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A Deep Dive into Social Security · Money In Motion with Klaas Financial

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  Speaker 1: the air with CJ. Coss and Eric Schwartz. Great show ahead.
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  Speaker 1: We're gonna be talking this week about social Security benefits.
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  Speaker 1: And I know this is one that always gets a
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  Speaker 1: lot of questions, a lot of calls, a lot of conversation.
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  Speaker 1: Love to hear from you this morning again, tell phe
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  Speaker 1: coming up a little bit later on the show, we're
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  Speaker 1: gonna have the coss Quiz question the week your chance
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  Speaker 1: to win a fantastic prize from our friends at Class Financial.
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  Speaker 1: This week's prize a twenty five dollars gift card to
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  Speaker 1: pet Smart. So listen closely oftentimes just about every time,
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  Speaker 1: to be completely fair, the question and answer just about
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  Speaker 1: up on everybody else by paying close attention. It definitely
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  Speaker 1: attention to the program. Speaking of the closs Quiz question week,
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  Speaker 1: before we get rolling on this week's conversation, let's actually
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  Speaker 1: take a look back at last week's show and get
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  Speaker 1: the question and answer there as well. Eric, first off,
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  Speaker 1: welcome to the program. Let's take a look back actually
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  Speaker 1: at last week's show and get the question and answer
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  Speaker 1: there as well.
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  Speaker 2: Yeah, thanks Sean, we had a great show last week.
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  Speaker 2: In our congratulations first of all to our winner, who
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  Speaker 2: was Jillian from Madison and Jillian. The question Jillian got
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  Speaker 2: right was if you are fifty five years old in
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  Speaker 2: twenty twenty five, how much can you contribute into your
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  Speaker 2: retirement plan at work? So the choices were twenty five
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  Speaker 2: thousand or thirty one thousand in Jillian shows the correct answer.
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  Speaker 3: With your thirty one thousand dollars in twenty twenty five.
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  Speaker 1: Congratulations Jillian, great work there, and again we'll have a
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  Speaker 1: chance for you to win again this week with the
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  Speaker 1: Class Quiz Quash Week. Pay close attention to the program
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  Speaker 1: smatch the full lines. They're open if you've got a question,
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  Speaker 1: love to have you join us. Six oh eight three
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  Speaker 1: for the weekly market Paul's newsletter all on the website
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  Speaker 1: class financial dot com. So today we're gonna be talking
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  Speaker 1: about Social Security benefits in the various ages folks may
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  Speaker 1: become eligible to receive certain benefits and CJ. What do
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  Speaker 1: we need to know there?
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  Speaker 2: Yeah?
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  Speaker 4: Well, first off, I hope you can hear me.
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  Speaker 1: Okay, so great, we're having some trouble there, sound fantastic.
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  Speaker 4: Okay, great, Yeah.
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  Speaker 5: So to begin our discussion, I want to outline the
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  Speaker 5: various types of social security benefits someone could become eligible
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  Speaker 5: to receive throughout their lifetime. Now, for those who have
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  Speaker 5: listened to our show for a while, I actually want
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  Speaker 5: to encourage you listen closely. Today's show is going to
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  Speaker 5: go quite a bit deeper into elements of social security
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  Speaker 5: I don't know that we've ever talked about on this show.
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  Speaker 5: So for those who are interested in sociecurity benefits, whether
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  Speaker 5: you're drawing it now or drawing in the future, this
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  Speaker 5: is going to give you some additional insights into the
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  Speaker 5: various types of benefits that soci security provides, along with
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  Speaker 5: different calculation.
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  Speaker 4: So hang tight.
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  Speaker 5: But the various types of sociecurity benefits include the following
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  Speaker 5: number one, retirement benefits. This is what most people think
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  Speaker 5: of when they think of soci security. They think of
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  Speaker 5: retirement benefits, but believe it or not, Outside of retirement benefits,
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  Speaker 5: there are the following other benefits, disability insurance benefits, survivor benefits,
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  Speaker 5: family benefits, and supplemental Social Security income benefits. Now, according
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  Speaker 5: to SOCI Security Administration, here are quick definitions of each
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  Speaker 5: type of benefit, someone could become eligible to receive throughout
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  Speaker 5: their lifetime. Because you actually think about it, you could
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  Speaker 5: become eligible to receive any one of those five different
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  Speaker 5: types of soci security benefits I just mentioned at different
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  Speaker 5: points throughout your life. So let's define them first. The
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  Speaker 5: soci security retirement benefit is a monthly check that replaces
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  Speaker 5: part of your income when you reduce your hours or
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  Speaker 5: stop working altogether. It may not replace all your income,
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  Speaker 5: so it's best to identify other ways to pay for
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  Speaker 5: your monthly expenses as you age. Again, everybody, these are
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  Speaker 5: actually definitions right off the Soci Security website. So again,
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  Speaker 5: that was just a definition for Social Security retirement benefits.
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  Speaker 5: Now here's a definition for Social Security Disability Insurance benefits
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  Speaker 5: also known as SSDI. Soci Security Disability benefits provides more
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  Speaker 5: monthly payments to people who have a disability that stops
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  Speaker 5: or limits their ability to work. The third type of
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  Speaker 5: benefit is the Social Security survivor benefit, and that provides
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  Speaker 5: monthly payments to eligible family members of people who worked
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  Speaker 5: and paid Social Security taxes before they died. So again,
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  Speaker 5: survivor benefit would be say I have a parent who
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  Speaker 5: died and it could be eligible for different family members.
