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Your Social Security · Money In Motion with Klaas Financial

0:00
Speaker 1: Talking social security this week with our retirement planning professionals
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Speaker 1: from Class Financial. If you have a question, love to
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Speaker 1: have you join us this morning, get you on the
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Speaker 1: air six oh eight three two one thirteen ten at
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Speaker 1: six oh eight three two one thirteen ten. You can
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Speaker 1: learn more about Class Financial on their website Clossfinancial dot
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Speaker 1: com that's Coss Klaasfinancial dot com and their telephone number
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Speaker 1: six oh eight four four two five six three seven.
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Speaker 1: No charge for the initial gets to know your appointment
0:25
Speaker 1: tech Loss Financial. It will be complimentary to you again
0:28
Speaker 1: the number six oh eight four four two five six
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Speaker 1: three seven. And joining us this morning are our retirement
0:33
Speaker 1: planning professionals CJ Closs and Malia Quavis. CJ. How you
0:36
Speaker 1: doing this week?
0:38
Speaker 2: I'm doing great. How are you doing?
0:39
Speaker 1: Really well? Great to talk with you. Malia, how are
0:41
Speaker 1: you this morning?
0:42
Speaker 3: Very good? Happy Halloween, Happy Halloween.
0:44
Speaker 1: Great to have you back. I hope you went somewhere fun.
0:47
Speaker 1: I know you're out the last week and and I
0:49
Speaker 1: hope you didn't.
0:49
Speaker 3: Yeah, just sitting at home doing that, not a whole lot,
0:52
Speaker 3: but feeling good about it.
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Speaker 1: Nothing wrong with that, nothing wrong with that at all.
0:56
Speaker 1: We've got an exciting important, and I know this is
0:59
Speaker 1: a conversation that often garners a lot of questions. Don't
1:02
Speaker 1: forget phone lines or open as we talked this week
1:04
Speaker 1: about social security and really when's the right time to collect?
1:07
Speaker 1: We'll get to that in your call. Do all of
1:09
Speaker 1: that as the program rolls on. Another thing too, as
1:11
Speaker 1: the program rolls on a really cool feature of the
1:13
Speaker 1: show with the class Quiz question leak your chance to
1:15
Speaker 1: win a fantastic prize. This week, our friends from Class
1:17
Speaker 1: Financial provided a twenty five dollars gift card to Cole's
1:20
Speaker 1: tell you a little bit later on in the program
1:22
Speaker 1: how you can win that little tipto. Oftentimes, the question
1:24
Speaker 1: and answer to the Class Quiz Question the Week comes
1:27
Speaker 1: up during the program, so it definitely is good to
1:30
Speaker 1: pay close attention to the program. And speaking of the
1:32
Speaker 1: Class Quiz Question the week, let's actually take a look
1:34
Speaker 1: back at last week's show and get the question and
1:37
Speaker 1: answer there as well.
1:38
Speaker 3: Maleia, Yes, we had a good conversation about what you
1:41
Speaker 3: should be putting in place if you haven't already in
1:45
Speaker 3: terms of a state planning, because a state planning, retirement
1:48
Speaker 3: planning all fold in together. So the question of the
1:51
Speaker 3: week was there are two primary types of power of
1:54
Speaker 3: attorney documents. There's one for medical. What's the second type,
1:58
Speaker 3: Tom of Madison called in the correct answer. The answer
2:01
Speaker 3: is financial, So you should have a power of attorney
2:04
Speaker 3: for your financial as well. So listen carefully to today's
2:08
Speaker 3: show and for our question, and.
2:09
Speaker 1: Don't forget if you missed any part of last week's program,
2:11
Speaker 1: or you missed part today shoal step out, maybe dropping
2:14
Speaker 1: the grand kids or kiddos off at school or grabbing
2:16
Speaker 1: some coffee. Don't think you can always listen back at
2:18
Speaker 1: class financial dot com that's coss k l a A
2:20
Speaker 1: s Financial dot com. Say, we're gonna be talking about
2:23
Speaker 1: a big question, that magic question as folks look towards retiring,
2:26
Speaker 1: which is when is the right time to collect our
2:30
Speaker 1: Social Security benefit? And CJ, I'm going to put this
2:33
Speaker 1: on you have fun with it.
2:35
Speaker 2: Yeah, you know, we return to Social Security every every
2:38
Speaker 2: month or two to talk about it because it just
2:40
Speaker 2: impacts every American and certainly as you are planning for retirement,
2:45
Speaker 2: or even if you've had a spouse pass away recently,
2:49
Speaker 2: or if you had been married and now you've been remarried,
2:53
Speaker 2: there's a lot of confusion around normal retirement benefits and
2:57
Speaker 2: then survivor benefits and then having spousal benefits. I mean,
3:01
Speaker 2: and it is, it's actually quite confusing. And then you
3:03
Speaker 2: add onto that soci security disability and oh boy, before
3:06
Speaker 2: you know it, people's eyes are, you know, rolling in
3:08
Speaker 2: the back of their heads. So we are going to
3:10
Speaker 2: be focused at least now on just retirement benefits SoC security,
3:14
Speaker 2: retirement benefits for you, maybe some things through a spouse,
3:17
Speaker 2: but it is a mystery for a lot of people,
3:19
Speaker 2: like when do I draw and what is the optimal time?
