[00:00:00] Welcome to The Financial Call. We are financial advisors on a mission to guide you through the financial planning everyone should have, whether you're doing it yourself or working with a financial advisor, these episodes will help you break down complicated financial topics to practical, actionable steps. Our mission is to guide motivated people to become financially successful. Welcome to The Financial Call today. We are working on our guided path series. So you have Laura and Zacc we're co-hosts. We also have Tyler Williamson with us. I'll explain why here in just a second. I'm excited to have Tyler, but let's go through where we are in the whole path. So we have the guided path and this is designed to help walk you through step-by-step. All of the financial planning topics we think you need to feel successful. And again, we're guiding those of you who are motivated. Uh, to be honest, I don't feel like I'm that great of a cheerleader, but if you are motivated and you know, you want to improve your finances, I can help you with the strategy

[00:01:00] and we'll work through that together. We are in the income planning section. So the guided path, first section is income planning, and we, there is a very specific reason for going through these sections in this order. Um, whether you are retired, planning your retirement or still working, you should be organizing your income first to determine. How much you'll be saving or how much you will be withdrawing and how that's going to shake out that will decide investing. That will decide tax strategy that will decide future estate planning. All of this is, is built around your income. So we started with income planning and I I'm showing the guided path here for those of you who can see this on YouTube. Um, for those of you just listening, that's fine. We're going to describe it, but we are in the guided path, social security basics. So Laura and I already went through organizing retirement income. And that was last episode. We explained the order in which you should work through your, your social security strategy,

[00:02:00] pension strategies, withdrawals, all. We've already covered. So go back and listen to the first guided path, um, session one week, what did we call them? Seasons, seasons, seasons ones. That was your idea, right? That's right. If only we could get these to just automatically play one after another, then people could binge them. I think I watched like three episodes of Schitt's Creek last night because of that exact feature keeps playing just keeps happening. Um, but anyway, So social security basics is where we're at today. And the reason Tyler's here is Tyler does presentations on social security. You've become an expert in social security, understanding, even the strangest things that people run into. And, and for that, um, you, you get invited to different employers, different groups, different associations, you jump in there and somehow you make social security exciting for these people. Somehow, somehow, I don't know how, but, uh, but anyway, this will be really good because. We want you to give us

[00:03:00] the general understanding of the different social security topics that someone should understand and give a taste on each of those. And for those of you listening, just to understand that our next season, we have a whole season on social security. So if Tyler says something today that you think, oh my gosh, I think that applies to me, or I wish I understood more about that. Um, hang tight because as soon as we get through the income planning section, we're going to dive deep into about five or six totally different topics. Um, half hour to 45 minutes each in social security. So Tyler is a partner with Capita Financial Network. He's one of our most tenured advisors here at Capita. Um, he works with a lot of folks. He's helped people with a lot of money in high net worth planning. He's helped people that barely have saved anything. So he understands a wide array of financial planning issues. And I think this'll be really good. Uh, anything else Laura, that you would say about Tyler? Tyler's great. He's the expert. He knows. If we have questions about social security, we

[00:04:00] go to Tyler and this is important because almost everyone qualifies for social security and it applies to everybody. So this will be really helpful. And if, if you can't see him, he's just got these eyes that suck you in but he's got the crow's feet on the side. We all laugh about the fact that anybody who listens to Tyler for a few minutes is just, is just mesmerized by it. So let's get into it here. Um, I'm going to pull up some of Tyler's, um, presentation slides. Cause I think those are going to be helpful for, for the conversation today. Um, but Tyler, why don't you get us going on on just anything you think that these folks need to know in terms of social security basics? Yeah. Awesome. So, um, I never thought growing up that I would be known as the social security expert. When I was in my thirties and I don't know how I feel about that, but, um, it's a, it's awesome to be able to go out and present to the community and really give back. And that's what we're all about here at Capita is being able to give back and provide this great

[00:05:00] information to retirees, um, here in the state of Utah and, uh, across the country as well. So these are always the topics that we cover when it comes to social security. What are the retirement benefits of social security? There's really five key benefits that we want to make sure that every, every retiree knows when it comes to social security. And we'll talk about each one of those specifically, uh, will social security be there for me. This is a big question that a lot of retirees have, you know, what's in the trust fund. How much is there? How long is it gonna last? This is a big question. A lot of, uh, retirees worry about, they worry that, Hey, I've heard in the news and there's headlines that social security is going to go bust that it's not going to be there. And a lot of times when a retiree is fearful about the status of the trust fund and retire or social security being there, we find that oftentimes that leads them to making ill advised decisions. Right? If you're worried that it's not going to be there, what do you do? You take it as quick as possible. You take it as quick as you can, because you want to get as much out of

[00:06:00] that, uh, out of the system, you want to get your money back, right? Cause you've been paying in all of these years. You want to get the best bang for your buck. So you're going to take that as soon as you possibly can. Um, but a lot of times filing at 62 or 63 early on in the equation can be very detrimental to your long-term outlook and success in return. So we want to, we want to help you understand what's there, what's in the system and how long that's projected to last, uh, how much can I expect to receive? We'll talk a little bit about how your benefits are calculated. Um, this is a pretty complex and we'll kind of touch on the basics of it, but it's important. Understand, you know, throughout your working career, how are they really determining what your benefits going to be when you do actually turn it on? Uh, when should I apply for social security, this, uh, and I think you would all agree with me. This is probably the number one question, right? At what age do I apply? Everybody wants to know, do I take it at 62 at 63 at full retirement age? Do I wait until seven? Um, and so we want to help you understand the ages at which point you're eligible for benefits, and

[00:07:00] then the questions that you should be asking and the things that you should be considering when it comes to actually applying, which will help you determine what age you specifically should apply for. Um, and, and I think, you know, this is very unique and very specific to everyone out there. It is not a cookie cutter approach. Everybody shouldn't wait until full retirement age. Everybody shouldn't wait until 70. We have to look at lots of different, um, you know, different aspects of your retirement plan. What's your age, what's your health? Um, you know, do you need income right now? What's your tax situation. There's so many different things that you've got to consider. And not only do I want to talk about when you should apply, but, uh, what benefit you should be applying for? Because as we all know here in this room, Retirees most retirees are entitled to one to two to up to three different types of benefits. And so now the question is not only, well, when do I apply, but at what age should I apply for which benefit? And then there is there a

[00:08:00] time that I should be switching to a different type of benefit, right? So let me give you an example. If you're married, you're entitled, you're most likely entitled to your own social security benefit. If you've worked at least a decade, but you could also be entitled to a spousal benefit. So the question is, do you take your own, did you take a spousal? Is there a time when you take your own and then switch to a spousal later, if you're a divorced spouse, meaning you were married prior and that marriage lasted at least a decade, uh, you could be entitled to divorced spousal benefits. And so you could be on a personal benefit and the switch to a divorce spousal, or vice versa throughout retirement. If a survivor, meaning you're a widow or widower. Uh, you could be entitled to survivor benefits. And so you can see there's lots of different types of benefits that you could be entitled to. So it's not only when should I apply, but when I do apply, which benefit do I apply for? And then there is there a time in the future when I switched to a different type of, I remember one time sitting across the table from a gal who, um, who had been married three times