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  Speaker 5: The fourth type of soci security benefit is Social Security
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  Speaker 5: Family Benefit. This provides monthly payments to certain family members
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  Speaker 5: of people who are eligible for retirement or disability benefits.
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  Speaker 5: And finally, Social Security Supplemental Security Income Benefit known as
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  Speaker 5: s SI. So remember the other one was ssd I.
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  Speaker 5: This is known as s SI provides monthly payments to
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  Speaker 5: people with disabilities and adults who have little or no
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  Speaker 5: income or resources. So listen, everybody, here's the example of SSI.
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  Speaker 5: What happens when somebody is born with a disability? Right,
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  Speaker 5: how do they function in the world. Maybe that disability
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  Speaker 5: doesn't allow them to work a normal job, but maybe
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  Speaker 5: they can still be in society and add add meaningful
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  Speaker 5: value and love and connection.
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  Speaker 4: But how do they live if.
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  Speaker 5: There's no you know, no employer that's going to pay
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  Speaker 5: them enough for sustenance? And the answer is often SSI.
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  Speaker 5: So here's what I want everybody to realize. With those
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  Speaker 5: five definitions in place, social security is fantastic for a
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  Speaker 5: society like ours to have some sort of a system
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  Speaker 5: in place that takes care of either the least of
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  Speaker 5: those in our society or provides a minimum sustenance, income
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  Speaker 5: and retirement. I believe we should all be proud of
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  Speaker 5: the fact that we have a social security benefit. Now
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  Speaker 5: I'm not saying this is not a political statement, right,
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  Speaker 5: That's not the point of this.
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  Speaker 4: It is rather just to say that as.
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  Speaker 5: A as a developed society like ours, it is nice
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  Speaker 5: to know that they're that there are these kind of
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  Speaker 5: like five fallbacks for people as the age or become unhealthy,
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  Speaker 5: or become disabled or born with a disability. Is nice
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  Speaker 5: to know that we we have developed the system.
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  Speaker 1: Talking this morning with CJ. Closs and Eric Schwartz, they
• 7:21
  Speaker 1: are our retirement planning professionals from Class Financial, the website
• 7:25
  Speaker 1: class financial dot com. That's Claus k l a as
• 7:28
  Speaker 1: financial dot com and their telephone number six o eight
• 7:30
  Speaker 1: four four two five six three seven. No charge for
• 7:34
  Speaker 1: that initial get to know you appointment tech Class Financial,
• 7:36
  Speaker 1: It will be complimentary to you again their number six
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  Speaker 1: oh eight four four two five six three seven. And CJ.
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  Speaker 1: You alluded to and as folks kind of heard you
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  Speaker 1: discuss those those five different different types of benefits, folks
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  Speaker 1: could experience multiple, if not all of these in their lifetime.
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  Speaker 4: Yeah, that's right. So a couple things on this.
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  Speaker 5: So we do understand that social Security can get a
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  Speaker 5: bad reputation due to its funding problems or how politicians.
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  Speaker 4: Use it for political leverage.
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  Speaker 5: I mean, listen, just just watch a couple of the
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  Speaker 5: more recent debates in political land, and it's like social
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  Speaker 5: Security is a big topic. However, as I mentioned, at
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  Speaker 5: its core, social security is a modern financial marvel and
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  Speaker 5: it positively impacts the lives of tens of millions of
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  Speaker 5: Americans and it keeps countless more out of extreme poverty.
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  Speaker 5: That's the key, right, it keeps countless more out of
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  Speaker 5: extreme poverty. Now, I'm not saying there's not abuse in
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  Speaker 5: the system. I'm not saying that politicians haven't managed it well,
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  Speaker 5: that it doesn't have funding problems. Those are all true statements,
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  Speaker 5: and I'm not disagreeing with that. But at its core,
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  Speaker 5: what a blessing to our American society that we have
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  Speaker 5: found a way to try to provide minimum sustenments. Now,
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  Speaker 5: with all of this being said, today, we will be
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  Speaker 5: primarily focusing on social Security, retirement benefits and family benefits
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  Speaker 5: for the remainder of our show. And the reason is
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  Speaker 5: because these two categories, again, retirement benefits and family benefits
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  Speaker 5: account for about sixty five percent of all Social Security
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  Speaker 5: benefit recipients. So that is where the remainder of our
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  Speaker 5: show will be focused, and.
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  Speaker 1: We're going to talk a little bit about I think
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  Speaker 1: one of the big questions every time we talk SOS
• 9:15
  Speaker 1: security is the when, and we'll find out from Cjan Eric.
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  Speaker 1: We will do that and so much more. As Money
• 9:20
  Speaker 1: Motion with Coss Financial continues, don't forget about the website
• 9:23
  Speaker 1: class Financial dot com. That's coss k l aa S
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  Speaker 1: Financial dot com. There telphon number six oh eight four
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  Speaker 1: four two five six three seven, and the phone lines
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  Speaker 1: us a ring six oh eight three two one thirteen ten.
• 9:37
  Speaker 1: That's six oh eight three two one thirteen ten. More
• 9:40
  Speaker 1: of Money in Motion with Coss Financial is next right
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  Speaker 1: here on thirteen ten. WIBA talking this week Social Security
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  Speaker 1: with our retirement planning professionals from Class Financial, joined by CJ.
