I’m 62 With $900K Can I Retire Now, When Should I Take Social Security and What About Taxes?

So you’re 62. You’ve done a great job saving for retirement. You have $900k in the bank. And the question is, can you retire? Well, yes, you can. That’s it. Erik cut the video. We’re done.

No, seriously, the question isn’t just can you retire? It’s can you retire and sustain your standard of living while making sure you have enough money for health care down the road ,when should you take Social Security? What about taxes?

This is everything that we talk about in our Oak Harvest Retirement Process process. And in this video, we’re going to go through those scenarios. We’re going to look at different life expectancies, different Social Security election strategies, different tax strategies, and also what happens if one spouse predeceases the other unexpectedly and what impact that has.

Hi, I’m Troy Sharp’s CEO of Oak Harvest Financial Group, Certified Financial Planner Professional and host of the retirement income show. OK, so I’ve laid out the case pretty clear here. I’m just going to jump right into it. First, we have to go through some basic parameters.

So. 62, I have both spouses here at 62, married. They want to spend $75,000 a year. Now, one thing I will say, I can’t go through every scenario in these videos, but this is why it’s important to work with someone so you can go through all these different scenarios for your personal expectations

, your personal circumstances, et cetera. I have life expectancy going to 95. I get a lot of comments, “Troye I’m not going to live to 95”. Yes, a lot of you will not live to 95, but a lot of you will live to 95 and a lot of you will live beyond 95.

The advancements in science and technology and medicine, we have drugs and treatments today that just five years ago, without them, people were dying much sooner than they do today. So please bear with me when it comes to these life expectancy ages.

We are going to look at another scenario where the husband dies at 80 and the wife lives till 90. But I believe many people are underestimating how long they will live. But again, circumstances are different for everyone. Customization is key when it comes to retirement.

OK. This couple has nine hundred thousand dollars saved. Seven hundred is in an IRA. Two hundred is in what we call non-qualified accounts. So non-qualified is outside of your retirement account. It’s non IRA. So your bank savings, your brokerage account, your investment accounts, whatever that may be.

Anything outside of your retirement account. The technical term for it is non-qualified money. And this first example, we’re going to look at what happens, because many people do this and oftentimes it’s a mistake and sometimes it’s actually the right decision.

So based on these parameters, we’re going to look at this couple taking Social Security. It’s sixty three. So essentially, they’re 62 now. They’re going to retire in 2022. I’m doing this video right now it’s almost October of 2021.

So we’re going to say Social Security next year when they actually retire. And then we’re also going to look at full retirement age FRA. And that is for this couple, about 66 and a half, maybe 66 and ten months, somewhere in that range.

We are going to look at the tax analysis. Should they do conversions? What about the withdrawal order? This is a big, big part of retirement planning. Step three of our Oak Harvest Retirement Process process is tax planning. So should they do conversions?

But also what sequence should they withdraw from the accounts, whether they’re doing conversions or not? Again, don’t just think about your money as far as stocks and bonds, what percentage there or your investment choices you have to also, in retirement.

Think about your buckets as far as their tax characteristics, because this is a very critical element of strategic income distribution and tax planning. So non-qualified bucket, IRA bucket, tax free Roth bucket. How much should we be withdrawing from each of them and when?

Very, very critical here. OK, with those scenarios now laid out or those parameters laid out, we’re going to jump right into the numbers. So this is a Monte Carlo simulation, this is going to run 1,000 different trials based on all the parameters, so taking Social Security at 63, living till 95, $900,000

saved, broken down 700 and retirement accounts 200 outside of retirement accounts to $75,000 is growing at 2.25% inflation and this does include medical expenses. So this is the entire retirement plan spending budget.

OK, comes in at 59%. So one thing, what would we do if this was your particular situation? Well, first thing we will go to is the spending. So what we might do is create a go-go spending plan where we want to spend the seventy five thousand in the first let’s call 5 to 10 years of

retirement, but we plan on tapering that down because the numbers don’t look great right now. Personally, I would just simply tell you not to retire, work a little bit longer if you were dead set on retiring. Right now, we have to look at alternative scenarios.

