How a Single Women Can Retire Before Social Security Starts

Hey everyone! Today we're looking at a case study of a woman named Mary, who wants to retire before her Social Security kicks in. We'll explore her situation, the risks she faces, and potential solutions.

Mary's Situation

• Age: 59

• Accounts: $1.2 million in a brokerage account, $1 million in a Traditional IRA

• RMD (Required Minimum Distribution) Age: 75

• Debt: None (mortgage just paid off)

• Social Security: $3,000/month at her Full Retirement Age (FRA) of 67

• Employment: Full-time, planning to retire at 60

• Desired Expenses: $7,500/month

Note: RMD and FRA ages depend on birth year; yours may differ.

Risks and Problems

Mary faces two main Social Security risks:

1. Claiming Too Early – She could lock in a smaller lifetime benefit if she claims before her FRA.

   • Earliest she can claim: 62

   • Reduced benefit: $2,100/month (vs. $3,000 at FRA)

   • Lifetime benefit (assuming age 92): $756,000

2. Claiming Too Late – If she waits until 70 and passes away at 72, she only receives benefits for two years.

   
   

Problem: Once retired, Mary needs income to cover expenses. Without wages, Social Security, or other income, she must pull from her savings.

Two Retirement Plans

Plan A: Retire at 60, Claim Social Security at 62

• Locks in a lower lifetime benefit

• Smaller income gap: 2 years until Social Security begins

• Immediate income benefit: less strain in early retirement

• Reduced benefit is permanent

Numbers:

• Age 62 benefit: $2,100/month

• Lifetime benefit: $756,000

• Portfolio withdrawals: $46,000–$102,000 in early years

Plan B: Retire at 60, Claim Social Security at 70

• Locks in a higher lifetime benefit

• Larger income gap: 10 years until Social Security begins

• More income later in retirement

• Requires careful planning for withdrawals from savings

Numbers:

• Age 70 benefit: $3,720/month

• Lifetime benefit: $980,000

• Portfolio withdrawals: $71,000 at age 72 vs. $96,000 in Plan A

Income Visualization

• Plan A: Early Social Security reduces portfolio strain early, but smaller benefits later

• Plan B: Delayed Social Security increases benefits later, but requires larger early withdrawals

Spending flexibility: Mary can spend up to $8,100/month and still manage her accounts.

Roth Conversion Opportunities

• What is a Roth Conversion? Moving money from a Traditional IRA to a Roth IRA, paying taxes now to avoid taxes later

• Benefit: Can reduce long-term taxes and increase net legacy

• Example:

  • Plan B with Roth conversions: Saves ~$160,000 in taxes, net legacy increases ~$152,000

  • Plan A: Saves ~$36,000 in taxes

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Note: Roth conversions depend on life expectancy, charitable goals, and personal comfort with taxes.

Key Takeaways

1. Social Security timing depends on lifestyle, assets, and goals

2. Single women have simpler variables – no spousal or survivor benefits to consider

3. Plan early to maintain flexibility and confidence

4. Roth conversions may enhance tax efficiency and net legacy, if appropriate

   
   

Bottom line:

• If you want income earlier, Plan A may suit you

• If you want larger long-term benefits and can handle early withdrawals, Plan B may be better

• Always align decisions with your comfort, goals, and financial situation