Social Security Questions

[IdahoMtnSpyder]

No it doesn't.
It is the amount that matters.
Once the dollars all go into a common account, all dollars are the same.

I'm going to have to do some more searching. But 401k plans are employer based and sponsored. I'm quite sure an individual can't set up a 401k on their own. An IRA yes, 401k no. I'll have to jump in and swim in the ocean of IRS regs I guess! Or can you save me a bunch of time and agony and point me to the regs that make it clear I'm wrong?

 

[Joe T.]

I'm going to have to do some more searching. But 401k plans are employer based and sponsored. I'm quite sure an individual can't set up a 401k on their own. An IRA yes, 401k no. I'll have to jump in and swim in the ocean of IRS regs I guess! Or can you save me a bunch of time and agony and point me to the regs that make it clear I'm wrong?

I think what he means is that he will offset his INCREASED 401K contributions by his SS monthly check. So, effectively, he is 'using' his SS as his increased 401K contribution.

Joe T.

 

[ThreeWheels]

As I read it, he plans to continue working while drawing SS and putting the amount of his SS into his 401K. That is OK as long as his earned income exceeds the 401K contributation. But, as he stated, all his income, SS and earned, will be taxable, less 401 contributation which is deferred.

My opinion is that the actuaries have the system set so that no matter when an individual starts drawing SS, it pretty much comes out even, unless you outlive expectations by a bunch. Then you have beaten the odds and you win.... If you wait until your 70 to draw SS and die a year later, you lose..... But then who cares..... Jim

Yes. You are correct. That's my plan.
I read the quote from IdahoMtnSpyder in your post. While I appreciate his unsolicited advice, it reminds me greatly why I have him on my ignore list and can't read his posts.

 

[ThreeWheels]

This is all an interesting read - not knowing my life expectancy I will start drawing mine at 62 in 2021.

Life is for the living and I am going to enjoy it on my Spyder for as long as I can post-retirement. Work is over rated for me - I have enough money to live comfortably for a long time excluding my 401k which is losing by the thousands each day here lately.

Great idea. The only caveat I suggest you consider is the amount your benefits drop based on any income you make.
If you take SS at 62 years old, the SS check is reduced based on a formula that includes the wages you bring in from other sources.
After you reach full retirement age, you're free to earn as much as possible and receive your full SS benefit.

I'm not a certified financial planner. I'm just relaying what I'm doing based on my own research.

 

[IdahoMtnSpyder]

No it doesn't.
It is the amount that matters.
Once the dollars all go into a common account, all dollars are the same.

The rules that apply to IRA aren't all the same as for 401k plans. From this IRS document: https://www.irs.gov/retirement-plan...ce-guide-plan-participants-401k-plan-overview

A 401(k) plan is a qualified (i.e., meets the standards set forth in the Internal Revenue Code (IRC) for tax-favored status) profit-sharing, stock bonus, pre-ERISA money purchase pension, or a rural cooperative plan under which an employee can elect to have the employer contribute a portion of the employee’s cash wages to the plan on a pre-tax basis. These deferred wages (elective deferrals) are generally not subject to federal income tax withholding at the time of deferral and they are not reflected as taxable income on your Form 1040, U.S. Individual Income Tax Return.

(Emphasis added)

Yes, you can use any money to contribute to an IRA provided you have wages that equal or exceed that contribution. No, you cannot add money to a 401k except through some rollover provisions and paycheck deductions. And no, you can't use the same wage earnings to cover contributions to both plans.

Another way to look at it. The money you put into an IRA can pass through your hands. The money that you put into a 401k may not pass through your hands. I'm having some of my Thrift Savings Plan (Fed employee equivalent of 401k) money roll over tax free into an IRA at Vanguard. That has to be a custodian to custodian transfer. If I touch it then it becomes taxable immediately.

 

[IdahoMtnSpyder]

I think what he means is that he will offset his INCREASED 401K contributions by his SS monthly check. So, effectively, he is 'using' his SS as his increased 401K contribution.

Joe T.

That makes sense. Good workable plan.

 

[Bob Denman]

After you reach full retirement age, you're free to earn as much as possible and receive your full SS benefit..

This is good news: I was worried that Clint hadn't figured on the possible tax ramifications, that his situation might have...

 

[al0vely]

Great idea. The only caveat I suggest you consider is the amount your benefits drop based on any income you make.
If you take SS at 62 years old, the SS check is reduced based on a formula that includes the wages you bring in from other sources.
After you reach full retirement age, you're free to earn as much as possible and receive your full SS benefit.

I'm not a certified financial planner. I'm just relaying what I'm doing based on my own research.

I understand I can only have $35k or so in taxable income until full retirement age or get penalized. I have set aside a bucket of cash like funds to help fill the gap between SS+ taxable pension withdrawal and what I need to live until full retirement age.

I have been researching and planning my strategy for a few years now and with no debt I can save a lot in the bucket.

I am all eyes here in this forum to get insight from other retirees to help me Lake sense of it all.

 

[wyliec]

I understand I can only have $35k or so in taxable income until full retirement age or get penalized. I have set aside a bucket of cash like funds to help fill the gap between SS+ taxable pension withdrawal and what I need to live until full retirement age.

I have been researching and planning my strategy for a few years now and with no debt I can save a lot in the bucket.

I am all eyes here in this forum to get insight from other retirees to help me Lake sense of it all.

Where did you come up with the $35000 figure? For 2018, the threshold, when not at full retiremet age, was $17040, unless you are talking the amount you can earn in the year you start drawing SS; that figure for 2018 was $45360, and only applies to that year. Of course, once you hit full retirement age, you can make as much as you want.

