Latest / After the Rush Podcast / When Should I Take Social Security? | Episode 5

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When Should I Take Social Security? | Episode 5 · After the Rush Podcast

0:03
SPEAKER_00: When I was 16 years old,
0:05
SPEAKER_00: working my first real job at a nursery school,
0:08
SPEAKER_00: someone explained Social Security to me.
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It was an older woman,
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one of the lead teachers,
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and she had been there for years.
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She pulled me aside when I got my first paycheck because I had
0:19
asked why the number
0:21
SPEAKER_00: was smaller than I expected.
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SPEAKER_00: She pointed to the line that said FICA.
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SPEAKER_00: She said, that money goes to the government.
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SPEAKER_00: And then when you retire, you get it back.
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SPEAKER_00: It's guaranteed by the federal government.
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SPEAKER_00: Your retirement is guaranteed.
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SPEAKER_00: I believed her.
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SPEAKER_00: Why shouldn't I?
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SPEAKER_00: She was grown up.
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SPEAKER_00: She'd been working for years.
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SPEAKER_00: The government was behind it and it sounded solid.
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SPEAKER_00: I also,
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because I was 16 and already paying close attention to money in
0:52
a way most 16 year
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SPEAKER_00: olds are not,
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It wasn't until years later I learned that I should probably
1:00
not count on just one thing.
1:03
SPEAKER_00: That instinct served me well.
1:05
SPEAKER_00: Because here I am,
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SPEAKER_00: decades later,
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and the social security question has turned out to be
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considerably more complicated
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SPEAKER_00: than that teacher in the nursery school made it sound.
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and not just complicated in the way financial decisions are
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always complicated,
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complicated in ways that are specific to my situation and maybe
1:28
to yours too,
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SPEAKER_00: in ways the standard advice doesn't account for at all.
1:34
This episode is about what I actually found when I sat down and
1:38
did the math myself.
1:49
SPEAKER_00: Welcome to After the Rush.
1:51
SPEAKER_00: I'm Catherine McDowell.
1:53
This is a show about designing the next life chapter with
1:56
intention and some honest
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SPEAKER_00: humor about the parts that resist design.
2:02
SPEAKER_00: If you're new here, welcome.
2:05
SPEAKER_00: Here is something most Social Security explainers do not account for.
2:11
Not everyone has a straightforward earnings record that
2:14
translates cleanly into
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SPEAKER_00: monthly benefits.
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SPEAKER_00: My husband worked in a federal job.
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Federal employees hired before 1984 are covered under a
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different retirement
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SPEAKER_00: system,
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SPEAKER_00: the Civil Service Retirement System,
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SPEAKER_00: and they do not pay into Social Security the way most workers do,
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which means they do not accumulate Social Security credits the
2:39
same way other
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SPEAKER_00: workers do,
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SPEAKER_00: which means my husband does not receive his own Social Security benefits.
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What he receives instead is a federal pension And when the time
2:50
came I needed to
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understand what that meant for both of us and what it means for
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me specifically
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going forward He does receive widower's benefits from a prior
3:01
marriage That is a
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separate calculation with its own rules But it is not the same
3:07
as having his own
3:09
full social security record The two systems sit side by side
3:13
and they do not always
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SPEAKER_00: play nicely together
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SPEAKER_00: So when I went to think about my own Social Security timing,
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SPEAKER_00: I could not borrow from the standard,
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SPEAKER_00: what should we do as a couple framework,
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SPEAKER_00: that most of the advice assumes.
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SPEAKER_00: My math was going to have to be my math,
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SPEAKER_00: just mine,
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SPEAKER_00: based on my own earnings record,
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SPEAKER_00: my projected benefit,
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SPEAKER_00: and my own best guess about how long I'm planning to be here.
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SPEAKER_00: The last part is where it got interesting.
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SPEAKER_00: My mother is 90 years old.
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SPEAKER_00: My grandmother lived to be 104.
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SPEAKER_00: I come from long-lived women on that side of the family.
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SPEAKER_00: And when I sat down to think about when to claim Social Security,
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SPEAKER_00: I decided I was going to take that seriously rather than use some generic
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SPEAKER_00: actuarially table that had nothing to do with my actual family history.
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SPEAKER_00: So I did what I do.
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SPEAKER_00: I ran the numbers myself.
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The Social Security Administration will give you your projected
4:19
monthly benefit at
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SPEAKER_00: different claiming ages.
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SPEAKER_00: You can pull your statement online at ssa.gov,
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SPEAKER_00: I pulled mine,
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SPEAKER_00: and then I built a simple spreadsheet.
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I took the benefit amount at 62 and I multiplied it by the
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number of months between 62 and 90.
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SPEAKER_00: Then I did the same at 63, 64, 65, you get the picture.
