Me thinking out loud about my financial situation.

Phase 457 from Dec 2019 to Feb 2028 (age 62)

Live off 457 withdrawals until reaching early SS retirement age.  This is the tightest phase and there is very little disposable income.  Tighten the belt.

Monthly budget: $500/mo.

Phase early SS from  Feb 2028 to Feb 2031 (age 65)

Collect early Social Security when I turn 62.  

Income in today’s dollars, per the SS website:  $1307/mo.  This is a little over 2.5x my current living expenses.  I will get to have a few craft beers on the local economy.

possibility: state retirement from Feb 2031 to Feb 2036 (age 70)

This one is iffy. It requires:

  1.  I make it to 62 without having to withdraw the pension kitty, which is possible ‘though not probable.
  2. the Texas state retirement program (ERS) still exists

Take state retirement, $1,171.85/mo, over 2.25x my current living expenses.

This source of income brings with it the possibility of suspending SS to get delayed retirement credits, ~8%/year up to the full value. The breakeven point is around 83 years of age; if I make it that far I would be slightly better off stopping those early SS payments from age 65 to 70. With this option the combined amount after my 70th BD it would be $3,001.65/mo.

If I don’t suspend SS from 65-70 the early SS + state retirement would be $2,478.85/mo.  I’m inclined to go this route regardless of the breakeven calculations.   Either value should be sufficient.

If I have to use the pension funds then it’s just early SS from 62 on out.

tax issues

In my present $500/mo austerity mode I owe no income taxes because I am under the standard deduction amount (~$12k).

It gets a bit weirder with SS.  From 62-65 I will likely pay no taxes, as SS would be my sole source of income and would be under the $25k IRS base amount.

Adding in the state retirement pension requires some math. My understanding is SS is taxed if (SS/2) + other income breaks the $25k base amount barrier.  That figure for me with early SS would be $21,904.20, so SS itself would not be taxed. [Stopping SS from 65-70 then getting the larger amount at 70 would put my base amount at $24,142, just under the $25k limit again.] Non-SS income would be taxed as usual.

I would have $14,062.20 in pension income and would pay income tax on some of that.  Probably on the $2k that exceeds the $12k personal exemption. At 2020 rates, federal income tax rates for that bracket would be 12% of  $2,062.20, or $247.46. I haven’t read much about that and lots could change by then.

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