3:22
Speaker 2: And so we're going to kind of build from the
3:24
Speaker 2: ground up. So a little education on where social security
3:29
Speaker 2: benefit is derived from. So remember your benefits were funded
3:34
Speaker 2: originally by payroll taxes that both your employer and you
3:38
Speaker 2: paid into. This is known as OASDI if you look
3:42
Speaker 2: at your paste UB or what they'll often refer to
3:47
Speaker 2: as FIKA, which is Medicare and OASDI. OASDI for those
3:52
Speaker 2: who don't know, is old age and Survivor's disability income.
3:55
Speaker 2: I mean, it's it's the social security withholding. So FIKA
4:01
Speaker 2: ends up being seven percent something. But the OASDI or
4:04
Speaker 2: the social security component of that that you pay is
4:08
Speaker 2: six point two percent of your wages, and then your employer,
4:12
Speaker 2: assuming you're not self employed, your employer pays the other
4:16
Speaker 2: six point two percent, which amounts to twelve point four
4:19
Speaker 2: percent of your income going into a future SOLI security benefit.
4:24
Speaker 2: So we should pause right there. WHOA like WHOA? If
4:29
Speaker 2: I'm an employee somewhere, are you saying, CJ, that between
4:32
Speaker 2: me and what my employer puts in for me, over
4:35
Speaker 2: twelve percent of my income from now until the day
4:38
Speaker 2: that I retire is going into Social Security. Yes. And
4:42
Speaker 2: that is the reason why when people just kind of
4:44
Speaker 2: with a cavalier statement say I don't think soci security
4:47
Speaker 2: is going to be there, I go, hold on, if
4:50
Speaker 2: what you are saying is actually true, you should be
4:53
Speaker 2: like picketing at the White House right now, because that's
4:55
Speaker 2: twelve percent of your income for a career that you
4:59
Speaker 2: just suddenly are saying not going to be there now.
5:02
Speaker 2: By the way, I'm sure there's some people listening to
5:04
Speaker 2: me right now in saying, CJ, do you not know
5:06
Speaker 2: the funding issues? I do. I'm aware that there's risk
5:09
Speaker 2: to Social Security. I'm aware that there's funding problems with
5:11
Speaker 2: Social Security, but I think all of us should get
5:14
Speaker 2: a little bit more educated on how much is going in,
5:18
Speaker 2: how much money that would equate to, and just recognizing
5:20
Speaker 2: that actually we should all be working very hard to
5:23
Speaker 2: make that make sure that soci security is there. Okay,
5:27
Speaker 2: with that being said, so then people say, well, is
5:29
Speaker 2: there a difference between when I can first take my
5:32
Speaker 2: benefit and when I reach a full benefit? And the
5:36
Speaker 2: answer is yes. So there's this concept in social security
5:39
Speaker 2: called your full retirement age. We have talked ad nauseum
5:43
Speaker 2: about your full retirement age on this show. So according
5:46
Speaker 2: to Social Security, if you are born between nineteen forty
5:49
Speaker 2: three and nineteen fifty four, your full retirement age is
5:54
Speaker 2: sixty six flat. For those born between nineteen fifty five
5:58
Speaker 2: and nineteen fifty nine, or full retirement age is sixty
6:01
Speaker 2: six plus some number of months, so sixty six and
6:04
Speaker 2: two months or four months or six months or eight
6:07
Speaker 2: after nineteen sixty and like I'm raising my hand right now,
6:10
Speaker 2: I was born in the early nineteen eighties, your full
6:14
Speaker 2: soci security retirement age is sixty seven. Now here's the key.
6:19
Speaker 2: Your full retirement age is the time you can collect
6:23
Speaker 2: one hundred percent of your Social Security benefit with no
6:27
Speaker 2: reduction let me repeat that full retirement age, in the
6:30
Speaker 2: eyes of Social Security is the age at which you
6:33
Speaker 2: can collect one hundred percent of your Social Security benefit
6:35
Speaker 2: with no reduction. Therefore, if you draw early, all of
6:39
Speaker 2: us should be able to quickly say, well, that means
6:41
Speaker 2: I'm getting reduction. That's right. You can draw as early
6:44
Speaker 2: as sixty two, by the way, but if you're going
6:46
Speaker 2: to draw before your FRA, your full retirement age, we
6:50
Speaker 2: all know it's going to be some reduction. Now where
6:53
Speaker 2: it gets a little confusing as people go but wait, wait, wait,
6:56
Speaker 2: I thought I could draw even after my full retirement age.
7:00
Speaker 2: So what happens then? And the answer is, well, actually,
7:03
Speaker 2: you get delayed retirement credits. You can get additional monies
7:08
Speaker 2: for having weighted and in the eyes of Social Security,
7:11
Speaker 2: that is over one hundred percent of your benefit, right,
7:15
Speaker 2: if that makes sense. So sixty two up till say
7:18
Speaker 2: sixty five sixty six. Is this idea of a reduced
7:21
Speaker 2: benefit once I get to my full retirement age, which
7:24
Speaker 2: remember is different for each person. But once I get
7:27
Speaker 2: to my full retirement age, which is somewhere between sixty
7:30
Speaker 2: six and sixty seven, they consider that one hundred percent
7:33
Speaker 2: of my benefit but if I wait, I get delayed
7:35
Speaker 2: retirement credits that take it up to one hundred and
7:37
Speaker 2: eight and then one hundred and sixteen percent all the
7:41
Speaker 2: way up to age seventy. Here's the key, delayed retirement
7:45
Speaker 2: credits add eight percent per year flat tier benefit right
7:49
Speaker 2: now guaranteed, but it stops at age seventy. So often
7:53
Speaker 2: people will say, well, should I wait beyond age seventylan?
