This was very informative and I appreciate the work you put into this analysis. A few years ago, I started a spreadsheet to compute a surviving spouse’s tax burden, in parallel with our current MFJ status. We fall slightly below the middle category for income in retirement. For determining the impact of a surviving spouse, I had calculations for Medicare expenses and IRMAA (if any), percent of SS benefits taxable, and the loss/availability of 0% long-term capital gains bracket. I also estimated the reduction in expenses versus the loss of the lower SS benefit. A key difference for our situation is the use of SPIA annuity income to further reduce RMDs computed from the end-of-year T-IRA balance (using Secure Act 2.0 provisions). When I retired, we used about one-third of our IRA portfolio to purchase (joint-survivor) single-premium immediate annuities (SPIAs) and use the other two-thirds to invest in the market (70/30 asset allocation). We had undergone a six-year Roth conversion plan (2017 – 2022) that reduced our traditional IRA holdings from 100% to 60% (with the goal of having a 40% reduction in estimated RMDs). In parallel, we kept the effectively conversion tax rate at roughly 23% (half at 22% and half at 24%). We paid IRMAA to the first tier (which is not too bad). Because of the annuity income and SS benefits, we were comfortable using our RMD primarily for discretionary expenses (mostly travel) and can consider withdrawals to be variable (rather than required for daily expenses). Due to the conversions, when I started RMDs, the withdrawals only applied to roughly 50% of our portfolio (the other half being in Roth). With the advent of Secure Act 2.0, which allows the excess annuity payout to count against the RMD as computed from the T-IRA end-of-year balance, our effective RMD dropped from roughly 4.38% to 1.78% (at age 76/79, weighted by account size). Additionally, since roughly half the portfolio is in Roth, the true required minimum distribution from the portfolio is currently 1%. Each year the RMD percentage increases but the fair market value (FMV) of the SPIA contracts also decreases. This makes the effective (excess) payout increase as well, which counteracts the increase in RMD percentage. By having a “low” RMD, it made making adjustments to our income to maximize tax savings, such as keeping our MAGI <$150K to max out the $12K senior deduction, for example. The net effect for our situation is that the surviving spouse avoids any IRMAA surcharges and as well as any significant tax dollar increases. This assumes only withdrawing the RMD and using Roth assets for additional income. In this case, the lower income spouse took SS early while the higher income spouse claimed at age 70. Consequently, the loss (of the lower income) turned out to be less than the reduction in expenses due just for major identifiable expenses (insurance premiums, medical out-of-pocket, dental, eyeglasses, hearing aids, automotive expenses, retail, etc.).
My wife and I are avid travelers. In fact, we just return (today) from a 14-day cruise (Boston to Quebec and return to Boston). This wasn’t planned but our travel agent told me there was a last minute “sale” (almost 70% off) that I couldn’t pass up. This two-week cruise cost the same as the airfare for one person for our trip to S. America earlier this year. We always wanted to cruise down the St Lawrence River. Since we had been to all the other ports on this cruise except for Quebec, we didn’t spend much on excursions since we were happy to just get off the ship and walk around. It was our first time in Quebec though and we did a nice excursion there. About a month earlier, we had returned from a month-long trip to S. America (a cruise from Buenos Aires to Santiago, around Cape Horn). It was supposed to be four weeks in duration (including pre and post cruise options) but due to bad weather on our return and a mishmash of errors by the airline, we got delayed in Miami for six additional days. Instead of fuming about it, we decided to rent a car and spend the next five days at Disney World (without the grandkids). We made good use of our Lightning Passes (twice). Believe it or not, we still enjoy a good rollercoaster ride (and Guardians of the Galaxy: Cosmic Rewind was an interesting ride where each car can spin 360 degrees while traveling on the rails). This will be the first summer we plan to stay at home, though. We have big plans for June (wife’s birthday) and the 4th of July (where we do plenty of fireworks). I’ll be able to tend to our gardens for the first time in years, too (a task I've had to hire out since we haven't always been around). We have a 1.5-acre Japanese garden (with a 5,000 koi pond) and a vegetable garden as well. In October, we head out to Hawaii for a week (visiting our friends) and then on to Japan for a two-week cruise around the island (plus Busan, S. Korea). This is their iconic fall foliage cruise. My daughter will be accompanying us – her first visit there. She had just returned from an African safari trip to the Serengeti. For the past several years, I try to arrange one trip with one adult child (and family) to take them somewhere that is mutually agreeable. Last year, my son (and his family) wanted to go to Disney World during spring break and this year my daughter wanted to visit Japan. With my frugality period over, we travel first class, too. It makes “getting there” more pleasant. Last year, we had about 12 weeks of traveling as well. We are 76/78 and still going strong.
