We have heard so many people share their experiences about going to the Social Security Administrator and asking them but failing to get some answers. What people don’t know is that it is what it is by design. The government does not give any financial advice because it might backfire. Fortunately, there are financial advisors who are willing to take on the task instead and offer financial education to people. Thrive talks about how to maximize social benefits and its importance to navigating a successful retirement. Learn about the changes that happened to it together to help you make the most of your retirement planning.
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Maximize Social Security Benefits
David Bezar and Bret Elam are back in the studio. David, the introduction of our conversation is maximize Social Security benefits plus the importance of how to navigate it into a successful retirement.
As we do our educational workshops on a monthly basis, this is the one that has been a powerhouse for a lot of people that we serve because it’s a very confusing topic. At the workshop, people come in with tons of questions and we ask, “Have you gone to Social Security Administration to get your questions answered?” We already know this, but we ask anyway, “Have you visited and what the experience was like?” The common answer is, “We went and we couldn’t get a clear answer on what we were supposed to do.” That’s by design to be honest with you. Social Security Administration, in their operation manual, tells their clerical workers and their advisors internally that they can’t give information.
It’s a financial advice and the government doesn’t want liability in making recommendations that could backfire on a particular client. It’s an important topic. A lot of people need to know about it. It does have a major impact on how you do navigate retirement. Think about it, if we could get more money out of Social Security and have it delay someone from having to tap into their IRA accounts or retirement assets, two good things happen that way. One is we’re not reducing principal because we’re not withdrawing money out of our retirement assets. Two is when we don’t take money out of IRAs or 401(k)s or any type of tax qualified plan, we’re not paying taxes yet. There’s a window of opportunity to use Social Security and increase the benefits if you haven’t already taken them and understanding how to do that.
Bret, that maximize Social Security benefits is a big topic. It is a big phrase and a lot of times, as David mentioned, the audience has a hard time wrapping their arms around understanding that. We’re going to tell people about MaxMyPlans.com and give the audience an opportunity to go there and find out what’s there. What will they see?
The subject of Social Security can be confusing just like Medicare. We feel like we know quite a bit regarding that as well. Most of the people that we sit down with already have a financial advisor. Statistically, 22% of advisors find themselves very knowledgeable when it comes to Social Security. Continuing with that theme of education and advocacy, we saw the importance out there of bringing that education to the public. As David said, the government isn’t in a position where they can give that advice, they can give that information. As it says in the in the manual, give enough information so that people can make a decision but not necessarily giving the advice that’s out there. The software that we utilize on the MaxMyPlans.com, as long as we have some good information up front, what’s your date of birth along with how much am I going to receive at my full retirement age, the information that the government provides to you, we factor a little bit in with life expectancy. Then, from a mathematical standpoint, we’re able to show people inevitably how you can maximize their Social Security benefits.Give enough information so that people can make a decision. Click To Tweet
Our conversation, our topic, David, is maximize Social Security benefits plus its importance in navigating a successful retirement. Where do you begin when you start that conversation?
You had asked, “What does this MaxMyPlans.com website look like?” First of all, it’s got tons of information on it. It’s very interactive with the people who visit it. There are lots of facts and figures. There’s also a quiz that’s involved so people can test and see what they think they understand related to Social Security. There’s the option available that if they’d like to get a consultation or submit for this Social Security Maximization Report, which is the analysis of all these moving pieces about Social Security. Bret shared with you the data that we need. We ask about longevity. A lot of people take Social Security without thinking about it, 62, 66 or maybe age 70. In between those ages, there are many options available.
There’s also a lot of misinformation out there. The government has made some changes related to the benefit choices that you can take with Social Security. There still are some election choices that are available, that people don’t think, that both financial advisors, financial professionals and consumers think that they’re completely gone and that’s not true. There are still some avenues available where you can end up maximizing that benefit. Our discussion points are all related to what the actual need, what are the parameters of that particular client.
I want to make sure that if you joined us for the inaugural broadcast, one of the key phrases that we talked about was no pressure. This is about education. This is about being smart enough to know what you don’t know, which I say every day and then trying to wrap my arms around information that on the surface might appear to be challenging, but when taught or instructed in the right way will help you make a better decision or certainly put you in a position to help find success.