7:57
Speaker 2: I go no, no, because there's no longer and eight
8:01
Speaker 2: percent delayed retirement credits. So again, sixty two is the earliest,
8:04
Speaker 2: but it's going to be reduced. Somewhere between sixty six
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Speaker 2: and sixty seven is considered my one hundred percent unreduced
8:10
Speaker 2: full retirement age benefit, and then age seventy is when
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Speaker 2: delayed retirement credits end.
8:16
Speaker 1: Talking this morning with CJ. Coloss and Malia Quavis, i'll
8:18
Speaker 1: retirement planning professionals from Class Financial the website class financial
8:22
Speaker 1: dot com. That's Class k LaaS Financial dot com. Tell
8:25
Speaker 1: phan number for the office here in Madison six so
8:27
Speaker 1: eight to four four two five six three seven, So CJH.
8:31
Speaker 1: Is there are there tools out there folks can be
8:33
Speaker 1: using websites sort of the things that folks can go
8:35
Speaker 1: to to kind of get an idea of where they're
8:37
Speaker 1: headed and what they might expect when it comes to
8:40
Speaker 1: Social Security.
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Speaker 2: Yeah, thanks for pointing that out, Sean so so To.
8:44
Speaker 2: The answer is yes, So SSA dot gov is a
8:46
Speaker 2: wonderful website that you should consider. Just about every American
8:49
Speaker 2: should consider setting up a secure log in making sure
8:53
Speaker 2: that when they earn income and their employer and they
8:57
Speaker 2: pay money into soci Security, that Social Security is receiving
8:59
Speaker 2: that record accurately. Because this is you know, hundreds of
9:02
Speaker 2: millions of Americans, there could be errors that occur. So
9:06
Speaker 2: number one, set up a log and just to make
9:07
Speaker 2: sure that your earnings are getting attributed to Social Security,
9:11
Speaker 2: because again, if it's twelve percent of your earnings, this
9:13
Speaker 2: could be a big number in the future, and it
9:15
Speaker 2: is for many of the people that we work with.
9:16
Speaker 2: So set up a log in SSA dot gov. I
9:19
Speaker 2: don't tend to be really positive about government websites, but
9:23
Speaker 2: this is one of the exceptions. It's actually really good.
9:26
Speaker 2: Now because it's a complex system, there's only so much
9:29
Speaker 2: that they can show to you. So I will warn
9:31
Speaker 2: you you'll you'll need to set that up and if
9:33
Speaker 2: you have any unique circumstances that are impacting you. They
9:36
Speaker 2: may not be able to display that to you accurately
9:38
Speaker 2: within the website, but at least you can get some
9:41
Speaker 2: some basic understanding. And I'll add to that. You know,
9:44
Speaker 2: I haven't really gotten into so like when should I
9:46
Speaker 2: draw right? You haven't answered that question. We're going to
9:49
Speaker 2: get into that a little bit more. But generally speaking,
9:53
Speaker 2: we like to see people try to get at least
9:56
Speaker 2: to their full retirement age benefit. Surprise, surprise, the most
10:00
Speaker 2: common age to draw is like sixty two or sixty
10:02
Speaker 2: three because people are uneducated and or fearful of Social Security,
10:06
Speaker 2: so they just grab it as soon as they're eligible.
10:09
Speaker 2: But generally speaking, we would suggest try to at a
10:12
Speaker 2: minimum get to your FRA and then obviously meet with
10:15
Speaker 2: an advisor if you have unique circumstances.
10:17
Speaker 1: Talking this morning, we see j Colossamalia Quavis, our retirement
10:19
Speaker 1: planning professionals from Class Financial, the website Classfinancial dot Com,
10:23
Speaker 1: delfht number six so eight four four two five six
10:25
Speaker 1: three seven, and Malia As we kind of break this
10:28
Speaker 1: down and kind of figure out and try to compile
10:32
Speaker 1: are social Security how exactly is that benefit determined? And
10:36
Speaker 1: can my benefit go up over time.
10:40
Speaker 3: Yeah, that's an excellent question. It's one of those curious
10:42
Speaker 3: things people scratch their heads about. It's like, how do
10:45
Speaker 3: they how does this number even you know, come out
10:47
Speaker 3: of the computer. So we like to start back kind
10:51
Speaker 3: of educating people again understanding that first of all, you
10:55
Speaker 3: need to have enough credits to even qualify to receive
10:58
Speaker 3: Social Security benefits. People say, well, what are the what
11:01
Speaker 3: are you talking about? What are credits? So as you
11:03
Speaker 3: work and pay taxes, you earn these these items called
11:07
Speaker 3: Social Security credits. So for example, in twenty twenty four,
11:12
Speaker 3: you earn one credit for each seventeen hundred and thirty
11:15
Speaker 3: dollars of earnings. And you've been doing this your whole life,
11:19
Speaker 3: and that number has continued to increase. The most credits
11:24
Speaker 3: that you can actually accumulate in one year, regardless of
11:27
Speaker 3: your income, is a maximum of four credits per year.
