I’m 62 and have enough money to live on for about another year before I have to start taking money from my 401K or taking Social Security. Except during the Recession, my 401K has had a fantastic yield, and is growing now, as the Market is up. I don’t know if it would be better to let the 401K continue to grow and go for receiving Social Security earlier, or syphon a few thousand ($8,000-12,000) from my 401K each year and hold off on getting Social Security until I’m 66-70. I’m also wondering which choice would have the least impact income tax-wise. (My taxable income right now is so low that I don’t owe any federal or state tax. I’m getting spoiled. I’ve been spending down my savings.)
Terry Says: You need a serious analysis of your financial situation. And without even doing the specific numbers I am going to bet on two things: First, you quit working too soon — and unless you have an illness that will dramatically shorten your expected life span, you need to continue to work (even part time) for the next 6-8 years! Second, you should likely wait to take Social Security until at least full retirement age, because you lose about 8 percent a year (and future cost of living increases on the higher base) if you take SS early.
BUT, instead of taking my guesses, you need to do the planning work. The best place to go for that is T. Rowe Price (800-638-5660) and ask for their Retirement Income Counseling service. You’ll work with a certified Financial Planner who can give you the big picture and the specifics based on the amount and investments in your 40l(k) and your cost of living — including medical expenses, Medicare at 65, and supplement plus prescription drug plan costs. All that will add up which is why you should continue to work and set aside some more money after taxes if you possibly can. Please let me know what they say after you finish your retirement income consultation!