[00:09:00] and she had been divorced. All three times. And one of those individuals, one of her ex-husbands was, was dead at that time. And so I was sitting there with her and I'm thinking, oh my gosh, you've got your own benefit. You've got two divorced and all three marriages lasted more than a decade. So here's, she's looking at, um, two divorced, spousal benefits, one survivor benefit and her own benefit. And it was super confusing to figure out. And she doesn't even know where these people are. Some for a cup. Well, one of them, one of them was passed away, but she didn't know about the other two. And it, yeah, it was really complicated. And she had a lot of options as to switching her strategy at some point in the future. And unfortunately for this lady, there is not. A lot of great information out there. Right. And if she were to call the social security administration, I think they would probably be just as confused as her and trying to nail down what's the right strategy. And who do we have you file on first? And then when do you switch? And,

[00:10:00] um, and she's probably just going to get a really cookie cutter answer, um, you know, get her in, get her out the door as quick as they can. And this is really where Capita comes into play because we can really help disseminate all of that. Help her make the right decision, right. Uh, okay. Oh, sorry. Go back one sec. Uh, spousal planning techniques, uh, this landscape has changed, um, in 2016, the social security administration changed a couple of things in regards to spousal planning techniques, but there is still one strategy that we see being used. It's called a restricted spousal application. Uh, that's going away. Uh, in other words, it only applies to individuals that were born in 1953 or earlier. So those individuals born in 1953 or earlier in the year, 2022 are turning 69. Uh, and so here over the next one to two years, we're going to see that strategy basically fizzle out. It's not going to be available. Um, it's not going to make sense for retirees to do it, but it is something that's important for you to understand because every time I do a presentation, it seems like every time

[00:11:00] and there's at least 30 or 40 individuals in the room. There tends to always be one person that's missing out on money that they had no clue about. It's either, you know, they've got this old divorced spouse that they didn't know they could be claiming on, or they've got a, a spouse has maybe passed away that they didn't know they could be claiming benefits on while they're working. Um, and again, the social security administration doesn't do a very good job of, of educating the general population. And in this last bullet point, uh, sequencing your assets. Um, and we talk a lot about this here at Capita, but the idea behind this is, as you move into retirement, a lot of you will have a lot of retires will have multiple different buckets of money. Right? They've got, maybe they've got social security, they've got maybe a pension from an employer. They might have a 401k or an IRA or a 4 0 3 B or a 4 57. And a lot of retirees get confused about, well, how, when do I draw from each of those buckets? How do I sequence those distributions in retirement and when, and how you file for social security, your strategy for social security.

[00:12:00] Has so much to do with how you strategize those other buckets of money and when, and how you take distributions and you've got to consider taxes. Um, so there's, there's lots of different things there, but we'll talk a little bit about that. It sounds like a lot of good stuff. We'll break you down. We'll make it easy. Yeah. That's the goal every time she like, every time I talk or you talk, she's like, but folks it's going to be okay. It's going to be okay. Okay. Here's the five key benefits I referenced earlier. Um, lifetime income, w as, as financial advisors here at Capita, we love the fact that social security offers this income stream that is designed to last your entire life. In other words, there is not an age at which point. Um, you no longer are entitled, right? If you live to a hundred, if you live to 110, the idea behind social security is that benefits going to be there for you forever. And when we do income planning, which you guys talked about in your previous episodes, um,

[00:13:00] maybe you didn't talk about that. About what income plan we talked about order. Yeah. Sequencing. Well, figuring out, um, in what order you should organize your income. Okay. Awesome. So we talked about that, but, but we haven't gone through high level, well, deep strategy as to exactly why, but we just talked about here's the order in which you should work through it. So security being at the front end of that. Right. And that's exactly what I was going to say when you plan your income. And when we sit down with a retiree here, that's the first thing that we focus on is we need to start with social security. We've got to get that decision right first and then we can focus on, well, what do we do with the. [00:13:35] And how do we maximize distributions from 401k IRA and all of these other assets that you might have. Right. But as financial advisors, we love the fact that social security offers this income stream, this going to be there forever, and it's designed to be there forever. Um, and to piggyback on that, not only is it an income stream that lasts forever, but it has annual income adjustments, or we refer to them as cost of living adjustments. Call us if you'll advance

[00:14:00] to the next slide here just for a minute, Zacc, uh, this is the cost of living adjustments that have been instituted dating back to 19 75, 19 75 is when these were instituted prior to 75, they really weren't, um, increasing your monthly or annual social security benefit with a cost of living increase. Uh, all the talk right now in the year 2022 is about inflation. Right. Everybody's worried about inflation and a high it's been over the last year. Uh, cost of living adjustments are designed to help you keep up with the rising costs of goods. Right? You think about it. When you go to the gas pump today, we're paying more than we were a year to two years ago. When you go to the grocery store, we're paying more for that, that cart of groceries than we were paying a year or two years ago, that's inflation. And as a retiree inflation, can you road and really be detrimental to your retirement plan if you're not careful about it, but what we love is social security offers that lifetime income stream, but then it goes up over time with inflation. In fact, in the year 2022, They just instituted and I don't have it here on the slides, but they just

[00:15:00] instituted the largest cost of living adjustment. In the last 39 years, we've got a 5.9% cost of living adjustment in the year 2022 at whether or not you are taking your social security benefits. You received everybody in America that qualifies for benefit received this 5.9% bump. And we talked about this last time, that social security averages of these cost of living adjustments have been closer to, um, you know, 1.8 to two and a half percent on average long-term depending on what period you're talking about. And for those who can't see anything or just listening, let's call out a few times. So you said 39 years, right? That's back to 19. 81 83 or 83, 3 0.5% and 83 and 82 is 7.4. There you go. 74 and 82. Okay. So in, in the eighties, those people were super frustrated because they were paying double digit mortgage interest rates. Right. Um, at that time in 1980, they got a 14.3% cost of living adjustment on their social security, which

[00:16:00] is, which sounds crazy to us. But if you're paying 17% on your mortgage, that just seems, that just seems like it's barely helping at that time. Right. Right. And I always ask that question because I'm always curious to know the answer, but when I'm in a, in a group of baby boomers, I was asked the question, Hey, who was buying a home in 19 78, 19 79, 19 80. And what were your interest rates? And oftentimes I hear 15, 18%. And then I, you know, I point to this slide and you can see, like you just referenced that 1980 14%. So cost of living adjustments, they don't keep up perfectly with inflation, right? Isn't it, it's not an exact match, match, match to inflation, but they do a fairly good job of keeping up with inflation and helping us, or, or retirees keep up with those rising costs of. Okay. If you'll go back to slides, there we go. Um, another key benefit is social security offers spousal and survivor benefits. If you're currently married, um, or if you are divorced and that

[00:17:00] marriage lasted at least a decade, you could be entitled to spousal or divorced spousal benefit. This is a key benefit of social security. We'll dive into here a little bit later, and then survivor benefits. If you are a widow or widower of a spouse that passed away while you were married, or if you're emerged for at least a decade divorce, and then that spouse passed away, you could be entitled to survivor benefits. Uh, and again, we'll dive into this here in a minute. This is why we get a little nosy. When people come into our office and we asked about previous marriages, how long they lasted it's for this purpose. We're not just being nosy. It's so true. I always get a weird look when they're like, why do you want to know about my previous spouse and their current spouse is sitting in the room with them. Right. I had a client where I was filing for social security with them, and I asked him, cause it requires a lot of this data, right? Whether you've been married before and what day you got married and. So I asked them because it actually requires the place and the date of marriage. When you file, I asked them and they S and they both looked at each other, super awkward. And I've been working with this client for three years