I also managed to wait to age 70. I did go through a year-by-year assessment as to whether I “needed” to claim each year (starting at age 63, when I retired). While not planned, I had some part-time work that provided additional income until age 68 so that help us as well. Waiting also allowed us to increase our Roth conversion amounts over a six-year period (due to less overall income). That opportunity allowed us to convert 40% of our portfolio to Roth. That reduction of our T-IRA reduced our RMD proportionally, which further reduced the taxable portion of our SS benefit from 85% to 73%. We have the potential to reduce it down to 60% by using the revised method of RMD calculation allowed by Secure Act 2.0 (since we also annuitized part of our T-IRA). It is difficult to total up the financial benefit of waiting if you also factor these situations. Awhile back in response to a question regarding investing SS benefits claimed at FRA (vs waiting to age 70), I did a “what if” analysis. This analysis compared collecting SS at FRA (age 66 in this case) and investing such assets for four years (assuming 5% rate of return) against having an extra 32% at age 70. If I use $30K as the benefit at FRA, the investment path computes to $135,769. By waiting four additional years, you get $9,600 extra. In essence, this is comparable to getting $9,600 “annuity income” or equivalent to a 7.1% lifetime payout, with inflation-protected COLA. If you use a guaranteed investment rate of return of 6% (instead of 5%), the payout rate reduces to 6.9% (still not too bad for an inflation-protected benefit). If you are married, as the higher income earner, you can also consider this income “addition” to be a joint-survivor benefit. If you had the option of “investing” $135,769 with a guaranteed return of 7.1% and have that principal “grow” at the rate of inflation (CPI-W), would you take that deal? To illustrate that last statement, let’s assume that the CPI-W was 3%. That $9,600 would increase to $9,888 after one year. At a 7.1% payout, the effective principal to generate that benefit would be $139,842 (a 3% “growth” of the initial principal). While there is no such principal, this is another way to look at comparing claiming early or waiting from a financial viewpoint.
Comments
This was very informative and I appreciate the work you put into this analysis. A few years ago, I started a spreadsheet to compute a surviving spouse’s tax burden, in parallel with our current MFJ status. We fall slightly below the middle category for income in retirement. For determining the impact of a surviving spouse, I had calculations for Medicare expenses and IRMAA (if any), percent of SS benefits taxable, and the loss/availability of 0% long-term capital gains bracket. I also estimated the reduction in expenses versus the loss of the lower SS benefit. A key difference for our situation is the use of SPIA annuity income to further reduce RMDs computed from the end-of-year T-IRA balance (using Secure Act 2.0 provisions). When I retired, we used about one-third of our IRA portfolio to purchase (joint-survivor) single-premium immediate annuities (SPIAs) and use the other two-thirds to invest in the market (70/30 asset allocation). We had undergone a six-year Roth conversion plan (2017 – 2022) that reduced our traditional IRA holdings from 100% to 60% (with the goal of having a 40% reduction in estimated RMDs). In parallel, we kept the effectively conversion tax rate at roughly 23% (half at 22% and half at 24%). We paid IRMAA to the first tier (which is not too bad). Because of the annuity income and SS benefits, we were comfortable using our RMD primarily for discretionary expenses (mostly travel) and can consider withdrawals to be variable (rather than required for daily expenses). Due to the conversions, when I started RMDs, the withdrawals only applied to roughly 50% of our portfolio (the other half being in Roth). With the advent of Secure Act 2.0, which allows the excess annuity payout to count against the RMD as computed from the T-IRA end-of-year balance, our effective RMD dropped from roughly 4.38% to 1.78% (at age 76/79, weighted by account size). Additionally, since roughly half the portfolio is in Roth, the true required minimum distribution from the portfolio is currently 1%. Each year the RMD percentage increases but the fair market value (FMV) of the SPIA contracts also decreases. This makes the effective (excess) payout increase as well, which counteracts the increase in RMD percentage. By having a “low” RMD, it made making adjustments to our income to maximize tax savings, such as keeping our MAGI <$150K to max out the $12K senior deduction, for example. The net effect for our situation is that the surviving spouse avoids any IRMAA surcharges and as well as any significant tax dollar increases. This assumes only withdrawing the RMD and using Roth assets for additional income. In this case, the lower income spouse took SS early while the higher income spouse claimed at age 70. Consequently, the loss (of the lower income) turned out to be less than the reduction in expenses due just for major identifiable expenses (insurance premiums, medical out-of-pocket, dental, eyeglasses, hearing aids, automotive expenses, retail, etc.).
