What Baby boomers need to know about Social Security & their Retirement Income

0:00 The topics and opinions expressed in the following show are solely those of the hosts and their guests and not those of W FOURCY Radio. It's employees are affiliates. We make no recommendations or endorsements for radio show programs, services, or products mentioned on air or on our web. No liability explicit or implies shall be extended to W FOURCY Radio or it's employees are affiliates. Any questions or comments should be directed to those show hosts. Thank you for choosing W FOURCY Radio. Welcome to to Ask Good Questions Podcasts, broadcasting live every Wednesday, six pm Eastern Time on W four CY Radio at w fourcy dot com. This week and every week, we will reach for a higher purpose in money and life, as well as a focus on health and wellness. Now, let's join your hosts, Banita Bell Anderson, as together we start with Asking Good Questions.

1:01 Hello, this is Benita Bell Anderson and welcome to the Ask Good Questions podcast. Today we are part two of a three part series on social security, and today we are dealing with what baby boomers need to know about their retirement income. Those people that they've been retiring but there's a few more of them to retire, and there's a whole bunch of us out there. So first I have a little teaser for you before we get started. I'll invite there we go. Okay, here's my little teaser in life. Would you rather be early or would you rather be delayed? Would you rather pay a penalty or would you rather get a bonus? So I just want you to think about that and we'll return to those later. Right, So, this is what baby bloomers need to know. I am going to go through a bunch of things that have to do with this. This is such a huge important question.

2:13 And let me just also tell you I have been teaching in person classes for many many years, community colleges, libraries, things like that. Now I'm doing it online with a podcast. Who would have known? But anyway, here we are. I want you to know what the problem is. People are hurting their retirements by making terrible, costly decisions about social security. People say, why don't they matters? Yes, it does matter, and I'm going to show you many many different ways why it matters. Okay. Also, I want you to know that I have a handout and I'm also offering you a PDF analysis, a report. You're going to email me and if you have questions or if you would like the report that would basically tell you the top like five different ways you could do so security. That is complementary a professional evaluation. If you'd like to have this, if you'd like to discuss this, there's a small charge for that. But the complementary analysis is yours for really figuring out what's the best way to do this. There are some things to know about sob security. You have a lot of you have not a lot, but do you have different options in how you can claim this?

3:46 These decisions. If you're sixty five, there's a possibility I know some of you may say, no, I'm not going to live that long, but there's a possibility that you could be looking at the next thirty years that choice of what you do now could impact both spouses. And the system is not bankrupt. I'm going to talk to you about that is. It is also not a Ponzi scheme and the benefits likely helped the family member that you are aware of. Your friends also are not experts on this, so if you want to know Also another thing, little disclosure, I'm a financial advisor These are my opinions, but because I've been teaching this class for a long time, I do have opinions about what I see and what I've seen with clients. You're going to want to know the following. Is it going to be there for me?

4:43 How much can I expect to receive? When should I apply? That's the big question. How can I maximize my benefits? And will so scurty be enough to live on in retirement? Yeah? So if something that really you know, your parents probably never asked how it was possible to maximize benefits, there's absolutely nothing wrong with using the soil security rules to your advantage. So today we're going to talk about ways you can maximize your Social Security benefits simply by knowing the rules right and making smart decisions. That's why I'm doing this. I want you to make smart decisions. And finally, you're wondering if SO security is going to be enough to live on in retirement, You probably already know the answer to that. Sole security represents about forty percent of the average retirees in total income, but by coordinating Social Security with the rest of your retirement income plan, you can pursue a comfortable worry free retirement. Okay, that's what I think you would probably agree with me that you want to know. So most people tend to minimize the value of so security if they believe that they're likely to get something back from the system at all. They

6:16 think it will be a minimal payment and not enough to really count on. But social security is more valuable than many people realize. So there's there are many different ways that we're going to look at this today, and so if you worry, well, if it is going to be there for you. This has led to a lot of misunderstanding and irrational fears about the solvency of the social security system. So let's look at what the Social Security Trustees say. Every year they publish a comprehensive report showing the long range outlook for sole security. So it was designed as a pay as you go system, and payroll taxes from current workers goes through a trust fund and goes out to pay for current retirees. So right now, that trust fund holds about twelve two point seven trillion, which is invested in special issue treasury securities, and as baby boomers start retiring, those trust fund assets will gradually be drawn down. So over the next seventy five years.

