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David Crosetti
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I was born and raised in California. I worked in the family business for a number of years and then decided to spread my wings and try working for someone else. My first significant job was with Frito Lay. After a stint in the salty snack business, I transitioned to the beverage industry,... More
  • Approaching Retirement: Things To Consider Concerning Social Security 41 comments
    May 2, 2013 7:49 PM


    I have been thinking about retirement for some time now. Recently, at a family reunion of sorts, I had a conversation with a relative who I hadn't seen in a while. She retired a year earlier. I mentioned to her that one of the things I liked about retirement in Mississippi is the fact that the state does not tax Social Security income or income from pensions, IRA's, or 401k accounts.

    She informed me, in no uncertain terms, that Social Security income was taxable and that she paid taxes on it and she wasn't very happy about it. Contrary to my normal argumentative nature, I decided to just go and make myself another pulled pork sandwich and find someone else to visit with.

    What I Know:

    I have to admit, she got me thinking about Social Security taxes and I decided that I needed to look into it a little bit more, before I began taking it and being surprised. If there's one thing I don't like, it's suprises.

    So, I decided to look at the tax consequences of Social Security and I found out some interesting things about the program and how it is taxed. Here is a link to the Social Security website.

    You will have to pay Federal taxes on your Social Security benefits if you file a Federal tax return as an individual and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income of more than $32,000.

    But, there is some good news. Social Security exempts 15% of your benefit from taxes. That means that only 85% of your Social Security is subject to Federal income taxes--not the entire amount.

    Dig a little further and you will find this

    1. file a federal tax return as an "individual" and your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. If that income is more than $34,000, up to 85 percent of your benefits may be taxable.
    2. file a "joint return," and you and your spouse have a combined income* that is between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits. If that income is more than $44,000, up to 85 percent of your benefits may be taxable.

    What You Should Know:

    For all intents and purposes, there are three times when you can begin to draw Social Security income. If, like me, you were born between 1943 and 1954, you can draw Social Security at age 62 (a reduced amount); at age 66 (full retirement age); or at age 70 where you will receive the maximum Social Security benefit (as high as it will get).

    Every year, you should be getting a document from the Social Security Administration that outlines your contributions and your retirement benefits. If you don't have one, you can go online to their website (linked above) and get your statement directly from them with secured access.

    In my case, here's how the numbers shake out. I could have begun drawing Social Security at age 62. My monthly benefit would have been $1848 a month. By waiting until age 66, which would be my "full retirement age" that income would be $2379 a month. Now, if I wait to get my maximum benefit at age 70, that monthly income would be $3191 a month or $38,148 a year.

    Other considerations you will need to be aware of:

    1. Are you going to draw Social Security and still work? Well, that presents a few issues as well.

    If you are under the "Full Retirement Age" you can earn up to $15120 a year in gross wages (in 2013). Your Social Security income will be reduced $1 for every $2 over $15120 that you earn.

    In the year you reach "Full Retirement Age" (66 in my case) you can earn $40,080 in gross wages (in 2013). Your Social Security income will be reduced $1 for every $3 over $40,080 that you earn.

    After you have reached the Full Retirement Age--that is you have turned 66--then you are allowed to continue working, receiving income from your job and have no reduction in your Social Security benefits.

    Summary and Conclusion:

    I did some additional research with the state of Mississippi and I have discovered that Social Security is not taxed by my state. Additionally, my state does not tax pension income, nor does it tax income taken from 401k plans or IRA's. You should check your own state's treatment of retirement income and Social Security in order to put together a plan of action that makes the most sense for your particular situation. Here is a link to a website that breaks down tax treatment in all 50 states. Well worth the look.

    Looking at your own situation, you cannot plan your Social Security game plan soon enough. Take the time to sit down with your CPA or an Elder Care Attorney and explore your options.

    In my next article, I will be exploring a decision to wait until age 70 to begin receiving Social Security benefits. As a Dividend Growth investor, I want to show you an option that you may not have considered.

