A Smart Retirement Strategy Conversation

A long-time friend who recently retired at age sixty-five emailed me for my thoughts about a retirement strategy he was considering. He plans to live off the interest, dividends, and savings and postpone taking Social Security until age seventy. By doing so, his Social Security benefit will grow to the maximum (an additional 32% over his full retirement benefit amount). This is generally a good strategy for someone in good health with a lot of longevity in the family genes. An additional plus is that his younger wife is in excellent health with family longevity as well. So, if he predeceases her (statistically likely), she will take over his (maximum) benefit at this death. His bigger question was, “Since I’m now not working and I’m in a low-income tax bracket, should I go ahead and take distributions from my IRA? The longer he leaves the Money in his IRA, the longer it continues to grow tax-deferred.

My answer:

Great idea. Consider adding a powerful wrinkle in your plan. Roll the funds over into a Roth IRA. You’ll pay taxes (at the low rate), but you will continue to receive tax-deferred growth on the ROTH IRA funds and never have Required Minimum Distributions (age seventy-two for traditional IRAs). The taxes on the IRA distributions should be paid from personal savings, not from the distributions. The new Roth IRA will be the last bucket you ever touch for principal distributions and likely be inherited by your children, who will also take distributions tax-free. You will want to get as much over to the Roth from your traditional IRA each year as it makes sense tax-wise. Also, beware that increased income could affect your Medicare premiums. The new rule on inherited IRAs requires non-spouse beneficiaries (your children) take 100% of the Money out within ten years…when they will likely be in high tax brackets themselves.


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Smart Retirement Strategy

  • If possible, postpone taking SS until age 70
  • Take IRA distributions early if in a low tax bracket
  • If possible, convert IRA to Roth
  • Consult your tax/financial advisor



Stewart H. Welch, III, CFP, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including  J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaireand 100 Tips for Creating a Champagne Retirement on a Shoestring Budget.


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