When people talk about social security benefits and retirement planning, they often say, “My goal is to wait as long as possible deferring social security because it increases my benefit.”
Your social security strategy should be based upon a comprehensive retirement plan and things like your investment strategy, income strategy, legacy goals, tax strategy should be considered before you actually design your Social Security strategy.
In today’s video, James Conole is going to show you when it makes sense to draw down your 401k balance in order to increase your social security benefit and what’s the best retirement investment strategy for you.
Learn the tips & strategies to get the most out of life with your money.
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00:00 – Introduction
2:00 – retirement planning
3:20 – 401(k) Investing
4:50 – Retirement Plan
5:60 – Retirement Portfolio
6:45 – Social Security Strategies
7:55 – Work With Us
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When it comes to planning for retirement, one of the biggest decisions individuals face is when to start receiving Social Security benefits. While the full retirement age for Social Security is typically 66 or 67, many individuals have the option to start receiving benefits as early as age 62 or to delay until age 70. For those looking to maximize their Social Security benefits, one strategy to consider is drawing down on your investment portfolio to delay taking Social Security.
Delaying Social Security benefits can significantly increase the amount received each month. For every year you delay past full retirement age, your benefit amount increases by 8%. This can result in a substantial increase in monthly income over the course of retirement.
On the other hand, drawing down on your investment portfolio can have its own set of risks and challenges. Depending on market conditions, drawing down on your portfolio can deplete your savings faster than anticipated and leave you with insufficient funds in the later years of retirement. Additionally, there are tax implications to consider when liquidating investments, which can further impact your overall retirement income.
So, should you draw down your portfolio to delay Social Security? The answer depends on your individual financial situation and long-term retirement goals. Here are a few factors to consider when making this decision:
1. Longevity: If you anticipate living well into your 80s or 90s, then the increased benefits from delaying Social Security can provide a more stable and secure income in the later years of retirement. Drawing down your portfolio in the early years to delay Social Security may be a worthwhile trade-off.
2. Investment performance: Consider the performance of your investment portfolio and whether it can sustain the additional withdrawals needed to delay Social Security. If the market is performing well and you have sufficient savings, drawing down on your portfolio may be a viable option.
3. Other sources of income: If you have other sources of income in retirement, such as a pension or rental income, you may have more flexibility to delay Social Security without needing to draw down on your investment portfolio.
4. Tax considerations: Consult with a financial advisor to understand the tax implications of drawing down on your portfolio and how it may impact your overall retirement income and tax liabilities.
Ultimately, the decision to draw down on your portfolio to delay Social Security should be carefully thought out and tailored to your specific financial circumstances. It’s important to weigh the potential benefits of increased Social Security benefits against the risks of depleting your investment portfolio prematurely.
Before making any decisions, consider consulting with a financial planner or retirement specialist to create a comprehensive retirement strategy that takes into account your unique goals, risk tolerance, and financial resources. By carefully evaluating the pros and cons of drawing down your portfolio to delay Social Security, you can make an informed decision that sets you up for a secure and comfortable retirement.
This scenario doesn't consider a spouse who might not be interested in looking at investments, or how much someone might have in their 401K when making this decision. I ran the scenario of taking at 62, and waiting until 70. When I apply 3% COLA and 4% return on my 401K, There is more cash in my 401K over the rest of my life that can be inherited by my wife or children, but if I die before my wife she will lose the lower SS benefit and 1/2 my pension. I still need to do the math on that scenario to ensure she has the best chance at not having to move in with the kids.
Lots of different ways to look at things. 401k money is taxed at 100% and right now those rates are pretty low. After 2025 who knows what the tax rate will be. Social Security gives you a premium so to speak bc only a max of 85% is subject to taxes, depending on your provisional income.
The truth of the matter that for most people there really is no advantage in waiting. The reason you get more per month by waiting until full retirement age, or even waiting until age 70 is because you will get fewer payments. I retired at age 62 and began taking back my Social Security at the time. For most people the break even point is around 80 years old. (79 years 8 months for me. I first looked at my family history. My dad died when he was 80. He did have a brother who lived until 87, but he also had a brother and a sister who died in thier 60's. My older brother died when he was 70 and my son died when he was 41. Life is uncertain and living a long life is guaranteed to no one. The single most important thing you need to know is that more per month does not equal more total. 7 plus years retired now and I have zero regrets about taking the money early.
