period between retirement and claiming SS income at age 70, because of avoiding the "tax torpedo" where SS income can get taxed at a much smaller rate than qualified funds
- Drawing down the nest egg in this bridge period in order to delay the age of drawing SS income has been shown to extend the life of the portfolio, sometimes by up to 10 years (see: Video | New York Life Center for Retirement Income)
- Also, delaying drawing SS income can be viewed as purchasing additional insurance against longevity risk

 

[Justin Bilyj]

Hows the RICP? I am really thinking about it. I ruled out the cfp, and the chfc seems to vague.

 

[beachbum2012]

Hows the RICP? I am really thinking about it. I ruled out the cfp, and the chfc seems to vague.

I'm enjoying it. If you have any interest at all in retirement financial planning, I think it'll be invaluable for you. The time commitment isn't overwhelming either; you should be able to knock out all 3 courses in 6 months.

About half of the video content in the course comes from a lot of the videos at the New York Life Center for Retirement Income. The link is in my other post. Maybe start watching some of them to get an idea if that designation is for you.

 

[RedKite]

Yea a strategy to maximize social security income and reduce RMDs and taxable income. Draw down after 59.5 to 70.5 and use withdrawls into a Roth with income strategy. Balance contributions between Q and NQ plans, Roth Convert what you can if you have ISW with your current employer sponsored retirement plan. Then you get post 70 income that is smart and planned.

Funny how people say, "oh just buy ETFs or no load funds, it will all work out! Who needs an advisor?!" - yea... even advisors need advisors