Planning when you’ll take Social Security might be the most important decision you make for your retirement…
It impacts your income for the rest of your life (and your spouse’s income, too)…
The decision you make determines your destiny…
You need to make the decision that leads to your secure retirement—you’ll have the money to do the things you want and live worry-free.
In this episode, we’ll cover the basics of Social Security and help you understand this important decision.
Listen to learn:
What factors determine when you should take Social Security?
The pros and cons of delaying Social Security
How to find your full retirement age
What is the cost of living adjustment?
What spousal benefits will you receive?
Will Social Security change in the coming decades?
Is a strategy session right for you?
April Schoen: Hello, everyone, and welcome. So glad you're here. My name is April Schoen. And I'm sitting here today with John Curry.
John Curry: Hi, April. Hello, everyone.
April: And today we're gonna be talking about, we're really going to be focusing on one of the puzzle pieces of retirement. And that's going to be all about Social Security. And why is this so important? Well, when you take Social Security is going to be one of the most important decisions you make when it comes to retirement, if not the most important decision you'll make. And the reason that is is because this is going to impact your income for the rest of your life. And some people will live 20, 30, even 40 years into retirement. And not only is it going to impact your retirement, but if you're married, it could impact your spouse as well.
Okay, so we're going to be talking about today is we're going to talk about, so you make sure that you know how Social Security works, so that you can know what all your options are available to you under Social Security, both for you and for your spouse, okay.
And then that way you can make the best decision for you and your family. Now, the earliest you can take Social Security is 62. But there's a cost for that. There's a cost for taking Social Security early. So we're going to talk about that a little later on. And then your full retirement age for Social Security is somewhere between 66 and 67. And that all depends on the year that you were born. And then the longest that you can delay Social Security is age 70. Okay, so those three key ages, kind of keep those in mind, you may want to jot them down. 62, full retirement age, and 70, because we're going to be talking about those a lot today.
John: Absolutely. And they're very important.
April: So you know, John, I was just thinking the other day, I can't believe that it's been almost two years since COVID started. We really just have hit in March here this two year mark. And I was just thinking the other day, gosh, just thinking back about March of 2020. You know, you and I had just come back from a conference in Phoenix that we've been at for a week. And then it felt like we got back in the world had shut down. And I just remember what that felt like. I was remembering, you know, some of that uncertainty and some of that fear that we were feeling at that time. Some of the concerns we were having, you know, over our health, our loved ones, you know, also the state of the economy, the world, what is that future going to look like?
But right before COVID started, I had no idea how good timing this was going to be. But right before COVID started, I had actually hired a coach. I hired a business coach for women. And I hired her funny enough, because I'm thinking about this, as we're doing a webinar, I hired her to help me with my public speaking. Because you know that time you and I were doing live seminars at our training room here in Tallahassee. And sometimes we have 90 to 100 people in the room. And so I was working with her to help me with my public speaking. But I got, I got so much more out of working with her. And I'm so grateful for that. Because as soon as COVID started, I knew I couldn't do it on my own.
I knew that I needed to have someone that I could lean on someone I could bounce ideas off of because the world was changing, like in real time, very fast, very quick. And what's great about having my coach is that one, she had been doing this, she'd been a business coach for over 30 years. So her experience and her perspective in working with countless of other clients was really invaluable to me at the time, because she helped me come up with some great ideas that I may not have thought of at the time. And she was well worth the investment. Because I'm still benefiting today from the work we did two years ago.
And the reason I bring all this up, the reason I think it's relevant to this conversation we're going to have about Social Security today is because I think we've all been there. We've all been in this place of uncertainty, where I'm thinking about those of you on the call today or if you're listening to this later, you may be thinking as you're getting ready for retirement, what's it going to look like for you and are you ready to retire? And how's it really going to look? And not to mention, okay, that's just retirement in general. I think people have some uncertainty, anxiety about retirement in normal time.
John: Absolutely. Forget about COVID. Retirement is a big step.
April: It's a big step. And not to mention just this uncertainty that we have in the world today. If you think about inflation is the highest we've seen in 40 years. Interest rates, we're now entering in this phase where interest rates are going to be rising. And then we've got all of this geopolitical risk that's going on with this war in Ukraine. So I think it's, it's really important. I'm glad that those of you on the call today, I'm glad you're here, because we're really going to talk about how can you use Social Security to help create your own secure retirement, okay. And I want to emphasize your retirement, because it's not my retirement, it's not John's retirement, your neighbor's, your co worker's retirement. It's your own secure retirement.
And what makes it secure is not just that you have money, okay? It's great. But it's not just that you have money, it's that you have the money to do the things that you want in your life, and that you don't have to worry about it. Right. So before we get into all these details about Social Security, I let me bring John in. But I want to I want to tell you a little bit about John. So John is great. He's amazing. I've been working with John for eight years, and he has just a wealth of knowledge and experience. John's been helping clients for over 47 years. And he really focuses, has really spent a lot of his career focused in on around retirement planning. So helping people answer questions about Social Security, Medicare, IRAs, required minimum distributions, how do you kind of put it all together?