As a matter of fact, during this education process, we are so authentic with it because we understand people don’t even know what questions to ask. When it relates to Social Security, we bring up that Social Security is retirement planning. It’s a big component of it. We take people through an exercise where we need to understand what their income needs are going to be in retirement and we want to find out what those sources to fill those income needs are. We find that it basically breaks down to three things, Social Security benefits, retirement investments and possibly pension. We add up those income sources and minus off the expenses. If you remember back to our first show, Bret talked about we take people through a little bit of dental pain, that exercise is trying to figure out what’s the budget going to be like once you’re no longer working. Once we identify, we could either give a green light or a red light whether retirement is going to work or not.
Bret, dental pain can be hard sometimes for somebody you just meet, who shows up and is looking for answers.
We talked about in that report that we find out mathematically how we can maximize those benefits. What our job is, David and I, we extract the data from that report and figure out how’s it applicable to the person we’re sitting down in front of. Just because math works doesn’t mean it fits into reality for somebody. Going through that dental pain process where it may make sense that we need to wait all the way out until age 70, where we’re letting Social Security defer at 8% a year. Everybody’s situation’s different. The report is great. It tells us exactly what to do, but at the end of the day, it’s got to fit into the plan so inevitably what people are looking for in retirement.
David, set the table for our audience so we can transition them into the next step.
We’re going to try to stress that Social Security is part of the foundation of retirement income planning. We want to teach people to manage Social Security just like any other asset they have. It’s going to make up for most families, almost 65% of household income. It’s important to try to get it to have more value than we think it has. Number two is we want to get people to understand it’s a critical retirement decision. In fact, the difference between the best election choice and the worst election choice routinely is an extra $30,000 to $50,000 of lifetime benefit. We’ve seen it in our office as high as $170,000.
We said to that client, “Every extra $170,000 in retirement helps.” We wanted to make sure of that. Then lastly, we tell people it’s the best annuity that you can buy, and we don’t mean annuity in the general sense. What we mean is, “Every dollar that you can get out of Social Security prevents you from having to take a dollar out of retirement assets.” Like I said, if we can delay that process, you’re not paying taxes on those retirement distributions and you’re not reducing the principal and they can stay working for you.
It’s all about education, about learning, and about that subject line, no pressure. We come to you with a conversation, maximize Social Security benefits and its importance in navigating a successful retirement. Remember how this program started and remember when we all started here, no pressure and education is the key. David, I am learning that quickly already. It’s all about knowing what you don’t know so you can make a better decision.
First of all, we enjoy it. We like the process of trying to educate people on all these different topics. We love when we see the people walking out and getting that a-ha moment and go, “Now, I do get it.” These are the topics that typically don’t get discussed when people are getting financial planning done. Our topic on Social Security maximization and how it can impact positively or negatively. I said 65% for most households that income is going to be derived from Social Security so the more we can get, the better it’s going to be for that retirement.
It starts where? A conversation with a client, you outline the initial parameters that are needed to begin the dialogue, then what, Bret?
It’s going through the process of taking all the information that’s out there and how does it apply to me? Social Security goes deep and using a couple of different acronyms that are out there. First one that we educate people about is called PIA, which stands for your Primary Insurance Amount. It’s as simple as that sheet they send to you every year before your birthday where it tells you how much money you’re going to have at certain periods of time, that’s what we’re referencing. Where those numbers come from are those high as 35 years of earnings and again, adjusted for inflation. The reason they send us that report on an annual basis is where if you’re younger, you’re not going to get it as often, but you can go online and get that information as well. The important thing that you’re cross referencing there is your income that you made that last year is reported on there.It’s all about knowing what you don’t know so you can make a better decision. Click To Tweet
You want to go through that on an annual basis to make sure that information is correct so that twenty, 30 or even five or two years from now that you’re going to start collecting Social Security, you don’t want to find that error then. We’re educating people, Joe, regarding back in 2015 in the middle of the night, something called the Bipartisan Budget Act of 2015 where there were some drastic changes to Social Security that was done. One change that was done back in the ‘80s was they started changing what full retirement age was. When Social Security first started, age 65 was the full retirement age. The government saw these baby boomers come in and said, “We better start making some changes to the system.”
