Was SS filing steps until I started typing, now more.

[Workinghard]

I "think" we have figured out the best way to deal with SS, but need to make sure I have things lined up correctly. First some background. My husband is the higher earner and 6 years older than me. He will retire next year at 65. His PIA at age 66 is $2172 a month. At age 70 it's $2921 a month. I realize those amounts are based on if he kept working which he won't.

I will be 59 when he retires and will probably retire too or possibly work part-time.  If I did work it probably wouldn't amount to much more then my contribution to the 401(k).

At 62 my benefit is $1126, at age 66.6 it's $1721, and at age 70 it's $2428.  Again, that's if I keep working which I won't. I also have a COL pension ~10k/year and another small one that will start at 62-64 for about $2400 a year.

We have 5 years to bridge until he starts drawing SS at age 70 at which point I'll be 64. SS and pensions will be more than what we're currently living on.

We're planning on converting his 401(k) to Roth IRAs during that time up to the 15% tax bracket before RMDs kick in. We're also planning on selling our home and using that money as "income" for those years and stop dividend reinvestment once he retires. This will allow our other investment accounts to grow.

One, how does the above plan sound?
Two, does anyone know how to calculate SS amounts when we quit work earlier?
Three, is the following the correct order/steps with SS?

He files and restricts to spousal at age 66. I'm 60
At age 62, I file for my benefits. He will get 50% of my PIA starting at age 68.
At age 70, he files for his own benefit.
I keep getting my benefit until if/when I need to file for survivorship benefit.

Thanks!

[bogart]

I'm not able to answer your question, but can point you toward a book that was recently covered in the NYT and that sounds very relevant to this issue (I am wanting to read it, but my public library has only one copy and there are about 15 holds on it.  So I'm waiting in line!). 

It's called "Get What's Yours" and you can read the NYT bit about it here -- http://www.nytimes.com/2015/03/14/your-money/the-black-art-of-deciphering-social-security.html . 

HTH.

[seattlecyclone]

We're planning on converting his 401(k) to Roth IRAs during that time up to the 15% tax bracket before RMDs kick in. We're also planning on selling our home and using that money as "income" for those years and stop dividend reinvestment once he retires. This will allow our other investment accounts to grow.

One, how does the above plan sound?

It really depends on a number of things, including your current investment balances, the value of your home, your current expenses, and the expected rent you would pay after selling your home. We need more information to give informed advice.

In broad strokes, I might hesitate to sell the home if it's in the area you want to retire in and isn't way too large for two people. When you sell your home your expenses will go up because you'll need to add rent into the mix. This will be a permanent expense increase, just so you can have some more cash on hand before you start taking social security. The fact that you even mentioned RMDs indicates you think you'll have savings left over when you start taking your social security, and you already said your social security and pensions will be enough to cover current expenses after that, so why sell the house now?

Your situation sounds fairly similar to my own parents. They retired slightly early by normal standards, but they didn't need to plan for their savings to provide for them for a couple of decades prior to social security like many of the people on this site. There are basically three phases they need to plan for:
1) Time to spend savings before social security,
2) Time they're both taking social security, and
3) Time after one spouse passes away and only one is taking social security.

It sounds like you're all set for phase 2. Your social security benefits and pension will be more than your combined expenses. How about phase 3? My understanding is that the way "widow's benefits" work is basically that when one spouse passes away, the surviving spouse gets to keep the higher of the two social security benefits, but not both.

Don't fall into the trap of spending all of your savings during phase 1 so that you're dealing with a budget deficit in phase 3. I've been trying and trying to get my parents to invest more of their savings precisely for this reason. They see that they have plenty of cash to see them through phase 1 and are hesitant to take any market risk with this money, but I cFIREsim shows it's actually riskier in the long run for them not to invest because they will need their savings to grow some during phase 2 to provide enough for phase 3. If the surviving spouse still has quite a bit of life expectancy left when this happens, this is when having a paid-off home could be really helpful. Selling it would be your backup plan in case one of you meets an early demise and your remaining savings aren't enough otherwise.

Two, does anyone know how to calculate SS amounts when we quit work earlier?

In your case the number on your social security statements are probably pretty close to accurate. The system calculates your benefits based on a couple of income bands, such that once you pass a certain threshold of lifetime earnings your benefit won't go up all that much when you work more. This is especially true if you have earned money in at least 35 separate years, as new higher-earning years will simply replace lower-earning years in the calculation so you only get credit for the difference in pay between those two years (in inflation-adjusted dollars).

If you really want to calculate it anyway, the Social Security Administration has a program you can download that might be worth a try.

[Workinghard]

I'm not able to answer your question, but can point you toward a book that was recently covered in the NYT and that sounds very relevant to this issue (I am wanting to read it, but my public library has only one copy and there are about 15 holds on it.  So I'm waiting in line!). 

