Planning for Retirement

[rakendzior]

in regard to social security...my wife plans to take her lower spousal benefit at 62...i will take mine at 70
She can draw her spouse benefit at age 62 (and I will be age 72) which will be 32.5% of my increased full benefit. Upon your death, her benefits will increase to my benefit amount if she is at least age 67.

I am 10 years older than her

You may have already found these calculators but I find them helpful when advising people. On a personal note, I filed at my FRA and for whatever reason, my wife filed when she was 65. That permanently reduced her benefits below the 50% threshold even though we didn't need the money at the time. Now, several years later, that extra $XXX would be help us pay our extra medical expenses.


Benefits for Spouses—This page also has a calculator that computes the effect of early retirement.


Benefits Estimator—This page takes you to Social Security's calculators that allow you to get as detailed as you would like to estimate your benefits.


Retirement Planner: Benefits for You As a Spouse—A simplified version of the rules regarding spousal benefits.

 

[rakendzior]

what a great thread..thanks for starting it...very timely for me....here's something i came across, might be helpful if your spouse is 10 years or younger....TSP has a higher RMD than a regular IRA...it drains your account faster.....uses a different table to calucate RMD...this may explain it better...at least the IRA part...

https://www.kiplinger.com/article/r...01-rmds-when-your-spouse-is-much-younger.html

Is that why there are restrictions re extracting large chunks of TSP money by transferring to an outside IRA?

 

[alfaman]

Is that why there are restrictions re extracting large chunks of TSP money by transferring to an outside IRA?

did not know there were restrictions...assumed there were none since i thought you can transfer the roth part of the tsp to an outside ira..i will have to educate myself on extracting large portions...hope i do not have to transfer the whole tsp to an outside ira to get the lower RMD

i know the roth does not have a RMD...i was talking about the nonroth portion

 

[rakendzior]

I have a retired federal employee client who wanted to keep some of his money at TSP but remove the rest. He wanted an environment that gave him upside potential but guaranteed him against a loss if it turned out he was too exposed to sequence of returns risk. He moved some of it but TSP said "no more transfers". He thinks the rules may be changing but because he is afraid of a market crash this year, and he lost a lot of his account last fall, he has everything in the most conservative option available. That's not good if he expects to live another 25 years.

 

[rakendzior]

Check out this article: [FONT=&quot]https://www.thebalance.com/clearing-spousal-benefits-confusion-2388948[/FONT]

 

[exnavyew]

I haven't talked to TSP yet but it looks like they withhold 20% for taxes on age-based withdrawals. (FRA coming up soon.) However it seems that if I roll it over to an IRA no funds are withheld. True? No? Any feedback or related links are welcome! ​

:smile:

 

[uscfanhawaii]

Responding to rakendzior:
Yes, they are still predicting the change to the 2017 law to be implemented by Sept 2019.
Until then, only 1. Second one has to be ‘the rest’.
New rules under the 2017 law....unlimited number.
Go figure.

 

[uscfanhawaii]

I haven't talked to TSP yet but it looks like they withhold 20% for taxes on age-based withdrawals. (FRA coming up soon.) However it seems that if I roll it over to an IRA no funds are withheld. True? No? Any feedback or related links are welcome! ​

:smile:

IRA rollovers do not relieve you of the FRA burden. Just reduces the amount of $$ the FRA is based on.
By the way, you do not say if Roth or not. All conversions to Roth require a tax bite.

 

[exnavyew]

Not sure I understand. FRA = full retirement age, in my case 66.

 

[rakendzior]

Mindful that I'm new to TSP details, when you say "FRA burden', do you mean required minimum distributions (RMDs)? Not sure how to help you yet.

 

[rakendzior]

Not sure I understand. FRA = full retirement age, in my case 66.

FRA is the acronym for Full Retirement Age, that point in history when you qualify for full retirement benefits from the SSA system, and gain several other advantages.

 

[rakendzior]

Responding to rakendzior:
Yes, they are still predicting the change to the 2017 law to be implemented by Sept 2019.
Until then, only 1. Second one has to be ‘the rest’.
New rules under the 2017 law....unlimited number.
Go figure.

My friend who told me about TSP Talk gave me to believe it would be this fall but he wasn't sure and didn't know exactly how it would apply to him. Thanks.

 

[rakendzior]

IRA rollovers do not relieve you of the FRA burden. Just reduces the amount of $$ the FRA is based on.
By the way, you do not say if Roth or not. All conversions to Roth require a tax bite.

Yes, any conversion of 'QUALIFIED MONEY' to a Roth means ordinary income taxes. BTW, 'qualified money' means money earned but 'qualified' by the IRS so that income taxes are deferred.