The life expectancy back then when full retirement age was 65 was probably like 68 or 69. They started graduating where people born between 1943 and 1954, the full retirement age was age 66. One big change that occurred in 2017 that people haven’t thought about is the first-year people born in 1955. People who are turning 62 this calendar year, the full retirement age is no longer at age 66. That comes into play, especially people who are going to plan on working in retirement etc., where it’s now 66 and two months. People born in 1956, full retirement age is at 66 and four months where the graduation has now been made out to age 67. People that are born 1960 thereafter, full retirement age is at age 67 now.
What does it mean David? You’re working a lot longer until you get to that point. The other side of the question would be you have a longer period to prepare.
Sometimes people forget that taking Social Security doesn’t necessarily have to sync up with when you actually retire. On top of that, there are some things that happen if you don’t wait to full retirement age, that could have a negative impact on the amount that you receive. Statistically, over 50% of the population takes their Social Security benefit at age 62, by choice. There’s some fear factor where we hear a lot of times, “I think the federal government’s going to run out of money and Social Security’s not going to be there. They talk to their neighbor across the fence and said, “You better take it now.” There is some negative impact.
This is all part of the education. We want to give people all the facts so that they can make a rational decision versus an emotional decision. What’s interesting, one of the things that we statistically have seen through our workshops, there has never been someone who has attended a workshop that has come in for a consultation where at least one or two families are entitled to benefits that they didn’t even know that they were entitled to. Sometimes just that hour invested, you may end up finding that you’re owed benefits from Social Security. That all gets derived out of the report. We think that’s a big benefit.
When I think of that statement that you made, David and I spread that example across the population of the Delaware Valley, Bret, that is an unbelievable number out there just by the percentage of people who don’t know who are missing out on income they are entitled to.
I spoke about the Bipartisan Budget Act and those changes that were made. We’ll touch on it and some of those other changes of “closure of unintended loopholes.” The important thing in what David had just said is understanding that Social Security and past marriages. We meet so many families that are blended marriages. What’s important to understand is if you’ve had a past marriage, if you’ve been through divorce, if you’re a widow or a widower, there are benefits in which you are entitled to. It’s a matter of, “Do they apply to me? Can I collect them today?” or “Can I collect them at a later date?”
That’s the education and the advocacy that we’re into. We pride ourselves in owning that information so that we can be advocates to people in trying to find out what’s relative to somebody. I remember when the change happened back in April 2016, the last day, wherein someone we met, we got them in Social Security that next day where he was able to make some election choices that were expiring that day.
These workshops are local and they are good information. If you want to get educated on maximizing Social Security benefits, plus the importance in navigating to a successful retirement, go to MaxMyPlans.com. Maximize Social Security benefits plus the importance in navigating a successful retirement, PIA, do you know what that means? Bipartisan Act of 2015? Any idea? Bret Elam, these are some of the categories, these are some of the conversations that occur when it comes to getting educated and it’s so important.
We come in on the other side of the importance of understanding whether I’ve gone through a divorce, I’m a widow or widower, or a married couple. We meet so many people during our workshops and I’m a spreadsheeter at heart as well.
That goes back to your mother who was the accountant?
A Calculus teacher. It’s where we meet so many people who when they sit down with us and they have their spreadsheets where I’ve already done the calculation. I know where that simple breakeven analysis is. What’s important to understand is that Social Security offers different benefits and strategies. Even after that Bipartisan Budget Act of 2015, there were still election choices out there that, as David said, we meet someone at every workshop that typically there’s some monies that are left there on the table. When we talk about PIA, that’s your own benefit. That’s one way how you can take a benefit.
The next way you can take a benefit is through what they call a spousal benefit. A lot of people aren’t educated on how that spousal benefit works. Max My Plans or coming in for a consultation, that’s something that we get passionate about in educating people about how spousal benefits work. I would tell you probably about maybe 60% to 70% of the time that we sit down with people, typically a spousal benefit is used some way, somehow. Then most importantly, you are talking about survivorship benefits. There are only two inevitables in life Krause, it’s death and taxes. We tried to defer as long as possible but in reality, it’s going to happen at some point in time. As David said, the importance of maximizing Social Security benefits is looking at survivorship benefits. How survivorship benefits works is the passing of the first spouse, the surviving spouse always keeps the greater of those two benefits.
If you’re absorbing the information being provided by Thrive Financial Services, MaxMyPlans.com, it’s easy. You’re at home, log in, and David get that information, get educated so you can move or take a step forward. In life, it’s all about taking a step forward, not staying in neutrality, not staying where you are.