    That option is waiting until age 70 to receive the maximum benefit from Social Security, and using your DG retirement portfolio (be it 401k, Traditional IRA, or Roth) as your vehicle to a better retirement with minimal taxes.

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Comments (41)
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  • As always, another excellent article. We are at least a decade out from retirement, and this is the perfect time to start planning. I've been wondering about the treatment of 401k/IRA income from a taxation standpoint.


    One thing I still do not understand: Federal pensions under the old plan in which participants put little into the plan are not taxable Federally? Yet, the working stiffs in the private sector pay full income tax on 401k/IRA plans? Even though much of the growth was via capital gains or dividend/interest earnings? This hardly seems reasonable. To the point where I'm wondering if I've misunderstood the regulations.


    If you could address these topics in another article, I'd be very grateful.


    Happy investing!
    2 May 2013, 10:56 PM Reply Like
  • Author’s reply » Yank:


    It was hard enought to digest this information! Don't really know much about Federal pensions and taxes. I know that my wife will get a state of Mississippi pension and I need to check out if she will have to pay Fed taxes on that.


    My guess is that she will. I am very much interested in this Social Security stuff and it seems to be something that I want to spend more time on.


    SA editors thought it fell into the category of "personal finance" which they don't feature, so I made it an instablog. I guess if I would have put a chart or two in the article it might have been published.


    I don't care, though. The people that need to see this article will find it.


    3 May 2013, 07:25 AM Reply Like
  • "One thing I still do not understand: Federal pensions under the old plan in which participants put little into the plan are not taxable Federally?"


    Not true.
    3 May 2013, 04:41 PM Reply Like
  • Thanks David. Been thinking more SS thots as the years roll by.


    Yep, hope to go for the 70 yr old plan, now to just stay in shape, eat healthy, and stay away from stress.


    Look forward to your next one. tks.
    2 May 2013, 11:06 PM Reply Like
  • Author’s reply » Maybe:


    I am thinking about the tax implications of "early" Social Security and withdrawals from IRA/401k.


    As you know, those withdrawals are taxed as "ordinary income" and from what I gather would count toward your total income, along with the Social Security and put you in not only a Social Security tax issue, but into a higher bracket as well.


    I am thinking--not sure--that an investor with 200k or more in their 401k/IRA might be better off using that deferred money first and then at age 70 begin taking the Social Security becasue then, they would be getting the maximum benefit from SS and be able to cut down on the withdrawal rate from the deferred accounts.


    3 May 2013, 07:31 AM Reply Like
  • DC,
    That last idea seems like a good one...and it might also help to cut down on RMDs (Required Minimum Distributions) later on, since you would have reduced the balances of the 401k/IRA. Maybe in your follow-up, you can consider the relationship between those accounts and (not taking Social Security), along with the related notion of doing partial conversions (to Roth IRAs) between the age of 62 and 70-1/2.
    3 May 2013, 07:50 AM Reply Like
  • Author’s reply » DF:


    That is exactly what I'm thinking. I would rather have the higher SS payment (age 70) and use my tax deferred accounts to fund my retirement.


    In my case, with my wife working, I need to replace my income. But, I can withdraw without having to have a schedule. I can take the money as I need it to maintain our lifestyle.


    But, the reduction from the deferred accounts could be just the dividend income and not the principle in the account. Besides, you don't have to take all of your dividends--you can take only what you need.


    3 May 2013, 08:20 AM Reply Like
  • David,
    I am waiting anxiously for the second article. I just turned 62 and have been trying to analyze the impacts of using my IRA/ROTH/taxable investments to partially fund retirement until I decide to draw social security.


    Because I am drawing military retirement, will receive an additional much smaller pension at age 65 and my wife will receive retirement from a Teachers Retirement System, we are doomed to paying taxes on 85% of our social security distributions. A nice problem to have but I have found that deferring SS until age 70 seems to cause us some really bad tax consequences in conjunction with required minimum distributions from our IRAs.


