SS analysis question

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Tom_T
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SS analysis question

Post by Tom_T »

There are a number of online calculators that will easily show me how to maximize Social Security. But the recent debates on taking SS early got me wondering about something. If taking SS early replaces some income that would have come from IRA withdrawals, is there a calculator or tool that compares "early SS + letting IRA grow" vs. "late SS + earlier IRA withdrawals"? And I guess taxes would come into play, as well as the expected return in the IRA.
yog
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Re: SS analysis question

Post by yog »

We use MaxiFi Planner Premium for this purpose.
Silk McCue
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Re: SS analysis question

Post by Silk McCue »

I believe but am not certain that the Discount Rate parameter in opensocialsecurity.com is designed to assist with that. You would need to verify.

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chassis
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Re: SS analysis question

Post by chassis »

@Tom_T, yes it's your own home built financial planning spreadsheet. Or the RPM spreadsheet. These two options are the most specific tools you can get to model your personal retirement scenario.

A proper retirement calculator is very detailed, and takes time to either load the parameters (RPM spreadsheet) or to build from scratch. Once the model is built, it is very useful.
bradpevans
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Re: SS analysis question

Post by bradpevans »

Tom_T wrote: Sat Sep 18, 2021 5:17 pm There are a number of online calculators that will easily show me how to maximize Social Security. But the recent debates on taking SS early got me wondering about something. If taking SS early replaces some income that would have come from IRA withdrawals, is there a calculator or tool that compares "early SS + letting IRA grow" vs. "late SS + earlier IRA withdrawals"? And I guess taxes would come into play, as well as the expected return in the IRA.
Besides the math, assumptions on performance, lifestyle, there is the fact that IRA can be passed down. SS never runs out but can’t be passed down
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arcticpineapplecorp.
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Re: SS analysis question

Post by arcticpineapplecorp. »

have you read this:
Tap an IRA Early, Delay Social Security
This strategy could lower your lifetime tax bite, let you collect higher benefits and extend the longevity of your portfolio.
by: Susan B. Garland
April 26, 2013

It's conventional wisdom that you should delay tapping your IRA as long as you can. There's also the tendency of most retirees to claim Social Security benefits as soon as possible. The unintended consequence: You're likely to shorten the life span of your nest egg.

A growing body of research shows that flipping the order may be wiser. You could lower the lifetime tax bite, collect years of higher benefits and extend your portfolio's longevity if you delay Social Security and take larger IRA withdrawals in the early years of retirement.

Retirees who collect reduced Social Security benefits early often need to take some IRA money to meet spending goals. These retirees could be hit by what's known as the "tax torpedo." This occurs when IRA withdrawals trigger the taxation of Social Security benefits—and push taxpayers into a higher marginal rate. For these retirees, the tax torpedo can last a lifetime.

By holding off on Social Security and living on IRA income in those early years, you could receive a larger government benefit later, thus reducing the amount of taxable income you'll need from your IRA. The smaller IRA withdrawals could also increase the likelihood that Social Security benefits will remain tax free...

...Consider this example from Mahaney. The Smiths and the Jacksons are 72-year-old couples who each have $69,000 in income. The Smiths, who claimed their Social Security early, take $45,000 from an IRA and collect $24,000 in benefits each year. The Jacksons, who delayed claiming, get $39,000 in benefits and take just $30,000 from their IRAs.

The Smiths' provisional income is $57,000 ($45,000 and $12,000); the Jacksons' is $49,500 ($30,000 and $19,500). Because the Smiths have more IRA income than the Jacksons, they have more income exceeding the tax triggers and a higher adjusted gross income. Assuming a 25% federal income tax rate, the Smiths will pay $6,060 in taxes each year, compared with $2,854 for the Jacksons...

...By delaying until 70, the retiree gets an extra $10,260 in benefits than if he had claimed at 62. He reduces his taxable IRA withdrawals. And by substituting Social Security income for IRA income, his provisional income is lower. The result: a smaller tax tab on his IRA withdrawals and benefits.

https://www.kiplinger.com/article/retir ... urity.html
this works if you plan on living long. if you plan on not living long, early SS would be preferable. ymmv.
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MIretired
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Re: SS analysis question

Post by MIretired »

Google ss early and look for entries for this site.
Topic Author
Tom_T
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Re: SS analysis question

Post by Tom_T »

My inclination is to hold off on SS as long as possible, but I wanted to see the numbers. I recently bought Pralana Gold, and I assume it does this kind of analysis, but I've only just started digging into the product and there's a lot to digest.
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David Jay
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Re: SS analysis question

Post by David Jay »

Married vs Single is probably the single most important input, due to how the survivor’s benefit is determined.
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One Ping
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Re: SS analysis question

Post by One Ping »

David Jay wrote: Sun Sep 19, 2021 8:56 am Married vs Single is probably the single most important input, due to how the survivor’s benefit is determined.
This is the key discriminator in my view. If you are single it really doesn't matter what you do because it impacts no one. If you ar married, that is not true.
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celia
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Re: SS analysis question

Post by celia »

One Ping wrote: Sun Sep 19, 2021 5:53 pm
David Jay wrote: Sun Sep 19, 2021 8:56 am Married vs Single is probably the single most important input, due to how the survivor’s benefit is determined.
This is the key discriminator in my view. If you are single it really doesn't matter what you do because it impacts no one. If you ar married, that is not true.
The decision of which pot to collect from earlier still applies whether married or not, as mentioned in Susan Garland’s article (quoted by ArticPineapplecorp).
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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One Ping
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Re: SS analysis question

Post by One Ping »

celia wrote: Sun Sep 19, 2021 6:19 pm
One Ping wrote: Sun Sep 19, 2021 5:53 pm
David Jay wrote: Sun Sep 19, 2021 8:56 am Married vs Single is probably the single most important input, due to how the survivor’s benefit is determined.
This is the key discriminator in my view. If you are single it really doesn't matter what you do because it impacts no one. If you ar married, that is not true.
The decision of which pot to collect from earlier still applies whether married or not, as mentioned in Susan Garland’s article (quoted by ArticPineapplecorp).
Thought that's what I said. ...
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