They say, “Procrastination is the biggest nation,” type situation so that’s what we want help. We want to help people take that next step. We want to do it with no pressure. That’s why we built this website MaxMyPlans.com. It’s something that’s nice and interactive. It’s very educational. People can get a lot of information prior to even contacting us. A lot of times once they see the value of the website, it’s going to raise up some additional questions and they want to talk to somebody live so they can feel free. They can either talk to Bret and myself or Karen. We’re happy to help out with that. There’s a lot of information. Bret was talking about spousal benefits and things like that.
Here’s something that is interesting. We call it the impact of survival. More than half of elderly widows who are currently living at a poverty level were not poor before the death of their husbands. More than 70% of all elderly persons with incomes below the poverty line are women. We find that staggering. The reason that happens is women outlive men, so they have to survive in retirement longer. If planning wasn’t done correctly, it could have a very negative impact as we see. Statistically, according to US Census Bureau, if you’ve got a married couple at age 65, there’s a 50% chance that one of those two people is going to make it out to the age of 95. We’ve got a long time potential in retirement and if we don’t maximize the Social Security benefits, which are guaranteed type payments, you could run out of money prior to you running out. That’s important and that’s part of the work and the education that we do with the people who visit with us.
As David referenced, it’s very easy to go to MaxMyPlans.com and start to digest and consume some of the information that is there. Bret, we take so much for granted and sometimes that action hurts us. It costs us money.
We’re trying to make rational decisions, not emotional decisions. We get one chance essentially to make that right Social Security decision. Something that’s a big deal that we sit in front of is more and more people are working in retirement. In fact at AARP, we saw a statistic that 80% of boomers plan to work in some capacity during retirement. You and David a little bit ago talk about that 50% of all Social Security claims happen at the age of 62. I talked about how full retirement age is changing, but what people don’t understand is what impact could that have on your net income. If we’re taking Social Security benefits early, it could impact benefits in which you’re entitled to. There are income limits. If you do start Social Security early, they’ll penalize you if you’re taking benefits and working at the same time.
It’s a big impact. Depending on how much income they earn, they could wipe out their own Social Security benefit, not receive it because they’re earning money during retirement. The analysis that we go through is comprehensive, we call it dental pain. It’s not a difficult process to go through, but we ask the right questions and sometimes these questions are being heard by the people for the first time and we get that all the time, “How come the advisor I work with didn’t bring these things up?” That goes back to earlier in the show where Bret said only 22% of financial advisors polled consider themselves knowledgeable enough about Social Security to offer advice.
We mentioned the workshops throughout this broadcast. We started our inaugural show talking about the workshops. The workshops aren’t dental pain, they’re more informational to start the thought process.
They’re very engaging. We’re pretty lighthearted. There’s information that’s important but we do try to keep it light and allow for Q&A and so on and so forth. We do Social Security Maximization Workshops, so the things that we’re discussing in the short period of time that we have, we get into much greater detail. We get into much further detail if people take us off on a complimentary consultation. We call it continuing education because people have questions there and because of time constraints, we can’t answer every question. Some are short answers and obviously some are very long answers. We invite people to come to our office, no pressure, sit down with us and ask those questions. If they want to bring information so we can do an analysis for them, we’re happy to do that.We might think we’re bulletproof, but at the end of the day, the reality is we’re all aging. Click To Tweet
Joe, we always take people through the four income dangers that people face in retirement. David started off with it and I want to make sure that it gets reemphasized, is understanding the importance of maximizing those benefits. We share an example of somebody needing $100,000 in retirement and scenario A is not optimizing Social Security and scenario B is optimizing Social Security. In the example we’ve shown, those dollars that are lost to both asset growth and taxes where there’s difference of not having those Social Security benefits has to come from somewhere. When you look at not maximizing those benefits, typically you’re seeing over $300,000 loss in growth to those assets because they have to be eroded from not having that loss of Social Security income.
