Interesting proposal in this CNBC article. I think it might be beneficial if the Social Security Administration managed it itself in a “low-to-no-fee” manner. Bringing in Wall Street and the insurance industry to do it would just be another opportunity for scam and “skim”.
Waiting until age 70 currently allows you to “buy” an inflation-adjusted life annuity for about half what an insurance company would charge for the same increase in monthly benefit. A for-profit insurer funding the most corrupt members of Congress could easily take half that difference in “skim”.
It’s funny, I accidentally may have done the same thing. I just realized that the I-bonds I purchased in 2000/2001 are going to mature during the gap between 65 and 70. And that the TIPS I purchased earlier this year (when the prices/yields were quite good) will also mature during that period!
I’m sure that you are already aware of this, but if not, be sure that you have planned for the tax impact of the I-bond maturity for both income taxes and Medicare IRMAA premiums. If you haven’t already been declaring the I-bond change in redemption value as interest on your tax return, the entire amount of the interest is counted as income in the year that the I-bond matures, even if you don’t cash it in during that year. Given that $10k in I-bonds purchased in December, 2000 are already worth nearly $39k (i.e. interest of almost $29k) and are continuing to earn interest at a current rate of 7.24%, there could be significant impacts when the I-bonds mature.
Yep. I am aware and was part of the discussion here a few months and years ago. And right after that discussion, @WendyBG decided to start paying taxes on that income now instead of all in one shot in 2030/31.
I figure that I don’t really have to decide right now. I am already in a high-ish tax bracket, and it isn’t likely to be much lower or higher in the year before I turn 65 (when IRMAA begins). I will, of course, monitor the legislative process in 2025 before the current tax law expires. But even so, the old rates are not that much higher. I figure my decision points are:
Start taking the income in 2023. That would mean all the interest from 2000/1 through 2023. And then annual increments through maturity.
Start in 2024 or 2025. Still current tax rates so pretty much an equal decision to choice 1 above.
Take all the income at maturity in 2030/31 and take the one year hit in IRMAA and additional taxes. Since my taxable income (above the things like dividends and interest) will be determined by me anyway, based on taking or not taking capital gains, if I have an extra $50k of income from I-bonds, I can simply opt to not take $50k in capital gains in that year.
It’s a similar decision whether or not to convert IRA money to Roth IRA money and pay the taxes now or pay them later when the money comes out of the IRA via RMDs. You could think of the I-bond maturity date as one big RMD that year.
I’m in the same position. My plan is to reduce the size of the Roth conversion I’m doing in those years by the amount of the i-bond taxable income. Fortunately, all my i-bonds mature before my RMDs start under the last revisions to IRS rules.