7:42 They're basically saying that there's enough assets to pay one hundred percent of promise benefits until twenty thirty four. At that point, if nothing is done, and that's the operative word, if nothing is done to reform the system, then income will be sufficient to cover only eighty one percent of promise benefits. So what would it take to really restore solvency. There's a couple of things. I have taught this for years. Maximum earning subject to soci Security taxes at one hundred and seventy six one hundred. I think they need to dramatically increase that so that more people continue paying into Social Security for a longer time, or just eliminated together.

8:29 I also think, and I've said this for years as well, I think that it's possible that the normal retirement age could rise from sixty seven to seventy. It's also possible that they might lower benefits for future retirees, that is possible, or they might do something with the formula and reduce the cost of living adjustments on that. So those are all things that could happen. But really the bottom line for you, if you're sixty five to seventy right now, your benefits are not likely to be affected by soil security reform. However, are kids. I've got kids in their forties.

9:14 Let's let I'm telling them you need to Yes, so security will be there, but you need to have your own retirement savings as well. So what is a better way to think about sold security? Really? What do you think it is? Inflation protected income? You paid the premium in every paycheck, so it'd be smart about how and when to collect, right, Okay, that's insight number one. So if your monthly income is two thousand today and you live twenty or thirty more years, you look at this, that's significant. Five hundred and eighty three almost a million dollars in benefits. That's that's a big deal. I want you to really think about that. So how and when you take it is important. And because it offers an annual inflation adjustment a benefit in ten years that was two thousand and now could go to twenty four thirty eight, But in thirty years it would be thirty six hundred from two thousand. So that's assuming a two percent annual cost of living increase. I always say, especially for the higher earning wayjourner delay taking your sold security because if you die before your spouse, you want her to have the maximum benefit that she can have, and you want that larger. You want the cost of living to be calculated on a larger amount. Okay, So how much can

10:46 you expect to receive your benefit depends on how much you earned over your working career. Like for me, my first husband was in the military. We were overseas in Germany with the US Air Force in the nineteen years. There's if I look at my history, there was a whole bunch of years where I was having babies and we were overseas and I wasn't earning a wage. But if you've been consistently working, you're going to have a fairly decent benefit. And the age at which you apply for benefits is important to really realize. So I'm not going to go into the math. But so security benefits are calculated, are talied up in index for inflation, and the highest thirty five years of earnings are averaged. Okay, and then there's something called bend points, and that benefit is increased each year by the cost of living increases. Okay.

11:45 So I'm not going to spend too much time on this formula. But I'm just telling you there is a formula about how this is calculated. So the longer you put into the system and the longer you wait, you're going to benefit. And there's a break even point. Like if you started at sixty two, not only are you going to get penalized and have a much lower benefit, but you're you're gonna see that like between usually between seventy eight to eighty two. If you would have waited, you're going to be receiving much more in those later years.

12:26 So you may say, well, that's good to know, but I shouldn't. Why shouldn't I just claim at sixty two? I can't make that much difference, Right, Well, your monthly benefit here's number two insight. Your monthly benefit will be reduced if you claim early. That's just period, end of story. It may also be reduced for taxes and Medicare premiums. Right, and benefits could be withheld if you're working. I'm going to tell you. I'll tell you several times, don't work and take those security at the same time, don't don't don't do it. So when should I apply for benefits?

