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For the past year or so I find myself repeating this phrase over and over.
Here’s the scoop. As I have written we have been retired for just over five years now both retiring at 62. From copious reading about retirement guidance we are “waiting until we turn 70” to claim Social Security to maximize our monthly payments.(waiting to see your comments Dick, but I can guess 😂). In the meantime we have been financing our lifestyle via inherited IRAs in order for our own IRAs to increase in value.
We are also “waiting until we turn 70” so we can hopefully convert all of my wife’s traditional IRA to a Roth. This is so we can convert while staying in the 12% maximum tax bracket. If we were to claim SS now this would limit our yearly conversion amount. Because of market returns over the past few years the conversion is harder to complete than expected due to the yearly increase in value of the traditional account. This plan requires a bit of financial juggling of priorities as for every dollar we spend it is another dollar that can’t be converted that year.
We built our retirement house in 2017 and it is paid off. One modification we wish to make is to make is to convert our deck into a three season porch, especially for our older years when we are not traveling. However I/we are “waiting until we turn 70” as I plan on obtaining a home equity line of credit to pay half the cost so we maintain half of our taxable account. We will have to have an income source in order to qualify for the HELOC. This loan also will limit our withdrawal amount from our retirement accounts thus avoiding a higher tax bracket and potential IRMAA costs. I anticipate paying the balance off within five years or less to minimize the interest costs.
I recently researched the mechanics of CCRCs and we are “waiting until we turn 70” to get on a waiting list as around here it is generally a 7-10 wait and we are both very healthy.
We are also “waiting until we turn 70” to start flying first class as once we have claimed Social Security at 70 all of our living expenses excluding extensive travel will be covered by our SS income.
Considering we had two deaths in my wife’s family this year (a sister died unexpectedly at 81, her mother at 103) and an older sibling was diagnosed with a degenerative disease we know this is a bit of a gamble, but we are both very healthy.
We are still traveling several times a year so I do not believe this plan is significantly changing our current lifestyle.
What do you think of our plan?
Good discussion of your reasoning. There is no single right answer on when to claim SS. Piper provides good resources and I bought his book. Excellent guidance but everyone is different. For me, waiting until 70 maximizes my after tax position. I am 68 and 10 months and still self employed. My wife is 65 and retired. I am fortunate to have significant taxable income and IRA’s. I have been focusing for the last 5 years to convert as much of my traditional IRA to Roth but staying at the top end of my tax bracket. Taking SS would just force me to do less conversions. One more year of this and I will have around 50% converted. Tax diversification for me and my heirs is a goal.
I love it. Sounds like you know what you’re doing and what is best for you.
David, I like the plan. Social Security is different from other sources of retirement income. Unless someone has a pressing health problems, it’s probably best to wait. That said, I recommend you take a look at this article from Howard Rohleder, which takes a closer look at the features of Mike Piper’s calculator.
Edmund, thanks for the reference to that article. I agree it appropriately points out the complexity of the many variables involved in deciding when and how to pull the levers on the various pieces of our personal finance situation, and that most of the time there is not a simple answer that is right for everyone.
Dave, I had several suggestions that I thought made sense. Then I re-read your post a few times, and now I find myself in agreement with your plan, with (maybe) one exception. You guys are going to love the three season room; I would do it now.
Seems like you are allowing the tail to wag the dog. You seem to be making life decisions based on all the tax rules and age requirements of various instruments vs enjoying a new deck or first class seats on a long flight now. You can’t take it with you.
Why wait until 70 to fly first class? You don’t and won’t need the Social Security dollars to live on. Claim now and fly first class now. I wouldn’t wait, as you can’t predict what might happen health wise. Everything else sounds great with your plan and we are happy for your situation, but the bird in hand now to fly first class is the one I’d be feathering for sure.
We definitely do need the Social Security income, especially for paying monthly costs for a potential CCRC stay. The inflation adjusted payments will be invaluable.We have plenty of assets in our retirement account for all non project expenses until then.
Sounds like you have a good base. Whether that be social security or your retirement assets. At this point it likely doesn’t matter much as you seem to have things well thought out. If it were me I’d take the social security now and let my assets do the heavy lifting later in life supplemented by the smaller SS check. But we are all different and if you feel comfortable with your plan, that’s what matters the most.
Your plan seems well thought out. Some things I’d do differently but they’re mostly questions of personal desires and priorities rather than math and risk management. For example, I’d absolutely build the porch.
One exception – I would not wait to get on a CCRC list. I can see why you see no reason to jump on this, but unlike your other choices, you have no reason to delay. (Because you probably won’t need it yet? That’s a justification for not doing it, not a reason to not do it.) Meanwhile, genes aside, you just don’t know what can happen to one of you. It costs next to nothing, so I would already be researching and looking to get on a list – or two, as places may change in the time you hopefully have.