11:31
Speaker 3: So obviously you can get a credit for you know, working,
11:34
Speaker 3: you know, earning much higher amounts, but you're only going
11:37
Speaker 3: to get a max of four credits. Now, the amount
11:40
Speaker 3: of money needed to earn one credit usually goes up
11:42
Speaker 3: each year, as I said, and most people need forty
11:45
Speaker 3: credits or ten years of work to qualify for a benefit.
11:49
Speaker 3: So if you if you stop working before you have
11:52
Speaker 3: enough credits to qualify for benefits, your credits stay on
11:55
Speaker 3: your record, and then if you return to work later on,
11:58
Speaker 3: more credits will be added. And so this is what
12:01
Speaker 3: we talk about with a lot of you know, our
12:04
Speaker 3: clients who maybe were homemakers for a few years, were
12:08
Speaker 3: in and out of the workforce, and at some point
12:11
Speaker 3: it could make sense for them to go back into
12:14
Speaker 3: the workforce to accumulate more credits to make sure that
12:18
Speaker 3: they have a ten year period where they do have
12:20
Speaker 3: a Social Security benefit available to them. So what if
12:24
Speaker 3: you don't have them As you enter retirement, you don't
12:27
Speaker 3: have at least forty credits, you are not currently entitled
12:32
Speaker 3: to retirement retirement benefit. But if you stop working, as
12:36
Speaker 3: I said, those credits will stay on your record. So
12:39
Speaker 3: you can go to SSA dot gov that CJ mentioned
12:42
Speaker 3: you can read their publication how you earn credits to
12:47
Speaker 3: add to that potential benefit in the future. Assuming you
12:51
Speaker 3: have enough credits, your Social Security benefit is going to
12:55
Speaker 3: use this calculation based on a thirty five year average
12:58
Speaker 3: of your covered wages. They look at just the highest
13:02
Speaker 3: years in that thirty five year period, and then they
13:05
Speaker 3: adjust the wages for inflation before they average it out.
13:10
Speaker 3: And that's where people are scratching their head even more. Well,
13:12
Speaker 3: if I got a zero, you know, one year, but
13:15
Speaker 3: I got a higher amount the next year, they are
13:17
Speaker 3: going to look at the highest highest amounts in that
13:21
Speaker 3: thirty five year period and average those together. The next
13:25
Speaker 3: question always is, okay, well, there's cost of living, you know,
13:29
Speaker 3: increases every year. How does that affect my Social Security?
13:33
Speaker 3: So you are actually eligible for that cost of living benefit.
13:37
Speaker 3: I'm starting with the year you become age sixty two,
13:40
Speaker 3: and as CJ mentioned, sixty two is the earliest for
13:44
Speaker 3: normal Social Security benefits to be turned on. So that
13:48
Speaker 3: cost of living benefit, that's true even if you don't
13:51
Speaker 3: get benefits until your full retirement age or age seventy.
13:55
Speaker 3: So those increases apply to your benefit and up to
14:00
Speaker 3: the year you actually start receiving benefits. So, for example,
14:05
Speaker 3: here in twenty twenty four, social Security did their cola
14:09
Speaker 3: adjustment up three point two percent. It's been announced for
14:13
Speaker 3: twenty twenty five that will increase by two and a
14:16
Speaker 3: half percent, again reflecting inflation or the reduction of inflation.
14:21
Speaker 3: And what that will equate to for people is about
14:25
Speaker 3: fifty dollars per month per benefit in your household. For
14:28
Speaker 3: some people be a little bit more, but that's the average.
14:32
Speaker 3: And obviously, you know, we hear on the back end
14:36
Speaker 3: is like, well, my Social Security benefit it's going to
14:39
Speaker 3: go up, likely Medicare will too, and it'll eat it up.
14:42
Speaker 3: And sometimes that's true and sometimes it's not, but it
14:45
Speaker 3: does reflect the current inflationary situation we're in. Finally, if
14:51
Speaker 3: you're a government worker and you have a pension, there's
14:53
Speaker 3: a whole different formula. It's applied to your average indexed
14:56
Speaker 3: monthly earning. So we suggest again go to SSA dot
15:01
Speaker 3: gov and you can look at the Windfall Elimination Provision
15:04
Speaker 3: the web and that will help calculate what you might
15:07
Speaker 3: be looking at as a future benefit.
15:10
Speaker 1: Really good tools there. As we talk with Malia Quavis
15:12
Speaker 1: and CJ. Closs, our retirement planning professionals from Class Financial.
15:15
Speaker 1: The website, it's class financial dot com. That's spelled class
15:19
Speaker 1: k l a A S Financial dot com. Telephone number
15:22
Speaker 1: six oh eight four four two five six three seven.
15:25
Speaker 1: No charge for the financial get to know you appointment
15:27
Speaker 1: at Loss Financial. It will be complementary to you again
15:30
Speaker 1: their number six oh eight four four two five six
15:32
Speaker 1: three seven. So what's the best age to start your benefit?
15:36
Speaker 1: We'll find out maybe a little bit next as Money
15:39
Speaker 1: in Motion with Glass Financial continues right here at thirteen
15:41
Speaker 1: ten wib A talking with our retirement planning professionals CJ.
15:45
Speaker 1: Closs and Malia Quavis. Of course they come to us
15:47
Speaker 1: from Class Financial. The website coss financial dot com. That's
15:50
Speaker 1: Class k l a A s Financial dot com. Great
15:53
Speaker 1: place to learn more about Coss Financial. There's separate divisions.