I started SS at 62, and I am 70 now. My income from my other retirements and annuities did not count toward the threshold amount when I was still below full retirement age.

 

[Two cats]

S.S.

Mine is at 66 years, and four Months... :dontknow:

mine is 66 and 4 months also. From what I understand it goes up around 3% for every year you work past your retirement age. If I retire at 65 I only draw 1800 dollars. If I wait till 66 and 4 months it's 2100 dollars a month. If I work till 70 its 2400 a month But that's the way my statement shows I get every year around my birthday in october.

 

[IdahoMtnSpyder]

I understand I can only have $35k or so in taxable income until full retirement age or get penalized. I have set aside a bucket of cash like funds to help fill the gap between SS+ taxable pension withdrawal and what I need to live until full retirement age.

I have been researching and planning my strategy for a few years now and with no debt I can save a lot in the bucket.

I am all eyes here in this forum to get insight from other retirees to help me Lake sense of it all.

I think you may be confusing two issues with SS. As wyliec says you lose SS benefits if you are below full retirement age and earn money above a threshold. The thresholds he mentions apply for that case. The deduct is $1 for every $2 you earn above the threshold. The $35,000 threshold (something in that area) which you mention applies to how much adjusted gross income you can receive before your SS benefits become taxable. There is no age limit to that provision. Losing benefits because of work and age is one issue. Having to pay income taxes on your SS benefits because of too much other income is a different issue.

 

[Bob Denman]

But that's the way my statement shows I get every year around my birthday in october.

Mine is in September (barely!) :thumbup:

 

[wyliec]

I think you may be confusing two issues with SS. As wyliec says you lose SS benefits if you are below full retirement age and earn money above a threshold. The thresholds he mentions apply for that case. The deduct is $1 for every $2 you earn above the threshold. The $35,000 threshold (something in that area) which you mention applies to how much adjusted gross income you can receive before your SS benefits become taxable. There is no age limit to that provision. Losing benefits because of work and age is one issue. Having to pay income taxes on your SS benefits because of too much other income is a different issue.

When I mentioned $45360, I was talking the SS mid year retirement rule. When I retired 8 years ago in August, I was way above the yearly threshold, and it did not affect my monthly check. Back then, it wasn't $45360, it was less, which is why I questioned the $35000.

 

[Easy Rider]

I'm going to have to do some more searching. But 401k plans are employer based and sponsored. I'm quite sure an individual can't set up a 401k on their own. An IRA yes, 401k no. I'll have to jump in and swim in the ocean of IRS regs I guess! Or can you save me a bunch of time and agony and point me to the regs that make it clear I'm wrong?

Go back and read your original post. The wording was VERY confusing.
Now I see what you were trying to say.......but it didn't come out clear.

 

[IdahoMtnSpyder]

Go back and read your original post. The wording was VERY confusing.
Now I see what you were trying to say.......but it didn't come out clear.

Fair enough. The confusion started with the way I read ThreeWheels first post where he wrote, "...but I figure I can put my SS into my 401K plan...." I read that to mean he planned to take his SS payment and send it directly to the custodian of his 401k fund. That he can't do. I guess you read it correctly to mean he would have his employer deduct an additional amount equal to the SS benefit and send that to his 401k plan. The total amount from both his paycheck plus SS deposited into his checking account stays the same as the current paycheck amount. That makes sense and is a smart way to go. He does have to pay attention to the max amount he can put into his 401k. For 2019 that will be $25,000. If he gets a fairly decent SS check he could hit the limit pretty quickly in trying to offset the SS benefit. If TW is married and files jointly and his wife receives a SS benefit then he very well may not be able to offset the entire SS benefit by his 401k contribution. If that is the case he may be better off to delay receiving his SS benefit.

 

[Bob Denman]

What's that old saying?

"I can explain it to you..."

 

[al0vely]

When I mentioned $45360, I was talking the SS mid year retirement rule. When I retired 8 years ago in August, I was way above the yearly threshold, and it did not affect my monthly check. Back then, it wasn't $45360, it was less, which is why I questioned the $35000.

I was referring to the earnings threshold - the $35k was a number I had from a few years ago.

 

[DaveZinAz]

mine is 66 and 4 months also. From what I understand it goes up around 3% for every year you work past your retirement age. If I retire at 65 I only draw 1800 dollars. If I wait till 66 and 4 months it's 2100 dollars a month. If I work till 70 its 2400 a month But that's the way my statement shows I get every year around my birthday in october.

Using the examples you give, doing the math, you will break even at 85 years of age, all things being equal and assuming you are working until you retire be it either 65 or 70.
I don't know what other factors come into play that may skew the way I am assuming it works out.

Retire at 65. At 85 years of age you will have collected 240 months @ 1800.00 for a total of 432,000.
Retire at 70. At 85 years of age you will have collected 180 months @ 2400.00 for a total of 432,000.

I guess there are two questions.
1st, what to you expect your life expectancy to be? Depending on when you start drawing and how long you live, you will come out ahead or .gov will. Basically, if you are going to expire prior to 85, it is better (larger total) to collect starting at 65.

2nd, can you make use of the extra 600.00 per month when you are in your later years? Sure, you can defer collecting so you can get a larger monthly payment but depending on your health, you may not be able to spend it doing the things you want to do at 80 years old vs things you may want to do when you are 65-70.

I may be totally wrong in my thinking and if I am, please correct me. I still have a few years to go before i have to decide but I keep gong back and forth as to when I want to retire.

 

[wyliec]

Dave,

Everything you said seems correct to me. I started my SS at 62, and now I'm trying to make a decision for starting to draw on an annuity I have.

 

[canamjhb]

DaveZ..... You made the point I was trying to make in my post #32 of this thread. I think we agree. You just said it better..... Jim