Some people claim early because they are afraid benefits will be chopped. What are the chances of this?
Play the odds (Photo illustration by Kevin Dietsch)
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“I’m 66. Married, filing jointly. I have high IRA balances. Also, no debt, our mortgage is paid, and we are both healthy and locally active with a low cost of living. I’m thinking about postponing Social Security until I turn 70.
“This will allow me to maximize Roth conversions with minimum taxes given my federal taxes, now barely into the 22% bracket. Once RMDs begin the marginal rate will hover above and below 24% (assuming 2021 tax brackets and current IRA balances).
“But, do I trust the government at this time? I can easily imagine ‘equity’ arguments, on top of insolvency realities, directly or indirectly reducing my full Social Security benefit by 50% rather than increasing it by 30% in three-plus years.”
Brian, California
My answer:
You’ve got three balls in the air:
—Social Security, which is shaky.
—Your taxes, which are going up.
—Roth conversions, which make sense, up to a point.
I’ll tackle these in order.
Social Security? It’s already insolvent. Its liability for accrued benefits is in the trillions, and its assets are currently $0, if you don’t count some phony IOUs in which the government is both the creditor and the debtor.
As for the P&L: Taxes being collected now aren’t enough to cover benefits being paid now. If you recollect that in…