15:56
Speaker 1: You can know the team as well and sign up
15:59
Speaker 1: for the weekly market Paul's snowsletter. That all available to
16:01
Speaker 1: you at classfinancial dot com. Tellfh number six oh eight
16:04
Speaker 1: four four two five six three seven. No charge for
16:07
Speaker 1: that initial get to know your appointment at Class Financial.
16:09
Speaker 1: It will be complimentary to you again their number six
16:12
Speaker 1: oh eight four four two five six three seven. Talking
16:15
Speaker 1: this week about social security and Malia Uh, is there
16:19
Speaker 1: a way for someone to figure out what their best
16:20
Speaker 1: age to start their benefits? And if you start collecting earlier,
16:24
Speaker 1: what kind of reduction are we looking at?
16:27
Speaker 3: Yeah, show wants to collect today, so we're talk them
16:29
Speaker 3: off that Cliff. You know, it really depends our favorite
16:33
Speaker 3: word on the shows, depends on each person situation. And
16:37
Speaker 3: I will say the people get so excited. Admittedly I
16:41
Speaker 3: understand this because they've been paying into Social Security for
16:45
Speaker 3: so many years and it's almost like, Okay, I get
16:48
Speaker 3: to finally collect yay. And so this is similar to
16:52
Speaker 3: our shows. When we talk about signing up for a
16:55
Speaker 3: pension that you might receive, people get very excited. Okay,
16:57
Speaker 3: I'm just going to mark the box and be done.
16:59
Speaker 3: And on this is where we do want you to
17:01
Speaker 3: slow down because this really depends on your personal household situation.
17:07
Speaker 3: So we need to consider other first of all, other
17:09
Speaker 3: income sources that you might have when you retire. So
17:13
Speaker 3: are you going to have spousal benefits? Is there part
17:16
Speaker 3: time working income in the household? How much is that
17:19
Speaker 3: working income? Because that may suggest to us you should
17:22
Speaker 3: delay because you don't want to get benefit pulled back
17:26
Speaker 3: without understanding why it's getting pulled back, because there are
17:29
Speaker 3: income thresholds if you're taking Social Security early. And also
17:34
Speaker 3: we're going to look at, you know, existing debt. Is
17:37
Speaker 3: it you know, is a cash flow coming into your
17:40
Speaker 3: house and a lot of it's going towards mortgage or
17:43
Speaker 3: other outside debts. So there is quite a few things
17:46
Speaker 3: to consider for your specific situation. And then we have
17:50
Speaker 3: to look at life expectancy, which obviously can be difficult
17:53
Speaker 3: to estimate. So all of those factors go into it.
17:57
Speaker 3: So some people, you know, generally, they'll lean towards starting
18:01
Speaker 3: Social Security as soon as they're eligible. And I'll tell
18:04
Speaker 3: you what, many times that's because they're talking to their
18:06
Speaker 3: neighbor or colleague and they're like, well, I'm starting this year,
18:09
Speaker 3: so they feel like they should start this year. Well
18:11
Speaker 3: it's not necessarily, you know, apples to apples. So one
18:16
Speaker 3: other thing to recognize, and cee J mentioned about what
18:19
Speaker 3: full retirement age is according to Social Security, that age
18:23
Speaker 3: could adjust in future years because you do have to
18:28
Speaker 3: realize right now that Social Security is accommodating nearly seventy
18:34
Speaker 3: million people that receive benefits in some form today. So
18:37
Speaker 3: those aren't just retirement benefits. Those could be disability benefits,
18:41
Speaker 3: widow benefits, and survivor benefits, etc. So understand it is
18:45
Speaker 3: a big system. Things could get adjusted in the future.
18:49
Speaker 3: But let's talk about if you do say I am
18:51
Speaker 3: going to take my benefit earlier, I just want to
18:55
Speaker 3: just start it up. What is that really going to
18:57
Speaker 3: look like? So a few examples again based on if
19:01
Speaker 3: we say a full retirement age of sixty six years
19:04
Speaker 3: and two months, if that is your full retirement age.
19:09
Speaker 3: If you start collecting at age sixty two, knowing that
19:13
Speaker 3: sixty six years and two months is your full retirement age,
19:16
Speaker 3: Sean right out of the gate says I'm sixty two,
19:18
Speaker 3: I'm collecting, what is that going to look like? You'd
19:22
Speaker 3: receive about seventy four point two percent of your monthly benefit.
19:26
Speaker 3: So that's a thirty percent reduction that never changes. You're
19:30
Speaker 3: always going to be starting a third behind. And I
19:34
Speaker 3: don't think over time that makes sense for a lot
19:37
Speaker 3: of people. Some people, it does a lot of people.
19:40
Speaker 3: It doesn't. Age sixty five, you're going to receive about
19:43
Speaker 3: ninety two point two percent of that full benefit. Now, again,
19:48
Speaker 3: people get fixated on ages. We talked about ages a
19:50
Speaker 3: lot on this show. Sixty two, sixty five, sixty seven,
19:53
Speaker 3: et cetera, seventy But what's what you need to know
19:56
Speaker 3: is the sliding amount. You could start at age sixty three,
20:00
Speaker 3: sixty four, sixty five. So it doesn't matter as far
20:02
Speaker 3: as the actual year you start, but understand there will
20:05
Speaker 3: be a reduction in your benefit and it's a permanent reduction.