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SPEAKER_00: At 66,
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SPEAKER_00: which is close to my full retirement age at 67,
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SPEAKER_00: 70,
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SPEAKER_00: which is the latest age at which waiting still increases your benefit.
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SPEAKER_00: And then I looked at what those numbers actually said.
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SPEAKER_00: The break-even analysis is the standard framing.
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SPEAKER_00: At what age does waiting pay off?
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SPEAKER_00: If you claim too early, you get a smaller amount for more years.
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SPEAKER_00: If you wait,
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SPEAKER_00: you get a larger amount for fewer years.
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At some point,
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the person who waited catches up and surpasses the person who
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claimed early.
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That crossover point for most people lands somewhere in the
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early to mid-80s.
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SPEAKER_00: If I'm planning to be here until 90,
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SPEAKER_00: the way my mother is,
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SPEAKER_00: or longer,
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SPEAKER_00: the way my grandmother was,
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SPEAKER_00: waiting starts to look considerably more interesting.
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But there's another layer that most people do not account for
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when they run this math.
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SPEAKER_00: Waiting does not just give you more money per month.
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SPEAKER_00: It gives you more money in the years when you are most likely to need it.
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SPEAKER_00: Health care costs generally increase as you age.
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SPEAKER_00: Long-term care,
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SPEAKER_00: if it becomes necessary,
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SPEAKER_00: is expensive in a way that most financial plans underestimate.
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SPEAKER_00: A higher monthly benefit in your 80s and 90s is not just a number.
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It's a structural resource at a time when your other options
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may be more limited.
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I looked at my numbers for a long time and then I did something
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I recommend.
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SPEAKER_00: I asked for a second opinion.
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SPEAKER_00: I asked ChatGPT to check my work.
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I want to be honest about this because I think some people will
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find it surprising
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SPEAKER_00: and others will find it obvious.
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SPEAKER_00: After I ran my own numbers,
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I asked ChatGPT to review my statement and help me think
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through the timing
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SPEAKER_00: question.
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SPEAKER_00: I am aware that this is not a licensed financial planner.
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I'm also aware that I was not asking it to manage my portfolio
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or give me a binding
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SPEAKER_00: recommendation.
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SPEAKER_00: I was asking it to help me pressure test my own thinking,
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catch anything I might have missed and organize the variables
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in a way that would
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SPEAKER_00: be useful for a conversation with an actual human professional.
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SPEAKER_00: And it was genuinely useful,
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SPEAKER_00: not because it told me anything I could not have found elsewhere,
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SPEAKER_00: but because it helped me articulate the right questions early.
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SPEAKER_00: Which birthday do I apply?
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These are real questions with real answers that vary depending
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on your specific situation.
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And getting them organized before you sit down with a
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professional is not a small thing.
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What I cannot tell you and what no spreadsheet can tell you is
8:02
what your life is
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SPEAKER_00: going to look like in 10 years.
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SPEAKER_00: What are you going to want?
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SPEAKER_00: What's going to matter?
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SPEAKER_00: That is the part that requires a different kind of thinking entirely.
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SPEAKER_00: But the mechanical question,
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SPEAKER_00: the which birthday and when to apply,
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the how earned income interacts with the benefit before full
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retirement age,
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SPEAKER_00: Getting those clear before you make the call is worth the time.
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I'm not a licensed financial planner and nothing I'm saying
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here is financial
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SPEAKER_00: advice for your situation.
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The variables are specific enough to each person that a
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professional who knows your
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SPEAKER_00: full picture is not optional.
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SPEAKER_00: It is the point.
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What I'm offering is what I actually did because I think it is
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useful to hear what
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SPEAKER_00: someone else's process looked like.
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There's a question nobody wants to ask out loud and here's the
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thing that has been
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sitting in the back of my mind all through all of this math
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what if the money's not
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SPEAKER_00: there
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SPEAKER_00: The projections have been saying it for years,
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and the Social Security Trustees' annual reports have made it
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clear that without
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SPEAKER_00: changes to the program,
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the trust funds to pay Social Security benefits are projected
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to be depleted at
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SPEAKER_00: some point in the 2030s.
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SPEAKER_00: That's only four to five years away.
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The specific year shifts depending on the report and the
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economic assumptions
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SPEAKER_00: behind it,
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SPEAKER_00: but the general picture has been consistent.
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SPEAKER_00: The program is currently structured,
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SPEAKER_00: is taking in less than it's paying out,
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SPEAKER_00: and the gap is not small.
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SPEAKER_00: When depletion happens, if it happens, the program does not simply stop.
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SPEAKER_00: What the projections show is that Social Security would be able to pay
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approximately 75 to 80 percent of the promised benefits from
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ongoing payroll tax
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SPEAKER_00: revenue alone,
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SPEAKER_00: which is not zero,
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SPEAKER_00: but it's also not what was promised.