• 9:51
  Speaker 1: Closs and Eric Schwartz. Again, they are our retirement planning
• 9:54
  Speaker 1: professionals from Class Financial. Hope you've had a chance check
• 9:56
  Speaker 1: out the website Coss Financial dot com. That's coss k
• 9:59
  Speaker 1: l a as financial dot com. Maybe when you get
• 10:02
  Speaker 1: into the office this morning, take a peek over there.
• 10:04
  Speaker 1: Another cool thing to online at the website. If you
• 10:06
  Speaker 1: miss part today's program or you want to listen back,
• 10:08
  Speaker 1: or even better subscribe to the podcast. You can do
• 10:10
  Speaker 1: all of that online at clossfinancial dot com. That's colss
• 10:14
  Speaker 1: k l aa S financial dot com and their telephone
• 10:17
  Speaker 1: number six so eight four four two five six three seven.
• 10:20
  Speaker 1: Talking this week about social security and CJ laid out
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  Speaker 1: the different types of Social Security benefits there are, and
• 10:27
  Speaker 1: we're going to kind of break down in a great
• 10:29
  Speaker 1: rundown from CGEN those various types of social Security benefits.
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  Speaker 1: But I've got to think for most folks, Eric, they
• 10:36
  Speaker 1: just want to know at what age should I be
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  Speaker 1: taking and starting my own retirement benefit.
• 10:42
  Speaker 2: Yeah, Sean, That's that's pretty much what everybody wants to know.
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  Speaker 2: That's the most common question we get from from our clients,
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  Speaker 2: from the general public. And I mean, unfortunately my answer
• 10:52
  Speaker 2: is going to be a little bit unsatisfying for listeners.
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  Speaker 2: It is accurate, though it depends on a lot of
• 10:57
  Speaker 2: factors that are unique.
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  Speaker 3: To individuals and their families.
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  Speaker 2: So before we jump into kind of you know how
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  Speaker 2: timing and when you take your.
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  Speaker 3: Benefits effects the amount you get.
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  Speaker 2: Let's just talk a little bit first here about where
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  Speaker 2: our Social Security retirement benefits come from.
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  Speaker 3: Right.
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  Speaker 2: CJ was talking about this you know robust program that
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  Speaker 2: we have we have in our society here, but what
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  Speaker 2: actually funds Social Security? So the benefits that are received
• 11:25
  Speaker 2: are actually funded through payroll taxes. So we look at
• 11:30
  Speaker 2: our paycheck and we see the fight attack on the
• 11:33
  Speaker 2: deductions area, A portion of that is going to Social Security.
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  Speaker 3: So six point two percent.
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  Speaker 2: Of your wages to go to the Social Security Administration.
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  Speaker 2: Your employer also kicks in six point two percent of
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  Speaker 2: your wages, so that the total of twelve point four
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  Speaker 2: and that is applied to your wages up to what's
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  Speaker 2: called the Social Security wage base or the cap on earning.
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  Speaker 2: So the wage based cap for twenty twenty five is
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  Speaker 2: one hundred and seventy six thousand, one hundred dollars per individual.
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  Speaker 2: So this means that what if an individual is a
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  Speaker 2: higher earner and they earn more than one hundred and
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  Speaker 2: seventy six thousand, one hundred dollars, there will no longer
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  Speaker 2: be Social Security payroll tax taken out over and above there.
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  Speaker 2: So we often hear folks that we talk to who
• 12:23
  Speaker 2: maybe higher earners, say, oh, towards the end of the year,
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  Speaker 2: I actually get a I get a little bump in
• 12:27
  Speaker 2: my paycheck, I get a little raise. And what they're
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  Speaker 2: saying there is, you know, their take home is more
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  Speaker 2: because that that's six point two percent is actually no
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  Speaker 2: longer being being taken out. Now that changes when they
• 12:38
  Speaker 2: flip into the new year, obviously, and they start, you know,
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  Speaker 2: we start the clock over. But the funding mechanism for
• 12:47
  Speaker 2: the Social Security system.
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  Speaker 3: Is is payroll taxes.
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  Speaker 2: But more to your question here, let's let's talk a
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  Speaker 2: little bit about how soon people can take their benefits
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  Speaker 2: and what is the right age. Unfortunately it's a little
• 13:01
  Speaker 2: bit more of an art than a science, but let's
• 13:03
  Speaker 2: talk about a couple of the things here that we
• 13:05
  Speaker 2: think about. So the first thing is we want to
• 13:08
  Speaker 2: remember there's a difference between when you can first take
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  Speaker 2: your Social Security benefits, so when you are first eligible
• 13:14
  Speaker 2: to get some level of benefit.
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  Speaker 3: And when you receive your full.
• 13:19
  Speaker 2: Social Security benefit, which is at your full retirement age. Okay,
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  Speaker 2: so let's begin with a little bit of a background
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  Speaker 2: here on what is meant by full retirement age so
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  Speaker 2: accordinate to social security. If you were born between nineteen
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  Speaker 2: forty three and nineteen fifty four, your full retirement age.
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  Speaker 3: Is sixty six, okay.
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  Speaker 2: But for those born between nineteen fifty five and nineteen
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  Speaker 2: fifty nine.
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  Speaker 3: Your full retirement's a little more complicated.