20:09
Speaker 3: So the fact is, even though we know your benefit grows,
20:13
Speaker 3: is the longer you wait. We look back at data.
20:16
Speaker 3: Social Security data from twenty twenty two shows that the
20:19
Speaker 3: average age people begin benefits is about sixty five, So
20:23
Speaker 3: this has gradually increased from the age sixty two. But
20:27
Speaker 3: again most people are starting at a couple years prior,
20:31
Speaker 3: which doesn't mean prior to full retirement, ah, which does
20:34
Speaker 3: not mean that's what you should do, but just understand
20:36
Speaker 3: statistically what's happening out there.
20:39
Speaker 1: Really cool getting some of that information, some of that data,
20:41
Speaker 1: and it's really cool as we talk with CJ and
20:43
Speaker 1: Malia each and every week here on Money in Motion.
20:45
Speaker 1: If you ever have questions or want to listen back
20:47
Speaker 1: to the program. A lot of great information up at
20:49
Speaker 1: cossfinancial dot com. That's Coss Klaas Financial dot com. They're
20:53
Speaker 1: twell for number six eight four four two five, six
20:56
Speaker 1: three seven and CJ bringing you back in on the conversation,
21:00
Speaker 1: let's talk about that word break even and what exactly
21:02
Speaker 1: that break even ages and kind of how does that work,
21:05
Speaker 1: kind of put out into practice.
21:08
Speaker 2: Yes, so you know, up until now, most of what
21:10
Speaker 2: we've been talking about we've either discussed before on the
21:13
Speaker 2: show or it's more common language. Although I have to
21:18
Speaker 2: admit everything with social security is complicated enough you could
21:21
Speaker 2: hear it a hundred times in your life and may
21:22
Speaker 2: not still remember it. But this idea of break even
21:26
Speaker 2: is i'll call it more of a sophisticated concept. So
21:29
Speaker 2: some of you may not have heard of this. Others
21:32
Speaker 2: of you, you know, it may be old hat. But
21:35
Speaker 2: when you choose to start benefits early, as Malia just
21:39
Speaker 2: mentioned before, that decision becomes permanent. Now there actually is
21:43
Speaker 2: a way to stop that and pay back all the
21:46
Speaker 2: money and then like start back up the crew, but
21:49
Speaker 2: my goodness, it's a disaster, and most people can't do that.
21:51
Speaker 2: So once you start, it's tick typically after a short
21:54
Speaker 2: period of time, a permanent decision. And so as Malia
21:57
Speaker 2: just mentioned, your benefits are reduced for the rest of
22:00
Speaker 2: your life, not just until full retirement age. That's actually
22:03
Speaker 2: a permanent reduction. So therefore, here's this concept of break even.
22:07
Speaker 2: If I start at six, my benefits at sixty two
22:10
Speaker 2: versus another version of me starts it at full retirement age,
22:15
Speaker 2: let's say at sixty seven versus another version of me
22:18
Speaker 2: starts at age seventy, and then I just basically keep
22:22
Speaker 2: track of an EXCEL formula in nominal terms. For those
22:26
Speaker 2: of you who don't know what I mean by nominal terms,
22:27
Speaker 2: I'm just talking in pure dollar terms, not in terms
22:30
Speaker 2: of inflation adjustments. So just in nominal terms, when does
22:34
Speaker 2: the cumulative amount that I have received from Social Security
22:38
Speaker 2: break even? Okay, So that's the concept of break even again,
22:42
Speaker 2: one version at sixty two, another version of me at
22:45
Speaker 2: sixty seven, another version of me at seventy. When do
22:47
Speaker 2: they break even? Well, here's an example. If you were
22:50
Speaker 2: born in nineteen sixty two, your full retirement age is
22:54
Speaker 2: sixty seven. Therefore, if you start benefits at sixty two
22:59
Speaker 2: this year and twenty twenty four, your monthly amount would
23:02
Speaker 2: be reduced by thirty percent. Okay, So that's that reduction
23:06
Speaker 2: from sixty seven down to sixty two. So if your
23:10
Speaker 2: full retirement age benefit amount, your FRA amount was going
23:14
Speaker 2: to be one thousand dollars a month, well, if you're
23:17
Speaker 2: gonna start at sixty two, it would be seven hundred
23:19
Speaker 2: dollars a month. That's that thirty percent reduction. If you
23:22
Speaker 2: waited until your full retirement age at sixty seven, as
23:25
Speaker 2: I just mentioned, you'd get one thousand dollars per month,
23:27
Speaker 2: totaling twelve thousand dollars per year. But since you started early,
23:32
Speaker 2: it means you're collecting eight thousand, four hundred dollars per
23:35
Speaker 2: year instead of the twelve thousand dollars per year. Okay,
23:40
Speaker 2: if that makes sense. But here's the key. I started early.
