Latest / TaylorMade Retirement with Taylor Demars, CFP® / Give Me 8 Minutes And I'll Explain Why Everyone’s Claiming Early

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Give Me 8 Minutes And I'll Explain Why Everyone’s Claiming Early · TaylorMade Retirement with Taylor Demars, CFP®

• 0:00
  SPEAKER_01: Today's content is pulled from Taylor's YouTube channel.
• 0:04
  SPEAKER_01: If you want to watch the video version or catch more great content, subscribe by clicking the link in today's show description.
• 0:13
  SPEAKER_01: Welcome to Taylor Made Retirement, where we explore what it takes to build a retirement that works for your money and your life with third generation certified financial planner Taylor DeMars.
• 0:28
  SPEAKER_00: As we speak, millions of Americans are rushing to lock in their Social Security benefits early.
• 0:33
  SPEAKER_00: Claims are up 16% over last year, according to AARP.
• 0:38
  SPEAKER_00: And most of them are only looking at this from one angle.
• 0:40
  SPEAKER_00: After helping hundreds of people evaluate the optimal claiming strategy for their personal situation, I found that there are actually three distinct angles for this once-in-a-lifetime choice.
• 0:50
  SPEAKER_00: I call it the Social Security Triangle Analysis.
• 0:52
  SPEAKER_00: And it's that third angle, the one that nobody considers, that changes everything.
• 0:57
  SPEAKER_00: I'm Taylor Demars, certified financial planner and tax strategist, and today I'm going to walk you through all three angles so you can make this decision with the full picture and not just a piece of it.
• 1:07
  SPEAKER_00: A recent client of mine is a perfect example.
• 1:09
  SPEAKER_00: I'll call him George.
• 1:10
  SPEAKER_00: He's 61, semi-retired, and he and his wife Karen have about$3.1 million saved for retirement.
• 1:16
  SPEAKER_00: George had been going back and forth on when to claim Social Security for the past year.
• 1:21
  SPEAKER_00: And what made his case interesting is that the retirement lifestyle didn't hinge on this decision.
• 1:26
  SPEAKER_00: Him and Karen had saved rather well.
• 1:28
  SPEAKER_00: So when George said I want to take it early and start enjoying life while I have my health, I wasn't going to contest him.
• 1:34
  SPEAKER_00: But I suggested we considered his decision from all three angles of the Social Security triangle before making it final.
• 1:40
  SPEAKER_00: And it was the third angle that he hadn't even thought about that changed his whole perspective.
• 1:44
  SPEAKER_00: So let's start with the angle everyone focuses on, which I call quantitative.
• 1:49
  SPEAKER_00: This is where most people start and most people stop.
• 1:52
  SPEAKER_00: It's just the raw math of how much money you'll get from the system, depending on when you claim.
• 1:57
  SPEAKER_00: And it's this angle that creates the camp of people clamoring to delay as long as possible.
• 2:01
  SPEAKER_00: By age 70, your monthly check could be 77% larger than it would have been at 62.
• 2:07
  SPEAKER_00: That's a guaranteed inflation adjusted return for life.
• 2:11
  SPEAKER_00: You can't get that from a bond or a CD.
• 2:14
  SPEAKER_00: And research from financial planner Michael Kitsis shows that on a risk-adjusted basis, delaying Social Security often outperforms investing the equivalent amount in equities.
• 2:24
  SPEAKER_00: Because Social Security has no market risk, no sequence of returns risk, and comes with a built-in cost of living adjustment.
• 2:31
  SPEAKER_00: That cola compounds on a larger base every year.
• 2:34
  SPEAKER_00: So the gap between cleaning at 62 and claiming at 70 doesn't stay the same.
• 2:39
  SPEAKER_00: It actually widens over time.
• 2:41
  SPEAKER_00: Now, I know what some of you are thinking.
• 2:43
  SPEAKER_00: If I claim at 62, I can invest some in that money and come out ahead.
• 2:47
  SPEAKER_00: And depending on your rate of return, tax situation, how long you live, that very well could be true.
• 2:52
  SPEAKER_00: The typical break-even age is somewhere between age 80 and 85, so if you don't make it past that, claiming earlier may have been the better move on paper.
• 3:01
  SPEAKER_00: For George, the quantitative case pointed towards delaying, but it wasn't overwhelming.
• 3:07
  SPEAKER_00: His$3.1 million was going to fund retirement fine either way.
• 3:11
  SPEAKER_00: The math alone wasn't enough to change his mind.
• 3:13
  SPEAKER_00: So George then asked me something I hear all the time.
• 3:16
  SPEAKER_00: If the math only slightly favors waiting, why wouldn't I just take the money and enjoy it while I can?
• 3:22
  SPEAKER_00: And that's angle number two I call the qualitative side.
• 3:25
  SPEAKER_00: You don't know how long you'll live, and you want to use your healthy years, not try and save them for later.
• 3:30
  SPEAKER_00: And I see this firsthand with my own clients.
• 3:32
  SPEAKER_00: People who start Social Security earlier tend to actually spend more in retirement.
• 3:37
  SPEAKER_00: There's a psychological confidence that comes from having a fixed income source, depositing into your account every month, regardless of what the market is doing.
• 3:44
  SPEAKER_00: It gives people permission to live a fuller life earlier in retirement, no matter how much they've already saved.
• 3:50
  SPEAKER_00: These are legitimate reasons to claim early, and for some people, they're the right reasons.
• 3:55
  SPEAKER_00: But for George and Karen, the qualitative side wasn't where the real insight was hiding, because there's a third angle that neither of them had thought of before.
