Doug W

Comments:

• With the COLA pension and our SS income we end up having about 20 percent more than we need for day-to-day expenses and we usually use that 20 percent for part of our travel budget (40 to 50k per year, we are in the 'Go-Go' years). We supplement travel if needed from our IRA's. We took the 'a bird in the hand is better...' approach with SS. The pension acts as our guaranteed income and with the desire to maximize our IRA's and stock holdings to leave a legacy for our kids we are comfortable with where we are and see the SS break even as not really favoring our circumstances. The dollars we left in our IRA's instead of pulling out prior to SS claims is compounding nicely and will offset the break even by many times the amount we would receive in SS benefits if we had waited until even 70.

  Post: Quinn asks himself, Is delaying Social Security to age 70 the right decision?

  Link to comment from September 22, 2024

• I retired at 60 with a generous COLA pension and my wife retired at 62. We both claimed SS at 62. We were fairly high earners, so we get around 56K total in SS per year. We are very fortunate to have saved a fair amount in IRA’s too and barring unforeseen disasters have more income than we need in retirement. I am pretty healthy, but my wife has a health issue. However, we plan on living into our 80’s. With that rough explanation of our situation, I will now offer my thoughts for claiming SS early as it pertains to our specific circumstances. We live in a state that does not tax SS. The savings at a state level is around 5.75 percent per year of our total SS. We also have the offset of the Federal tax savings of 15 percent of our total SS per year. I created a small spreadsheet and with those two factors included it looks like we made the right choice for our circumstances by claiming early.  For an example, let’s say you have 50k per year in SS that nets to 45k with the tax advantages I mentioned above.  If you took 50k out of an IRA and applied taxes your net would be around 41k. In order to get you back to the 45k net of the SS figures you would need to take around 52k out of an IRA each year to net 45k. When I ran the numbers with the tax savings mentioned above, I found that we had about a 7 percent advantage each year from tax savings and even more if you use the last scenario where you try to match the net of just the SS dollars. Anyhow, it pushed our break evens out by 4 to 7 years beyond the normal break-even ages. That put us in our early to mid 80’s before we lose the advantage of claiming early. Another factor in claiming early is that we wish to leave a legacy to our kids and by claiming early it will leave more funds available to be passed on to them. By not having to take any funds out of our IRA’s for several years that principal has grown and if left alone for more years will greatly offset by several times any advantage of claiming SS at FRA or at 70. I understand that if you do not have the advantage of a COLA pension or other guaranteed income it may be best to wait, but in our circumstances it seems we did the right thing. I read a fair amount of articles about retirement strategies, but I have not found any articles that factor in taxes into SS claiming strategies and especially scenarios in which states do not tax SS. By doing so you can bump out your break-even ages it seems. Am I looking at this from an invalid perspective?

  Post: Quinn asks himself, Is delaying Social Security to age 70 the right decision?

  Link to comment from September 22, 2024

• Rick, thanks for all the articles over the years. I always look forward to reading your latest musings!

  Post: Many Words Later

  Link to comment from May 21, 2024

• Jonathan, thanks for the article, I always look forward to your Saturday insights. I have tracked our expenses for around a decade. Not in minute detail, but pre-retirement I was curious what our fixed and discretionary costs were so I would have an idea of what we needed in retirement. We have been retired going on 5 years now. Our fixed living expenses (utilities, insurance, taxes, internet, cell phones, gas, groceries, etc...) come in around 45k per year. All other expenses except for travel bump it up to around 65k per year. We live very comfortably on that level of expenditures, and it has hovered around that amount for a decade. We have no debt, so that helps. We are in our 'go-go' years so we spend around 50k per year on travel. We started taking a monthly 'paycheck' from our IRA's last year (less than 3 percent) and I was hesitant to do that (we are mid-sixties) but realized we should spend a bit more while we are in good health and travelling.

  Post: Where It Goes

  Link to comment from April 13, 2024

• We are in a similar situation. We are in our mid-sixties and still in the house where we raised our family. We really like the house, its location with lots of wildlife and good neighbors. Maintenance is not an issue yet. I bought a riding lawn mower last year to help with the half acre yard. I am a book lover too. I have around 2,000 or so. Many of mine are out of print or had a limited run and would be desirable to the right set of folks. I have polled my kids to see which of them would want my books when I am gone. I think our son and his wife will take them. It's funny, we have lots of other items we have accumulated over the years, but my books have a special value for me. Even though I won't be around I don't want them to just be given away or sold for a pittance. I want someone with similar interests to value them as much as I do.

  Post: What I’d Keep

  Link to comment from February 15, 2024

• Jonathan, thanks for all your hard work keeping this site going. I look over the new articles practically every day. The authors are very generous with their knowledge too.The community of readers are civil and offer insightful comments that add to the articles. You need to get one of your old comrades at the WSJ to put a mention in an article or two about the site! They would be doing the personal finance community a real service. More folks need to be aware of all the great articles and advice on HumbleDollar.

  Post: Business Schooled

  Link to comment from January 6, 2024

• We are fortunate to have around 20% more income (pension and SS) coming in than we spend. We had set aside some cash too before we retired. So we have been spending that down for traveling. In a couple years we will probably sell some assets in taxable accounts to spend on travel and build up another cash buffer. But if it were not for travel we would be saving money instead of spending.

  Post: Got Change?

  Link to comment from February 25, 2023

• Thanks for the insights Jonathan! After reading this I ran a new scenario in our financial planning software....I upped our spending by 20 percent for the next 5 years. We would still be underspending. We have been retired going on four years. We started our post-covid revenge traveling last year and will continue to spend on travel for the foreseeable future, till our creaky joints take the fun away. After saving for so many years, it is a bit of a challenge to spend freely. I still think through even modest spending and have to 'justify' it as not being spendthrift.

  Post: Got Change?

  Link to comment from February 25, 2023

• Dennis, Thanks for your insights! My wife and I are now retired but before retirement I managed our IRA's. Now that we are retired we pay a large company to manage the IRA's. I pay more than your PAS account charges but I justify the cost for a few reasons. My wife would have little knowledge on how to manage the IRA's if something were to happen to me. She is comfortable with our feduciary advisor and knows she can expect him and his company to look after her interests. I also like the peace of mind that comes from having professionals manage our accounts. I have set up a spreadsheet model of a simple IRA stock/bond allocation that I would implement if I still did it on my own. It uses Vanguard ETF's (Total US stock, total international stocks and total US and International bonds) that with my limited knowledge of how to do this makes sense to me. Our advisor managed account outperforms my attempt to control the IRA's. I also like that I can contact my advisor and have him call me back in less than an hour. The ability to just go about retirement and have some fun traveling without having to watch our accounts constantly and second guess my abilities is a big advantage in my eyes.

  Post: Paying Them to Worry

  Link to comment from February 24, 2022

• I did not realize that only 7 percent of pensions have COLA's. I retired from the Federal Reserve Banking System and we have the same COLA protection as Federal employees. We are very fortunate. Our pension is fully funded and I don't anticipate any issues in my lifetime with the Fed's guarantee of a pension. Wall street would throw a tantrum if the Fed ever mismanaged its pension program! As for Federal government employees (Fed Reserve employees are NOT Federal government employees, we are only quasi gov't), their income over the years, depending on their job sometimes lags private industry. So having the COLA is an offset in some ways for lower pay than some equivalent private corporation jobs. The longer you stay with a Federal job the better off you are though in retirement. Having a COLA is a powerful inflation hedge.

  Post: Deflated Pensions

  Link to comment from September 30, 2021