[00:18:00] or so three or four years, and they look at each other and then they look back at me, they look at each other and I'm like, this doesn't seem to be that hard at the question folks. And then they, they disclose to me that no one in the world knows this except for the two of them, but they eloped in Vegas and they didn't know which date to give me, oh, my, the date of their actual marriage in Vegas or the date. Um, several months later when they, they did like a fake wedding for everyone else. And they, they were the most conservative people ever, both, most soft-spoken conservative people ever, you would never have expected it of this couple. And I was really weird to be the first person outside of the marriage to find out about that, that, uh, anyway, anyway, keep going. That's funny. Uh, okay. Delayed credit. So if you retire or when you retire, if you decide, Hey, I'm going to hold off on taking my social security, um, or maybe you're still working and

[00:19:00] you just decide you, you know, your full retirement age, you could take your social security, but you decide I'm just going to hold off on it. There are, uh, delayed credits that social security will offer you essentially what this is is they'll. They, they allow your social security benefit to be enhanced by a specific percentage every single year. We'll talk about that here in a minute, but that is a, that is a large percentage. It's a large growth rate that social security will give you. If you decide to defer that social security benefit to a later date. And then the last one here, tax advantages, I think a lot of retirees don't realize that social security is a taxable stream of. I think a lot of retirees, and this is a surprise, but to a lot of retirees, but I think a lot of retirees just think, no, I, it was a tax I paid throughout my working career and I'm going to get this benefit back tax free. When in reality it is taxable to you, but here's the good news. It's not fully taxable up to 85% of your monthly social security benefit or annual social security benefit can be taxed at

[00:20:00] whatever your tax rate is. Now we see retirees often who may be just live on social security alone. And that they will pay zero tax. They don't have any tax, um, that they'll have to pay on their monthly social security benefit because that's all they live on. The way that this works is the more income that you bring in from other sources. So maybe you're working or you take distributions from an IRA or 401k, or you have a pension income, the more other income outside of social security that you have that creates a more taxable social security. Um, and, and one of the things that I like to point out to retirees is in, in a sense, they somewhat have control of how much tax they're going to pay on social security based on how much other income they're bringing in. They meaning the retiree, the retiree. Thank you, Zacc. Thanks for clarifying that. Yeah, the retiree, you as a retiree, as you move into retirement, You have the ability to control how much tax you're going to pay on social security, to an extent, if you're taking out large distributions from an IRA or a 401k, that's going to create more taxable, social security.

[00:21:00] And so there's strategies out there where you could double up on a distribution in one year from an IRA or 401k, you know, pay that full 85%, but then not take anything out the next year because you've pulled out enough though, your prior to cover you for the next year and then pay zero taxes on your social security, the following year. And those are the types of strategies that we're looking at with clients to see. Does this make sense? Uh, but here's the bottom line. W you know, we say these are five key benefits. We love the fact that social security is not a fully taxable income stream to retirees. You think about every other income stream that retirees have pensions, 401k withdrawals, IRA withdrawals, every dollar that comes out of those plans is. A hundred percent of every dollar that comes out is taxable. Whatever your tax bracket is, but social security does not work that way. So here you have a benefit that goes on your entire life, right? It last your entire life. It goes up with inflation. You get to leave at potentially to a spouse or while a surviving spouse. If you pass away, you get delayed credits. So if you don't take it right at retirement age, they'll enhance

[00:22:00] that benefit for you. And then you don't pay full tax on it. So some really powerful benefits that retirees, you know, this has caused for our retired to say, Hey, I'm going to pause for a minute before I just file for social security, because I've been told to, from told to do it because of my friends told me to, or my aunt and uncle told me to, or my mom and dad told me to, you know, we always say, don't do that. Don't take advice from, you know, around the water cooler, make sure that you're getting professional advice, that you understand the pros and the cons and that you're filing at the right time for the right benefit. And you understand all those key benefits. Okay, will social security be there for me? Let's talk about the status of the trust fund. We're going to kind of breeze over this because we could spend a whole hour on this alone, but here's the bottom line. Uh, and these numbers are as of if you're, if you're seeing the slides, these numbers that I'm going to share are as of the end of 2020, um, the numbers for 2021 have come out. I just haven't updated my slides here yet. But bottom line at the end of 2020, there was $2.9 trillion in the trust fund. And in the year 2020, we had a net increase, meaning more,

[00:23:00] went into the trust fund because of payroll tax then came out in benefit payments to the tune of $11 billion. Going to pause for a second here. Let's just make sure we all understand what's happening here. So we're all working. The three of us are working. We have. Taxes, payroll taxes, like you said, it's like FICA. It's like who's FICA and why are they taking my money? Right. So Fika is, is your social security tax it's coming out of your paycheck? Well, social security is a part of it. Medicare is another part. And then that goes to this trust fund. And then also the trust fund is paying out to my dad and mom, because they're on social security and it's the greatest Ponzi scheme ever. Right? I mean, not that I don't mean to talk derogatory about everything, but the reality is it's the only legal Ponzi scheme where, where there's no, like there, I'm not going to spend my deposits in the future. My parents are spending my deposits today and anyway, but it, the point is there was more money that went into this pile

[00:24:00] of money than came out of it last year to the tune of $11 billion. And I say last year, but I mean, 2020. Yeah. So when you're sitting around the dinner table, Zacc to your parents ever, thank you and say, Hey, thank you for all those FICA taxes you paid last year. They should, they should. Uh, awesome. Okay. So, uh, $11 billion more flowed in than came out in benefit payments. So we are trending in the right direction. Here's the problem. Uh, you know, as, as you're probably all aware, the baby boomer generation is retiring, uh, at a very fast pace. And I think COVID is even accelerate, celebrated that, right, for sure. Cause we see, we work with a lot of caregivers, uh, nurses and doctors at Intermountain healthcare. And, uh, we work with a lot of educators as well. And we're seeing those individuals retire sooner than they had anticipated because you know, if you're an educator and now you have to transition. Remote learning. And if you're dealing with students that maybe are massed up

[00:25:00] and maybe, you know, have been out of the classroom for a while and they're behaving different now, uh, that might make you want to retire a little bit sooner, or if you're a healthcare worker and you're being inundated by all of these patients. And you're working 60, 80 hours a week. That might cause you to say, Hey, you know what? I was going to retire in two years, but I'm done. And so they're all of a sudden claiming and filing on benefits sooner than maybe we anticipated, but we're seeing a lot of these baby boomers retire. And the numbers are about 10,000 people per day are retiring across America. And when you retire to your point, Zacc, you're no longer paying FICA tax, right? You no longer pay that FICA tax. Um, and so what we're seeing is this we're, we're trending in the right direction, but social security is telling us, Hey, if we don't make any changes and it's really Congress, Congress is the governing body. And they're the ones that make all the decisions on social security. But if Congress does not make any changes to social security, And how it's being funded. Then

[00:26:00] in the year 2035, they're projecting that they're going to have to reduce future benefits by about 21%. So I think a lot of people out there, a lot of retirees think it's going away. I've heard it's just going to be gone. Right? I'm not going to get a monthly benefit. That's not the case. What they're saying is we're going to have to reduce future benefits by 21% in that case, the money coming in, correct me if I'm wrong here, Tyler, but the money coming in. If it just flushed right back out, they're able to pay 79% of the benefits regularly. You got. Okay. And do you mean people that are currently on benefits? Their benefits will be reduced in 2035 or people just haven't filed yet? Yeah. That's a great question. Uh, this would be for everybody. So current retirees on benefits, they're saying we would have to reduce their, their monthly paycheck by about 21%. So let's, let's, let's throw a number out there. Let's say you're a retiree. You're getting a thousand dollars per month. If this comes to fruition, then instead of getting a thousand a month, you're going to get $790 a month.