    I'm now looking at a combination of IRA to ROTH conversion and starting SS at age 64 to reduce the RMD impact. This possible plan is based on multiple scenarios run on Smart Money's Retirement Planner. I've checked this through a couple of other programs and get similar numbers.


    Do you, or anyone else reading, have a favorite planning tool? Suggestions are much appreciated.


    3 May 2013, 05:35 AM Reply Like
  • Author’s reply » Fly:


    I think, and I'm working this out, that waiting until age 70, if you have income to support yourself might be a better notion.


    In my case, my wife is younger than me. While I draw SS she will be working (school administrator) and earning around 80k in income. Now, with that income on her side my 85% of my SS would be taxable.


    Now, I know we can all get wrapped up in deductions, allowances, credits etc. about taxes. I'm trying to keep this simple. So, I am just stating the "gross" reality. (Not gross "yuckie", but "gross" total.)


    So, here is my thought. Again, I haven't worked this out. Use the 401k and or IRA income to match what would be the SS income. I still pay taxes on the withdrawals from the deferred accounts, but my SS keeps growing.


    The difference--as stated in the article is the amount of SS at age 70 vs. say 62. At 70 I get $3200 vs age 62 being $1850 a month.
    Replacing that income from a larger tax deferred account might make more sense.


    Here's the deal. The RMD is a "necessary" evil. You have to take it at age 72. But there is no rule as to what you can do with that money.


    If I am still here and kicking, that withdrawal will go right into my wife's Roth (she is 14 years younger than me and will not "retire" along with me). That money that I don't need will be rolled over to my children's Roths. (As long as they have income, the government doesn't stipulate where the money comes from).


    My plan is to take the existing tax deferred accounts that I have and pay the taxes on withdrawals and pass that money along to my kids, utilizing tax free (Roth's) for them and my wife will inherit the balance initially and withdraw based on her own life expectancy following the same plans that I had.


    I hope that makes sense.


    3 May 2013, 07:48 AM Reply Like
  • Dave,


    Thanks. Makes perfect sense to me.


    This is a hard decision, complicated by many moving parts, and once made it is mostly irreversible. Social Security alone is so convoluted that I'm still studying to determine the best approach.


    My wife is only a year younger than I and intends (she says) to work two more years. I have been talking with a retirement planner who recommended the option of me applying for SS at 66 and deferring payment until 70. This would allow my wife to apply for a spousal benefit while deferring her own SS until she reaches 70. Don't think this complication can be applied to your situation but others might not know about it.


    BTW the age to begin RMD is 70 1/2 (72 above could be a typo).


    Bottom line is that we can currently replace SS income with dividend income without touching principal if we decide to defer SS withdrawals. I'm trying to develop my strategy for minimizing taxes and maximizing the estate to be passed on to our children.


    Good luck to all of us! We need it!


    3 May 2013, 08:39 AM Reply Like
  • David,


    You'll need to run the numbers, but when I did this a few years back for my mom, the SS didn't grow as much as I could grow her investments, so it made more sense to take the SS first.
    3 May 2013, 10:43 AM Reply Like
  • Author’s reply » Fly:


    I missed spelled on the RMD. Thanks for pointing it out!


    The estate planning part is critical no matter how large your estate will be. It's not about avoiding tax--it's about knowing the ramifications of your own particular situation and then taking steps to fashion a game plan that allows you to transfer wealth without any problems.


    For example. In Mississippi, Power of Attorney is useful mostly as toilet paper when it comes to handling your parent's finances. You are better off, here, having children listed as Trustees on your Trust account so that they have access to your money and the ability to manage your affairs is spelled out completely in the Trust documents.


    What I found with my mother is that the banks became much more accomodating once they had a copy of the Trust documents and we were able to manage her funds without much hassle.


    Another thing to consider is having fewer bank accounts and investment accounts. I took my mother's estate and closed out 5 bank accounts (CD vehicles). Rolled those into Schwab.