 

[rakendzior]

Hypothetically, you could gift an asset you already have to a charitable organization willing to take it. That would allow you to take a charitable deduction, assuming the new tax law doesn't stop that, and use the charitable deduction to offset the tax burden incurred by taking an equivalent taxable distribution from a qualified account. I am not a tax person; you must run this past a tax person first.

 

[exnavyew]

If I rollover TSP money to a brokerage IRA (say Fidelity - which allows me to use the $$ to trade). My understanding is that:
A: 100% of the TSP monies would rollover (I'm north of age 60).
B: any disbursement from that IRA to say my checking account would be considered taxable income and so reported to the IRS by 'Fidelity'.

Is that correct?

 

[PessOptimist]

Lots of info here and a great thread. Back to the social security and spouse’s social security question which is not real easy to figure out estimates for. Everything except for the spouses own estimated benefit is based on the “workers primary insurance amount”. The primary insurance amount (PIA) is defined as “The ‘primary insurance amount’ (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement”. You can figure yours out at https://www.thebalance.com/social-security-benefits-calculation-guide-2388927. I went to ssa.gov, established a chat session, asked to speak to an expert and got mine. I didn’t know at the time to ask if this would change before I started receiving benefits. Apparently so since I have ss income in 2019 which exceeds my income 35 years ago. I also didn’t ask when this amount gets set in stone. I think when you start receiving benefits.

According to the formula in https://www.thebalance.com/clearing-spousal-benefits-confusion-2388948, Take the older spouse's PIA divided by 2, minus the younger spouse's PIA. $2,100/2 = $1,050 - $800 = $250. In my case 2460/2=1230 – 1513 = less than 0.
Since the wife’s (age 63) latest ss estimate says $1225 if she applies now and $1555 if she waits until 66y 4m, I see no advantage for her to wait until I apply.

It’s all somewhat ambiguous especially the estimated amounts. Someone correct me if I am way wrong.

PO

 

[PessOptimist]

Not sure I understand. FRA = full retirement age, in my case 66.

Born in 1954 or earlier? if later it's 66y + some months.

PO

 

[PessOptimist]

I have a retired federal employee client who wanted to keep some of his money at TSP but remove the rest. He wanted an environment that gave him upside potential but guaranteed him against a loss if it turned out he was too exposed to sequence of returns risk. He moved some of it but TSP said "no more transfers". He thinks the rules may be changing but because he is afraid of a market crash this year, and he lost a lot of his account last fall, he has everything in the most conservative option available. That's not good if he expects to live another 25 years.

By “no more transfers” I assume you meant no more withdrawals?

Your client can do an “interfund transfer” to move his remaining TSP assets to the G fund. Any time the client wants. G is guaranteed not to lose money. It earns 2.75% this month. It does change monthly. Is this the most conservative option you refer to?

We all lost a lot of our C, S or I funds last fall. Most of us paying attention moved the money around. Your client can move money back to stock funds twice a month. Not great flexibility I understand. But the client need not be concerned about losing money if they move funds to G. Only concerned about missing gains.

I am aware about the gov suspending G fund investments to avoid the debt ceiling. They do it every time the ceiling is close. They have a hard fight and have to change laws to make that permanent. As of today my G fund investment have kept increasing in value. Yeah I know it's all paper money like all investments until you take the cash.

I am very curious about the “environment that gave him upside potential but guaranteed him against a loss if it turned out he was too exposed to sequence of returns risk” I’d like some of that myself.

PO

 

[PessOptimist]

in regard to social security...my wife plans to take her lower spousal benefit at 62...i will take mine at 70
She can draw her spouse benefit at age 62 (and I will be age 72) which will be 32.5% of my increased full benefit. Upon your death, her benefits will increase to my benefit amount if she is at least age 67.

I am 10 years older than her

alfaman, are you sure about 32.5% of your increased benefit under the delayed retirement credit rules and not your PIA?

If you would like to get really in to it go to https://www.ssa.gov/policy/docs/rsnotes/rsn2017-01.html.

Every rule I find about spouse being 10 years younger applies to minimum required distribution (MRA) and not SS benefits.

PO

 

[uscfanhawaii]

.....apparently so since I have ss income in 2019 which exceeds my income 35 years ago. I also didn’t ask when this amount gets set in stone. I think when you start receiving benefits.

PO

Yes, ‘set in stone’ when you start receiving benefits. This is because all previous years’ income is indexed based on inflation. SS.gov has all the up to date index info if you want to get down into the details.
So what the chat advisor must have said is that your 2019 SS income is larger than the INDEXED SS income 35 years ago. Note also, I believe this 35 yr period is consecutive.
yes?