Well, I started on the take social security at 62 and saving as much of my 401k as possible, until later. My thought was to take the money I can't control and keep as much of what I can, as possible. Now, that I understand RMDs, Roth conversions, and IRMAA a little better, I'm beginning to question the wisdom I was so certain of.
I am currently retired with a local government pension and withdrawals from my IRA for additional funds. I am planning on taking my Social Security at my FRA and stopping my IRA withdrawals . I currently live in Virginia which does not tax Social Security.
I haven’t heard the whole video yet, but that once did you bring up taxes and that’s the main reason I want to drive from my 401(k) while I’m in the lowest tax bracket! Unless you have a Roth 401(k), there’s a ton of taxes to pay specially when you have state tax on top of federal
Uh, no. Not in most cases. You can't bequeath SS payments to adult children.
Excellent points that you clearly explain. I'm watching all of your Social Security videos.
RMDs can increase taxes particularly if you have dividend income. Spend the 401k down. SS is an inflation adjusted anuity.
Growth on the 401(k) is not guaranteed. You said it yourself. PLUS 401(k) has hidden fees, PLUS I don't trust the government to NOT decide to somehow access our 401(k) funds for their own reasons.
After much work and consideration on tax consequences on social security. My wife's and my situation, we decided that I would take social security at 70 and she will take it at 65. She also has a good pension coming from her work. Our tax es on $90,000 a year will be a little below 3%. Everything must be considered in your decision as to what you do. What works for me will probably not work for you!
Very good video.
I don't know and have never heard of anyone waiting to 70 to take SS. That's just not realistic for 95% of Americans.
I opted to wait until I was 70 (my husband, the lower earner, took his at 62). I stopped working at 67 and used cash from the sale of real estate (invested in laddered T-bills) to pay for our expenses until I turned 70 so I could leave my 401K of $360K (rolled over into an IRA) and $300K in stock untouched. Our expenses as full-time travelers run around $10K a month but this will decrease to $6K a month when we can no longer want to or can sustain a nomadic life. I am happy I waited—my net after medicare is $4400 a month. I feel “secure” that I can live on that alone if I should need to. Though, projecting death at 90 suggests SS plus 401K withdrawals will offer a comfortable life for the remainder of my days on earth.
I absolutely have considered letting the 401k grow and drawing at 62. It helps that my age 62 SS# is better than the average, but it's still a tough call. It's an extra $1k/month if I wait to 67. I've been thinking 64/5 more and more might be the best. And have wife wait to 67 so she can maximize her 50% draw off mine.
IF you're 62 ish and can qualify for state medicaid by not having more than 16K or so in reportable income, you might be better off delaying SSA until 65 when medicare kicks in and using medicaid as your medical plan. You'd have to live off cash/roth or sales of assets so your MAGI isn't over 16K or so. But you wouldn't need to be enrolled in ACA and paying premiums and deductables for that coverage through age 64/5..
It is gone, we lived through the zenith of our time.
These bourgeoisie individuals in tandem with the corrupt govt. will take down this country like what happened to Rome. My condolences to anyone approaching retirement, you may have concerns over whether your pension pot will stretch to cover the rising cost of living, bad regulatory policies, bad energy policies and insane fiscal policies
I like simple guidelines. Assuming you are not wealthy to begin with, the following make sense to me. 1) Don't take early retirement unless you have health issues and can't work anymore. Social Security penalizes you and reduces your monthly payment if you start collecting before your full retirement age. 2) Social Security will pay you 8% more for every year you delay taking Social Security after your full retirement age (up to age 70). Depending upon your full retirement age, 66 or 67, you could get 24% to 32% more each month. 3) Work to 70 if you can to max out your benefit. During those final work years, pay off as much debt as possible and take advantage of your company's 401k program. A full time job will almost always pay you more that Social Security will alone and you will probably be retired a lot longer than you think. You don't want to run out of money during retirement.
You need a white board to show illustrations for those of us who are visual learners. Also, why all the hype a about 401K? Not everyone has that investment. What about annunity, Roth and Roth IRA investments only?
Still good advice