First one we would look at, besides the go-go slow-go income plan, is what happens if we take Social Security at a different time. So for this particular couple, we’ll see right here, taking Social Security at 63 is not the right decision if they want to retire now.

So we have a bunch of different ages here. So at retirement, taking Social Security 62 or 63 here. So this would be as soon as possible. This would be a partial year Social Security, since we’re at the end of 2021.

That’s why these numbers are reduced right here. But at retirement, looking at 63 Social Security benefit, John, at his full retirement age is assumed to be $3,000 a month or $36,000 per year. This is close to the maximum amount you can have from a Social Security standpoint currently at this time.

It’s actually a little bit higher. But to make things simple, I put $3,000 a month in. So at retirement, they take it at 63. Based on those parameters, everything we went through in the beginning to 60% probability of success.

But if they wait and take Social Security at their full retirement age, the probability of success jumps up to 85%. OK, so 85%. This is a very doable number at this point. I’m feeling pretty comfortable about you retiring.

We just need to monitor it. We need to track the progress over time. So when we meet with clients, typically at semiannual, if the numbers are a little bit lower or somewhere in this range, we might meet quarterly just to have conversations.

But truth of the matter is, the markets don’t change typically that much. Quarterly intervals in the plan doesn’t change that much. But we want to be comfortable, especially if we’re kind of borderline here. So, OK, we look we see Social Security does make sense here at full retirement age, gets us to a much higher probability.

But I want to go back to taking Social Security early. So, if we take Social Security early, can we retire? Yes, we can technically retire. But we have to realize that we’re going to be in a position to where we need to spend a little bit less than that.

$75,000 number. But let’s say we continue to spend that $75,000 number. No inclusive of health care costs. I want to look at this breaking down the Monte Carlo simulation into these various trials. So we have out of 1,000 various simulations.

This is number 10. This is number 250. Number five hundred, 750 and 990. OK. The five year interval of how much money is in the account. But it’s very, very, very important to understand time value of money. OK.

And this is what this column breaks down, these two here. So in the average scenario, in what’s different in these simulations is that we’re looking at variable stock returns or portfolio returns over time. One of the things you don’t ever really want to do is just say, OK, what happens if I make 7% per year forever

? That just doesn’t happen. You’re going to make 12%, 6% , -10%, +22%. That’s what this simulation is doing. So if we look at the returns, this is about a 50% excuse me, 60% allocation to stock portfolio.

What this simulation, this is the 500th simulation. This is looking at the returns in these various years. So first year we make 11%. Next year, we make 8%. A couple of negative years here, some positive years.

In this simulation, we have a -10% in a -14%, very detrimental to have to back to back negative years while we’re taking withdrawals from the portfolio. But this trial down here breaks it down into various different simulations, looking at five different simulations.

But here’s what matters. So if we just look at the fiftieth, OK, we still have four hundred thousand dollars in the future. And this is at the end of the plan. OK, so this is at life expectancy. So some of you may be thinking, you know what, I pay?

I if I can do this and still have $400,000 when I die, I’m good. But here’s the thing you have to realize in today’s dollars, as far as the amount of goods and services that you’ll be able to purchase that $400,000 because of inflation.

Inflation erodes our purchasing power over time. In today’s dollars, it’s only $193,000 again, 2.25% inflation rate. Now, this is overly simplified because you have some expenses that are going to inflate more than others, such as health care expenses, different video, different conversation, just overall concept here.

But here’s what I want to get into. So in the 500th simulation here, and this is pretty average returns if we look to see. So this is portfolio averages almost 6% a year. OK, 5.76%

Not bad for someone who’s a fairly conservative type investor and most of our clients are fairly conservative. At least they don’t typically want 100% of their money in the stock market, although some people do. And that’s and that’s fine as long as you can tolerate the ups and downs.

But here’s the point. Let’s say we’re over here in 2044 . OK, so this is twenty two, twenty three, twenty three years down the road. $700,000. But that’s in future dollars. OK, in today’s dollars, it’s probably somewhere around five hundred grand.