Another, just mentioned, is that the lower earner claiming SS earlier is likely the better choice than both waiting.
Btw, re your autumn trip to Scotland – we’ve been here since mid-September. Nice time to be here.
i want to go to a small Highland Games about an hour train ride from Edinburgh that’s why the specific time to visit.
The conversion of your deck into a three season porch sounds fantastic. I am sure whenever it gets completed, that it will be greatly enjoyed.
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If you haven’t already done so, you might want to utilize a tool like “Open Social Security” ( https://opensocialsecurity.com/ ) to make sure you are not leaving Social Security money on the table by waiting until 70 for both spouses.
It all depends on the income and longevity of each spouse, but often when looking at just Social Security payments (not considering Roth conversions), the highest paid spouse is recommended to wait until 70, but the lower paid spouse is recommended to start collecting earlier (67 or earlier).
I know you said you are delaying so as to perform higher Roth conversions, just make sure you know what Social Security payments you are giving up.
I agree that deciding when to take Social Security is a decision that involves evaluating multiple variables that are not attempted to be included in the Open Social Security Calculator.
Mike Piper eludes to this on his “About” page for Open Social Security ( https://opensocialsecurity.com/about ):
Please note that this calculator should not be the only analysis you do, as there are various factors that it does not consider, such as:
– The fact that delaying benefits reduces longevity risk and therefore may be preferable even in some cases in which it is not the strategy that maximizes expected total spending, or
– Tax planning reasons or other unrelated reasons why it might be better for you to file earlier or later than the calculator suggests.
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So I would agree that in some cases there may be overriding reasons not to follow the suggestion of this calculator.
But it does a great job of giving you financial results of social security payments in isolation of those other factors, which for me is of great informational value. 🙂
Thanks for mentioning “Open Social Security” @Doug – I hadn’t seen that one. I played around with it and I think I see a misalignment with the goal of that calculator – which is to “maximize the total dollars” that you receive from SS – with the usual stated goal of “not running out of money”. Certainly as I adjusted the assumptions with “Assumed age at death” to be greater than the mortality tables both my and my spouse’s dates quickly became 70.
Shouldn’t the goal of SS benefits be the same? To not run out of money (if you live longer)?
Thanks Doug C; I have used Open Social Security and have recommended it to others. My wife will probably claim a year early or when her starting benefits are a targeted dollar amount.
Do you really care about the total lifetime SS benefits collected as opposed to generating the monthly income stream when desirable or needed?
Agreed – I think the calculator is answering the wrong question (see my post in this thread).
Why not take all your withdrawals from your taxable account instead of some from traditional retirement accounts? You’re guaranteed to pay less tax on money from taxable than the same money from retirement. Plus you will lessen the tax drag from your taxable account.
Hi Randy,
Thanks for commenting. As to your question I have repeatedly read that it is advantageous to have some money in a taxable account for tax flexibility. I’m not sure but I have a rough guess that the cost of the porch would completely drain my taxable account which is money inherited from the sale of my parent’s house. The vast majority of our portfolio resides in our IRAs.
I think I wish I was in your shoes.
Hi Amber,
We definitely feel blessed. Our financial situation in retirement is a combination of years of disciplined savings and spending; and an unanticipated inheritance.
We put a screened in porch on a few years ago when the $$$ became easy. Only regret is not sucking it up and doing it sooner. Life changer in terms of quality of life at the house. We virtually live out there!
Your plan seems well thought out. I really agree with waiting until 70 on the social security. Seems like your wife has some longevity on her side and the survivor benefit of waiting (including the peace of mind) is hard to beat. I don’t have a strong opinion on the porch either way; really depends on your financial situation versus how much you want it. Best wishes.
Build the porch. Start using it now. You’ll be glad you did.
Agree about the porch. Time is promised to no one. Chris
Considering the longevity of the women in your wife’s family, delaying seems reasonable. But what about your future health?
There is a risk in delaying. I’m speaking from my personal experience. I too was very healthy and then, suddenly and unexpectedly, at age 76 I wasn’t.
Of course, delaying certain travel expenses may be dictated by your cash flow, the size of your retirement savings, and your planned expenditures for a CCRC.
If you have the wherewithal, I’d consider accelerating your plans.
Hi normr60189:
Our travel expenses are not dictated by our cash flow. Since we retired and got past COVID we have been taking trips twice a year except for last year when my mother in law moved in for the last year of her life. From a travel standpoint if something very unexpected comes up we have already checked off all of my first tier locations except a fall trip Scotland the home country of my great grandmother who was alive until I was in college. That was put on hold last year as described above, and tomorrow we fly to California to celebrate my daughter’s 40th birthday. It’s a definite for next year. Otherwise we have already been on two week vacations to Italy, Greece, and Hawaii. My wife wants to do more US trips as well, but the early goal has been to check off as many long distance travel while we are younger.
