How do I maximize tax efficiency?

Key Takeaways

• Suspending Social Security after Full Retirement Age earns 8% per year (or 8/12 of 1% monthly) in delayed retirement credits that permanently increase your benefit for life and your surviving spouse's benefit
• Social Security income is more tax-efficient than IRA distributions—best case scenario it's completely tax-free; worst case only 85% is taxable versus 100% for IRA withdrawals
• Replace tax-inefficient IRA income with more tax-efficient Social Security income later in retirement by converting to Roth during low-income years when you suspend benefits
• Before suspending benefits, ensure you have alternative income sources to live on: part-time work, distributions from other retirement accounts, or spending down taxable brokerage and bank accounts
• The strategy only makes sense if you live long enough to recoup the forgone Social Security benefits—if you pass away during the suspension period, you lose those years of benefits entirely