@colorado_mom condolences for the loss of your mother.
@CountingDown is using the Foreign Tax Credit a possible option for him rather than the FEIE?
I can no longer in good conscience advise people (if they ask me 
) to delay social security until age 70. We have all seen projections that the SS trust fund will run out of money (estimate 2035) which could result in a 20% benefit cut. I have always felt that this would not be allowed to happen and some kind of fix would be in place to prevent it, or they would simply keep paying benefits at 100%. Now, I am not so sure.
It would be very hard for me to argue against somebody who wants 100% of a reduced benefit now vs possibly receiving only 80% of a higher benefit later.
@njres, interesting point.
Yes but if that happens then theyâll only be getting 80% of a reduced benefit. Unless you think they wonât cut benefits of people already getting them.
I think it would be about impossible to cut benefits from those already receiving them. Seniors vote at very high rates. My guess is there will be some combination of raising full benefit age, eliminating the cap for income but keeping max payments where they are, and changing the cost of living formula. Perhaps also making 100% taxable instead of the current 85% for higher income retirees, with the difference going to SS fund. All these things would be more acceptable than cutting benefits to already retired people.
@shawbridge We were surprised about the recommendation of H to start receiving benefits at 68 and me at 62. The report was generated with Social Security Pro software. Our assumption is that I will outlive H by a decade. Also my benefits are small as Iâve worked part time/no time since we had the kids ⊠so more than 25 years. Never was a big earner. Trophy wife ya know ?.
Iâm not sure what will happen, but I think those who are already âin the systemâ and receiving benefits will be better positioned than those who are not. Harder to take something away. Pure speculation on my part.
My understanding is that if they do nothing - donât increase taxes, reduce benefits, adjust bend points, preserve current benefits, etc, on the day the âsurplusâ runs out, everyone takes a 20-25% haircut. Current beneficiaries and future beneficiaries.
I highly doubt it will get to that point, but who knows.
Last time they cut benefits by raising the full retirement age, they spread it out over years so people right at the switch date didnât bear the full brunt, and people over a certain age kept their old FRA. I expect FRA to get raised to 68 or maybe even 69 so I would expect that again. Every year it gets raised is essentially an 8% or so lifetime reduction of benefits.
Do any of you know if social security benefits are affected by not working the last few years before collecting? Would those years of $0 income be averaged with the most recent working years? My DH was laid off last month and is undecided about looking for another job. We had thought he would wait until 70, but he had also hoped to work longer.
From the SSA website:
We base Social Security benefits on your lifetime earnings. We adjust or âindexâ your actual earnings to account for changes in average wages since the year the earnings were received. Then, Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.
I retired at a youngish age so mine will be impacted by that.
As a NJ Public employee I donât pay into SS and I will have a pension at time of retirement. Iâve worked several part time jobs for the past 30+ years in which I paid into SS. My understanding is the Social Security will penalize me, reducing my benefit of up to 50%
Any Social Security experts give me any insight to this?
Also, if Iâve met the income levels/contribution amounts for past 30+ years does the penalty get reduced?
Iâve been self employed and semi-retired for 6 years, and will retire fully next month. My salary has been very low for the past several years. Does this mean that my SS -payment calculation will drop? I ws writing the pros/cons of starting to collect at 67 vs 70 (DH will wait until 70 for his) so am conflicted. And noI cant collect half o his as mine is more than half of his and he would then be subject to the Deeming rule.
That is correct. If Congress does nothing, an automatic haircut kicks in for all, current and future.
H taking at 68 means a lower survivor benefit for you. (You will receive 50% of his then-current benefit when he dies.)
But whether that is surprising depends on your health status and long-lived genes. To paraphrase Clint: âdo you feel luckyâŠ?â
Iâm a fan of Mike Piperâs OpenSocialSecurity, which is free. (use the Additional input tab at the top so you can play with mortality tables.)
Thanks for raising the SS question. I went back and looked at the analysis and the analysis differs if we donât earn income on the SS distributions or if we do. If we are not spending that money, waiting until 70 for me and 68 for ShawWife is optimal. However, if we will just be saving that money with a 5% return on investment (or not spending other money on which will then get a 5% return), then age 68 for me and 66 for ShawWife is optimal and taking it out at 66 for both ShawWife and me is a close second. I think I will not need the SS income in any of the years in question, so I would be investing the distribution. Hence, Age 68 is the winner.
^^do you have any tax room for tIRA conversions to a Roth?
@bluebayou, good question. I could roll from 401K to tIRA and then to Roth. Usually I am in the highest income bracket and probably will be for a while, so the analysis has seemed to suggest against a conversion. However, maybe I wonât be in the highest bracket this year because the Pandemic has delayed a bunch of work until next year. I will check.
^^yeah, if you are in the highest marginal rate, its highly unlikely to be worth the effort. But doing a conversion is another good reason to delay SS.
btw: also need to think about the heirs. Right now I have one who is making bank in NYC. His marginal rate today is higher than my rate ever was. 
For a traditional investor the tIRA/401k is usually a better bet, because typically your deduction all happens at your highest marginal rate (or two highest if you cross a threshold), whereas withdrawals, which tend to be larger than your contributions on a yearly basis, happen at lower marginal rates and cross more rate brackets, so you come out ahead taking the deduction.
Somewhere in the past I posted a link to a pretty heavy mathematical analysis that showed this.
There are exceptions like if you can invest in non-public companies that pay off hugely.
absolutely correct, but no heavy math models needed. It basically comes down to marginal tax rate while working vs. estimated marginal tax rate when retired and taking RMDâs. (and of course, your best guess on tax law changes â many of the current personal income tax rates will expire in 2025 if not extended by Congress)
Itâs more a comparison of what your marginal rate is while working vs. your effective rate while retired, because itâs unlikely your entire distribution will be taxed at your marginal rate.
Taxability of SS benefits also clouds the picture because tIRA distributions can cause almost all your SS benefit to become taxable, whereas that might not happen with Roth distributions depending on your other circumstances.