[00:27:00] Right. Uh, instead of the full thousand, now I don't anticipate the Congress is going to sit around and let this happen. [00:27:07] Right. And there's a lot of reform proposals they've talked about. Here's just a couple that we've got up on the screen, uh, increasing maximum earning subject to social security tax. So Zacc referred to FICA tax. You only pay the social security tax on your payroll up to, and, and the number for 2022 is 147,000. [00:27:25] So if you're a high income earner making $200,000 per year, you actually only pay social security tax on the first 147,000 for a while. Biden had a proposal of reintroducing this also security tax after 400,000. Yes. And that that didn't actually go through, but that's an example of a, of a way. And by the way, that would have caused a lot of tax because it's, it's 6.2% for the employer and 6.2% for the employee. [00:27:52] And you can imagine there are a lot of people that make multiple millions of dollars per year. If it was everything after $400,000, those really

[00:28:00] high income earners would pay a lot, you know, 12.4%, um, tax on that anyway, it could be a lot of money. Yeah, absolutely. But this is an example of one thing that they could tweak. Right. A pretty simple tweak. Now I don't think any of us in this room in this room are proponents of raising taxes. Right? I don't, I don't think anybody wants to see that, but this is a pretty easy tweak. The Congress could say, okay, above 400,000, we're going to reimplement this. There's going to be that phase out from 1 47, up to 400. And then if every, every dollar over 400, you're going to pay FICA tax again. And, um, and I want to say on that proposal, Zacc, that, um, when they ran the projections, it was showing that that would show. The trust fund until 2100, I believe just that minor tweak. And so you can see how just a small tweak like that can really improve and enhance the situation, uh, raising normal retirement age for, for most retirees today, it's between the ages of 66 and 67. That's the age at which point you can file for your social security and get your full benefit without any reductions or penalties.

[00:29:00] Uh, you know, by the time we get there, I think all of us in the well, Laura, you're the, you're the young one here, but Zacc and I are in our thirties, Laura, you're in your twenties. You know, by the time we get to retirement age, uh, the reality is our full retirement age could be 70, but I anticipate that we're going to see them push those full retirement ages out. So they've already done it. I mean, they did, it used to be 65 and then it was 66 and then 66. And then it graduates, you know, you're going to show this later, so I won't go into it. But the bottom line is they've done this multiple times in the. It's a tool in the tool chest. They probably are going to do it again. Absolutely. Yeah. So right now they've kind of locked it in at 67 is the latest for anyone born after 1960. But I anticipate that they will continue to push that out, uh, lowering benefits for future retirees. This would affect us and just how they calculate our benefits and amount, the amount that we would receive. And then also the other, uh, proposal on the table is changing how they calculate cost of living adjustments right now is it's based on the CPI, uh, CPI index. And they're talking about changing to the CPI chained index, which would actually lower cost of living

[00:30:00] adjustments in the future. Uh, as you can see, there's lots of reform proposals here, lots of things that they're talking about every time we come around a new election cycle, the, the candidates are always talking about the ways that they're going to fix it. Right. And, uh, it remains to be seen exactly how we'll do that, but I don't think the Congress will sit by until 2030. And, uh, you know, just let this this happen. And by the way, quick history lesson, we were in a similar predicament back in 1983, uh, the trust fund was about to kind of run out or go bust and their solution back then was let's start taxing it. So prior to 1983, social security was not a taxable income stream in retirement since 1983, it is now a taxable income stream. And here we are 39 years later and we're still having this conversation and had they not done that we wouldn't even be sitting in this room talking about social security because it wouldn't be here. So I'm going to give you a. You know, you know, you don't like to go on record and record something with predictions, but here we go. I mean, here's my let's do it. Let's do it. Um, okay. Here's what I tell people when we meet often is

[00:31:00] I actually think that I will have the ability, you know, I'm 37. I think when I, you know, let's fast forward, you know, crossing fingers, I can live this long, but let's fast forward 30 to 35 years. And I'm social security eligible age. [00:31:14] I believe social security will be there for us. Yeah. I think it will be in a slightly different fashion. And those of us who have prepared well for retirement might be means tested out of it. I think there's a really good chance. I actually won't get the social security, but that won't be because the fund ran out, it will be because I saved well and I have too much income. [00:31:34] And the government says, you know, you did a great job, Zacc, sorry, we're going to give it to people who, who don't have as much, which is, which would be fine too. Um, but. I think it will be there. And I think most of the people we're talking to today who are in their fifties and sixties and stressed about it, I actually think they will receive social security in a very similar fashion for the rest of their lives. [00:31:53] The government likes to grandfather, people in who are already receiving it to certain benefits. You talked about that spousal

[00:32:00] strategy going away. That's why they drew a line in the sand and said, Hey, anybody, before this date can still do it anybody after this day. Um, can't and that way they're not taking something away from people who already had it, they're just taking it away from people in the future. So those of you who are close, I think you're fine. And the reality is there are so many little tweaks that they could make to this and change it entirely. I mean, we haven't even talked about what if they went from 6.2 to 7% on the FICA tax. I mean, that would make a massive difference on it across everyone. So I, again, if you can. Yeah. I mean, I'm not advocating that we trust the government to take care of us. Let's be clear here because we all are stressed and frustrated with different government parties, depending on which side you're on to that. But I am saying that there are a lot of baby boomers out there who are a very large voting population, and I think they have enough sway that it would be political suicide for someone to let this thing just go without proper attention. Absolutely. I agree. A hundred percent

[00:33:00] with that. And I, and what I always tell in my, the seminars that I do, I generally say, Hey, listen, if your late fifties, early sixties, I feel really good. Just like use act that that it's going to be there. Long-term for you. We see people in our office, retirees who all they have is social security, right? That's it. And for those individuals to receive a letter in the mail saying, Hey, either it's gone or, Hey, we're going to reduce this by 20%. That's not a solution they're going to anarchy. It was so terrible. And they're just going to have to turn to a different government assistance program. The money's got to come from somewhere. Right. And so I agree with you, Zacc. I think that in the future, it will probably will be, could be means tested, right? If you make over a certain amount of income, um, then your social security benefit is going to be reduced or you're not going to get it at all. Which means the people that really need it will likely have it. That's exactly right. Yeah. Everyone feels like they need it, Laura. That's the problem. Right. And we all feel like we deserve it cause we paid to serve it. Absolutely. Yeah. Uh, but anyway, let's keep

[00:34:00] going. In the meantime, Zacc, if you could just keep funding the Ponzi scheme, that'd be fantastic. I think you two are as well. I don't know why you're calling me out. Okay. Let's talk about how your benefits are calculated. Uh, what they do is they look at your top 35 years of earnings. Okay. Your top 35 years of earnings, they take all of those years of earnings and they throw it into this calculation, this equation and outcomes. What's called your Pia. Okay. The Pia stands for primary insurance amount. And your Pia is your monthly social security benefit at your full retirement. Okay. So that's your, what, what you're entitled to on a monthly basis at your full retirement age. Now, if you'll flip to the next slide here, Zacc, this is your full retirement age. So on the left-hand side, you've got your year of birth. So anyone born pre 54 or from 1943 to 1954, your full retirement age is 66. This is what we were talking about earlier. They, they graded it up. And then for, if you're born in 55 at 66 and