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  Speaker 2: It's sixty six plus some number of months based on
• 13:48
  Speaker 2: when you were born. And then for everybody after nineteen
• 13:52
  Speaker 2: sixty that's all age sixty seven. So your full retirement age,
• 13:57
  Speaker 2: which is also known as your FRA, and you'll hear
• 14:00
  Speaker 2: us refer to that here throughout the show, that's the
• 14:03
  Speaker 2: agent which you become eligible to receive your full unreduced
• 14:07
  Speaker 2: Social Security benefit. Okay, So notice I said you're full
• 14:11
  Speaker 2: and unreduced social Security benefit. You are actually able to
• 14:16
  Speaker 2: collect as early as age sixty two, and a lot
• 14:19
  Speaker 2: of people do.
• 14:20
  Speaker 3: You're able to collect as early as sety two. You
• 14:23
  Speaker 3: can also wait until you're seventy. We'll talk about that
• 14:26
  Speaker 3: more in.
• 14:26
  Speaker 2: A moment, but you know, really between sixty two and
• 14:30
  Speaker 2: seventy you can collect anywhere in there, you know, kind
• 14:33
  Speaker 2: of down to the I think whole a lot of times,
• 14:36
  Speaker 2: think okay, I can take it at sixty two, maybe
• 14:38
  Speaker 2: sixty five and my full retirement age. Not true.
• 14:42
  Speaker 3: You can take it any month in between there, and.
• 14:45
  Speaker 2: Social Security is actually going to you know, pro rate
• 14:48
  Speaker 2: your benefit so to speak.
• 14:50
  Speaker 3: If let's say you take it at sixty two.
• 14:51
  Speaker 2: And six months, okay, so you'll get a larger benefit
• 14:55
  Speaker 2: than at sixty two, not quite as much as if
• 14:57
  Speaker 2: you wait until you wear your sixty Let's talk to
• 15:00
  Speaker 2: here a little bit about how much you actually received
• 15:04
  Speaker 2: as a benefit. This is a really really difficult calculation
• 15:09
  Speaker 2: and that try to recreate it on our own.
• 15:12
  Speaker 3: And it can be done, but it takes a long time.
• 15:15
  Speaker 2: We actually have a great resource available to us at
• 15:19
  Speaker 2: SSA dot gov, So anybody can go to SSA dot
• 15:22
  Speaker 2: gov and.
• 15:24
  Speaker 3: Create a profile for yourself.
• 15:26
  Speaker 2: You can see your earnings history, you can get an
• 15:29
  Speaker 2: idea of what your actual benefits.
• 15:31
  Speaker 3: May be based on the age at which you start.
• 15:34
  Speaker 2: It's a really really great tool, So encourage all listeners
• 15:37
  Speaker 2: to go out there and create a profile on SSA
• 15:41
  Speaker 2: dot gov so that you can you can get an
• 15:44
  Speaker 2: idea of what your benefit might be. But talking about
• 15:48
  Speaker 2: the best time to collect okay, so again depends on
• 15:51
  Speaker 2: your situation. In most cases, it is generally advisable. You said,
• 15:56
  Speaker 2: generally advisable to wait at least until you've reached your
• 16:00
  Speaker 2: full retirement age to start collecting Social Security because the
• 16:04
  Speaker 2: monthly benefit is so much higher. Okay, So, if you
• 16:06
  Speaker 2: were born in nineteen fifty five and your full retirement
• 16:10
  Speaker 2: age is sixty six and two months, that is the
• 16:13
  Speaker 2: age at which you are able to collect your full
• 16:17
  Speaker 2: unreduced benefit. Now, what if you wait beyond your full
• 16:21
  Speaker 2: retirement age, because we do have.
• 16:22
  Speaker 3: People who do this.
• 16:23
  Speaker 2: Maybe they're still working, they don't need income, or they're
• 16:27
  Speaker 2: just you know, it's part of their retirement income strategy
• 16:30
  Speaker 2: to push Social Security off until seventy. Okay, So the
• 16:35
  Speaker 2: Social Security benefits are increased if you wait after your
• 16:38
  Speaker 2: full retirement age any number of years up until seventy,
• 16:43
  Speaker 2: and depending on your data birth, you are getting what
• 16:46
  Speaker 2: are called delayed retirement credits, and that can allow your
• 16:50
  Speaker 2: benefit to increase up to eight percent per year until
• 16:54
  Speaker 2: you actually start taking benefits. Now, once you hit seventy,
• 16:56
  Speaker 2: there's no more increases. So most people should not wait
• 17:01
  Speaker 2: beyond seventy to take their Social Security benefits. But even
• 17:06
  Speaker 2: if it means using some of you the income that
• 17:08
  Speaker 2: you've saved in your retirement account. For example, it can
• 17:12
  Speaker 2: still be worth it to put off that Social Security
• 17:16
  Speaker 2: until seventy. It's because you're getting a risk free eight
• 17:19
  Speaker 2: percent annual benefit increase. Now at Class Financial, we have
• 17:24
  Speaker 2: an excellent investment management team here. Great, they did great work,
• 17:29
  Speaker 2: but they will tell you that to have a guaranteed
• 17:32
  Speaker 2: eight percent rate of recurry that is really, really really
• 17:35
  Speaker 2: hard to beat. Okay, So pushing it off till seventy
• 17:39
  Speaker 2: can be really really valuable if you have the assets
• 17:42
  Speaker 2: to create income in between there and last thing Sean
• 17:46
  Speaker 2: here before we go to the next question. Is I
• 17:51
  Speaker 2: mentioned this earlier, but you don't when you start taking
• 17:54
  Speaker 2: your Social Security benefits, you don't have to do it
• 17:57
  Speaker 2: like on your birthday each year. Depending on how old
• 18:02
  Speaker 2: you are, social Security either gives you a five ninths
• 18:05
  Speaker 2: of one percent or a five to twelfths of one
• 18:07
  Speaker 2: percent increase for each month that you wait.
