Author Topic: Drawdown of IRA then Social Security  (Read 1537 times)

perplexed

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Drawdown of IRA then Social Security
« on: May 09, 2015, 08:27:24 PM »
First ever post apologies. I did search first so not to duplicate.

I am retiring in 3 years at 66 (with a small part time job) and I thought to withdraw from my IRA/401k 8% to live on until I am 70 when I will receive maximum Social Security.  I would drop my IRA withdrawals to 3 to 4 percent then.

I figure the 7 to 8 percent SS increase guaranteed plus cost of living make waiting the 3 years and loss of IRA funds worthwhile.  None of the simpler retirement calculators such as Financial Engines allow you to do calculations with a partial withdrawal like this.

I also consider that my minimum IRA withdrawals at 70 will push me into a higher tax bracket so withdrawing some sooner will lower that risk.

Sorry for the poorly written post.

MDM

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Re: Drawdown of IRA then Social Security
« Reply #1 on: May 09, 2015, 08:55:23 PM »
perplexed, welcome to the forum.

From what is in your post, what you propose appears reasonable.  Have you tried www.cfiresim.com to evaluate different options?

Wolf359

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Re: Drawdown of IRA then Social Security
« Reply #2 on: May 11, 2015, 01:55:13 PM »
Do you have any savings in taxable accounts? 

I plan to hit my taxable savings to let my traditional IRA get to 70 1/2, to maximize the amount of time they compound  before the RMDs start.  If the RMDs are too big, the excess would go to replenish the taxable accounts.

I also intend to use the lower income of the initial retirement years to convert some of the traditional IRA balances to Roth IRAs.  At lower tax margins, the Roth conversion is nearly free.  Living off of taxable accounts (if available) also results in lower taxes, since dividends are taxed at a lower maximum rate.  IRA withdrawals are taxed at ordinary income rates.

Overall, the plan to defer Social Security sounds wise.

MikeBear

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Re: Drawdown of IRA then Social Security
« Reply #3 on: May 11, 2015, 06:04:46 PM »
 You can (and should) do a "file and suspend" at your full retirement age, and then wait until age 70.5 to get the max. Doing the "file and suspend" method is backup insurance in case you are forced due to unforeseen circumstances to suddenly start drawing from SS between your full retirement age, and 70.5. If that happens and you've done the "file and suspend", you will get accrued checks going back from that date to the date you filed and suspended! Good loophole, and there's no plans to plug it for now.

Plus if you are married, once you file and suspend on your record, your spouse (if they are full retirement age) can immediately file on YOUR record and draw the $$ difference between what they would get on their own work record from SS, and 1/2 your full retirement age amount, IF your amount is more than theirs. That might give them an extra couple of $100 dollars a month over their normal amount...