How would being pushed into a higher marginal tax bracket lower your net income? It would simply make those new dollars in the next bracket worth marginally less. For example, for a single filer, each additional dollar earned over $36,250, would provide a $0.03 smaller net income increase than the 36,250th dollar did, but it would still be an increase.
And can’t remove money from 401ks/IRAs and the like until 59 1/2 without penalty.
That said, there is a whole early retirement movement out there that is easily searchable on the internet. You can, of course, retire anytime you feel you have adequate wealth (or some other means like a willing spouse) to support you.
The 55 vs. 60 statement is a different pension plan, separate from Social Security. It also comes into play…is it worth it to me to retire at 55 from this particular job for the lower amount, or wait until 60 for the more than double amount?
I still totally understand YMMV, so your opinions are all helpful.
… where I worked for around 35 years for two employers who both gave excellent pensions. They were ‘final salary’ schemes, which I believe are being rapidly phased out as ‘too generous’.
Anyway aged 55, I had paid of my mortgage and had savings, so decided to take my pensions early.
As you’d expect, there was a corresponding % drop in benefits, but I did start getting payments earlier.
(There is also a UK State Pension, but that arrives when I’m 66.)
So far all is fine 
, but undoubtedly my circumstances differ from yours…
You could probably work out an equation…
How much money do you need to live comfortably - some people need a LOT more than others.
How much income will you have in retirement under each of these scenarios (and don’t discount the idea of a part time job).
How much do you hate/love your job - Warren Buffet has plenty of money, but will retire when they sink him in the ground.
What can you do for benefits until you qualify for Medicare (assuming you are in the U.S.)?
Someone who hates their job, needs very little to live on, gets retirement benefits from their pension, and their pension + early social security will cover all their needs should quit as soon as they can.
Someone who loves working, has high expenses, would need to pay medical out of pocket, and won’t see a dime other than their social security check will be handing out samples at Costco in their 80s - both because they need to financially and because retiring will suck.
Okay that makes more sense. I am retiring this year at age 55. I won’t collect SS until 62 or 66 (will make the call when I get nearer that age). Just your OP threw me off as you said 55 which confused me! My wife will retire this year at age 55 and we opted to go that route rather than wait until 60, even though waiting is a significant increase in her pension.
As to your question. For me, I would retire earlier than later. I really enjoy what I do for a living but I enjoy my free time even more. What determined it for me was my wife can retire at 55 with a pension, so that coupled with our investments and living below our means gets me out earlier than later. I have crunched the numbers and know I have an out if need be, but I not too concerned about it. I can also pull in income if I need to by doing the occasional architectural project.
yep-part of that group. I know of a couple other members here who post on the early retirement board I also am at. Early retirement isn’t just about the money you have saved, what you spend is probably more important.
One thing my financial planners have been stressing since we started working on my wife’s retirement several years ago is that it isn’t so much how you save money at this point, it’s how you **spend **money.
What they meant is that the time is past go heavy into high-return but risky investments. When you’re in your late 50’s or early 60’s, you savings portfolio should be safe but low-return choices.
The factors that really come into play are your relative health; how much mortgage, credit cards, kids’ school loans, etc. that you’re still paying off; what you predict your life expectancy to be; and whether you want to retire quietly and leave something for your kids and favorite charities, or whether you want to treat yourself to everything you missed while you were young.
I do not know the details, but for personal income above 25k or joint income above 32k the government starts to tax your SS income. The tax rate will likely only be 15-25%, but if you are collecting a higher amount of SS at 70 which is taxed at 25% vs a smaller amount at 62 which falls under the 25k threshold then you have to factor that in to when the break even point occurs between retiring at 62 vs 70. If the purpose is to determine at what age you come out ahead for taking smaller SS payments at 62 vs larger SS payments at 70 factors like ‘what ROI can I get on the SS payments at 62’ or ‘will waiting until 70 put me into a higher tax bracket’ should be considered in how they affect the break even point. I’m obviously not an accountant.
Not what they meant, but if you start pushing your spending into a retirement mode while still working, that gives you a lot more to save. And more to spend when you have the time to.
If you’ve saved enough to be able to pay minimum deposit amounts, there are some relatively stable but higher yielding investments out there. They are not going up 20-% a year, but they pay a lot more than bonds do. We’re moving in that direction.
They still haven’t invented medical procedures to allow that. 
I want to repeat what sinjin said. One of the many reason that on-line retirement savings calculators are bogus is that they seem to assume constant spending with age, which isn’t going to happen. My father-in-law, who is 98 and still trading stocks and making money at it, spends almost nothing because going anywhere is such a bother. At a certain age hookers and blow just lose their appeal.
We are talking about multi-year scenarios. If you can keep all your income just under the bracket limit for all years, that’s better net than if some years you are over the bracket line and some years well under.
Many people (e.g., yours truly) have the option of deciding when to move things from tax-deferred to taxable, in effect “earning income” as far as the IRS is concerned. Technically, the income is (mostly) already earned, but as far as taxes are concerned it isn’t. So the terminology can sometimes get muddled.
The bracket thing is really important concerning taxes on SS. The marginal rate can be over 46% (!) in certain scenarios, so adjusting what year you report income over the years is something worth paying attention to.
That is an interesting link, but I don’t understand how the tax rate drops from 46% to 25%.
Are you referring how the marginal tax rate jumps from 25% to 46% in certain cases?
If so: note this line in the link:
“For every dollar over $24,000, an additional 85 cents becomes taxable, up to a total other income of $38,706, which makes the maximum $17,000 taxable.”
So you are getting SS and some other income, in a certain range, for every extra dollar you earn you have to pay regular taxes on that dollar (25 cents) but 85 more cents of SS income is now taxable (at 25%) and you also have to pay taxes on the 85 cents. 25+85*.25 is 46.25.
So it can really pay to adjust what investments you move from tax-deferred to taxable or cash in for a given year. But the formula for calculating tax on SS is not easily reversed for planning purposes (as well as being rapacious).