The Retirement and IRA Show Social Security, IRA Basis, and Roth 5-Year Rule: Q&A #2521
May 24, 2025
Listeners dive into crucial topics like the optimal timing for Social Security benefits and the implications of large pre-tax contributions on earnings tests. The discussion also clarifies how to isolate IRA basis during conversions and the complexities of the Roth 5-Year Rule. Personal anecdotes about a classic TV show add a nostalgic touch, while trivia games bring light-hearted fun to serious retirement strategies. Expert advice shines through, making complex financial topics more approachable and engaging.
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Optimal Retroactive Social Security Filing
- File for Social Security retroactively in December, not January, to avoid losing one month of benefits.
- December payments are issued in January, so income is reported in the following tax year, aiding tax planning.
Earnings Test and Pre-Tax Contributions
- Earnings test is based on gross income, so pre-tax contributions to 403(b) and 457(b) do not reduce earnings for Social Security purposes.
- State government employees not contributing to Social Security system have no special earnings test exceptions.
Separating IRA Basis from Gains
- To avoid taxes on IRA gains during Roth conversion, transfer pre-tax IRA assets to a 401k if the plan allows.
- Do not move money back to IRA in the same tax year after conversion to maintain tax advantages.