Ask Larry

Should I Change My Plans If I Will Be Withdrawing Funds From An IRA?

I have been collecting my own SS benefits since May, 2017. In August my husband died. He had not started collecting his benefits when he died. Following your excellent "Maximize my Social Security" guidelines, I intended to claim my Survivor's benefit only when I turn 66 in November, 2018, when I will earn about $150 more a month than I would if I collected now.
Because I am keeping the house, I now have to pay the household bills, in addition to my own. I inherited his 403B, which I have rolled over into an annuity (which I can't touch for 6 years) and into a liquid IRA. I figure I will need to withdraw about $720 a month from the IRA in order to pay the house bills, until I turn 66 and can reconfigure my income and expenses. In the coming year I will have to fill his estate account with about $21,000, and possibly pay one of his sons about $20,000. All this money will have to come out of the IRA, which my broker tells me is liquid and very flexible to work with.
My current SS benefits amount to $1,034 monthly with Medicare Part B taken out automatically in November, 2017 (before the Medicare deduction they have been $1168 monthly or $14,016 a year). Because I will need to withdraw so much money from my IRA to pay expenses, this will make me subject to the Earnings Test, putting me well over the annual exempt amount, which I will NOT get back at FRA, (according to your book) when I start collecting Survivors' benefits.
Should I re-pay SS what I've earned to date, and just pull all of my expenses from the IRA until I turn 66 in one year? Or perhaps, since I now have FAIRLY comfortable investments to fall back on, I should just take survivors' benefits now, though it breaks my heart to do so.
Can you give me any direction?
Thank you so much for this and for all you do to help us poor aging Americans.
Pam

Hi Pam,

I'm sorry for your loss.

The good news is that IRA withdrawals don't count as earnings for purposes of Social Security's earnings test regardless of how much you withdraw. So, unless you have other earnings it doesn't sound like that will be an issue for you.

Therefore, assuming that your own benefit rate if you waited until age 70 to file wouldn't be higher than your maximum potential widow's benefit rate, you are likely best off following your original plan (i.e. continue drawing your own reduced retirement benefits until your full retirement age and then file for unreduced widow's benefits). However, if your own retirement benefit rate would be higher at age 70 than your unreduced widow's rate, then you might want to consider withdrawing the application you filed on your own account and file for reduced widow's benefits instead.

Our maximization software should be able to help you determine your best course of action.

Best, Jerry

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Posted: 
Oct 8 2017 - 7:34pm
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