But what happens if one spouse now has a nursing home stay? Nursing home costs right now we have clients spending $20,000 a month and you can easily get to 20 grand a month at $20 an hour for in home health aide.

Long-Term Care costs are astounding how much they are. So what I want to point out here is Medicare will cover about the first 100 days of a nursing home stay. But if you have home health care, if you want to move into an assisted living type place, if you need to go to a long term care facility

because you broke a hip or a knee, many of you have parents and you’ve went through this situation, or maybe you’re fearful that you have a parent that maybe has or does not have the money and they possibly could be about to go into this situation.

Long term care costs are real and it’s something that we need to be aware of. My point overall here in today’s dollars, this is only going to be off the top of my head somewhere, probably around $500,000 of goods and services because of inflation.

Now, what happens if we need to spend $150,000 or $200,000 or $300,000 in the future? These are the contingencies that we have to be aware of, because, yes, even though this is saying we die with $400,000 in today’s dollars, it’s only $193,000.

But this can all be wiped out if we have a long term care or medical need or some other surprise expense. Now, if I just slide the slider up, going this way means that we haven’t quite had as high of returns as we were expecting.

Maybe we’re in an extended recession because of the debt, the deficit, higher tax environment, whatever it may be, wars, you name it. This is actually an interesting scenario right here. So in the beginning years, you see the green.

We’re having a lot of positive returns in retirement the portfolio is doing really well. These are the values. So $500,000, a $1,000,000. We’re feeling pretty good right here, retiring. But on the back end, we get hit hard with an extended period of negative returns and we see the depletion, the rapid depletion.

Now, you combine a medical expense in this scenario. Yeah, it’s you know, it’s going to deplete the nest egg much more rapidly. So I just want to look at one a little bit more normal here. OK, this is also a very interesting one.

So look here, it’s still it’s this is a worse simulation than the 500th, if you remember the 500th average, 5.76%. This one actually averages 7.65%, 5% a year. But look what happens in the second year of retirement.

We have a -27% loss that was preceded by just a -5% loss. So this is, we have videos out here. One of them is called “ Two portfolios average 7%, one runs out of money, one doesn’t.”

It focuses on the sequence of returns risk. One of the biggest factors to determining whether your money will last. This illustration very clearly shows this. So we see the portfolio immediately. Now we’ve dropped down from $900,000.

Second year of retirement. We’re at $592,000 because of that big loss combined with the retirement withdrawal. So that is substantial. Then we have some modest gains over the coming years. Not many bad losses ever, really. But we start to see it being depleted here.

So and even though it’s staying level here, if we look, this is still just $400k, $400k, 500k. This is 2039. So 18 years down the road, if we have a medical situation here, this is going to be depleted.

The surviving spouse is really going to be left with next to nothing, especially when you take into consider inflation and purchasing power in today’s dollars. OK. I didn’t mean to go that far down this rabbit hole, but these it’s it’s really good content here.

It’s very good for you to understand some of these aspects. OK, getting back on track. Social Security is what I was talking about for this particular couple. Taking Social Security at full retirement age increases the probability from 55 to 60 percent to 85 percent.

Now, if we look at this is the same simulation, but now we’re looking at the simulation based on taking Social Security at full retirement age as opposed to as soon as they retire. OK, starting out with the 500th simulation, we have some good years, couple down years.

But look what happens. Look how important for this particular couple deferring Social Security into a full retirement ages. Even in this scenario where we’re averaging about 5.5, 5.4, the balances stay fairly leveled throughout retirement.

Out here, we’re still at a million bucks. The only difference that I’ve done here is I’ve changed Social Security from taking it at retirement to taking it at full retirement age. If we look at the individual trials, look how big this is to the 99th percentile now.

Future dollars, six million. Now, this is the market averages 20% a year. It’s not going to happen. So but if we if we break it down to the the middle, 75% here, two million, one million, even three fifty, this starts to get scary for sure down here.

If we get underperformance in today’s dollars $978k for $498k. So this is a much more comfortable retirement scenario. It still needs to be monitored. We still need our accounts in how much we’re spending all of that and needs to be connected to a plan so we know where we are and we can make adjustments

as time goes on. But we see a very clear impact just to do one more simulation here like I did before. OK, even in this simulation, we still have we’re still better off. That’s the main point. Now, everyone, Social Security situation is a little bit different.