    So now I have my checking, my wife's checking (Regions). Everything else is at Schwab. IRA, Roth, Taxable Account, and checking (for big ticket stuff). One place. Easy to find. Have a relationship with the Schwab people at my local office and they are great.


    I want my wife and my kids to have as little hassle as possible in all this stuff.


    3 May 2013, 10:55 AM Reply Like
  • "Social Security alone is so convoluted that I'm still studying to determine the best approach."


    Which, in and of itself, is a good enough reason to get the government out of the retirement business. All they can do is build a worse mousetrap. :-(
    3 May 2013, 07:01 PM Reply Like
  • Amen, Robert. Unfortunately we are preaching to the choir.
    3 May 2013, 07:13 PM Reply Like
  • Thank You for thinking out loud , this is most helpful to those of us in the same age range. Social Security is a complex issue itself, so any conversation can help
    3 May 2013, 10:34 AM Reply Like
  • Author’s reply » James:


    It is pretty interesting stuff when you start digging into it. Here's what I'm planning to do. I am going to retire next year at age 65. I will be able to qualify for Medicare insurance, but my drug program will be part of the $4/$10 offerings from CVS, Walgreens, Kroger, Walmart etc.


    What I've done is sit down with my doctor to discuss the alternative drugs that I can take, relative to various medical needs. The drugs I am currently taking do not come as "generic." So, the bills for those monthy drugs was over $300 a month--because my insurance coverage at work has changed dramatically.


    Now, I take 3 prescription drugs that work as effectively as the ones I was taking at a fraction of the cost. Now, everyone is different, but when you look at the drugs available on those "cheap" packages, there are hundreds of substitutes available.


    But the thing that I found troubling was the taxable nature of the SS benefits. I didn't consider this. Now, since my wife will continue working, my SS benefits, if taken at 65 would be reduced from what they would be at age 70 (and significantly as well) AND the taxes that we would have to pay on her income and my SS would further reduce the value of the SS income I draw.


    So, why not match that income with withdrawals from my tax deferred accounts, in the form of dividends and not principle. I still have to pay income taxes on the withdrawals as ordinary income, but in the meantime, my SS value would be increasing as I wait until 70 to get it.


    So, we are talking 5 years of withdrawals from the deferred account, those withdrawals would not be part of the RMD, they would not be 100% of my dividend stream (so my shares in the deferred account can continue to grow), and once I am 70, I take the full value of my SS and the RMD from the deferred account.


    Meanwhile, my Roth continues to grow (as there is no required withdrawals on that account) AND when I pass, my wife can roll my Roth into hers and there is no requirement for her to withdraw.


    The kids will inherit the Roth combination account from my wife. We are exploring the possibilities and the advantages and disadvantages of taking the remaining IRA funds and the Roth funds and looking at placing them in Trust to reduce tax liabilities.


    I would hope that more people would visit the blog and contribute, as we can all learn from one another, for sure!


    3 May 2013, 10:48 AM Reply Like
  • Dave


    This is a good food for thought article. I turn 60 next month and have been thinking more and more on what to do about SS. I had created a spreadsheet awhile back and calculated what I could theoretically make on drawing SS at age 62 and then investing it versus waiting until age 66 for the full amount, and where the breakeven or catchup would be between the two. If I remember correctly it was around age 80 or so before the age 66 totals received would match the age 62 totals received. But I hadn't considered the tax implications. And my pension is going to put me in the 85% taxable category. Unfortunately I didn't keep the spreadsheet and will need to recreate it with the tax considerations. My intent was to use the SS to continue growing the investment accounts until at least RMD's kick in and then at that point make a decision on what to do with them. Decisions, decisions... glad you're doing this series. Thanks.


    3 May 2013, 11:30 AM Reply Like
  • Author’s reply » Eddie:


    The field is filled with potential "mines" as to determining the "best" approach to take. When you go to their website, you can create an account for yourself and it will update you on what your benefits will be at the different age platforms.


