In this series of videos we’re going to tackle what someone can do when they have $1 million in an IRA.
We’ll start with Karen and Ken, Married Filing Jointly. WE’ll have them take Social Security at 66, 70 and 62 and look at their taxes due, their income, expenditures and their ending net worth.
Then we’ll see what things look like when they start Roth conversions.
Finally, we’ll make Karen a single taxpayer right out the gate and see what that looks like.
So, buckle up, it’s gonna be a wild ride!
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Karen has been diligently saving for her retirement over the years and has managed to accumulate a substantial $1 million in her Individual retirement account (IRA). Now that she is approaching retirement age, she is faced with the decision of when to start claiming Social Security benefits. One option she is considering is to start claiming at age 62, the earliest age at which she is eligible to receive benefits.
Many people are in a similar situation to Karen, wondering what to do when they have a sizable retirement account such as an IRA and are approaching the age at which they can start claiming Social Security benefits. While there is no one-size-fits-all answer, there are several factors that should be taken into consideration when making this decision.
First and foremost, it is important to understand the potential impact of claiming Social Security benefits at 62. By claiming early, Karen would receive reduced monthly benefits compared to waiting until her full retirement age, which is 67 for those born in 1960 or later. Additionally, her benefits would be further reduced if she continues to work and earns more than a certain amount. On the other hand, if Karen waits until her full retirement age or even further, her monthly benefits would be higher.
Another important consideration is Karen’s health and life expectancy. If she expects to live a long and healthy life, waiting to claim benefits may be a more financially sound decision. On the other hand, if she is in poor health or has a family history of shorter lifespans, claiming early may make more sense.
It is also important for Karen to consider her overall financial situation. With $1 million in her IRA, she may have enough savings to support herself in the early years of retirement without needing to rely on Social Security. In this case, she could potentially wait to claim benefits and maximize her monthly payments in the long run.
Additionally, Karen should take into account any other sources of retirement income she may have, such as a pension or other savings accounts. These can impact her decision on when to claim Social Security benefits.
Lastly, Karen should also take into consideration her personal preferences and lifestyle. If she is eager to retire and start enjoying her free time, claiming benefits at 62 may be the right choice for her, even if it means receiving lower monthly payments.
Ultimately, the decision of when to claim Social Security benefits is a deeply personal one and there is no right or wrong answer. Karen should carefully weigh all the factors and consult with a financial advisor to make an informed decision that aligns with her individual circumstances and goals. With $1 million in her IRA and a thorough understanding of her options, Karen is well-prepared for a comfortable retirement.
Another scenario to this is if you do not need the social security then why not draw it and safely invest it. Lets say I start drawing it at 65 getting $2,200 a month and I save it. Then I pass away at 70. Over those 5 years I collect $132,000 plus interest. That is money my children will get versus if I had not started drawing no one would ever get it. Oh wait the government gets it. At least this way it is there if I do live longer and need it or I leave it to my children if I die. Great video.
Heritage, if I give you my info can you perform an analysis on me?
From Leo: I had close to 1 million, Tied up in 401k, maxed out contribution every year for my whole life. March '99 the con job of the securities and exchange commission took over 100K in one day when the tech bubble in NADAQ burst. The broker said let it ride, more loss and never came back. IN 2008 Merrill Lynch and Lehman brothers turned my wealth into about $80K. That did not come back either.. If you are counting on the financial industry to keep their part of the bargain you will be sadly disappointed. I should have put it in jars in the back yard, I would have only lost inflation.
Can I ask you a question here ?
Josh, Thanks for the clarification of spousal benefits taken at full PIA while the primary earner is less than full PIA. That, to me, has always been a bit cloudy.
Great work!
I’m 64 and have $5.00 to my name! Now what?
my brother and his wife retired.
he has 67k in cd's.
his wife has 220k in a 401k.
His wife hasn't been seen in a couple weeks.
he just bought a new Challenger.
Very nice excel spreadsheet to use for planning purposes. Can you provide a link to it?
My wife and I are 62 and retired. We made a Roth conversion this year and we will be making one for the next 8 years while our taxes are low.
Hello I live in the Atlanta area can we meet and talk about my situation????
I was saving 8% of my work income and my employer matches 5%. I looked into a Roth and found out my employer offers one so I switched 3% to the Roth. I learned this from watching your videos so thank you!
So the "Widow's Tax Trap" is the single person's normal, right?
With that large of a nest egg, doesn't really make much of a difference with SS @ 62/66/70. Numbers are 'basically' the same.
One thing that stands out to me, 3.7 mm left at the end of Karen's life, why not spend MORE earlier in retirement and enjoy the time while Ken's still around? I think a lot of the time we put too much attention to what $$ is left in the end, instead of what amount we can spend earlier. Just my opinion….
So, it was obvious in 2022 that they should have done Roth conversion or just took more money out just for cash/security slush fund.
I like women, but I love beer.