[00:35:00] two months, if you're born in 56, at 66 and four months, and you can see, they push that out by, in two month increments out to 1960 and for everybody, but we're in 1960 and later it's 67. [00:35:10] I think they're going to continue this right. And so the reality is by the time we get there, it realistically could be 70. Our full retirement age could be 70 by the time eight or eight. That's right. So this is the age at which point you can file and receive your full return, full retirement benefit unreduced. [00:35:28] Okay. Um, so if you file early for this benefit, There are consequences and, and let's just kind of lay out here real quick, the ages at which point, kind of that spectrum are those those ages at which point you can file. So the earliest that any retiree can file on their own personal benefit is age 62. [00:35:46] Okay. Now, if you're a disabled, clearly you can get it prior to that. There are social security, disability, disability benefits that are, that you're entitled to. If you have enough earnings history, uh, you know, recently that you could be entitled to benefits at

[00:36:00] 30 or 40 or 50, but if you're healthy and, um, you know, 62 is going to be the earliest that you could file on your own benefit. Now for a widow or widower, it's a little bit different. If you are a surviving spouse, um, your husband or wife has passed away, or maybe you have a divorced spouse that passed away. As long as you were married for at least a decade to that divorced spouse, you can actually get benefits as early as age. Sixties, the earliest on a widow. And we run this all the time. We see it all the time. No, that rule of 62 and making, well, I can't get social security until 62, but they don't realize that if they're a widow or widower or, you know, like you said, from a divorce also widow or widower that they could have started two years earlier in 60. Yep. Yeah, we do run a run into this all the time. And again, here's, this is a good example of w where are we learning this? Who's educating us about this. No one, unfortunately there is nobody out there called guided path episode 1.2. That is the only place you can find this information.

[00:37:00] So, okay. 62 is the earliest or 60 for a widow or widower, um, full retirement age. We just talked through that. The latest that you'd ever want to file is age 70. You never want to wait past 70. Okay. Now let's kind of distill this down. Let's talk about the consequences of filing early in the benefits of potentially waiting. If you'll go back, there you go. So, uh, three consequences to filing early that you need to be. Consequence number one, if you can see the slides, it's pretty apparent here. If your full retirement age is 66, that middle column and you file at 62, you will only receive 75% of your Pia of the benefit that you would have been entitled to. Had you waited til 66, right? So, um, a math equation here, let's say that you've got a $2,000 Pia. That's what you would get if you waited till 66 or full retirement age, but you decided, Hey, I'm going to take this at 62. You will only receive $1,500 per month. And that is a penalty. The rest of your life, but you're getting it for four years. You're getting it early. Right. So there's the trade-off there is the trade off there.

[00:38:00] Yeah. So 25% reduction that's consequence. Number one, consequence. Number two is if you decide, Hey, you know what, I want to file at 62, but I'd like to keep working. I really enjoy what I'm doing. I'd like to keep working. That's okay. However, you need to be aware that there are income limitations, and you can only earn up to a certain amount of income while being on social security. And that income limit changes every year. But for the year 2022, it's $19,500 and change per year, per year. And then they break that down into a monthly amount. It's like $1,600 for every $2 over that amount that you earn. An income or wages, they will take back a dollar of your social security benefit. Now be clear to be clear, this is only earned income, right? So if you have a pension or you have rental income, or you're taking distributions from an IRA or 401k, those that income stream does not count. This is you waking up in the morning

[00:39:00] and going to an employer that sends you a W2, or you have a 10 99 that comes in at the end of every year. Those are the wages. That count. And again, 19,500 is the max for every $2 over that, that you make in that calendar year, they will take back a dollar of your social secure. And just to be careful here, because we run into this where someone may have a lot of income in the beginning of the year and then retire. And then they think, oh, but I earned $40,000 in the first three months. So I'm not going to be able to take social security for the whole year because that's over 19,500. That's not the case. Um, they do it, like you said, they break it into monthly amounts. So when we file on online for the social security benefit, or when you do it, I guess, um, you go in and you say, well, all that income happened in January, February, and March. So I should be good from April through the rest of the year and you are good and that that's not. That's exactly right. And then from there on, if you decide, Hey, I'm going to retire from my full-time work, but I want to keep working part-time you can do that. And they're going to just say,

[00:40:00] they're going to ask you, are you gonna earn more than that 1600 a month, which is the 19,500 divided over 12 months. Are you gonna earn more than that? 1600 per month moving forward? So you could go work a part-time job, make $1,500 a month and collect social security and you'd be okay. Okay. Um, third consequence, if you are the primary bread breadwinner within the walls of your home, meaning you have the largest pie, you have the largest monthly social security benefit and you file early and you take this penalty, you know, by getting a lesser reduced monthly social security benefit. And then you pass away, you will leave that reduced benefit to your surviving spouse. So if you're married and you're the primary breadwinner, you file at 62, and then you die, you're going to leave that reduced benefit to your surviving spouse. You know, there's always a story that we tell around this, um, And this is the story of one of our business partners here, but his grandfather was retired at 62 and decided, Hey, you know what, I'm retired. I'm going to take my social security benefit for him. The penalty was about

[00:41:00] 20%. So he got 80% of his monthly social security benefit because he retired early and he lived in another, uh, he lived 11 months and then he died. And most people with their logic would say, well, geez, he timed that perfectly. He got on the benefit. As soon as he possibly could, at least he got 11 months worth of it. And he got 11 months of, at which otherwise he would've missed out on. And then he died like kudos to you. You timed it perfectly. You couldn't have done it better. What's the problem. Well, grandma's still alive, right? She's still living at that point. So nineties. So she inherits that 80% benefit or that 20% reduced benefit. And she's still alive today. And I think she's nearing a hundred years old. So for the last, is that right? Is she over a hundred? So for the last 30, 40 years, she has been re receiving this reduced benefit because grandpa filed and got 11 months worth of benefits. And if you were to run the math out on that, including, uh, you know, cost of living adjustments and all the

[00:42:00] money missed out there, most likely this individual, this retiree, this survivor, this widow has missed out on probably two to $300,000 of lifetime social security benefits because grandpa got 11. It was a terrible trade-off and I'm sure Mike brings that up at the dinner table regularly, right? Thanksgiving dinners. Yeah. At family reunions. This is a common topic. That's discussed grandpa, this isn't lips and just lets it go. But right. But that's too bad for sure. It is. It is terrible. And so, you know, we always caution that primary breadwinner. If you have the largest social security, you really have to think twice about filing early, not to say that it's not right. Right. Because we have told primary breadwinners to file early because for them and their situation, it makes sense. But we have to, we, we really have to pause and think about it and make sure that we're okay with those long-term effects and consequences before we just filed. And on the flip side, if grandma had her own social security benefit, um, and grandpa dies most likely if grandma's is less.