Both spouses may be working. You may put in place some type of Social Security strategy that I haven’t shown here, obviously. But it needs to be customized to your particular situation. And we haven’t even got into taxes yet, which I’m still going to do.

Big, big difference. Now we’re going to look at a different life expectancy, all the same parameters that we’ve already went through. But I get this comment a lot as well. “Troy, I’m not going to live to 95”. Well, maybe you don’t have the longevity.

Maybe you’re not in the best health and you still want to have this information. So again, please keep in mind everything I go through here, this is just to help to introduce you to all of the complexity and all the concepts and the decisions that need to go into a comprehensive retirement plan.

What we do when we go through this with clients and this is real retirement planning, looking at all these scenarios, having these discussions, and it’s not just once it gets set up, it’s ongoing. We need to be having this conversation, this analysis as as time progresses, because things change, not just your health, expected longevity, markets, the economy

, tax rates, everything, and being able to connect your money to your security. That’s how I in my opinion, you sleep better at night. So in this example, we’re going to look at what happens if the husband passes away at 80 and then the wife.

Live till 90. OK, so all of the same parameters, as I said, this first one is taking Social Security. As soon as they retire. OK, sixty two, sixty three. Much better. We come in at eighty four percent. So does this need to be monitored?

Absolutely. Because if we end up spending a little bit more. And one of the things that we do see often in retirement is that people do spend more in the first year or two than they were anticipating. So we’ll put plans together.

And this happens fairly frequently. And we do our first review. Typically, it’s six months down the road and they come in and they say, Troy, I’m spending more. We want this vacation. We did this, we did that. We gave some money to the grandkids and we spent $20,000 more $10,000 more than we were anticipating

. Not a big deal. That’s why having a plan is critical, because all we do is we adjust the numbers and your accounts are linked up to your plan. So as we’re sending you money from your investment account, when it decreases and then the account goes up or down or whatever that happens in the market, all of that

automatically flows through to your plan. And our clients have access to it either on their phone or on their computer. So they’re always connected. But we’re reviewing this and we’re tracking the progress. So if we spend too much and the markets don’t cooperate in the first couple of years of retirement, this number could still go down.

Not a big deal. We just need to be aware of it. OK. If it goes down and stays down, we probably need to make some adjustments. OK, so taking Social Security as soon as they retire 84, looking at Social Security, because for this particular planning case, Social Security is one of the most critical elements.

Again, this assumes about a 60% stock portfolio, 40% bond, which, again, bonds aren’t typically the best investment right now simply because of the low rates. There are some better alternatives to incorporate into a mix, whether it’s 60/40, 60/20/20.

In real life, we’d have a more in-depth conversation about the tools we’re using here. But this is, again, just to start communicating some of the concepts that you need to be aware of in retirement. OK. 66 they take Social Security of 66, probability of success jumps to 96%.

So now if I’m sitting down with you or if one of our advisors are sitting down with you, you know, we’re saying John and Jane, you guys are 96%. Let’s increase that stress, test this income spending level.

Let’s get it up to maybe $90,000 a year for the first 10 years or $90,000 for the first 7. And then let’s plan on tapering it back down to an inflation adjusted $75,000 where we’re looking at now.

And if this are still coming in, it at 88, 90, 92. That’s good. We’re in a good place here. Let’s just monitor it and track the progress and we can make adjustments as time goes on. Also, keep in mind, we haven’t even really done or we haven’t at all.

This software is not the best for tax planning. We do a lot of tax planning by hand looking at your income sources and running Excel calculations. But also we have three different softwares that we use for tax planning.

So these numbers most likely well, I know because I’ve already done it can be improved from a tax planning as well, which again, thats Step Three of our Oak Harvest Retirement Process process. OK, so much better taking Social Security, full retirement age.

I’m still comfortable if they take it here at 62 or 63. 83, 86. Just we need to, you know, pay a little bit more attention. Now we’re going to look at the tax analysis of the very first scenario we looked at.