• 4:03
  SPEAKER_00: Now, if you're starting to realize this decision has more dimensions than you expected, and you want to see how your own Social Security triangle stacks up, click the link in the description to book a call with me so you can map out your retirement with confidence.
• 4:15
  SPEAKER_00: The shift started for George when I asked him a question that no one likes to dwell on.
• 4:19
  SPEAKER_00: I said, What happens to Karen if something happens to you?
• 4:22
  SPEAKER_00: He sat back in his chair, and after a year of running break-even calculators and reading articles about when to claim, nobody had asked him that.
• 4:30
  SPEAKER_00: It reminded me of the Mike Tyson quote that everyone has a plan until they get punched in the mouth.
• 4:35
  SPEAKER_00: Most couples have a plan for retirement, assuming everything goes right.
• 4:39
  SPEAKER_00: And very few have a plan for those what-if scenarios, and survivorship is one of those that's not only very severe but often overlooked.
• 4:46
  SPEAKER_00: Now you may already know this, but when one spouse passes away, you don't get to keep both Social Security checks.
• 4:52
  SPEAKER_00: The surviving spouse keeps the higher of the two.
• 4:55
  SPEAKER_00: So if George is collecting$3,800 per month and Karen is collecting$1,400 per month, and George passes first, Karen doesn't keep the$5,200.
• 5:05
  SPEAKER_00: She just keeps the$3,800.
• 5:07
  SPEAKER_00: That's a 27% drop in fixed Social Security income overnight.
• 5:11
  SPEAKER_00: But it gets worse because the income drop is just the beginning.
• 5:15
  SPEAKER_00: There's something called the widow's penalty, and it hits the surviving spouse from three directions at once.
• 5:20
  SPEAKER_00: First, the income drops.
• 5:22
  SPEAKER_00: Second, the standard deduction on their taxes gets cut in half.
• 5:26
  SPEAKER_00: And third, the tax bracket thresholds get cut roughly in half as well.
• 5:30
  SPEAKER_00: So Karen could jump from the 12% income tax bracket to the 22% bracket, 10% bump, despite having less income.
• 5:38
  SPEAKER_00: According to the Center for Financial Planning, despite receiving 25% less household income, a surviving spouse can end up paying roughly$4,000 more in federal taxes per year.
• 5:49
  SPEAKER_00: Less money coming in, more money going to the IRS.
• 5:53
  SPEAKER_00: And for couples with larger retirement account balances, the required minimum distributions push the surviving spouse even further into those compressed brackets.
• 6:00
  SPEAKER_00: And this compounds by crossing certain Medicare thresholds, making your premium spike too.
• 6:06
  SPEAKER_00: Now here's where George's claiming decision becomes a very different conversation.
• 6:09
  SPEAKER_00: If George claims at 62, he permanently reduces his benefit.
• 6:13
  SPEAKER_00: And that reduced benefit becomes the ceiling of what Karen can receive as a survivor for the rest of her life.
• 6:19
  SPEAKER_00: Women are four times more likely to outlive their husbands.
• 6:23
  SPEAKER_00: The average widow over 65 spends 12 to 15 years on her own.
• 6:28
  SPEAKER_00: George isn't just choosing when to start his Social Security, he's setting the floor for Karen's financial stability for what could be 10 to 15 years after he's gone.
• 6:37
  SPEAKER_00: And here's what ties this all together.
• 6:39
  SPEAKER_00: The official name for Social Security isn't actually Social Security.
• 6:43
  SPEAKER_00: It's called Old Age Survivors and Disability Insurance, OASDI.
• 6:48
  SPEAKER_00: It's literally an insurance program with the word survivors built right into its name.
• 6:53
  SPEAKER_00: And delaying your benefit is how you activate full coverage on the policy.
• 6:57
  SPEAKER_00: You've already paid for it.
• 6:58
  SPEAKER_00: You're not buying anything new.
• 7:00
  SPEAKER_00: You're just deciding whether to secure the full protection for your spouse's livelihood or lock in a permanent discount that follows them for the rest of their life.
• 7:08
  SPEAKER_00: When George saw these numbers and these angles, he didn't change his mind because of a spreadsheet.
• 7:13
  SPEAKER_00: His perspective changed because he saw the whole picture for the first time.
• 7:17
  SPEAKER_00: George and Karen decided to start her benefit earlier, but delayed his till 70 so that no matter what happens, Karen has the strongest possible foundation for the rest of her life.
• 7:27
  SPEAKER_00: And I want to be clear, not every client who triangulates their Social Security timing changes their claiming date.
• 7:34
  SPEAKER_00: But each one comes out the other side more confident that their choice is right for their situation, and that's the whole point.
• 7:41
  SPEAKER_00: This is a once-in-a-lifetime irreversible decision.
• 7:44
  SPEAKER_00: And here's the flexibility that most people miss.
• 7:47
  SPEAKER_00: If you planned a delay and something changes, like a health scare, a diagnosis, a shift in your financial picture, you can always pull the ripcord and claim earlier.
• 7:56
  SPEAKER_00: But if you claim early, that reduction is permanent for you and your spouse.
• 8:01
  SPEAKER_00: Now that you understand the three angles of the Social Security Triangle, the question is what does it mean for your situation?
• 8:08
  SPEAKER_00: Every couple's numbers, needs, and health are different.
• 8:11
  SPEAKER_00: And every couple deserves a plan that accounts for all three.
• 8:14
  SPEAKER_00: If you're looking for certainty around how Social Security timing fits into your retirement plan as a whole, click the link in the description or scan the QR code on screen to book a call with me.
• 8:24
  SPEAKER_00: And if you want to see more about the other side of this conversation about claiming earlier, watch my video on 5 smart reasons to claim Social Security at 62 that's on screen now.