23:43
Speaker 2: I'm sixty two right, This later version of myself, you know,
23:47
Speaker 2: is five years behind. So I get eighty four hundred
23:50
Speaker 2: dollars per year, which for the first five years accumulates
23:54
Speaker 2: forty two thousand dollars more than I would have had
23:57
Speaker 2: if I had waited to sixty seven. Well, when you
24:00
Speaker 2: run that mass, so I'm forty two thousand dollars ahead,
24:03
Speaker 2: but I'm only getting eighty four hundred a year. And
24:05
Speaker 2: then this other version of myself starts at twelve thousand
24:07
Speaker 2: a year. The question is when do the nominal dollars
24:10
Speaker 2: break even? And the answer is at seventy eight years
24:14
Speaker 2: and eight months. Again at seventy eight years old and
24:18
Speaker 2: eight months. So as you can see, it's like, oh,
24:22
Speaker 2: that's kind of interesting. Well, here would be a way
24:25
Speaker 2: to almost manage that. If I am really unhealthy and
24:29
Speaker 2: or I have a chronic illness and I'm retired, I
24:32
Speaker 2: might want to draw early because there's no guarante I'm
24:34
Speaker 2: going to live to seventy eight years and eight months.
24:36
Speaker 2: But if I have a lot of longevity in my genes,
24:39
Speaker 2: goodness gracious, and everybody in my family lived to eighty
24:41
Speaker 2: five to ninety five to one hundred, well, then I
24:44
Speaker 2: should probably wait longer because then I'd be money ahead.
24:47
Speaker 2: And it's like ding ding ding, a light bulb is
24:49
Speaker 2: going off. Right. You get the idea. You can quote
24:52
Speaker 2: unquote game social security to the extent that you know
24:55
Speaker 2: the future, which none of us do. Well, you can
24:57
Speaker 2: game it by saying, hey, based upon my life exp
25:00
Speaker 2: and see a family, and my health, I could draw
25:02
Speaker 2: a little earlier or later based on these break even calculations.
25:06
Speaker 2: Now we could nerd out for another hour, and I
25:08
Speaker 2: could just ramble on and on and on about a
25:10
Speaker 2: lot of different considerations like inflation adjustments and what about
25:13
Speaker 2: real rates of return and what if you took that
25:15
Speaker 2: money and invested it. But at a basic level, this
25:18
Speaker 2: concept of break even at around seventy eight years and
25:21
Speaker 2: eight months is something that you should pause and recognize.
25:24
Speaker 2: And one final thought on them, surprise, surprise, what do
25:28
Speaker 2: you think life expectancy is for the average American? Right
25:33
Speaker 2: about eighty? Isn't that interesting? So people go, oh, social
25:37
Speaker 2: Security wants me to draw earlier, they want me to
25:39
Speaker 2: draw late, And I just laugh and I go, social
25:42
Speaker 2: Security could care less when you draw, because all of
25:46
Speaker 2: the numbers break even at average American life expectancy. So
25:50
Speaker 2: if you draw it sixty two, sixty seven, or seventy,
25:52
Speaker 2: they all tend to break even right around between seventy
25:55
Speaker 2: nine and eighty, which means it doesn't matter to Social Security.
25:58
Speaker 2: It is irrelat to them. When you draw. It's not
26:02
Speaker 2: irrelevant to you, but it's irrelevant to Social Security administration.
26:06
Speaker 1: It's almost like they plan it that way, isn't it exactly?
26:09
Speaker 2: That's actually the point I'm making, Sean, They planned it.
26:11
Speaker 1: That way exactly. Talking this morning with CJ. Class In
26:13
Speaker 1: Malia Quavis, our retirement planning professionals from Class Financial, the
26:16
Speaker 1: website coss financial dot com. That's Class financial dot com.
26:20
Speaker 1: Teleph number six O eight four four two five six
26:22
Speaker 1: three seven, which is the Class quiz question week will
26:25
Speaker 1: do that next and wrap up our conversation about Social
26:27
Speaker 1: Security as money in Motion with cost Financial continues right
26:30
Speaker 1: here on thirteen ten WIBA talking with our retirement planning
26:34
Speaker 1: professional CJ Closs and Malia Quavis. The website coss Financial
26:38
Speaker 1: dot com. The telephone number six oh eight four four
26:40
Speaker 1: two five six three seven. So CJ, let's say I
26:43
Speaker 1: don't have enough credits to qualify for my own Social
26:47
Speaker 1: Security benefits? What can I do? Are their options?
26:51
Speaker 2: Yeah, if you don't qualify for your own benefits based
26:53
Speaker 2: on your own record, which Malia was talking earlier about,
26:56
Speaker 2: how you qualify, right, it's the about ten years worth
26:59
Speaker 2: of earn as an American citizen paying into Social Security Administration,
27:03
Speaker 2: and then once you're beyond that, they take your highest
27:05
Speaker 2: thirty five year inflation adjusted wages to come up with
27:08
Speaker 2: a number to try to solve for. But even if
27:12
Speaker 2: you don't qualify for that, so say you've only worked
27:14
Speaker 2: for eight years or five years, or maybe you never
27:17
Speaker 2: worked outside of the home and you've been home with children,
27:20
Speaker 2: it doesn't mean you won't get a benefit. You may
27:22
Speaker 2: still be eligible to receive some sort of a benefit
27:26
Speaker 2: even if you're divorced, or your spouse has passed away.
27:29
Speaker 2: So here's some of those situations that might apply to you. Unfortunately,
27:33
Speaker 2: we don't have enough time for me to dig into
27:35
Speaker 2: each of these, but I'll just mention them and then
27:36
Speaker 2: if you have questions, you can follow up with us
27:38
Speaker 2: or your financial advisor. So one area would be spousal benefits.