And then I’m going to switch the ages to what we just saw. So, both spouses, good health, working out, eating healthy. 95 life expectancies, the first one we’re going to look at. At this spending level and $700,000 in retirement account.

We do not need to be, usually, we do not need to be overly aggressive with the Roth conversions as we see here. We have doing Roth conversions. This is going up to the 12% bracket for this particular couple.

Now, under current tax law, and we do have an impending tax change, but under current tax law, you’re going to have over a hundred thousand dollars of income and still be, if this 12 % tax bracket range, your effective tax is actually less than 10% of that income level.

So, doing conversions up to the 12% bracket versus doing no conversions estimated ending value, $775,000 versus $416,000. Total taxes paid in retirement. $143,000 versus $443,000.

So with $300,000 in potential tax savings of doing conversions first not doing conversions for this particular couple. Now this Social Security strategy, they’re identical here. It’s taking Social Security when they retire at 60. Again, they’re 62 now.

They’re going to retire in the beginning of 2022 in this hypothetical example, and they’ll be 63 in that next year. These numbers will look better if we take Social Security at different times, just like the last case.

It looked better if we took Social Security a little bit later. OK, we’re going to look at what does converting up to the 12% tax bracket and actually look at what are these conversions? So you see in the first year, we have a $56,000 conversion.

22, 23, fairly big 106,101. And then they dropped down 24 and 25. So a couple of things to note. First, the first year, this is a more realistic projection, because in the real world, if they’re working this year and they’re going to retire next year, where they’re going to have a

salary this year, this couple. So we have that salary of $50,000. That’s why the conversion for 2021 is reduced, because we’re targeting that 12% bracket, which also, by the way, we’ve looked at over a hundred different.

The computer has a hundred different possible Roth conversion alternatives and has ranked them this 12% bracket for this family is the #1 ranked strategy. Something else to keep in mind here, we’re extrapolating out many, many years.

We’re modeling, we’re forecasting, we isolate all variables. But the top ten strategies or so are pretty closely aligned. So we just because we start down one path this year doesn’t mean next year and the subsequent years we’re going to be doing the same conversion strategy and the taxes are about to change.

So all of this is why we work with someone who understands these retirement complexities and they can connect your accounts to your security and your money. But two conversions of 100 here, a couple of smaller ones.

24 and 25 over, Let me show you what these taxes look like in this particular scenario. OK, so this is kind of a breakdown of the tax schedule, so we have adjusted gross income, so we’re targeting this 12% tax bracket here.

Twenty one, twenty two, twenty three, twenty four, twenty five, twenty six. It goes out if I hit that next button. Taxable income, taxable Social Security, total taxes. Here we go. Twelve thousand two hundred and fifty two. $11,683. So in this example we’re showing you can convert this, 2022, I believe was $106,000. Convert that and move it from the IRA to the tax free Roth. It’s tax free forever.

You do not have to worry about the government changing the rules, coming back and saying, no, you have to pay tax on that twice. Let $11,600 was the total taxes that you can pay to do that conversion under current tax law.

Now, we’re going to go through we’re actually going to be doing a live stream. If you subscribe to the channel, if you haven’t subscribed yet, we’re going to be doing a live stream as soon as the new tax legislation comes out.

We’re already starting to go through the proposals once the Republicans, Democrats are on the same page. We’re going to sift through it, connect you to what’s going on and how it impacts your retirement. So if you haven’t subscribed to the channel yet, now’s a good time to do that.

And you can attend that live stream that we’re going to do here on YouTube. I want to talk a little bit about the withdrawal plan. So we know now conversions make sense for this couple estimated three hundred thousand dollars in savings, higher ending values again projected, but apples to apples comparison with all the variables.

The question now becomes, if you remember the very beginning of the video, I said we’re going to talk about withdrawal order and also Roth conversions. How much are we taking from the non IRA? When how much are we taking from the IRA?

How much are we converting to the Roth? And then how much and when are we taking out of the Roth? Well, this is one of the tools that we’ll use with you to help identify that in this hypothetical example, taxable.