    While 15% of the benefit is "not taxed" you really have to run the numbers with other sources of income, such as the spouse, self employment income, and other "qualified" income sources to get a complete picture of your own particular situation.


    Since my wife will continue to work, and we will continue to file a joint return, the early draw on SS for me would be reduced by those taxes. Additionally, I would have to draw from my IRA to supplement the SS income.


    Withdrawing the income is not an issue. I just think I might be better off drawing from the IRA for money I need and letting the SS grow until I reach 70 to get my maximum payment, which right now would be $36k a year.


    But, I tend to write articles as I go along. I need to put all the next stuff in place before I get to far ahead of myself. I just know that each situation is different and perhaps it would be advisable to sit down with a SS expert and look at all the possible scenarios as they relate to your own situation.


    Kiplinger has a Social Security review on their website. There is a basis version and one that charges for an "in-depth" review. I might do the paid version this weekend just to be able to share my findings. Off the top of my head, I don't remember the cost.


    You can find it at


    3 May 2013, 11:40 AM Reply Like
  • Please factor in your SS net income that Medicare payments are taken out of your SS. Based on your income, for each person this Medicare deduction could be approx. $100.00, $200.00, $300.00, etc per month.


    This can significantly impact a couples net income from SS. Between the Medicare payments and my secondary policy, my wife and I pay nearly $900.00 per month for medical insurance. The secondary policy is thru my retiree plan. I suspect it would be more costly if I went into the market for a secondary plan.


    Just saying, do not forget to factor medical insurance into your plan!!!!!!!!!!
    3 May 2013, 01:11 PM Reply Like
  • Author’s reply » Heg:


    Medical care is the biggest "bugaboo" in the retirement scenario. It is unfortunate how much medical care costs and it is a big drain. It's almost as expensive as a mortgage.


    As part of any retirement plan, you have got to eliminate debt. Like a business, each of us has revenue coming in; we each have operating expenses; and then we have earnings (that which is left over, in the simplest of analogies.)


    Having a $1200 a month mortgage and two car payments is not a good place to be. Credit card debt is a potential retirement killer as well. Cash flow is king, both in business and in our personal finances, for sure.


    3 May 2013, 01:35 PM Reply Like
  • "It is unfortunate how much medical care costs"


    And it's only going to get worse. Hopefully some more of those who supposedly "represent" us in Congress are beginning to see what a train wreck Obamacare is going to be.


    3 May 2013, 02:11 PM Reply Like
  • Author’s reply » Eddie:


    Concern over the cost of medical care has got to be taken into account with any and every retirement plan.


    It will get worse if Obamacare is allowed to move forward. The tax implications on that program are downright scary.


    3 May 2013, 02:16 PM Reply Like
  • DC, I agree. In business so many people want to look only at revenues and net income. They are definitly important but I always want to look at cash flow. A company and a household lives on cash and therefore cash flow just as you stated.
    3 May 2013, 01:42 PM Reply Like
  • Author’s reply » Heg:


    I've been trying to improve mine ever since I decided that next year I'm done with this job and moving on to something that I really enjoy. I have the cattle business and that's fun, but not all that time consuming (my nephew runs it--it's time consuming for him!) I am going to sell the plane and pay off my mortgage with that money. I don't fly anymore and other than the times we get the plane leased out, it's just a drain, like owning a boat.


    My niece just opened up a bakery in Kentucky. She is a real artist and makes beautiful stuff that tastes great. She can't cook stuff fast enought to keep up with the demand.


    There is always something out there to turn a buck in. You just have to go for it.


    3 May 2013, 01:56 PM Reply Like
  • DC, good luck in any future endeavor.
    3 May 2013, 02:06 PM Reply Like
  • Author’s reply » Heg:




    3 May 2013, 02:16 PM Reply Like
  • Nice article, Dave. And very timely! I just started drawing SS, and living in a state that taxes everything to the hilt, I was pleasantly surprised that I'll only get Fed taxed 85% on SS instead of 100% like I'd originally thought. But I'm sure the CA state tax will make use of that little bit I get to keep.