But let me tell you what he, his strength is. We call it unique ability. And that is really to see a strategy for someone, because he knows how to do it, right. He knows how to do it well. He's seen hundreds, if not 1000s, of plans, so he knows what works and what doesn't. And he can also spot red flags. So if there's a weakness in someone's plan, John sees it. I mean, it is just clear as day I could see it sometimes in his eyes when he notices something's off. And that really comes from him being in business for 47 years and helping 1000s of clients at this point. And so I'm glad John's here today, he's going to share with you guys some information he has about Social Security. John's actually already collecting Social Security himself. So not only working with clients, but also firsthand knowledge. So glad you're here.
John: Thank you, April. I will say this, I'm 69 years old. So I started collecting Social Security at full retirement age. So when appropriate in the presentation, I will jump in and talk about the pros and cons of that. But let me tell you about April. April has been, we've been working together eight years, but she's been in business for 12 years. And as soon as she started working with me, I realized something about April, she was a detail person analytical, she loves her spreadsheets. She has a passion for investments. In fact, I call her a geek, the investment geek. Because she loves doing that, she has a passion for it. And she can sit down with people and build portfolios based on what their goals are. Just this morning, we're talking with a lady, we were talking as we went out. We've been working together since 1980, one way or another, that's 43 years.
April: Amazing.
John: And it's just amazing the relationships you develop over time. But I love it. But what April and I have done is we've put together a team of where we can get things done for people, usually faster than they can do it themselves. And definitely save them time and money. And one of the things I want to brag about April, while I've got her in front of me, you could hear. When I was out last year because of my amputation of my right leg above the knee, we didn't miss a beat as a business. Clients didn't suffer. April stepped right in, ran the business and everybody was taken care of. And for me, that was very important in my own retirement planning. What happens if I were to become totally disabled or I were to die? I wanted to make sure my clients were taking care of. And now they're no longer my clients, they're our clients. We work together. So I just wanted to share that.
April: Thanks, John. You know, you mentioned it as earlier today. We were talking about it. But I think what what makes our team so unique and really most efficient for helping people is that and you said it earlier today was that we kind of cover all aspects. We've got the age gap covered, right because you're 69, I'm 38. We've got the gender gap covered having a male perspective, a female perspective, not just from us, but the other people in our team as well. So I think that's really what allows our team to help get the best results for our clients.
John: I put it this way. We've got the young whippersnapper, we've got the old fart. Between the two of us, we'll get it done.
April: Between the two of us. I love it.
John: I do want my comment on your comment about coaching. I've been hired my first coach back in 1986 I think it was. I have been in a coaching program pretty much ever since. And the power of coaching is this, it's not a cost. It's an investment. If you're working with the right coach. We're coaches. We coach people. And I love that. Many people will say to me, okay, coach, what should I do? And I like that, because the job is not to be in sales, it's to coach people and guide them to make decisions.
April: That's right. Yeah. And you know, it's good to have a coach too, I think that tells you like, it is right, like, it's not always fun to be coached.
John: I would never do that. I hold things back so much.
April: Oh, I bet. So let's kind of get into what we're going to be talking about today. So we're going to talk about your options for Social Security and how this impacts your overall retirement. So no matter what stage of life you're in, right now, no matter if you're where you want to be, or you're not sure where to start, or even if you think you've got it all figured out. I'm glad you're here, because we're going to really be talking about the most important aspects of social security. And you're going to know which parts of this are relevant to you, and how it's going to impact you. So and so again, we got about 50 minutes left, here.
And so we're gonna really just dive in, roll up our sleeves and get to work. And if it's okay, because we're not going to really have enough time to get all the knowledge that I have all the knowledge that John has, out of our heads and to you. But we're gonna talk later about, we're gonna set a time at the end, to talk about how you could do a strategy session with us. So that we can really take this experience, we can kind of shorten it down and customize it so that you can create the retirement that you want.
John: Do this April, for just, take just a moment for those who might have to leave early. And let them know what happens on that strategy session call.
April: Yes. So at the strategy session call, what we're going to talk about is what opportunities are available to you what roadblocks are, might be in your way. And then we're gonna talk specifically about the strategies we're going to go through today and figure out which one of those may be appropriate for you.
John: And then what's the cost for that call?
April: It's complimentary. There's no cost for the strategy session. Yeah, absolutely. So we're gonna go through a lot of that today about how Social Security works, key components of your benefits and these different payments scenarios. But don't stop listening, okay. We got some really good information to go over. But we're gonna save some time at the end and talk about how to customize it for you. So these decisions around Social Security are so important, because the decisions that you make are going to determine your destiny, okay. Write that down. The decisions you make will determine your destiny. So let's get into this today and talk about how Social Security works. This way, you know how your benefit is calculated, and what your options are going to be.
