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Author: akck Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 62060  
Subject: Re: Next up, the Social Security decision Date: 10/26/2012 1:16 PM
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That's the thing. I'm not even convinced that collecting the max from SS over time is necessarily the wisest goal. I think greater income in one's 60s & 70s may be more valuable than greater income in one's 80s and beyond. I'm probably influenced by not expecting to exceed the ordinary life span. Also by observing my mother up close reduce her spending over time...now in her 80s, no more entertaining, very little travel, much less eating out, less frequent maid service and salon services, much less driving, less book-buying and more library, fewer movies and no more live performances, more aggressively seeking out discounts but less shopping otherwise--so she goes to 3 grocery stores for bargains, but rarely shops for anything else.

Studies--or maybe just one study--showed that retirees spend more in early retirement than later, although maybe that's simply because income tends to fall over time due, I suppose, to death of one spouse in married couples, unwise investing, over large asset withdrawals either every month or occasional lump sums, and unCOLAd corporate pensions. Maybe failing health keeps you closer to home, falling appetites has you buying two dozen Lean Cuisine on sale instead of restaurant meals or meat/fish, and canned soup or scrambled eggs for dinner instead of a traditional meal (at least that's true of my 80something mother).

Because of RMDs, many peoples' incomes jump when they turn 70*. And I think a GOP COngress will at least try to downgrade the SS COLA formula and refuse to up the SS tax to where it should be (I've read that if we had followed the Greenspan COmmission's plan to the letter, we'd already be taxing up to $180k in income instead of $110k or whatever now).

In practical terms, is there even a difference between self-funding for a year (3400-3500/mo to replace SS for us), then filing for SS, or filing asap and then having the option to pay that $41k back in a year and rebooting? I tend to think of rebooting as buying an 8% annuity (for $41k that pays $3300 the first year, then COLAd). I don;t have the math to know if that's a good deal, nevermind that isn;t it essentially the same investment to self-fund for the first year?

Am I making any sense?

* And another issue...conventional wisdom said to spend down taxable assets before IRAs, but I've run across recommendations to spend down IRAs to avoid unnecessarily large & taxable RMDs.


One plan to consider is to take income from your traditional IRA and convert it to a Roth IRA up to the top of your tax bracket. Do this until you reach 70 (maybe beyond). This will reduce your RMDs (smaller pot), and allow you to manage income after age 70 with the Roth.

I agree with you that it's likely as you get older, you'll spend less. Already, I don't see us traveling as much (bad knees), and I've discussed the issue on other sites and most agree that expenses go down (health care may be the exception). RetiredVermonter is a living example who confirmed this in his retirement. If we're wrong about expenses, I know we can make adjustments if needed. The biggest adjustment would be to move to a lower COL area, if we haven't already done so.
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