    3 May 2013, 03:40 PM Reply Like
  • Author’s reply » Miz:


    You'd be a lot better off moving a couple of hundred miles to Nevada!


    Check out the tax situation by state and click on Nevada. Unbelievable the difference.


    3 May 2013, 03:58 PM Reply Like
  • DC, you are correct. I've have had former business associates who before they retired moved to Nevada. Their reasoning was within a year after retiring, a working career of company stock(in cash) would be distributed to them and minimal, if any, Nevada state taxes would be paid on the windfall. They worked for a private company which acrued phantom stock to employees accounts over their careers and then paid this out as cash when they took retirement.


    Do not know how it worked out for the individual.
    3 May 2013, 04:12 PM Reply Like
  • Author’s reply » Heg:


    Nevada has no state income tax. Social Security Benefits are not taxed. Other retirement income (IRA/401k/Pensions) are not taxed.


    There is property taxes, but they are not bad. Property is taxed at 35% of appraised value. There is a sales tax statewide of 6.5% (there is no tax on food or prescription drugs). Localities may add to the sales tax (counties) by up to an additional 1.25%.


    3 May 2013, 04:54 PM Reply Like
  • No need, I already know that Nevada would be much cheaper, as would many other states. But I just bought a house 90 miles away to be closer to family (still in CA), so I'll just pay the price to be poorer and happier instead of marginally richer and much, much more lonely.


    Besides, that's what my DG portfolio is for -- to help make up for the "poorer" part. :)


    3 May 2013, 05:29 PM Reply Like
  • Miz, CA may tax the whole 100%. For your sake I hope they don't but you know CA state policy much better than I do.


    Good luck. I've been drawing SS for four years now. Each year it seems it is increased a little and then they take more out for Medicare and the net result in cash is lower each year. Then the taxes!!!!!!!!!!!!!!!!
    3 May 2013, 03:46 PM Reply Like
  • Heg, I just did some poking around, supposedly CA exempts tax on SS. Color me surprised! Guess I'll find out next year when tax time rolls around. That would be a first!


    3 May 2013, 05:38 PM Reply Like
  • DC
    We have been retired about 1 year. My wife is 1 year younger. Health insurance costs us $553 per mo. Medicare went up 5% this year, supplement ins. went up 17%, and part "D" went up 22%. If this rate of increase keeps up, it is going to be hard to keep eating steak.


    3 May 2013, 03:51 PM Reply Like
  • Author’s reply » Gas:


    I raise cattle and I almost can't afford to eat steak!


    You are so right about the medicare. You might have to get a job!


    3 May 2013, 03:59 PM Reply Like
  • Dave, with your previous military service would you qualify for VA benefits? I have friends from the Vietnam era who have been very satisfied with their VA medical care.
    3 May 2013, 09:39 PM Reply Like
  • Author’s reply » L:


    Yes, Vietnam vets do qualify for VA benefits, including medical. When I got injured, I was active duty. I was at Walter Reed for a while, getting rehabbed and fitted with a prosthetic leg. The care was very good, considering how many Vietnam casulties were there at the time.


    After I was released from the service I chose to use private medical care as I preferred the specialists that I was able to access and my insurance at Coca-Cola was pretty spectacular. So, I have to admit, I got spoiled with private insurance and have not really gone back to the VA. I just don't want to screw with it. It is a great benefit for many veterans, but I've been spoiled.


    I have the best doctors you could want from the private sector. My insurance premiums are nothing out of the ordinary, but I have them. Most of my doctors will accept me with Medicare and I would rather maintain my relationship with them than start all over with the VA. My only complaint this year is my deductible has gone way up and while I have one of those bank account things (my wife set it up), it just frosts my butt to have that deductible so high.


    And, I am one of those people who doesn't like "change." Unlike people that I sometimes envy, I don't embrace change. Give you an example of what I mean. I started wearing JCP Stafford Executive pinpoint oxford shirts 35 years ago. I don't wear any other dress shirt. I don't want a Van Husen or a Polo or anything else. I know the JCP shirt is going to fit me exactly the same way every shirt I get.