• 18:10
  Speaker 3: Okay, so you are getting credit for that. And I
• 18:14
  Speaker 3: just want to underline here there's almost no reason to.
• 18:17
  Speaker 2: Not pull your retirement benefits once you've reached age seventy
• 18:19
  Speaker 2: because you're not getting any more of those to layed
• 18:21
  Speaker 2: retirement credits.
• 18:22
  Speaker 1: Really important information there. Eric Schwartz and CJ. Closs out
• 18:25
  Speaker 1: retirement planning professionals from Class Financial online Class Financial dot com.
• 18:29
  Speaker 1: That's Coss k l aas Financial dot com. So CJ,
• 18:33
  Speaker 1: how is this your specific soci Security benefit? How is
• 18:36
  Speaker 1: that determined? And does that increase what's kind of the
• 18:40
  Speaker 1: understanding there?
• 18:42
  Speaker 4: Yeah, good question.
• 18:43
  Speaker 5: First, you need to have enough credits to even qualify
• 18:47
  Speaker 5: to receive Social Security benefits. So for our listeners who
• 18:51
  Speaker 5: listen quite often, up till now, we've talked about a
• 18:54
  Speaker 5: couple of things you maybe haven't heard on social security.
• 18:56
  Speaker 5: But here's where we're going to get into some fun
• 18:58
  Speaker 5: these last two sections. We're going to talk about these
• 19:01
  Speaker 5: calculations and it's it's quite interesting, so stick with us. So,
• 19:05
  Speaker 5: as you work and pay taxes, you earn Social Security
• 19:08
  Speaker 5: that are credits.
• 19:09
  Speaker 4: They're known as credits.
• 19:10
  Speaker 5: In twenty twenty five, you earn one credit for each
• 19:12
  Speaker 5: one eight and ten dollars in earnings, up to a
• 19:15
  Speaker 5: maximum of four credits per year. The amount of money
• 19:19
  Speaker 5: needed to earn one credit usually goes up every year,
• 19:22
  Speaker 5: by the way, but most people need forty credits or
• 19:25
  Speaker 5: ten years of work to qualify for their own retirement benefit. Now,
• 19:30
  Speaker 5: notice I emphasize the word their own retirement benefit.
• 19:35
  Speaker 4: Harken back at the beginning of.
• 19:36
  Speaker 5: The show, we talked about there's actually five different benefits
• 19:39
  Speaker 5: that soci Security can pay. We're honing in on a
• 19:41
  Speaker 5: retirement benefits, and now I'm honing it even further on
• 19:45
  Speaker 5: your own retirement benefit. You need at least forty credits
• 19:48
  Speaker 5: are about ten years worth of earnings to even qualify
• 19:52
  Speaker 5: for your own retirement benefit. Now, if you do not
• 19:55
  Speaker 5: have at least forty credits, you are not currently entitled
• 19:58
  Speaker 5: to a retirement benefit. Stop working before you have enough
• 20:01
  Speaker 5: credits to qualify for benefits.
• 20:03
  Speaker 4: Your credits will stay on your record.
• 20:05
  Speaker 5: If you then return to work later, more credits will
• 20:08
  Speaker 5: be added. So again, you can go to the SSA
• 20:10
  Speaker 5: dot gov website and read their publication how you Earn
• 20:13
  Speaker 5: Credits for more information. Now, assuming you have enough credits,
• 20:17
  Speaker 5: your Social Security uses a calculation based on your highest
• 20:21
  Speaker 5: thirty five year inflation adjusted average of covered wages.
• 20:27
  Speaker 4: Let's dig a little deeper on this. Now, this is
• 20:29
  Speaker 4: where it gets fun.
• 20:30
  Speaker 5: Every American begins with one hundred and forty credits or
• 20:34
  Speaker 5: thirty five years worth of zeros in their Social Security
• 20:38
  Speaker 5: retirement benefit calculator. Okay, so again, if they're going to
• 20:43
  Speaker 5: use thirty five years worth of inflation adjusted earnings or
• 20:47
  Speaker 5: one hundred and forty credits, that's just thirty five times four,
• 20:50
  Speaker 5: Then what do I begin with the answer is one
• 20:52
  Speaker 5: hundred and forty zeros. And as individuals earn money and
• 20:56
  Speaker 5: paid wages into Social Security, those zeros start getting replaced
• 20:59
  Speaker 5: by wage is that are inflation adjusted to create a
• 21:03
  Speaker 5: present value purchasing.
• 21:05
  Speaker 4: Power for dollar for those dollars.