[00:43:00] Her benefits gone. So you could take the flip side of that argument and say, and we do in our social security planning, take the opposite side of that and say, Hey, if one of you pass away, grandma's benefits gone. Yep. We maybe should consider taking grandmas as quickly as possible. Oftentimes for that lower breadwinner, a lot of times the, the, the solution or the answer is, Hey, you, you might file earlier, right. Because we know we're going to lose that at some point in time. So it's okay to take that one a little bit early if we want to. And it makes sense as part of the plan. Um, so I, I don't want you to walking away from this conversation thinking it's always bad to file early Tyler. Zacc Laura said it's bad to file early because that's not the case. It just depends on your situation. And you've got to sit down with a professional and make sure that you've got a plan in place. Okay. Let's talk about filing on time and the benefits of delaying past full retirement age. So once you achieve full retirement age, which is either 66 or 67, or somewhere in between, depending on your year of birth, you then receive 100% of European. You get all of your monthly

[00:44:00] social security benefit without any reductions, you can also continue to work and there is no income limit. So you could make a hundred thousand, $200,000 per year while collecting your full monthly social security benefit. And then if you pass away, you get to leave that unreduced, that full monthly social security benefit to your surviving spouse. Okay. So all three of those consequences that I mentioned earlier, we can throw those out the window. They no longer apply once you've achieved full retirement age. And so we do see some retirees who, you know, they want to work till 70 and their thought processes have got a lot of debt that I really want to annihilate before I move into retirement 70, or I didn't do a very good job of saving in my qualified retirement plans. Uh, I want to beef those up for the next four years. So we'll see some of them work and collect social security, and then use those dollars wisely to either pay down debt or increase their retirement savings, to put them in a better financial position as they move into retirement. Okay. What's the benefit of waiting though. So if you decide I'm

[00:45:00] 66, let's just say I'm going to retire. Uh, but maybe I don't want to take my social security now and I can live on another income stream. Maybe I've got a pension, I've done a good job of saving inside of a 401k or an IRA, and I can live off of those dollars. What is the advantage to possibly pushing out that social security benefit? If you can see the slides here every year, you defer this benefit. It grows at 8% per year, in addition to the cost of living adjustment. So for, to give you an example for a retiree that, um, postpone their benefit this year, they got a 5.9% cost of living. In addition to an 8% increase. On their, on their social security, but 8% per year is the delayed credit that I referred to earlier. That social security will give you, if you don't take your benefit at full retirement age and you decide to push that off, it is prorated monthly. So every month you wait past your full retirement age, you will get 0.6, 6% growth. So it's not like you have to wait until 67 to file. You could file at 66 and a half and get

[00:46:00] 104% of your Pia or what you were entitled to back at your full retirement age. Okay. So it would max out here, if your full retirement age is 66, you can get up to 132% of your monthly Pia. And I'll talk about this here in a minute, but that benefit you get to leave to your surviving spouse. Like what you said about, um, if you have other assets or other income that you can wait on. [00:46:21] Sometimes we hear retirees or soon to be retirees, make the potential mistake. Well, I just can't stand my job. I've got to get out. Well, that doesn't mean you have to start social security. You could get out and retire and it further perpetuates the confusion because in the social security language, they always use the word retire for claiming benefits. But we like to separate that word a little bit and say, Hey, there's leaving work. And there's claiming on benefits. Both of those are retire by different different groups called the both of those retire. Let's just clarify. Some

[00:47:00] people will leave work, but delay their social security for a while and then take it later. Yeah. And we see that all the time. It's, it's actually, I mean, it's, it's common to see someone, um, match those two events up right. Retirement. And then they just file for social security. But a lot of times we see someone retire and then delay social security or they'll claim social security and retire a few years later. Right. If they're trying to do that, that strategy of paying down debt or beefing up re. Um, and I think this, you know, what I referenced earlier of, you know, filing early is not, not always the wrong thing to do. I'll also say that delaying till 70 is not always the right thing to do. Good point. One of the things that we walked through with retirees is what's called a break, even analysis. And everybody wants to know the answer to this while Tyler, if I, if I had alert defer till 70, yes, I'm getting 8% growth, but I've just missed out on four years of income that I could have had. And how long is it going to take me to make up for those four years of lost income now that I'm getting a larger monthly social security, and

[00:48:00] there is an age in the future at which point those, you know, those lines cross over, that's called the breakeven point. That's something that we run for all retirees here to help them understand, you know, what is that age? How far into the future is it? And what is the reality that you or your spouse will achieve that a. And that just really helps them make an educated decision. And that's not a standard answer for everybody, you know, um, we find that based on spousal benefits, survivor benefits or other factors, and we even throw in the investment gain that they could have had on their 401k and compare, you know, withdrawals versus w versus social security. We'll talk about that in much more depth later in season two. But, uh, but we throw all those factors in. And so sometimes we get different ages and I've seen, you know, late seventies, I've seen early to mid eighties and even late eighties, and that number can help guide us around, you know, what strategy they should be looking at. Yeah. Some people will see the breakeven age of 85 and they go, yeah, I'm not living to 85. I'm going to take it earlier, which is funny because a lot of them will live to 85, but

[00:49:00] then the math says they will, but if they don't believe it, that's okay. We have to help them make a right decision for their, their feelings. Right. Absolutely. Um, okay. Let's talk about. Spousal benefits. Perfect. So spousal benefits, let me run you through just a couple of scenarios here to help you really understand how spousal benefits work. So in this situation, in this example, we've got John and Jane, and we're gonna, we're gonna pretend that these guys are married. We're going to pretend that they are 66. They're both full retirement age. And John and Jane walked into the social security office. They're both retiring from work and they're ready to go ahead and kick on their monthly social security benefit. John's Pia is 2000. That's how much he's entitled to. And Jane's Pia is 800 and John's going to file. He's going to get 2000 a month. Jane has two options. Jane can have all of hers or she can choose to have. Up to half of John's benefit. You can't have both. Can't have both, you get one or the other that's right. So in this situation, in this scenario, the social security ministration is going to say, well, Jane,

[00:50:00] clearly half of John's 2000, which is a thousand is more than your own personal benefit. So we're going to give you a thousand dollars a month. So for this couple, John will receive 2000 a month. Jane will receive a thousand dollars per month while both of them are alive. So that household gets $3,000 per month. What good did Jane's benefit do her? It, she didn't really need it. In fact, if she had a zero Pia had she never worked outside the home, she is still entitled to a thousand dollars a month because she's married to John that's that's as simple as spousal benefits are, you get the larger of either your own benefit or a spousal benefit. And that applies to a current spouse or a divorced spouse. So if you've been married in the past and you're currently divorced, but that previous marriage lasted at least a decade. You could be entitled to divorce, spousal benefits off of that previous spouse. If half of theirs is more than all of yours, favorite comment is when you teach someone this and they say, finally, we found something good from my

[00:51:00] previous marriage. And it's something good to remember is it doesn't affect that spouses benefit either. Some people get nervous. Well, I don't want to take 50%. We don't have a good relationship. I don't want him to know, get bad. It doesn't affect them. And they don't even know actually. That's exactly right. So if John and Jane are divorced, you know, Jane's thinking maybe she she's afraid that it's going to penalize John. Right. Well, it's going to reduce his monthly benefit. That's not the case. Um, she gets half of his, he gets all of his benefit on a reduced. And if John has remarried, his current spouse is also entitled to up to half of his. And so you can see how, you know, that that fear of I'm afraid that it's gonna hurt my previous spouse ex spouse. It doesn't, uh, you can claim it. They won't even know. I want to switch up the numbers here and I want to teach you a strategy. Okay. So we're going to pretend that Jane's benefit is now 1200 a month. Now this strategy, this is referred to as the restricted spousal application, this applies to retirees who were born 1953 or earlier. Sean is still

[00:52:00] 2000, right? Yawn has 2000. Jane has 1200, the 1200. You got it. Okay. I actually, I had this scenario built out. I had an awesome social security plan built out for my in-laws. Both of them were born 1954. When the news came out in 2016, that they were going to draw a line in the sand. And they said, Hey, anyone born, you know, 1953 or earlier, can still do this. Anyone born 54 later can no longer do this. I had to scrap the whole plan, but here's how it works. So Jane's benefit is now 1200 on her own personal working record. Okay. Same scenario. They walk into the social security office. John files. He gets $2,000 per month. Jane has the same two options. Okay. She can have all of hers or up to half a John's. Well, now the scenario has changed, right? Because now all of her 1200 is more than her spousal benefit or, or a thousand dollars a month. However, if Jane is born pre 1953 or 1953 or earlier, she can use this restricted spousal application and what she can do, she can say, Hey, I actually don't want to take my benefit. I want to restrict that.