This is your non-qualified tax deferred. And Roth, if you had an HSA, we’d have it over here. So for the first three years, we’re paying some taxes on the retirement account, but we’re also maxing out our tax bracket with the Roth conversion.

So once we retire, we still have to live. We’re still going to need to pull money out. So in this example, we’re maxing out that 12% bracket with IRA to Roth conversions living off the non-qualified. If you remember, there was $200,000 in this example.

If you’re preparing for retirement, if you’re in that pre-retirement stage, try to please build up your non-qualified bucket as much as possible. Don’t just stuff it all into that 401k. Get your match. Definitely, absolutely, get your match. But be aware.

Think ahead. This is what most people haven’t told you. Think ahead when I start taking money out of those accounts. Think of your buckets as their tax characteristic as well. This is going to help you have a more secure retirement, especially if you believe taxes are going to be a lot higher in the future.

So this is what it looks like. We’re doing conversions, OK? We’re not liquidating this entire account. This is very important. I’m going to show you why in a minute. When I say liquidating this entire account, I mean, we don’t have to convert the entire account to Roth.

A lot of people think again that, hey, I have to convert this whole thing. No, you don’t. You don’t. Many of you do not, because for many reasons I don’t have time in this video to go down that rabbit hole.

But there are many reasons why you don’t have to convert your entire IRA. We just need to have tax diversification. OK, so now here in 2029, we’re starting to take $15,000 from the IRA. $16,000 from the Roth.

And we’ve taken Social Security. So that is filling in the income gap. If I come over here. So the taxes this is going to be cool. I’ve went out from 2031 to 2036. This is why I converted to the 12% bracket for this hypothetical family.

Makes the most sense, because we don’t have to get it all out of the IRA into the Roth, because, look, here’s our total taxes in the future.$91, $101, $312. $500, $700.

Big deal. It even starts sooner than that. If I go back now 2026 through 2031, here’s your total taxes basically in the zero percent tax bracket. Well, you are in the zero percent tax bracket and current law because well, almost these are the total taxes paid.

But darn close. OK, so that’s why when we’re planning for retirement income, this is why Retirement Process is so important. It’s not just about the investments. This is why you pay someone a fee to help you through this, because you need to have a plan to coordinate all of these different moving pieces, but then analyze them on

an ongoing basis and stay connected so you feel secure so you sleep better at night. OK, one last thing I want to show you. I said I want to come back to this. First thing is this is your required minimum distributions.

The blue line is doing the conversions. The green line is doing no conversion. So just a quick comparison here. It’s seventy two. You are forced to start distributing from your retirement accounts. They’re called Ramdas or require minimum distributions.

The green line. OK, they get up out here. 76, 73, 71, 68. So be aware of that. Total taxes comparing doing nothing versus going up to the 12% bracket. We’re going to pay some taxes[a].

If we’re doing conversions, we’re going to pay some taxes. This is not a big deal. We could pay less taxes, OK, over the first several years of retirement, at least through right here. But then once we kind of get to this point 2029 at 70 years old.

This is the total. Don’t worry about these columns. Different conversation. Different day. But look, we do the comparison. We’re going through retirement. This is very, very manageable. I don’t care if you’re in the situation if the government raises taxes, it doesn’t affect us.

It doesn’t impact us. We’ve prepared, we’ve planned over here. Still, I mean, this isn’t horrible if we don’t do the conversions. This is manageable. This is much better, in my opinion. But one thing, this is where a lot of people also fail to get the Roth conversion discussion.

Right. I’ve done something to the television screen here, but this is showing us the composition of accounts. When you’re having the Roth discussion, you’re doing planning. And we’re sitting down and we’re having these conversations. I’m talking to you and our advisors are talking to you about what do you want your money to do when you’re gone?

Who to whom do you want to bequeath the money to? If it’s important to you that the kids or grandkids receive your money, would you rather pass on mone that’s all subject to income tax. So $700k+ here that once they take it out and they do have to take it out within 10 years

. And keep in mind, when they take it out, that will go on top of their existing income, possibly bumping them into a much higher bracket. Realistically, here, you’re probably passed around 400-500 grand instead of the whole 700.

