Thanks, all. Great advice
Here's another question from Jerry H.
And here's one from retiredteacher
Retired, how old are you now?
For every year you delay taking Social Security (until age 70) you receive an 8% benefit increase. That is a hard rate to find in the marketplace. If you don't have a need for the money, delaying can be a good strategy.
Retired, I would generally recommend waiting until your full retirement age, which is probably 66. If your wife works and collects SS before full retirement, she will lose some of her social security income.
Your Full Retirement Age (FRA) is 66-67 years old, you will receive a DECREASED benefit for taking SS before that age. Also, there is a strategy that may allow you or your spouse to receive Spousal Benefits (NOT retirement benefits) from your FRA, while you both delay receiving RETIREMENT benefits until age 70. This is called a "Restricted Spousal Application" that you both must be at your FRA. Social Security folks are aware of this strategy and can help you impliment it down the road.
Hi retiredteacher - Kate's advice is exactly right. You need to look at your question taking into account your wife's age. The goal is to maximize the benefits for your combined expected lifetime.
retiredteacher- You are very wise to be considering different SS claiming strategies. Health and life expectancy (two things which are hard to predict) play an important role in your decision to delay. I would recommend at least waiting until your full retirement age, which is probably 66 or 67. You will take a meaningful cut in benefits if you claim at 61 and 62.
Thanks, all. Some great advice for RetiredTeacher!
Bethany and Chris, here's a follow-up from RetiredTeacher
Retired Teacher, as Kate mentioned in an earlier answer, you or your wife has the option to begin receiving spousal benefits at age 66- the spousal benefit amount would be half of the full benefit amount. I would urge you to consider other income options before claiming at 61 or 62. Claiming before full retirement age will permanently decrease the benefit amount you will receive for the rest of your life.
Retired, SS is a very complicated benefit. However, I've had good luck helping my clients work with our local SS office to figure out if it makes sense. I'd recommend starting there or working with advisor who is knows this area well. They can run some break-even scenarios so you can see what you're gaining and losing under these scenarios.
Sam and Kate, do you want to take this next one from Stevers?
You can contribute to a traditional IRA. If you do not have an employer retirement plan (401K, 403B) your entire contribution will be deductible. If you do have an employer retirement plan, it will only be deductible if your income is less than $59k (filing singly) or $115k (filing jointly). Regardless of deduction, you can make the contribution.
Stevers, where things get interesting is when to convert to a Roth.In order to convert to a Roth, you will have to pay taxes at your ordinary income tax rate on the amount being converted that has not previously been taxed. Therefore, if you received a tax deduction in the past on that money, you will then owe taxes on that part of the conversion. Sam is right to be very cautious. Probably best to consult with your tax advisor on your specific situation. Also, it may not be the right time to convert to a Roth if your AGI is high. It may be better to wait for later in life and your income is lower.
Hi stevers, Be careful with the workaround for contributing to a Roth when your AGI is too high. If you have a lot of existing deductible contributions in your Traditional IRA, then converting a part of it to a Roth may create a tax bill you were not expecting.
Bethany and Chris, you can take this next one from Hemang
Hemang, there are a few exceptions that allow you to pull money from your IRA without paying a 10% early penalty charge, however, a refinance is not an exception. If you were to withdrawal the money you would pay regular income taxes on the withdrawal and an additional 10% penalty.
Hemang, you can do a 60 day rollover BUT this is only allowed ONCE per calendar year. Meaning you can't do it again. I would plan on putting the money back in by day 55. If you miss the deadline it is taxable as income and will also be penalized. I'd talk to your CPA first.
Christopher, thanks for clarifying the 60 day rule!
Kate, here's a question from Rick
I believe that money is merely a tool to support the lives we want to lead. So my suggestion for you and your wife, is to look closely at your lives and what it is you really want from them. Are you on that track now? Or do you need to do some rearranging? Utilizing this money to best support YOUR life goals is key. Now that isn't to suggest you go out and spend it all on a hot car, but to truly be mindful and choose how this money will support your life. You may want to consider discussing this with your financial advisor. "Here are our goals, what is the best way to position/utilize this money to get us there?" I hope that helps! Good luck!
You can take this one from "R" when you're ready
Sam, here's one from Robin
Hi Robin - Married Filing Separately is usually more costly than Married Filing Jointly. I would recommend seeing a financial advisor before you get married. It may be best to meet with the advisor on your own to delve more deeply into your concerns.
Bethany, you can take this one from Brian