13:09 Number time? Number one would always be wait to do benefits until your full retirement age. Your health status has something to do with it. You're a life expectancy, your need for income, whether or not you plan to work, and survivor needs. Those are all huge factors. And yes, I've had people say, you can't tell me when I'm going to die. No, I can't. I get that. But if if you have a reasonable idea of what your health status is, if you have a reasonable idea of what your family history is for life expectancy, think about it. If you're still working, don't touch this. Wait until you're done, wait until seventy two to start taking it. Will so security be enough to live in retirement? Probably not? Maybe, like I said, maybe forty percent. Right, So here's what that fra. If you've seen that term, it means full retirement age. Most of you listening to this are probably nineteen sixty and later. Your full retirement age is probably age sixty seven, and so if you apply for early benefits, it can be reduced. Right, if your full retirement age is sixty seven and you apply at sixty two, it's going to be reduced thirty percent. And that's permanent. You're

14:41 never gonna make it up. And so let me show you what that means. If you apply after full retirement age, you get something called delayed credits. So it's eight percent of year. And so if you look at the last column, it could be an extra twenty four percent eight percent a year times three years, So you're going to have an extra twenty four percent in your monthly benefit. If you wait until age seventy plus, you're going to have a higher cost of living increase, right, because you're dealing with a higher number. So make sure that you go out to your to Social Security dot gov. Make sure that you go in and look at your account. If you do, email me for the complimentary analysis. I'm going to need your your estimated benefits from your Social Security account. Okay, So why here's another reason why bigger checks now mean bigger checks later. So if you started benefits with the COLA, so like if you started at age sixty seven and it was thirty three hundred a month, now at age seven, and you waited and you wait until seventy, that's like another thousand dollars. So bigger checks are going to come because of having a little bit of patience in starting.

16:16 And I know I'm going fast, but there's a lot of information to cover it a little bit of time. Here's more. If you if you have a benefit age seventy and it was forty three fifty nine, if you claim at seventy and you do happen to live to one hundred, that could be seventy eight hundred a month. That's a big deal. Even if you live to be eighty five, that's fifty eight sixty six month. I mean, what I'm saying is this is not small potatoes. This is a big commitment on the on the US government's part. So how do you maximize your benefits? You need to get educated, you need to examine your earnings record from your You've gone in, You've gone and found your Social Security statement. You're gonna go in and you're gonna look and you're gonna make sure it's accurate. Is there any missing years? Can you improve it by working longer, applied for Social Security at the optimal time? What are your income needs, what's your life expectancy, what's your spouse's life expectancy? Right?

17:26 Those are all things. Taxation of benefits. Have we heard just a little bit of stuff going on with that just recently, Well, there was a tax bill that passed on July fourth. Let's take an example of it doesn't eliminate taxes on Social Security. It just seems like that. It's a it's a deduction. So the married couple both age sixty five under the one hundred and fifty thousand income limit, they're now going to have a maximum total standard deduction of forty six thousand, seven hundred. That's for twenty five, twenty six, twenty seven, and twenty eight. It's not forever. It's a base standard deduction of thirty one to five plus a senior extra deduction of thirty two hundred, plus a new bonus deduction of six thousand each or twelve thousand. That's how you get to forty six seven and so it doesn't eliminate taxes on Social Security. It's just a deduction off of your total income that is figured. Okay, please please please keep working. Understand the annual earnings test.

18:39 If you are working before your full retirement age, one dollar out of every two that you'll earn over twenty three thy four hundred and twenty twenty five is going to be deducted. So wait until the full retirement age or later to apply for benefits. Okay, and just as a reminder, most married filing jointly couples have an income of over forty four thousand and forty four thousand, most likely eighty five percent of your soci security benefit is going to be figured for taxation, right, so just realize that that it's going to be still factored into how much total income you have. So waste to minimize taxes is reduce other income, anticipate required distributions, possibly convert traditional iras to ross delay it, reduce the number of years the benefits are subject to tax, Reduce your expenses, pay down debt, adopt a simpler lifestyle, and continue to manch it manage. You're going to always be managing taxes through retirement. Right.

19:52 So the other funny thing is that, well, yeah, you did get a two point five percent increase in sold security this year, but Part B premiums went up five point nine percent. So if you're receiving soil security and our sixty five or older and rolled in Medicare, your Part B premiums are deducted from your check. If you wait to do your soil security, you're going to be paying your Medicare premium out of your checking account. Okay, when to apply. If you apply early, your benefit starts lower and it stays lower for life. Cola's magnified the impact of early or delayed claiming. The longer you live, the more beneficial it is to delay benefits. And yes, we do not know how long you're going to live, but it's possibly the most lovely thing you can do for a spouse. If you feel like you might live as long as your spouse, your benefit may be taxed and reduced to cover your Medicare premiums. Don't let the earnings test discourage you from working. You know, it's just like maybe work a little bit longer, and delaying benefits may give surviving spouses more income. That's a that's a fact.