• 21:08
  Speaker 5: For purposes of determining the highest inflation adjusted figures over
• 21:13
  Speaker 5: the thirty five year working career. So some people will
• 21:16
  Speaker 5: say to us, Hey, I've worked for thirty years, but
• 21:19
  Speaker 5: I decided to kind of like semi retire, and now
• 21:21
  Speaker 5: my last final five years are going to be lower,
• 21:24
  Speaker 5: and I've heard that's going to hurt my benefit. And
• 21:27
  Speaker 5: Eric and I go, no, You've still got five years
• 21:29
  Speaker 5: worth of zeros to fill in, right, one dollar is
• 21:32
  Speaker 5: more than zero. Now, people then will say, but I've
• 21:36
  Speaker 5: worked thirty five years and now at the end of
• 21:38
  Speaker 5: my retirement benefit, now I'm going to potentially have lower income. Well,
• 21:44
  Speaker 5: you've already filled in the thirty five. Now interestingly enough,
• 21:48
  Speaker 5: I will just tell you, guys, social Security has to
• 21:51
  Speaker 5: project your benefit. So sometimes at the very end, if
• 21:55
  Speaker 5: you have less years that are filling in zeros that
• 21:57
  Speaker 5: are less than what Social Security is anticipated you to have,
• 22:02
  Speaker 5: then yes, their projection would be wrong. So listen, we're
• 22:06
  Speaker 5: really getting down into the weeds now on how they
• 22:08
  Speaker 5: project your benefit. What I would encourage you to do
• 22:11
  Speaker 5: is that if you're going to have what i'll call
• 22:14
  Speaker 5: inconsistent future income as you get closer to retirement, or
• 22:18
  Speaker 5: lower than expected income for your final five years of work,
• 22:21
  Speaker 5: I would just sit down with a good qualified advisor
• 22:24
  Speaker 5: or somebody soci security specialist to say, hey, can you
• 22:26
  Speaker 5: run a custom calculation instead of me just relying on
• 22:30
  Speaker 5: the default provisions of the Social Security projection, can we
• 22:32
  Speaker 5: run a custom now. Consequently, if someone works less than
• 22:36
  Speaker 5: thirty five years or one hundred and forty credits of
• 22:38
  Speaker 5: Social Security covered wages over their lifetime, then as I mentioned,
• 22:42
  Speaker 5: they will still have those zeros. They work more than
• 22:45
  Speaker 5: thirty five or one hundred and forty one hundred and
• 22:47
  Speaker 5: forty credits of Social Security, then they will simply remove
• 22:51
  Speaker 5: the lowest inflation adjusted dollars within that formula. So everybody,
• 22:56
  Speaker 5: when I say inflation adjusted dollars, here's the problem.
• 23:00
  Speaker 4: You don't think.
• 23:01
  Speaker 5: Our brains are not taught to think in inflation adjusted dollars.
• 23:04
  Speaker 5: So often we'll say, well, when I, you know, first
• 23:07
  Speaker 5: started working, I only made fifteen thousand dollars and I
• 23:10
  Speaker 5: had to walk uphill barefoot. You know the whole story, right,
• 23:14
  Speaker 5: Here's the problem. That fifteen thousand dollars forty years ago
• 23:18
  Speaker 5: is the equivalent of seventy thousand dollars now, right, and
• 23:22
  Speaker 5: so Social Security knows that, and the inflation adjusts those
• 23:26
  Speaker 5: prior earnings to bring it forward. So when someone wants
• 23:30
  Speaker 5: to draw retirement benefits, here's where it gets fun. A
• 23:34
  Speaker 5: calculation is performed to create what's called an average indexed
• 23:39
  Speaker 5: monthly earnings known as AIM for short, that's a new point.
• 23:43
  Speaker 5: Your inflation adjusted earnings from your highest thirty five years
• 23:48
  Speaker 5: are added together, and then the total is divided by
• 23:52
  Speaker 5: four hundred and twenty that's the number of months in
• 23:54
  Speaker 5: the thirty five years to get your AIM. A formula
• 24:00
  Speaker 5: LA is then applied to your AIM to calculate your
• 24:04
  Speaker 5: primary insurance amount, also known as your PIA, or the
• 24:09
  Speaker 5: amount you would receive at your full retirement age. The
• 24:13
  Speaker 5: formula applied to your aim to your average indexed monthly
• 24:17
  Speaker 5: earnings to create your PIA primary insurance amount is as follows.
• 24:24
  Speaker 5: You get ninety percent of the first one two hundred
• 24:28
  Speaker 5: and twenty six dollars of your aim, You get thirty
• 24:31
  Speaker 5: two percent of the amount over one two hundred and
• 24:34
  Speaker 5: twenty six up to seven thy three hundred and ninety
• 24:38
  Speaker 5: one dollars of your aim, and you only get fifteen
• 24:41
  Speaker 5: percent of any amounts over seven three hundred and ninety
• 24:44
  Speaker 5: one dollars of your aim. Listen, your head should be
• 24:47
  Speaker 5: spinning right.
• 24:48
  Speaker 4: Now, should go what what what?
• 24:50
  Speaker 2: What? What?
• 24:51
  Speaker 4: What? What's happening here?