    I don't wear suits anymore, but I only wore Hart Schaffner and Marx suits. Not the most expensive, but the best value for the buck. Fit the same every time. Right off the rack. Just hem the pants and we're ready to go.


    My cousin goes to the VA all the time and loves it. He drives 70 miles from where he lives to come to Jackson and then ends up spending most of the day here. That's just not for me. Don't want to even try it out.


    3 May 2013, 11:17 PM Reply Like
  • " I started wearing JCP Stafford Executive pinpoint oxford shirts 35 years ago." That made me smile.
    I'll read this to my wife when she gets up. She thinks I'm crazy but I also wear nothing but Stafford shirts for the very same reason. I just hope JCP survives or the emperor may have no new clothes. Now that would be a crisis!
    4 May 2013, 05:13 AM Reply Like
  • Author’s reply » Fly:


    At all the holidays--birthdays, Father's Day, Easter, whatever--they used to buy me clothes. I have finally got them to undersand that I am obsessive-compulsive about my clothes.


    I have a full supply of Stafford shirts in every color and pattern. If it was an executiive, I've got it. Even my son wears my shirts that no longer fit my rather expansive body.


    We were going to church the other day and he had a kakhi colored button down shirt (pinpoint) and I said, "Son, that is a good looking shirt. Where did you get it?"


    He said: "Out of your closet."


    4 May 2013, 08:16 AM Reply Like
  • Dave,
    I turn 62 next week and I decided to start drawing my SSI as soon as I can. My DG income is substantially higher than my SSI, but I never considered not taking the SSI as soon as possible. Like Eddie, I did the math on the break even point, and realized I'd have to live a long, long time to break even.
    But some emotional factors got into it, too. Given how screwed up the government is with the budget and deficits, I figure I better collect now, before Congress changes eligibility/benefit rules, which is inevitable. I figure at least I will be grandfathered in. Part of it, too, is just that I paid so darned much for so many years (always at the maximum contribution rate), I want some back NOW so I can invest it. Wish I had been able to opt out of the system and invest it myself, I'd be sitting pretty now. But I think you are probably taking the more rational approach to the issue! Thanks for the article.
    7 May 2013, 01:06 PM Reply Like
  • Author’s reply » Marilyn:


    Don't know if you are married or single, but a spouse can really affect your SS in a good way. The earner with the largest SS benefit impacts the spouse with the smaller SS benefit, in that one spouse can elect to "share" in the other's higher SS benefit. I think that makes sense, but if it doesn't, look into things a little more.


    Like you, my inclination was to start drawing SS at 62, but when I got to looking at the taxes that were going to have to be paid for the SS and the additional needs that I would have to draw down from my retirement portfolio, I decided to delve a little deeper.


    In my case, the $3000 benefit at age 70 seems to be something to shoot for, because the $1800 benefit at 62 would have required a bigger take out on my retirement portfolio.


    So instead, I will draw what I need (which will be about $3000) a month; wait for the SS of $3000 a month (which will give me $6000) and have my portfolio continue to grow while my SS benefit is doing likewise.


    My wife works and makes a good nut. So, my 36k from the retirement portfolio and her 80k income from work,, (she just got promoted to a Principal job in the education system) gives us $116 in income vs. the 130k we make now (I am a salesman on salary and commissions).


    Giving up the 15k difference in my working and her working would give us an equivalent cash flow, since my two oldest are done with college. One is married and the other is going into the Navy in June. Our cars are paid for and our mortgage will be paid for next year.


    I guess what I'm trying to say is that it's all a matter of cash flow and which strategy is right for you. Take the time to sit down with an advisor who specializes in SS and lay all of your options on the table.


    Do not discount that tax ramifications, because those can be the difference maker in your decision.


    Good luck!


    7 May 2013, 01:23 PM Reply Like
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Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.