[00:53:00] But what I do want to take is that my spousal benefit off of my spouse. Okay. Or my divorce spouse, John. So give me the thousand dollars a month, half of his, as a spouse, as a spouse or a divorced spouse, give me a thousand dollars a month. I'm not going to take my own. Now I'm going to restrict that. Well, we just learned in one of the previous slides, while she's deferring her 1200 a month, what's happening to it. She's getting 8% increase, 8% growth. Right? And so our advice to Jane would be, Hey, Jane, this is going to sound crazy. Don't take 1200, take a thousand. You're going to lose $200 a month, but we're going to do that for four years. And over the course of four years, you're going to pick up $48,000 of spousal or divorced spousal benefits. And then when you're 70, we're going to remind you to go back online and file for your personal benefit, which that $1,200 has now turned into $1,700 per month, right? Because she's now eligible for. 132% plus colon plus cost of living adjustments. And so she's taking that 1200 multiplying by

[00:54:00] 132%. Yup. And she can then switch from her thousand dollars spousal over to this, you know, 1700 plus dollar own benefit. Yeah. And when we talk about the breakevens on that, I've run the math on it. It's a 21 month break, even. So as long as Jane is going to live to about 72, the math makes sense every single day of the week. But again, if John and Jane were to walk into the social security office, This is something that they most likely I would, I would bet 99% of the time would not hear this strategy from the social security administration. They would use some pretty basic math and say, well, 1200 is more than thousand. Thus, you should take the 1200. Here you go. Here's your personal benefit. See you later, but not only do they not suggest it, we've had them try to block it. Oh, all the time. Tried to tell clients to do this and then to go to the social security administration and they say, don't do that. You're going to give up $200 a month right now. Why would you do that? And then w then the client comes back to us and we have to say, okay, just trust us and to, well, and I've

[00:55:00] had clients come back and say, they said, I'm not eligible. They said that I, that that's no longer. I'm no longer entitled to that, that social security got rid of that strategy. And it's like, no, no, no, they didn't get rid of it. You just talked to someone who doesn't understand how the, how the rules work. Then we just jump online and we just do the application online and it, it works flawlessly. Yeah. So that's still available again. That's for individuals born 1953 or earlier, those individuals are turning 69 this year. So we're seeing this phase out, but I S we see people in our office. Almost weekly, there are missing out on money because they're not aware of the strategy. And this is something that social security is not educating them about. So it's up to us, you know, it's up to you as a retiree, uh, to understand what you're entitled to and then go get it because, you know, don't, don't plan on don't count on the government, um, reaching out to you via phone call saying, Hey, you know, we were bored and we thought we would just reach out and let you know, you're entitled this money. You probably didn't know about it. We want to do your favor. I've heard the government has lots of extra

[00:56:00] money. There's lots of extra time. There's no debt. There's no issue with that at all. Right. Right. Okay. I think you have, um, a list of basically, I mean, we've, we've talked very generally about concepts and strategies and situations, and I think, um, as we, we're not necessarily winding down just yet, but I think we're going to move into basically. Here's a FYI or two about different strategies and let's make sure we tackle the yeah. A couple of rules here that you need to be aware of. Um, you know, in the, in the situation of John and Jane for Jane to be entitled to half of his benefit, he has to be on benefits, right? So we come across as sometimes where maybe John wants to defer till 70 to maximize his benefits while she's not entitled to a spousal benefit until he files. So let's pretend that she's never worked outside the home. It has a zero benefit. Sometimes the math won't make sense for him to delay till 70, because now not only is he missing his, but she's also missing a spousal benefit and there's no delayed credits on a spousal benefit. So by her waiting until he filed. She's not getting anything and her benefit, her spousal benefit is not growing. So

[00:57:00] again, every situation is unique. Every situation is different. My parents, by the way, that's exactly how they are. Um, we, we filed for my dad at full retirement because my mom has a very, very minimal, her own benefit was two or $300. And so we actually filed for her own benefit early because, um, there wasn't much of a penalty on it. And then she got that for, from 62, until 66 and change. Cause she's born in 55. Um, that anyway, so then she switched to a spousal benefit when my dad filed and that worked out really well, but you just described it perfectly. Yeah. Yeah. So something you need to be aware of there. Um, you can get spousal benefits at, at the earliest at 62, but anytime you file early for any benefit, there's always a reduction. So be, you know, be careful about that. And then I've already talked about that last one there. Okay. Um, divorced spouse benefits, same rules apply. If you, as long as you were married for at least a decade to a previous spouse, You could be entitled to divorced spousal benefits. You need to be unmarried. If you're

[00:58:00] remarried, you've got to take those spousal benefits off your current spouse. But if you are still unmarried, uh, you could be entitled. And you know, you, you brought up the scenario earlier with that, that retiree who had three marriages prior in each one, lasted a decade, that individual can go back and find out who has the largest Pia and take up to half of the largest divorced spouse or all a hundred percent of the one that's passed away. That's right. I forgot. Yeah. One of them is dead. One of them's dead, so they'd get a hundred percent. So that's probably the best benefit for, for that individual. Yeah. Is that survival? Uh, I think that person didn't earn a lot of money. She was actually the bread winner in many of those marriages, which might, you know, I don't know. I don't know the family relationships and all that, but, um, she, she, I believe she ended up on her own. It's been years since we went through this, but I think the last step was to go back to her own. Gotcha. Okay. I think that's good enough for that slide, Zacc. Okay. Survivor benefits. Um, in this situation we have Joe and Julie. So w we want to help you understand. So a survivor benefits apply when

[00:59:00] both spouses are alive. So if you're married or divorced, while both of those individuals are still living, that's when spousal benefits come into play, a survivor benefit comes into play. When one of the two spouses, whether currently married or divorced has passed away. Okay? So in this situation, we've got Joe and Julie Julie's benefit is $2,000 per month. And Joe's benefit is $1,200 per month. And we're going to pretend that Julie dies. Here's how simple it is. Joe loses his 1200, his benefit because it's the lesser of the two is going to go away. And Julie's benefit remains with the survivor with Joe. So if you're connecting the dots here and we know that the larger of the two social security benefits is going to remain with the survivor, what should Julie try to do if she can? And if the math makes sense, we probably want to have Julie maybe try to delay this benefit, right? If we can take a $2,000 a month and get it close to 3000, by having her maximizing out to