Or would you rather pass on, You know, all this money tax free. So this is over 600 tax free. This is over 328. Subject to income tax. If we were going to do estate planning, we’re we’re looking at charitable gifting, we’re gifting the IRA assets, giving the children and grandchildren the Roth IRA

money. So when we’re doing conversions, we’re having those discussions looking into the future. And what’s important to you? What’s your vision? What do you want to happen with your money? This plays into the decision of whether we do conversions or not.

If you don’t care, we forget about this. We skip this. All right. Now we’re going to look at the tax impact with the two different life expectancies, the husband living until 80 and the wife living until 90. So a couple of interesting things here.

So first, this is the same Roth 12 conversion strategy going to compare to doing nothing. OK, so ending value for 45 versus 151. This is going to be very interesting once we kind of dig into this total taxes, 130 versus 451.

So not a ton of difference here on the total taxes paid compared to the longer life expectancy simply because we’re not living as long. But here’s also something that’s interesting. In the other scenario, living to 95, the ending value was about $750,000, 740 something, I believe in that range.

The reason why it’s much lower here is a couple of reasons. With the husband dying early, OK,, one Social Security check goes away. The wife is left with the bigger one, but that’s five. That’s so that’s a significant amount of income not coming in.

In this particular scenario, that would have primarily been going into savings and earning interest and growing. But also, there’s five less years for the assets to grow. So dying sooner, they actually have less money than if they had lived to ninety five.

Taxes are fairly similar if we do the Roth conversion. But if we don’t do the Roth conversion. The only reason taxes are 451, they would be a lot higher if the husband died sooner and the wife lived to ninety five, but because she’s dying in 90, in this example, their taxes are relatively

the same. If memory serves based on the previous example that we looked at. But you’re going to be I did another video on this similar concept. One of the most punitive aspects of the tax code is when a retired couple, when one spouse predeceases the other, you go from the married filing jointly tax brackets to the single

tax brackets. So oftentimes because of required minimum distributions, maybe pension income, rental income, whatever it may be, the income doesn’t really change that much. Oftentimes, only the smallest Social Security check is lost. But you have the same so you have the same level of income.

Similarly, at least even though maybe you aren’t spending it because you’re supporting one spouse. But you go from the married brackets to the single brackets. This is a tremendous oversight. I don’t know if it’s an oversight. It could be intentional.

I don’t know. And I don’t mean that in a mean way. I just someone obviously has looked at this and said, no, we’re going to keep it the same. You’re single, you stay in the single bracket. OK, this is what I want to show you.

. OK, so here is the scenario, so still in the Roth conversion, still similar, both spouses are alive. No change here from the last scenario, but we get out here. The husband dies at age 80 in the non Roth conversion scenario,

The taxes jump, if you can see this here from $9,800 the previous year. Of course, compared to $1,500 if you’ve done the Roth conversions to $25,000 a year going from the married to the single brackets.

OK, that is a significant increase in taxes from being married, filing jointly to single. So be aware of that. One of the reasons I talked earlier about one of the reasons we look at Roth conversions is the composition of our assets.

If to whom we pass them on to is important to us, we’d rather pass tax free money to our children. Another reason it’s more abstract that we need to be considering when doing Roth conversions, is “is one spouse less healthy than the other spouse, or does one spouse have a shorter life expectancy than the other spouse or spouse

?” If so, keep in mind, you’re going to go from those married filing jointly to single brackets. And depending on your particular situation, it can be a pretty big jump in taxes. Keep in mind, again, if taxes go up in the future, which I’m in the boat, that they will simply because we’re on an unsustainable path when it

comes to the country. All of the disparity between these two sides, it will be much greater. So another reason to consider Roth conversions. OK, I said I was going to go through the same analysis with the other Social Security strategy.

Truth of the matter is, I’ve went into great detail on this video, and I have an existing client. We’re actually waiting in the lobby. We’re actually going to go through this everything that we’ve went through today. Hypothetically, for you guys, we’re about to go through with them.

So I hate to be late and I also hate to cut you guys off and not finish that other Social Security strategy. But I’ve covered a ton. I think you guys get the point today, and I really appreciate your time.

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