Social Security lump sum payment at age 70
I am considering converting a portion of my IRA to a ROTH IRA in 2021. My income will also include a pension, and social security. I have waited to take Social Security at age 70 to max out a potential survivor benefit for my wife at some time in the future. My wife and I are in good health. Should I take the lump sum payment offered by Social Security, and invest it, or should I take the higher monthly payment?
Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2021-07-22 18:45
If you are in good health, I would take the higher monthly payment rather than back dating the start date 6 months or whatever it is. Up to 85% of the additional income for the SS lump sum payment would add to your taxable income in the same year you plan to convert some amount to Roth. And you probably have only one more year until RMDs begin, meaning that you may only have one more year to convert after 2021 without having your SS benefit, RMD, and the conversion all adding to your marginal rate and possibly increasing that rate. It is surprising how much the SSA encourages the lump sum in lieu of higher monthly payments for life.