[01:00:00] 70, and we know that then becomes the survivor benefit for that. Couple that might make sense. Uh, because we know in the future we're gonna lose 1200, right? We already know that. And we've got a plan for that event, either through trying to maximize maybe one of the social security benefits, or hopefully there's enough other income or, you know, uh, retirement assets to maybe offset that $1,200 a month loss. Or maybe that retiree is that, that couple's okay with a $1,200 a month monthly reduction. But if you think about it, that's a one third percent reduction to their monthly social or annual or monthly income from social security. And for a lot of retirees, that's a massive blow. And so we've got to think about the future and know that one of us is going to die in the future. And how are we going to try to offset that? But one of the ways you could do that is by maximizing the primary breadwinners. Uh, okay. Uh, let's see. You can get survivor benefits as early as 60. We've already mentioned that, um, if you're disabled, you can get it actually as early as 50, uh, if you get remarried. So let's say you are married for a

[01:01:00] decade, um, or excuse me, you're married. And then that spouse passes away and then you decide, Hey, I'd like to remarry. If you get remarried before you are 60, you preclude yourself from being entitled to that survivor benefit off of that deceased spouse. And we've actually had this scenario come up to where we had a client who was, uh, who had, uh, a deceased. Um, from an earlier marriage and she was about to get remarried and she was 59 and change. And she had sent out her wedding invitations. And what she didn't realize is the minute that she got married, if it was prior to age 60, she was no longer going to be entitled to survivor benefits off that deceased spouse. And so we notified her of that. And I think because of that, she postponed her wedding until after she was 60. But could you imagine, and we see this often where, you know, this is just a penalty that a lot of retirees are no aware of that, Hey, I got remarried before 60 that's. I'm not entitled to the survivor benefit, but it's something you've gotta be aware of because you could be missing out on 2000.

[01:02:00] I mean, that could be a 2000 to $2,500 a month. Just because you got married before you were 60. If you go back in the, um, the archives of The Financial Call, I can't remember which number episode it is. Um, but it's, what'd, you get divorced for $640,000. So Jason McGinnis and I go through an exact scenario of this, where we figured out the math was a little over $600,000 that this person lost because they got married before, before 60. Now we also went through the technical aspect of it and learned that if they choose to get divorced, From their current spouse and their current spouse. So if, if the gal is willing to divorce her current spouse, and then they get remarried, then technically she's married after 60, instead of having been married before 60. And so we're trying to figure out they still, they they're planning on doing this by the way, but they're not quite to this age yet. So, um, where they want to actually file for the benefit, but it's pretty close. And basically what we're thinking is maybe we send the husband on a two week

[01:03:00] golf trip and they get divorced at the beginning of it. They get remarried at the end of it. And she hops on her spouse, her survivor benefit and all as well. Uh, but anyway, it's a fun episode. Jason McGuinness found this scenario. So he and I flushed it out in that episode. So Zacc, I just did this. Did you actually go through with it? We just did it with a retiree couple. Uh, she had a spouse that passed away and when they were in their thirties of her first spouse, and then she got remarried in her forties and. She's now 66. And she didn't realize that of course, remarrying prior to 60, that she was going to preclude herself. So they went through the scenario and by the way, for the listeners, we don't give marriage advice or unless it pertains to security and then we're all over it. Yeah. So we're not advocating divorce here, but you know, we educate and then let you make the final decision. But for this retiree, they decided, yeah, we're going to go through with this. So they, they did get a divorce. I don't know if he went on a golf trip, but maybe he went on a cruise, but, uh, they got a divorce and got remarried and

[01:04:00] she, we just turned on her survivor. It's $2,500 per month. She'll pick up now. Here's the cool thing. She'll get that from age 66 to 70, and she's not taking her own benefits. So again, remember what's happening to her personal benefit while she waits is growing at 8%. So she'll get $2,500 a month for the next four years. And I want to say her personal benefit during that time grows to about just north of $3,000 per month. And so if we were to run that out in a, you know, in a, in a, in a math equation or a calculation, um, we'll see how long she lives. Right. But yeah. Um, tell me, have you, have you, has she reported that you've seen the $2,500? She's actually getting it, she's getting so that's the first, I think that's our first confirmed. Um, case of that actually working, I was on the phone with her when we called social security to file for the application, it was a breeze. We had the application filed in 15 minutes. Um, they asked, you know, if she was currently married, of course she was divorced at this time. So,

[01:05:00] no. Um, and so they didn't ask any further questions. She's on the benefit. She's getting it every single month. So she gets remarried later and she's good to go. Yep. Wow. Okay. So it works. Let's hope social security doesn't listen to this call. They might queue in on this loophole. I don't care about us. Um, so that helps Jason's client too. We know that's gonna work. That's great. Yeah, that'll work. Okay. So if you had a, uh, again, the very bottom one here, divorced spouse. So your marriage. You divorce this individual, and then later this individual dies. As long as you were married for at least 10 years to that individual, you could be entitled to divorced survivor benefits. Okay. So, you know, we always kind of joke, make sure you keep track of your divorce. Spouses, know where they are. Um, of course you can't kill them. That's not an option, but, uh, make sure you, you kind of track them and keep it and be aware because anytime something happens or changes within your marital situation, you need to be on the phone with your advisor, your financial advisor, or call us

[01:06:00] because we can quickly figure out does that change in your marital situation, change your social security strategy. And oftentimes it does. And in that scenario, it's not even a change to their marital situation. It's a change in whether or not their ex spouse is alive. Right. And that's an awkward one to where, when we ask the client, like, okay, so you've been married for more than 10 years to the previous spouse, and then you follow it up with, well, is he alive? And, and they say, well, I don't know. And then you have to tell them that, well, don't, don't take any drastic action, but it'll double your social security benefit. If he dies, it's kind of a weird feeling and a weird thing to think about, but we need to know, we do need to know. Yeah. And, and, and like, like Zacc said, if you have that spouse has passed away, make sure you're on the phone with your financial advisor or a professional in this area so that we can figure out, you know, is, is there a change that needs to happen? All right. So I think we made it through, um, Tyler is the expert here. You can tell he's, he's been through a lot of different scenarios. Uh, I thought this was super helpful. And again, we'll get into

[01:07:00] this in a lot more detail in our social security season. So don't feel like if you missed it or if you don't understand it, um, don't feel like you, you needed to get it all from this particular, this particular episode. Um, Laura, let's pull up what's next and then we'll probably call it good for a day. Shall we? Um, and I don't know if I still have that up. I believe we have the pension decision coming up. Oh, yes, that's right. Okay. So pension decisions is next. Anyone who has a pension, which, uh, they're going away there aren't as many as there used to be, but oftentimes there are multiple choices between lump sums and different income benefits, different survivor benefits. We're going to go through that. And there's also a breakeven there, a required rate of return. We'll go through all of this and, and there are some deal breakers. So there are certain things that will make it. So you say, I don't care what the math says, I'm going this way, or I'm going that. And we're going to help you through all of that, um, stick with us, but thank you for joining us today, Tyler.

[01:08:00] Excellent work. Thank you. It's been fantastic. Being here. This podcast is intended for informational purposes only and is not a substitute for personal advice from Capita. This is not a recommendation offer or solicitation to buy or sell any security. Past performance is not indicated or for of future results. There can be no assurance that investment objectives will be achieved. Different types of investments involve varying degrees of risk, including the loss of money invested. Therefore it should not be assumed that future performance of any specific investment or investment strategy, including the investments. Investment strategies recommended or proposed by Capita

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