Social Security benefit may be subject to 1 of 3 potential tax treatments depending on your income at the time you collect:

It won’t be subject to federal income tax.
Up to 50% of it will be subject to federal income tax.
Up to 85% of it will be subject to federal income tax.
Let’s say you retire at age 62 and cover your living expenses by taking withdrawals from a tax-deferred retirement account—a traditional IRA. The amount you withdraw from your traditional IRA will lower your account balance. This may reduce your future required minimum distributions (RMDs), which are calculated by dividing your retirement account balance (as of December 31 of the previous year) by the IRS’s life expectancy factor.

Since your RMD is considered ordinary income, smaller distributions can help you control your income when you begin collecting Social Security at age 70.

if you defer your benefit until you’re age 70 and live until age 90, you’ll collect $652,560 in Social Security over the course of your lifetime. If you don’t defer your benefit and begin collecting at your full retirement age (66), you’ll collect almost $80,000 less over the course of your lifetime.

Lifetime benefit based on age you collect

Note: Example excludes inflation.

The choice is yours

A timeless debate perseveres because it’s a fair fight—both sides of the argument hold water. Folding your pizza makes it easier to eat; not folding it makes it last longer. Cats are independent; dogs are loyal. No matter what you call it, a sandwich is delicious—so just enjoy it. Taking Social Security at full retirement age means you may be able to preserve other financial resources; deferring until age 70 means you’ll get more money when you do collect.

Several personal factors will likely influence when you decide to collect Social Security. At the risk of sounding morbid, you won’t know whether you’ve truly made the “right” decision until it’s too late. So the best advice I have to offer is to choose your Social Security start date based on the facts you know right now. If you get a good night’s sleep after you’ve made your decision, you’re on the right track.

*Source: longevityillustrator.org, supported by the Society of Actuaries.
— Read on vanguardblog.com/2018/05/30/the-social-security-timing-debate/

Americans’ optimism about their personal finances has climbed to levels not seen in more than 16 years, with 69% now saying they expect to be financially better off “at this time next year.”

The 69% saying they expect to be better off is only two percentage points below the all-time high of 71%, recorded in March 1998 at a time when the nation’s economic boom was producing strong economic growth combined with the lowest inflation and unemployment rates in decades.
— Read on news.gallup.com/poll/246602/americans-confidence-finances-keeps-growing.aspx

Retirement spending: 3 strategies

This challenging topic regarding spending rules to help retirees who want to generate a paycheck from their portfolios. Two of the most popular are the “dollar plus inflation” and the “percentage of portfolio” rules. One alternate solution: is the “dynamic spending” strategy.

The dollar plus inflation strategy is just what it sounds like. Upon retirement, you select the initial dollar amount you’d like to spend each year and increase that amount annually by inflation. The well-known “4% rule” follows this approach (Bengen 1994[1]). While this strategy allows for rather stable real spending from year to year, it also requires a trade-off: a higher risk of premature portfolio depletion. The chink in the armor for this strategy is that it’s indifferent to the returns of the portfolio, which can be problematic in both bear and bull markets. The result is you could potentially run out of money (or at least have to substantially reduce your spending since you’re not likely to continue spending down to your last $1) in the event portfolio returns are negative, or you could potentially live well below your means and not enjoy retirement to its fullest if portfolio returns are much better than expected.

The percentage of portfolio strategy, on the other hand, may be too sensitive to returns, creating significant income volatility based on market movements. With this strategy, the annual spending amount is a consistent percentage of the portfolio’s value. This approach ensures that the portfolio won’t be depleted, but as the portfolio’s value rises and falls, the income amount will rise and fall as well—sometimes dramatically. Yes, it’s this last part—income falling in response to negative returns—that people often struggle with.

The dynamic spending strategy is a more flexible approach that moderates the other two strategies’ weaknesses, as summarized in Figure 1.

With dynamic spending, you would calculate each year’s spending in three steps:
Use the percentage of portfolio approach (e.g., 5%) to calculate a spending level based on the portfolio’s value at the prior year-end.
Determine a range of acceptable spending levels based on the prior year’s actual portfolio value. To find the range, increase the prior year’s spending by 5% (the ceiling) and reduce it by –2.5% (the floor).[1]
Finally, compare the results. If this year’s spending amount based on the percentage of portfolio:
Exceeds the ceiling amount, spend the ceiling.
Is less than the floor amount, spend the floor.
As you can see, the dynamic spending strategy is a bit more involved and may require a little more discipline and oversight to follow compared with the other two strategies. Given that, this is certainly one area where working with a financial advisor can make a lot of sense and may even pay for itself.
— Read on vanguardblog.com/2019/08/08/sustaining-retirement-income-in-a-lower-return-world/