I’d say you do you. Seems clear that the porch isn’t a “must have now” thing and you’re comfortable with the rest of your logic. And if you should get a sudden poor health prognosis all the decisions fall into lower order concerns.
To me first class travel will always be a “spend it cos there is no way I’ll ever run down to challenging levels” and not a thing to target in early retirement. Plus the younger, more resilient, greater comfort level at still slumming it type of thing. There might be a time in my life when I can only travel on escorted tours – I’d rather end load budget that way than “treat yo’self” for the sake of it.
Hey bbobbins:
You are right. The porch is a nice to have, but is a significant expense that I don’t want to take on until I know what our financial situation is at 70 basically in two years. I don’t have problems spending money, it is however difficult to get over being financially prudent, not stingy
I think you are doing a lot of planning based on remaining healthy and active to age 70 and beyond. I think all that is a mistake.
Being retired is not the time to wait for anything.
Do everything you want to do now and if it takes starting SS now, do that too.
Two months ago Connie and I had plans to go to Florida this winter, to remodel our kitchen. Instead, next week she is starting 16 weeks of chemotherapy and life has changed forever.
Convert that deck now. Stop “waiting” your life away.
Sorry to hear about Connie’s diagnosis. Hope things work out for the best and next winter you can complete the remodel with her healthy and by your side.
Sorry to hear that, and hope the chemo works. However, Connie is in her 80s, right? Odds are a lot better in your 60s.
Not sure why this is getting downvoted. I didn’t mean that Connie’s odds of chemo working were bad, but that you were more likely to get sick in your 80s than your 60s.
I noticed that too— I think your post was misinterpreted.
That is a post that needed to be very carefully worded, and it was not. It’s the responsibility of the poster to make sure it is not misunderstood.
It’s also the responsibility of the reader not to jump to the worst conclusion without further thought.
Well, I waited until 70, so I definitely endorse that plan. I flew business class before I turned 70, but I did it on FF miles – I originally had some left over from business travel, and then used an AA affinity credit card.
I’m not sure I understand the logic of waiting WRT the CCRC. All the ones I know about let you sit at the top of the wait list if you’re not ready to move in when you get there, and lists are certainly not getting shorter. You may find the wait is several years longer when you reach 70.
I am about five years behind you and also following the “wait until we turn 70” plan for my social security benefits (67 for my wife). My thinking is that foregoing eight years of payments purchases me an inexpensive annuity with COLA. I built a TIPS ladder to replace the “missing” social security payments until I claim. Have you done anything to bucket, or separate, those funds from your retirement accounts? I realize that this amounts to mental accounting, but removing the TIPS ladder from the total helps me more freely spend from the balance of my accounts.
I agree with the others. Build the porch!
Thanks for commenting Ken. I haven’t separated out the funds or built a TIPS ladder. I consider myself a total return investor and hold 10% of our portfolio in cash and the 45% each in stocks and bonds. This has returned 8.5% per year over the past 10 years, and recently our portfolio has continued to reach all time highs. Reaching highs is not a priority, but I am limiting our “spending” to the maximum of the 12% tax rate. Our normal spending ie non conversion income is normally near the limit so we don’t consider ourselves being handcuffed by the plan.
Why limit the spend just to stay within the 12% bracket? I respect the decision but I truly do not get that. It’s one thing to be careful with spending so as not to run out of money, but just to stay within a certain tax bracket seems very very misguided. I say this because you may live to be 100 or be gone tomorrow. Taxes cannot be a reason you don’t get to enjoy things while youre here. While I don’t want to pay more taxes than I need to, I’m not going to miss out on something just to stay below a threshold. I’d rather pay the taxes and move on. And, there may be Aunty IRMA visiting too, but life is just so short.
In closing it’s a really great post which as can you see has generated quite a few responses. While I view things a bit differently from you, it is with the utmost respect and admiration for what you’ve achieved. Best to you and the missus.
It does seem a shame to wait until 70 for your porch and for more comfortable travel. I understand about maximizing your SS benefit—we’re on the same plan right now—and about making the Roth conversions before increasing your income. But is there another way to fund the fun stuff in the meantime?
David, I obviously know little about US tax planning, but one thing stands out to me: the three-season porch. Would the tax drag really be so large when you take the HELOC interest payments over five years into account? It sounds like a lovely addition—why wait another three years to enjoy such an improvement? Could you be over-optimizing tax efficiency at the expense of current enjoyment?
All seems well considered— except the porch. Like others, I’d do it now. You should get the maximum benefit from the improvement.
I’m with you, Mark. Build the porch, David! And then invite us over to sit on it!
I might even take a first class flight to join the porch party!
I’ll let you know when the porch party is scheduled, but don’t wait to travel till then as despite the encouragement it ain’t gonna happen until 2028.
Oh well, gives me more time to plan!