27:43
Speaker 2: If you qualify or to qualify for spousal benefits, you
27:47
Speaker 2: need to be at least sixty two years old, or
27:50
Speaker 2: if you're caring for a child under sixteen or a
27:52
Speaker 2: distabled child. You can qualify at any age. That's for
27:56
Speaker 2: spousal benefits. If you are spousal benefits at your full
28:02
Speaker 2: retirement age, you receive fifty percent of the monthly benefit
28:06
Speaker 2: your spouse would receive if they began benefits at their
28:11
Speaker 2: full retirement age. Let me repeat that, if you start
28:15
Speaker 2: your spousal benefits, so again, say I was a stay
28:18
Speaker 2: at home parent, my wife worked. I don't qualify on
28:21
Speaker 2: my own record, but my wife does. If I start
28:26
Speaker 2: my spousal benefit at my full retirement age, which would
28:29
Speaker 2: be sixty seven, I would receive fifty percent of what
28:33
Speaker 2: my spouses benefit would have been at full retirement age.
28:37
Speaker 2: So this is three thousand dollars a month I would
28:38
Speaker 2: get fifteen hundred. Keep in mind, if you start before
28:42
Speaker 2: you reach your full retirement age, you will get a
28:44
Speaker 2: permanent reduction if your spouse has passed away. Here's what
28:50
Speaker 2: you should know about widow or widower's benefits. You can
28:52
Speaker 2: actually start benefits based on your own record and later
28:55
Speaker 2: switch to survivor benefits, or start with survivor benefits and
28:59
Speaker 2: then switch to your own record later on. By the way,
29:02
Speaker 2: that whole thing is really complicated, So I suggest you
29:05
Speaker 2: talked to talk to a financial advisor if your ex
29:08
Speaker 2: spouse passes away. So again, now you're divorce but that
29:11
Speaker 2: ex spouse has passed away. You may also qualify for
29:14
Speaker 2: a survivor benefit similar to a widow or widower benefit,
29:17
Speaker 2: but you'd have to work with Social Security to figure
29:19
Speaker 2: out what that would be. And if you're divorced and
29:22
Speaker 2: considering survivor benefits and you're at least age sixty and
29:26
Speaker 2: the marriage lasted at least ten years and you didn't
29:30
Speaker 2: remarry before age sixty, you may be able to collect
29:33
Speaker 2: on your late expouses record. Okay, hopefully everybody's getting the idea.
29:38
Speaker 2: Like whoa a lot of different even if I'm not
29:44
Speaker 2: eligible for my own benefit, right didn't work ten years,
29:48
Speaker 2: it wasn't an American citizen long enough, whatever it might be.
29:51
Speaker 2: You know, on there could be different situations that might
29:55
Speaker 2: apply to you, which often is why we tell people
29:58
Speaker 2: if you've got any comple exity and social security, just
30:01
Speaker 2: sit down with a social security expert and they can
30:04
Speaker 2: give you a lot of help.
30:05
Speaker 1: Really important guidance and one fast thing a final thing
30:07
Speaker 1: here quick, Malia. I think a lot of folks wonder
30:10
Speaker 1: is when do I need to apply? Do I apply
30:12
Speaker 1: the day I want to start collecting? I'm going to
30:14
Speaker 1: guess that's probably a bad idea.
30:16
Speaker 3: Probably you probably want to look at a plane up
30:19
Speaker 3: to four months ahead of when you want your benefits
30:21
Speaker 3: to start, So it doesn't have to be four months,
30:23
Speaker 3: but that's the earliest you can. For example, if you're
30:26
Speaker 3: turning sixty two on April second next year and you
30:29
Speaker 3: want your benefits to begin in April, you can apply
30:31
Speaker 3: as early as December, So put that on your calendar
30:34
Speaker 3: if that's your goal. But as CJ said, sit down
30:36
Speaker 3: with your your financial advisor to make sure you're when
30:40
Speaker 3: you want to start is the right time to start
30:42
Speaker 3: in your situation.
30:44
Speaker 1: Important timing, important conversation as well. Of course, speaking of conversations,
30:47
Speaker 1: don't forget no charge on that initial appointment conversation that
30:49
Speaker 1: class Financially, it will be complimentary to you. Telphy number
30:52
Speaker 1: six so eight four four to two five six three seven.
30:54
Speaker 1: I want to hold on to that tel ful number
30:56
Speaker 1: as well, because in just a moment through the class
30:57
Speaker 1: quiz questioned leak be your chance to win a twenty
30:59
Speaker 1: five dollars gift card to Coles this week's Closs Quiz
31:02
Speaker 1: question week is this true or false? Once you reach
31:05
Speaker 1: full retirement age, you are entitled to receive one hundred
31:09
Speaker 1: percent of your Social Security benefit. Telphon number six oh
31:12
Speaker 1: eight four four two five six three seven. First call
31:15
Speaker 1: correct answer win the twenty five dollars gift card two
31:17
Speaker 1: Coals again telphone number six oh eight four four two
31:20
Speaker 1: five six three seven. Of course, the website for Class
31:23
Speaker 1: Financial it is Cossfinancial dot com. That's Coss k l
31:27
Speaker 1: Aasfinancial dot com.
31:29
Speaker 2: CJ.
31:29
Speaker 1: Malia, It's always great talking with both of you guys.
31:31
Speaker 3: Have a fantastic day, Thanks Sean.
31:33
Speaker 2: Thanks