It's called "Get What's Yours" and you can read the NYT bit about it here -- http://www.nytimes.com/2015/03/14/your-money/the-black-art-of-deciphering-social-security.html . 

HTH.

Thanks, bogart. I'll look it up!

[Workinghard]

We're planning on converting his 401(k) to Roth IRAs during that time up to the 15% tax bracket before RMDs kick in. We're also planning on selling our home and using that money as "income" for those years and stop dividend reinvestment once he retires. This will allow our other investment accounts to grow.

One, how does the above plan sound?

It really depends on a number of things, including your current investment balances, the value of your home, your current expenses, and the expected rent you would pay after selling your home. We need more information to give informed advice.

Our current NW is north of 1m.  That includes home. Figuring on the low side it's worth 250K, but more than likely closer to 300K.  Figuring on the high side with rent, we're looking at 1K, but I'm sure we can find something cheaper. Current homeowner expenses for around $700-$800 a month which includes taxes, insurance, HOA fees, yard/pool expense, increased electricity, maintenance.

In broad strokes, I might hesitate to sell the home if it's in the area you want to retire in and isn't way too large for two people. When you sell your home your expenses will go up because you'll need to add rent into the mix. This will be a permanent expense increase, just so you can have some more cash on hand before you start taking social security. The fact that you even mentioned RMDs indicates you think you'll have savings left over when you start taking your social security, and you already said your social security and pensions will be enough to cover current expenses after that, so why sell the house now?

We definitely do NOT want to retire in this area and the house is definitely too big for us. It's four bedrooms, three baths. With wanting to travel a little bit, we don't want to worry about the house while were gone. We would be perfectly fine with a cheap rental while were doing some traveling, and then later having a nicer rental when we're more homebound. The reason I was thinking of the house as income to live off of is because it's nontaxable income which would allow us to do more conversions from our401(k) to Roths before SS.  We also have Roth IRAs and other accounts.


Your situation sounds fairly similar to my own parents. They retired slightly early by normal standards, but they didn't need to plan for their savings to provide for them for a couple of decades prior to social security like many of the people on this site. There are basically three phases they need to plan for:
1) Time to spend savings before social security,
2) Time they're both taking social security, and
3) Time after one spouse passes away and only one is taking social security.

It sounds like you're all set for phase 2. Your social security benefits and pension will be more than your combined expenses. How about phase 3? My understanding is that the way "widow's benefits" work is basically that when one spouse passes away, the surviving spouse gets to keep the higher of the two social security benefits, but not both.

Since I am the more frugal one, I would have no problem living off his SS.

Don't fall into the trap of spending all of your savings during phase 1 so that you're dealing with a budget deficit in phase 3. I've been trying and trying to get my parents to invest more of their savings precisely for this reason. They see that they have plenty of cash to see them through phase 1 and are hesitant to take any market risk with this money, but I cFIREsim shows it's actually riskier in the long run for them not to invest because they will need their savings to grow some during phase 2 to provide enough for phase 3. If the surviving spouse still has quite a bit of life expectancy left when this happens, this is when having a paid-off home could be really helpful. Selling it would be your backup plan in case one of you meets an early demise and your remaining savings aren't enough otherwise.

We're currently 60/40 and I'm okay with that. It helps knowing we will only have five years to bridge to Social Security and the sale of our house would easily cover that. And again, we do have other investments that we could use if we didn't sell the house

In your case the number on your social security statements are probably pretty close to accurate. The system calculates your benefits based on a couple of income bands, such that once you pass a certain threshold of lifetime earnings your benefit won't go up all that much when you work more. This is especially true if you have earned money in at least 35 separate years, as new higher-earning years will simply replace lower-earning years in the calculation so you only get credit for the difference in pay between those two years (in inflation-adjusted dollars).

Thanks. I do not have earned 35 years earned income but my husband does.

If you really want to calculate it anyway, the Social Security Administration has a program you can download that might be worth a try.

I tried this once but will have to try it again. Thank you for the reminder, your comments, and help.

[Workinghard]

 Sorry if the above is difficult to read. I was having troubles trying to format it on my iPad.

[Shane]

One, how does the above plan sound?
Two, does anyone know how to calculate SS amounts when we quit work earlier?
Three, is the following thencorrect order/steps with SS?

He files and restricts to spousal at age 66. I'm 60
At age 62, I file for my benefits. He will get 50% of my PIA starting at age 68.
At age 70, he files for his own benefit.
I keep getting my benefit until if/when I need to file for survivorship benefit.

maximizemysocialsecurity.com is the best online SS calculator I've found so far. It costs 40 bucks, but I think the detailed analysis it gives you is worth it. I recently paid their fee, and I'm happy with the results. You can either manually enter all of your SS covered earnings from when you started working, or you can open an account on SSA.gov and just cut and paste all of the numbers into the calculator. It allows you to run all different scenarios that you propose, and then the software gives its "maximized" recommendation based on how you can get the maximum number of $ from SS.