Post: Widow Tax
Link to comment from July 25, 2026
My wife and I are avid travelers. In fact, we just return (today) from a 14-day cruise (Boston to Quebec and return to Boston). This wasn’t planned but our travel agent told me there was a last minute “sale” (almost 70% off) that I couldn’t pass up. This two-week cruise cost the same as the airfare for one person for our trip to S. America earlier this year. We always wanted to cruise down the St Lawrence River. Since we had been to all the other ports on this cruise except for Quebec, we didn’t spend much on excursions since we were happy to just get off the ship and walk around. It was our first time in Quebec though and we did a nice excursion there. About a month earlier, we had returned from a month-long trip to S. America (a cruise from Buenos Aires to Santiago, around Cape Horn). It was supposed to be four weeks in duration (including pre and post cruise options) but due to bad weather on our return and a mishmash of errors by the airline, we got delayed in Miami for six additional days. Instead of fuming about it, we decided to rent a car and spend the next five days at Disney World (without the grandkids). We made good use of our Lightning Passes (twice). Believe it or not, we still enjoy a good rollercoaster ride (and Guardians of the Galaxy: Cosmic Rewind was an interesting ride where each car can spin 360 degrees while traveling on the rails). This will be the first summer we plan to stay at home, though. We have big plans for June (wife’s birthday) and the 4th of July (where we do plenty of fireworks). I’ll be able to tend to our gardens for the first time in years, too (a task I've had to hire out since we haven't always been around). We have a 1.5-acre Japanese garden (with a 5,000 koi pond) and a vegetable garden as well. In October, we head out to Hawaii for a week (visiting our friends) and then on to Japan for a two-week cruise around the island (plus Busan, S. Korea). This is their iconic fall foliage cruise. My daughter will be accompanying us – her first visit there. She had just returned from an African safari trip to the Serengeti. For the past several years, I try to arrange one trip with one adult child (and family) to take them somewhere that is mutually agreeable. Last year, my son (and his family) wanted to go to Disney World during spring break and this year my daughter wanted to visit Japan. With my frugality period over, we travel first class, too. It makes “getting there” more pleasant. Last year, we had about 12 weeks of traveling as well. We are 76/78 and still going strong.
Post: Lifetime Supply
Link to comment from May 23, 2026
I also managed to wait to age 70. I did go through a year-by-year assessment as to whether I “needed” to claim each year (starting at age 63, when I retired). While not planned, I had some part-time work that provided additional income until age 68 so that help us as well. Waiting also allowed us to increase our Roth conversion amounts over a six-year period (due to less overall income). That opportunity allowed us to convert 40% of our portfolio to Roth. That reduction of our T-IRA reduced our RMD proportionally, which further reduced the taxable portion of our SS benefit from 85% to 73%. We have the potential to reduce it down to 60% by using the revised method of RMD calculation allowed by Secure Act 2.0 (since we also annuitized part of our T-IRA). It is difficult to total up the financial benefit of waiting if you also factor these situations. Awhile back in response to a question regarding investing SS benefits claimed at FRA (vs waiting to age 70), I did a “what if” analysis. This analysis compared collecting SS at FRA (age 66 in this case) and investing such assets for four years (assuming 5% rate of return) against having an extra 32% at age 70. If I use $30K as the benefit at FRA, the investment path computes to $135,769. By waiting four additional years, you get $9,600 extra. In essence, this is comparable to getting $9,600 “annuity income” or equivalent to a 7.1% lifetime payout, with inflation-protected COLA. If you use a guaranteed investment rate of return of 6% (instead of 5%), the payout rate reduces to 6.9% (still not too bad for an inflation-protected benefit). If you are married, as the higher income earner, you can also consider this income “addition” to be a joint-survivor benefit. If you had the option of “investing” $135,769 with a guaranteed return of 7.1% and have that principal “grow” at the rate of inflation (CPI-W), would you take that deal? To illustrate that last statement, let’s assume that the CPI-W was 3%. That $9,600 would increase to $9,888 after one year. At a 7.1% payout, the effective principal to generate that benefit would be $139,842 (a 3% “growth” of the initial principal). While there is no such principal, this is another way to look at comparing claiming early or waiting from a financial viewpoint.
Post: Rethinking the “Right” Time for Social Security
Link to comment from April 25, 2026