Along with that again, because Social Security’s taxed like no other income that’s out there, it’s another impact as well where you’re typically seeing somewhere between $300,000 to $400,000 gap that’s created simply by not maximizing those benefits. The next danger, the two inevitables in life, we talked about taxes a little bit last time and we touched on it here is understanding the other inevitable, which is the death of a spouse. We talked about it whereas many times, we’re getting in front of people and saying, “Your retirement looks great,” and then that awkward silence until the death of the first one of you. It’s understanding these options that we’re choosing and not only Social Security, but our pension benefits as well is really understanding the impact of these decisions that we’re making today of how it’s going to impact us, meaning the husband and wife, when the first one of us passes away and that income that’s going to be left with it.
Joe, there are four income gap dangers and we want to bring those to people’s attentions. We do it during our workshops. One of the additional ones is people don’t realize, people get their Medicare when they turn age 65 basically paid out of their Social Security benefits. It’s out of sight, out of mind, but we see this is one of the areas where we’ve got significantly escalating costs in Medicare Part B. We talked a little bit about the Medicare surcharges and so on and so forth. We’ll address those in the future, but we figured out on average people have to budget out of their retirement assets about $250,000 over their lifetime for Medicare costs. That does not include any catastrophic illnesses. That’s a big deal in itself. We trying to help people to get an understanding of how that works.
The last income gap danger is the unpredictability of the stock market. We’re registered investment advisory firm, we do talk about investments, we do look at investments from a risk management standpoint versus an investment management standpoint but it’s unpredictable. Now, we’re seeing new highs on a weekly basis and we all know the old cliché, what goes up must come down. It makes a much bigger impact during retirement if it comes down because we don’t have the luxury of time to recover. We’re probably using those assets and there’s nothing worse than withdrawing money from a declining asset. We bring these things to people’s attentions. We spend a lot of time getting them educated about it and then more importantly, making recommendations and offering solutions that will prop it up so that these don’t become the things that caused that retirement to go off the rails.
Certainly, Bret. We only scratched the surface of where the conversation goes once an individual comes in for that complimentary consultation and that’s important. Start at the seminar, absorb the information, take advantage of what you and what David and what Karen Bezar provide, which is an incredible amount of education.
It’s amazing that the people that we see as repeat attenders of our workshops where they say the a-ha moment happened where it clicked. Providing that education and advocacy, people are living longer. These decisions that we’re making, not just conventional wisdom, the importance of understanding the information, working with somebody that understands that information and how it really all applies to me. We have the adage in the office, you got to be healthy to be wealthy at the end of the day, it’s important. A couple aged 65 have a 50% chance that one of us makes it to the age of 95. People are living longer and longer and the impact of our decisions that we’re making in our 50s and 60s and the impact that’s going to have on us long-term.
David, with that thought in mind, as we bring our audience back into the conversation, we’ll talk about what?
We’ll probably cover a couple of topics. We’ll wait to see how the week plays out with the markets and so on and so forth. One of the big disruptors to a successful retirement is tax efficiency in retirement. We’re doing our workshops right now related to that and we’ll take some of that information to our listening audience. We’re looking forward to the weeks ahead. We’ll have some great topics to discuss.
A couple of bullet points. One being impact of survival. Bret, you talked about the death of a spouse and the impact that that has, and we don’t realize that reality until we get to that point.
We all think we’re bulletproof at the end of the day, whether it’s life insurance where I’m going to live forever, It’s not me, it’s my neighbor. Reality is we’re all aging every single day. Just now, I’m now a parent of a teenager. I never thought thirteen years ago that I’d be saying that, but they are now and just different thoughts as you enter your 40s, your 50s and your 60s taking it through those steps, no matter how old you are of something happens, what does life look like? It’s just going through that exercise, making sure my family’s prepared, not only why I have children in the house, but more importantly when it’s real. When we’re empty nesters, Did we make these right decisions on Social Security and pension to ensure that we’re going to continue with that same quality of life of what we’ve become accustomed to?
We will begin a one-hour conversation that will encourage you to stop and imagine the end to think and wonder what you can do or force you into accepting the reality of where you are while providing an outline for you to change the narrative. This is made on behalf of Thrive Financial Services from a company who is local, works local, lives local and serves the local community. Join us and get to know David, Karen and Bret. More importantly, start to understand what is waiting for you when you start to get educated.
Stay protected and keep your future a priority. Ask David, ask Bret anytime for information, they will provide the education you need. David, nice job, well-done. Thank you very much. Bret, awesome stuff. Good information by you. Thanks to all our audience. On behalf of Karen, David, and Bret and all our audience, I am Joe Krause. We’ll see you next time.