• 24:52
  Speaker 5: These are known as social security bend points. Boy, we're
• 24:56
  Speaker 5: getting into the weeds. These bend points. You need to
• 24:59
  Speaker 5: know social care already is what a social program. It
• 25:04
  Speaker 5: is designed to provide a backstop, a backstop socially. Therefore,
• 25:10
  Speaker 5: the calculation provides the largest benefits to the lowest aim
• 25:16
  Speaker 5: calculations aka the lowest income earners. It provides a lower
• 25:20
  Speaker 5: benefit to the highest income earners because when you run
• 25:24
  Speaker 5: that aim calculation, they then apply the ninety thirty two fifteen,
• 25:28
  Speaker 5: And as you can already see, your top dollars are
• 25:30
  Speaker 5: only getting a fifteen percent return on them when it
• 25:32
  Speaker 5: comes to that aim calculation, your first dollars were getting
• 25:35
  Speaker 5: a ninety percent, right. So what you need to know
• 25:39
  Speaker 5: is that while this is complicated, you just need to
• 25:41
  Speaker 5: understand Social Security was designed to be a social program
• 25:45
  Speaker 5: that provides a backstop to people. Therefore, do not think
• 25:49
  Speaker 5: that you are getting a linear benefit replacement up to
• 25:54
  Speaker 5: that up to that income cap we were talking about
• 25:56
  Speaker 5: that Eric was talking about earlier, You're not. If you
• 25:59
  Speaker 5: were hitting those income caps and paying in all that
• 26:01
  Speaker 5: Social Security, the amount of money you get back in
• 26:05
  Speaker 5: retirement is much lower than if you had earned just
• 26:08
  Speaker 5: fifty thousand dollars per year. So I know this is
• 26:11
  Speaker 5: getting really complicated. I don't want to freak people out
• 26:14
  Speaker 5: on this, but I would just really encourage you to
• 26:17
  Speaker 5: understand this aim calculation, and just for a reference point
• 26:22
  Speaker 5: so people understand one other element. There's also known as
• 26:25
  Speaker 5: a cost of living adjustments. So people often confuse this.
• 26:28
  Speaker 5: They say, guys, I heard that you said my Social
• 26:30
  Speaker 5: Security benefit if I wait, can grow by seven or
• 26:32
  Speaker 5: eight percent a year that's good. That's good. But then
• 26:35
  Speaker 5: one of my friends just said that Social Security grew
• 26:37
  Speaker 5: by two point five.
• 26:38
  Speaker 4: Percent, So like you, what's going on here?
• 26:41
  Speaker 5: Well, listen, if you're not drawing your benefit, your benefit
• 26:45
  Speaker 5: can grow for delayed withdrawal, but if you are already drawing,
• 26:51
  Speaker 5: then they want to try to keep your purchasing power
• 26:54
  Speaker 5: up with inflation. And so even after you've drawn, there
• 26:58
  Speaker 5: will be annual inflation adjusts months if there is inflation.
• 27:03
  Speaker 4: So boil boy, my goodness.
• 27:05
  Speaker 5: I'm sure everybody's heads are spinning in the you know,
• 27:07
  Speaker 5: spinning around, but.
• 27:08
  Speaker 4: Hopefully this is helpful. You can reach out to us
• 27:10
  Speaker 4: with any questions ye.
• 27:11
  Speaker 1: Have, Bendpoint and Aim. I don't think we've touched on either.
• 27:14
  Speaker 1: It's very fascinating stuff. This week, as always, talk with CJ.
• 27:16
  Speaker 1: Closs and Eric Schwartz, our retirement planning professionals from class
• 27:19
  Speaker 1: financial website COSS Financial dot com. That's Coss k l
• 27:22
  Speaker 1: a A S Financial dot com. We'll take it down
• 27:24
  Speaker 1: the home stretch next as Money in Motion continues right
• 27:26
  Speaker 1: here on thirteen ten WIBA talking with CJ. Closs and
• 27:29
  Speaker 1: Eric Schwartz. They are our retirement planning professionals. From class
• 27:32
  Speaker 1: Financial Online Cossfinancial dot com and they're telephone number six.
• 27:36
  Speaker 1: So eight four four two five six three seven just
• 27:38
  Speaker 1: moments away from the class quiz question week Before we
• 27:40
  Speaker 1: get to that, though, real quick, we've got a good
• 27:43
  Speaker 1: question involving figuring out the best age and this is
• 27:46
  Speaker 1: one of those areas too. I know that a lot
• 27:49
  Speaker 1: of people wonder, and there's a little bit more that
• 27:50
  Speaker 1: goes into it. So how can you kind of figure
• 27:52
  Speaker 1: out the best age to start your benefits? And if
• 27:54
  Speaker 1: you start collecting earlier, what kind of reduction are we
• 27:57
  Speaker 1: then looking at there?
• 28:00
  Speaker 2: Great question, John, But first I have to blame you
• 28:02
  Speaker 2: for the fact that we're talking about ben points and
• 28:04
  Speaker 2: aims today because you made the mistake of telling CJ
• 28:07
  Speaker 2: how much you've learned from the show.
• 28:08
  Speaker 3: So we have the.
• 28:11
  Speaker 4: Exactly Thank you. It's not my fault.
• 28:17
  Speaker 2: But let's let's get to the answer to your question here.
• 28:19
  Speaker 2: So if figuring out when when to start collecting your benefits,
• 28:24
  Speaker 2: you know what I'm going to say, it depends it's
• 28:26
  Speaker 2: ingrained in me.
• 28:27
  Speaker 3: I can't I can't help it.
• 28:28
  Speaker 2: But what are some of the things we want to
• 28:30
  Speaker 2: consider when we're thinking about when to start benefits, so
• 28:33
  Speaker 2: you know things like your income sources. When you retire,
• 28:36
  Speaker 2: you have a pension, are you going to be working
• 28:38
  Speaker 2: part time? Would you receive spousal Social Security benefits? And
• 28:44
  Speaker 2: then at the same time, we want to think about
• 28:45
  Speaker 2: things like do you still have debt? Do you have
• 28:47
  Speaker 2: a mortgage and auto loan that you're paying off? So
• 28:51
  Speaker 2: these are some really important topics when we're we're thinking
• 28:54
  Speaker 2: about when to start benefits. But we also have to
• 28:56
  Speaker 2: think about life expectancy, right because security is a benefit
• 29:01
  Speaker 2: that play that pays while you are alive, but it
• 29:04
  Speaker 2: obviously ends at depth, you know, different from like a
• 29:07
  Speaker 2: pension for example, that may have some sort of joint
• 29:11
  Speaker 2: life benefit.