21:17 You may say, I'm not going to live long, so why shouldn't I just claim my benefit while I can? Right, Well, here's insight number three. For couples, you should always maximize hire earnings benefit to protect the surviving spouse. The spouse of benefit is basically fifty percent of the higher earnings benefit. So if you if you have a a if the wife is a lower benefit than half of her spouses, she's going to get what they call a spousal add on, So the primary worker has to file for benefits. The spouse has to be at least sixty two for reduced benefit or full retirement age for full benefit. There's no delayed credits on spouse of benefits, so coordinate your spouse of benefits. And basically I'm just because of time, I'm just going to tell you that this analysis that I do will show you when it makes sense for a lower earning spouse to start taking or to get a spouse of benefit, and how to maximize the lifetime benefits for both of the spouses. So there's actually thousands of ways that this can turn out, and so with the help of the computer, it's fantastic to be able to look at basically, here's the five best ways for us

22:48 to take it. And then you look at what your life is doing. And this is going to generate income for the rest of your life. So you need to pay attention to what is the best thing to do. So make sure that you take advantage of that. Email me to inquire about getting the complimentary PDF. So if you're widowed or divorced, that also can impact your claiming strategies. You may be elable survivor benefits. You may not know that divorced spouse benefits. There are divorce spouse benefits that can increase your monthly check. I've seen it happen, and it depends on the age at which the deceased spouse originally claimed. And so those are things that the age at which you claim makes a difference on how this happens.

23:46 I'll just tell you that, you know, I'm quickly going through these survivor benefits, but i just want you to know that if a spouse dies while both are receiving the benefit, the widow or widower will will switch to the higher benefit. Each person only receives one benefit. Okay, so just realize that I have somebody. I've got a client whose husband is going to be passing away, probably in the next few days. Her benefit is like eight hundred a month, his is like two thousand. Her benefit will go away. She will start receiving his two thousand a month. Okay. The couple must have been married at least nine months at the day of death. The survivor must be at least sixty. The survivor benefit isn't available if they're remarried before age sixty and the divorce bouse survivor benefits are available if the marriage lasted at least ten years. Okay, so these it's the same basically the same rule for divorce and widow is basically the same source of things. So this really is more complicated than and usually people realize. So with that, I want to ask you again, do you want to be early or what should rather be delayed? Would you rather pay a penalty or would you rather get a bonus? I think

25:17 you know my status on this, and I want you to not hurt your retirements by making terrible, costly decisions about Social Security. And here's the four things it's offers. Inflation protected income, your monthly benefit will be reduced. If you claim early, maximize the higher earnings benefit for the surviving spouse and widowed or divorce you may be eligible for benefits. Okay. So you need to know what is going to be the best thing for you to do, and so I'm here to help you with that. So consider social Security. You're you're putting this together with your iras.

26:03 This is something we've done for a gazillion years, so we're very adept at this and so security personnel. They can't. They all they do is just look you up and say here's the numbers. They can't help you with projecting future benefits. They can't help you with looking at the whole scenario. So the questions you might have are when should I apply? What if I want to keep working? What if I've already applied? How much will my benefits be? How can I coordinate spousal benefits? What's the best long term strategy? What do I do next? Well, that's up to you. But so security is too important for guesswork.

26:49 Let us help you protect your nest egg, maximize your income and retirement. Email me and we can move forward with giving you some more information about this process. Thank you so much for joining me today for this quick look at what baby boomers need to know for maximizing their income in retirement with so security benefits. Thank you so much for joining me on the Ask Good Questions podcast. Today's episode is over, but we did Ask Good Questions again, didn't We don't miss out as we broadcast live every Wednesday six pm Eastern Time on W four CY Radio at W fourcy dot com. Joined Nina bellend'erson next week for more conversations with experts on finances, retirement, behavioral finance issues, health and wellness, and more. Until then, remember to ask good questions.