[Workinghard]

One, how does the above plan sound?
Two, does anyone know how to calculate SS amounts when we quit work earlier?
Three, is the following thencorrect order/steps with SS?

He files and restricts to spousal at age 66. I'm 60
At age 62, I file for my benefits. He will get 50% of my PIA starting at age 68.
At age 70, he files for his own benefit.
I keep getting my benefit until if/when I need to file for survivorship benefit.

maximizemysocialsecurity.com is the best online SS calculator I've found so far. It costs 40 bucks, but I think the detailed analysis it gives you is worth it. I recently paid their fee, and I'm happy with the results. You can either manually enter all of your SS covered earnings from when you started working, or you can open an account on SSA.gov and just cut and paste all of the numbers into the calculator. It allows you to run all different scenarios that you propose, and then the software gives its "maximized" recommendation based on how you can get the maximum number of $ from SS.

Since that annual fee is $40, I might as well wait until we're in that last year. I wonder how it compares to T Rowe Price's calculator.

[Shane]

Since that annual fee is $40, I might as well wait until we're in that last year. I wonder how it compares to T Rowe Price's calculator.

All the other calculators I've tried, including T Rowe Price's, ask for your current yearly salaries and then estimate what your benefits will be assuming you will continue working until 62, 66, 67, or 70. With maximizemysocialsecurity.com you input your exact SS wages for every year since you started working, and then you can put in how much, if anything, you and your spouse expect to make each year between now and your proposed dates of collecting SS benefits.

To me, that seems like a more accurate way to project how much you will get.

Since you asked:

Two, does anyone know how to calculate SS amounts when we quit work earlier?

I thought you might like to try maximizemysocialsecurity.com, because it allows you to do that. Their $40 fee allows you to use the software for 1 year. You can run all different scenarios, save the results to a PDF file and then download it to your computer, print it out, or whatever.

BTW, I don't have any connection to maximizemysocialsecurity.com. In response to a post I made on these forums recently, another member suggested it to me, I tried it out, and am happy with the results. We're still a few years from being able to collect any SS benefits, but having the information now seems useful to me. I like to plan ahead...

Good luck!

[MarciaB]

I'm not able to answer your question, but can point you toward a book that was recently covered in the NYT and that sounds very relevant to this issue (I am wanting to read it, but my public library has only one copy and there are about 15 holds on it.  So I'm waiting in line!). 

It's called "Get What's Yours" and you can read the NYT bit about it here -- http://www.nytimes.com/2015/03/14/your-money/the-black-art-of-deciphering-social-security.html . 

HTH.

+1 on this book, it's fantastic. Super readable and an excellent resource. I checked it out of the library a couple months ago and read it twice. Then got on the SS website and got info on myself. Then went down to the local SS office and talked to a helpful and knowledgeable person who ran several scenarios for me that included survivor benefits (which I couldn't access online because it involved my late spouse's record).

You're asking really good questions and doing some great thinking. Go get this book and consume it, then get confirmation from someone in the SS office (in print).

[Workinghard]

Thanks, Shane. I like to plan ahead too so will give it a try. Even if things change, and I need to renew it again, it's not like $40 will break me. It's just hard for me to spend money. Hopefully, I'll have  a block of time next week and can dig in.

MarciB, thanks for adding input to Bogart's suggestion. I may look for a used copy. I have to review things over and over again for it to sink in.

[Shane]

I'm not able to answer your question, but can point you toward a book that was recently covered in the NYT and that sounds very relevant to this issue (I am wanting to read it, but my public library has only one copy and there are about 15 holds on it.  So I'm waiting in line!). 

It's called "Get What's Yours" and you can read the NYT bit about it here -- http://www.nytimes.com/2015/03/14/your-money/the-black-art-of-deciphering-social-security.html . 

HTH.

+1 on this book, it's fantastic. Super readable and an excellent resource. I checked it out of the library a couple months ago and read it twice. Then got on the SS website and got info on myself. Then went down to the local SS office and talked to a helpful and knowledgeable person who ran several scenarios for me that included survivor benefits (which I couldn't access online because it involved my late spouse's record).

You're asking really good questions and doing some great thinking. Go get this book and consume it, then get confirmation from someone in the SS office (in print).

Thanks, MarciaB for the recommendation for the book. It looks like my library offers it as an e-book that I can read on my Kindle, so I'm definitely going to check it out and read it.

It looks like the same guy who wrote the book, Boston University economics professor Laurence Kotlikoff, also made the website, maximizemysocialsecurity.com. If you go to the first page of the website and scroll down a little bit, you'll see a photo of Laurence and an ad to buy his book. :)