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 trickiest phase and there is very little disposable income.  Tighten the belt.

Monthly budget: $500/mo. I will call this 1X.

Phase early SS from  Feb 2028 (age 62) to at least Feb 2031 (age 65)

Collect early Social Security when I turn 62. Not an option, I will need the income.  

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.

state retirement from Feb 2031 (age 65) to Feb 2036 (age 70)

At this point I can either

  1. take both early SS and the pension ($1307 + $1171.85, 5X)
  2. take both early SS and 50% pension ($1307 + $585.93, 3.79X)1
  3. or live off the pension ($1171.85, 2.3X) and suspend early SS in order to get the higher delayed SS rate.

The breakeven point for me would be 82.5 years of age; the SSN website life expectancy says I’ll make it to 82.9. My father recently passed at 83 so that tracks. I’m inclined to take both since either value would be sufficient. The total difference between the two total is <$2000 over 20+ years.

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 62-67 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 67-70 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.

If I take 50% pension then my income would be below the tax threshold.

timeline

  • 2025 (59.5yo) 401k no longer dinged for withdrawal; use at will. Spend down to asset limit if required (Roth IRA?)
  • 2026 (60yo) set up Escapees residiency, enroll SNAP
  • 2028 (62yo) early SS2
  • 2031 (65yo) state pension (2/28)
  • 2033 (67yo) SS full retirement age
  • 2036 (70yo) max SS age. Note: retirement capital will be zeroed by this time, but pension will continue to be paid.
  • 2039 (73yo) mandatory 401k distributions, if any remain
  • 2049 (83yo) dead

  1. in this approach my daughter would receive the rest of the pension. It’s not clear to me that that would necessarily be a good deal for her. Will discuss and ponder. ↩

  2. I was married for >10 years, and it is conceivable that my ex’s SS benefit will be ≥2x mine. So it would be smart to check. Claiming a spousal benefit does not affect their benefit in any way. ↩

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