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Congress has changed this program before In 1983 there were
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amendments made under
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Greenspan and Reagan They made significant changes to shore up
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the system They
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raised the retirement age They increased the payroll tax They
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made benefits
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partially taxable Changes on that scale are politically
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difficult and take years to
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SPEAKER_00: negotiate But they have happened
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SPEAKER_00: I think about the woman in the nursery school.
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SPEAKER_00: I think about the first paycheck and the explanation that felt solid.
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SPEAKER_00: Your retirement is guaranteed by the federal government.
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SPEAKER_00: I paid into this system for my entire working life.
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SPEAKER_00: 40 plus years.
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SPEAKER_00: That's not an abstraction.
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That is money that came out of every paycheck,
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every job,
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through every chapter.
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SPEAKER_00: The nursery school, the clinical work, the non-profit, all of it.
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SPEAKER_00: The Guarantee was the premise on which I organized part of my planning.
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And now I'm looking at projections that say the premise may
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need to be revised.
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SPEAKER_00: What I feel about that is something I suspect you recognize.
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SPEAKER_00: Not panic exactly, not despair.
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Something more like the specific frustration of having done
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what you were told to
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SPEAKER_00: do and then watching the ground shift anyway.
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I diversified thankfully not because I was especially skeptical
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of Social Security
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at 22 but because the math always told me one stream was not
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enough that instinct
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the one that said don't count on just one thing is looking like
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the most important
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SPEAKER_00: financial decision I made and I made it before I fully understood why the
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SPEAKER_00: retirement industry and the financial planning industry more broadly
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SPEAKER_00: tends to present Social Security as a settled input.
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You have your benefit amount,
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you pick your claiming age,
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you optimize the math,
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you move on.
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SPEAKER_00: That framing is not wrong.
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SPEAKER_00: The math matters.
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SPEAKER_00: I spent real time on it and I think you should too.
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But the framing leaves out is that this is not just a financial
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calculation.
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SPEAKER_00: It's a relationship with a promise,
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SPEAKER_00: a promise made when you were 16 or 22 or 35,
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a promise that was backed by the full faith and credit of the
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federal government in
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language that felt permanent and that has turned out to be more
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contingent than
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SPEAKER_00: that language suggested.
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Designing this chapter well means taking both things seriously,
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the math and the uncertainty.
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Not pretending the uncertainty does not exist and not letting
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it paralyze the math.
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The people who navigate this well are the ones who treat Social
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Security as one
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SPEAKER_00: piece of a picture that includes other income sources,
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SPEAKER_00: other savings,
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SPEAKER_00: other plans,
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SPEAKER_00: not because they distrusted the promise.
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because they understood at some level that designing a life on
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a single guarantee
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SPEAKER_00: is always a risk,
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SPEAKER_00: regardless of who made it.
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SPEAKER_00: That is not cynicism.
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SPEAKER_00: That is a discipline that makes options possible.
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SPEAKER_00: I have not made my financial decision yet about when I will claim.
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SPEAKER_00: I know the numbers.
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SPEAKER_00: I know my family history.
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I know the questions I need to have answered before I sit down
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with a professional
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SPEAKER_00: and make it official.
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SPEAKER_00: What I know more clearly than the timing is this.
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SPEAKER_00: I am grateful that I asked the question early enough to have choices.
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SPEAKER_00: Not everyone does.
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Some people hit 62 and claim because they need the money and
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there's no other answer available.
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SPEAKER_00: That is a real situation and it is a legitimate one.
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The timing decision is a luxury of having options and I do not
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take that lightly.
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SPEAKER_00: If you have options, the math is worth doing.
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SPEAKER_00: Not because it will give you certainty,
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SPEAKER_00: it will not,
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SPEAKER_00: but because it will tell you what you are actually choosing between.
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And knowing what you're choosing between is different from
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drifting into a decision
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SPEAKER_00: because someone at a party gave you permission to stop waiting.
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SPEAKER_00: Pull your Social Security statement.
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SPEAKER_00: It's free.
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SPEAKER_00: It is at ssa.gov.
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Look at the numbers at different claiming ages Build the simple
14:59
version of a
14:59
spreadsheet Run it out to 90 or 104 if that runs in your family
15:06
Then ask the harder
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SPEAKER_00: question What am I funding and for how long and with what?
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The question does not have a benefits calculator It has a life
15:20
I'm Catherine McDowell
15:22
And this is After the Rush If this one landed for you it would
15:26
be great if you
15:27
would share it with one person who is working through the
15:30
decision or who should be
15:33
And that is how this show grows and I'm genuinely grateful for
15:38
every share You can
15:40
find more at aftertherushletter.substack.com including weekly
15:47
articles and the full
15:48
SPEAKER_00: episode archive
15:51
SPEAKER_00: I'll be back Thursday Until then, stay well