• 29:12
  Speaker 3: So none of us knows how long we're going to live.
• 29:15
  Speaker 2: Obviously, if we did, we could we could make this
• 29:18
  Speaker 2: social security calculation pretty exact. That's where it becomes a
• 29:23
  Speaker 2: little bit more of an art than a science. Like
• 29:25
  Speaker 2: I said earlier, a lot of people, you know, say
• 29:28
  Speaker 2: they have a If somebody has a health issue, they
• 29:31
  Speaker 2: may say, I'm going to start earlier because I don't
• 29:33
  Speaker 2: think I'm going to be living long enough to make
• 29:37
  Speaker 2: up what I what I left behind by by waiting
• 29:41
  Speaker 2: and other people may have longevity, longevity in their family
• 29:43
  Speaker 2: and say, hey, I'm going to wait till seventy get
• 29:46
  Speaker 2: the largest benefit, and you know, that's how I'm going
• 29:48
  Speaker 2: to get the largest benefit out of Social Security. But
• 29:51
  Speaker 2: regardless of when you decide to take it, let's just
• 29:55
  Speaker 2: look really quickly here at you know what kind of
• 29:57
  Speaker 2: reduction you get for taking it early. So let's say
• 30:00
  Speaker 2: that your full retirement age is sixty six.
• 30:03
  Speaker 3: In two months.
• 30:04
  Speaker 2: So you're in that kind of odd ten year stretch
• 30:08
  Speaker 2: where where it's sixty six in some months. In this case,
• 30:10
  Speaker 2: it's sixty six and two months. That's your full retirement age.
• 30:14
  Speaker 2: If you draw at sixty two, you're going to get
• 30:17
  Speaker 2: about seventy four point two percent of your monthly benefit.
• 30:21
  Speaker 2: So you're losing, you know, a little over twenty five percent.
• 30:25
  Speaker 2: If you waited until you were sixty five, you receive
• 30:29
  Speaker 2: around ninety a little more than ninety two percent of
• 30:32
  Speaker 2: your full benefit. Okay, so these are the really tough calculation.
• 30:36
  Speaker 2: It's not we're not going to get exact. But that's
• 30:38
  Speaker 2: where again your access on SSA dot gov is going
• 30:42
  Speaker 2: to be really really.
• 30:43
  Speaker 1: Helpful, great great stuff this week, and you mentioned that website,
• 30:47
  Speaker 1: and I know there's a little bit of information to there,
• 30:49
  Speaker 1: Eric that you wanted to add.
• 30:51
  Speaker 2: Yeah, yeah, the last last piece here. I even though
• 30:55
  Speaker 2: we know that benefits go up the longer we wait.
• 30:59
  Speaker 2: Social Secure any data from a couple of years ago
• 31:01
  Speaker 2: tells us that the average age that people start benefits
• 31:05
  Speaker 2: is sixty five, which is not all that surprising. This
• 31:09
  Speaker 2: generally when people are getting on Medicare and dealing with
• 31:14
  Speaker 2: the Social Security administration anyway, so they tend to get
• 31:17
  Speaker 2: started them.
• 31:18
  Speaker 1: Talking this morning with Eric Schwartz and CJ. Closs, our
• 31:21
  Speaker 1: retirement funding professionals from Class Financial website class Financial dot Com.
• 31:24
  Speaker 1: There telephone number six oh eight four four two five,
• 31:27
  Speaker 1: six three seven. Want to hold on to that telephone umber,
• 31:29
  Speaker 1: because it's time not for the class quiz question in
• 31:30
  Speaker 1: the week. It works like this just a moment, I'll
• 31:32
  Speaker 1: ask you the class quiz question the week. You will
• 31:34
  Speaker 1: then have thirty minutes from the today's program to call
• 31:36
  Speaker 1: the Class Financial office right here in Madison at six
• 31:38
  Speaker 1: oh eight four four two five six three seven. If
• 31:41
  Speaker 1: you are the first call correct answer when this week's prize,
• 31:43
  Speaker 1: which is a twenty five dollars gift card to pet Smart.
• 31:46
  Speaker 1: This week's Class Quiz question week is this true or false?
• 31:49
  Speaker 1: Your full retirement age, known as your FRA, is the
• 31:53
  Speaker 1: age at which you become eligible to receive your full
• 31:56
  Speaker 1: unreduced Social Security retirement benefit. True or false? Telphone number
• 32:01
  Speaker 1: six O eight four four two five six three seven. Also,
• 32:04
  Speaker 1: let's cross financial office right here in Madison in their
• 32:06
  Speaker 1: website class financial dot com. CJ. Eric, It's always great
• 32:10
  Speaker 1: chatting you guys.
• 32:10
  Speaker 4: Have a great day, Thanks Sean.
• 32:12
  Speaker 1: Thanks take care guys. Doctor Greer joins us in sixty
• 32:15
  Speaker 1: seconds here on thirteen ten w I b I