We had a couple people send in some questions prior to the webinar. So if we have time, we're gonna make sure we get to those. And I'm glad that they did. They sent in some questions asking about their benefits about spousal benefits. So we're gonna go through that a little bit later on as well. So I'm gonna say the same thing to you. If you have a question that comes up during the webinar, jot it down, and you can email us at the end, and we'll try to get get back to you on that. Okay. So let's go and talk about how Social Security works. So, you know, American workers have been really counting on Social Security since about 1935, that's when Social Security was first enacted.
And as we know, it's designed to provide you an income in retirement, okay. And the Social Security's Trust Fund, how benefits are paid, how it's funded, is from the taxation of wages by the current workforce. So as I'm working, as John's working, people are still working, we are paying into Social Security, and those funds are being used to pay current beneficiaries. Okay, very important to note that. We're gonna circle back and talk about later about one of the issues around the program, but I'll kind of go ahead and give you the Cliff Notes version. This is a problem that Social Security faces, is that in today's age, there's not as many workers to beneficiaries as there were in previous generations.
For example, and 1945, there was about 40 workers per one beneficiary, but Social Security estimates by 2035, there's only going to be two workers per one beneficiary. Okay. So it's very important. So when we get to talking about the issues around social security, this is one of them, is funding. It's making sure that Social Security is properly funded. Now, to qualify for Social Security and Medicare, you need to have 40 credits. So what is a credit? Essentially, you need to have 10 years of work history to be able for you and your spouse to qualify for Medicare. So as long as you have 10 years of work history, kind of gets a little more in depth about that there are some income restrictions in there too.
But for most people, if you've worked ten years or longer, then both you and your spouse will call qualify for both Social Security and Medicare. Now, how is your benefit amount determined by Social Security? Well, what they do is they actually take an average of your highest 35 years of salary. Okay, regardless of when that salary was earned. And here's a key important thing to note is that if you don't have 35 years of work history, then Social Security uses zeros to fill in those gaps. Okay. So if you don't have 35 years, it's very important for us to look at that and decide when will be best for you to retire. Because you may benefit from working a few more years to make sure that you've got at least 35 years of work history.
Social Security used to send out paper statements, but they don't anymore. So what you're going to want to do is go on to Social Security's website to get a copy of your statement. If you haven't gone to Social Security's website, we really encourage you to go on create a profile. It's been a couple years, but Social Security was having some issues with fraudulent activity, people trying to create profiles on behalf of other people. So if you don't have one, go ahead, go on and create a profile. And on there, you're going to see some different calculators that they have, that you can look at. And you can also get a copy of your statement.
And this statement is going to show you what is your full retirement age, it's going to show, and what your benefit amount will be at full retirement age. It'll show you if you took it as early as 62. And if you delay to 70, as well. And the statement, your Social Security statement, this is one of the things that we would want to look at if we were going to do some comparisons for you. So if we were going to show you which one is better, which option is better for you, and even your spouse, so when to take Social Security, your statement is going give us the information that we can look at. And we can talk about who claims first, who delays. What's the crossover point.
There's a lot of different things we can look at when you talk about what survivor benefits will be, either for your spouse or kids or what have you. So lots of different things that we can talk about from someone's Social Security statement. Let's go into a little bit more about the program and talk about when, how these benefits are calculated and when. So your full retirement age, this is the year that you get your you get your full retirement benefit, meaning there's no reduction in your benefit from claiming earlier. As I mentioned, you can start your benefit as early as age 62. But your benefit is going to be reduced and it will remain reduced for the entire time you collect it. Okay, so there's a cost for taking Social Security early. And you want to make sure that you know how that's going to impact your retirement.
Now, you can also delay past your full retirement age, and we're going to talk about that in a few minutes. But let's just focus in on your full retirement age. What is it and when is it? Well, your full retirement age is determined on the year that you were born. And so if you're born between 1943 and 1954, your full retirement age is 66. If you were born in 1960, and later, your full retirement age is 67. And if you weren't somewhere in between there, so between 55 and 59, it's 66 and some months, okay. So you can look at this chart to figure out when your full retirement age is and then you can also look on your statement and that's going to tell you what your full retirement age is as well.
So now let's take a look and let's talk about what happens if you delay taking Social Security or your options of taking it early. So we're gonna assume right now that we're looking at someone whose full retirement age is 66. So this means they were born between 1943 and 1954. And so the earliest they could take it would be age 62. But they would only receive 75% of their full retirement age benefit. Now, and so again, when we look at someone's plan and say, do you take it early? Do you take it at full retirement age do you take at age 70? This is very important. I mentioned earlier about this is the most important decision you're gonna make when it comes to your retirement.
And this is why, because it's a huge difference between these benefits of taking it at 62, taking it at full retirement age, or taking it at age 70. Now Social Security has what's called delayed retirement credits. And what that means is you're deferring taking your Social Security benefit, you're deferring past age 66. And every year that you delay, you get an increase, it goes up by 8% every year that you delay. And so that's why you're seeing that if someone's full retirement age is 66 and they wait and take their benefit at 70, then their benefit has gone up 32%, okay.
John: Let me jump in for a moment on this, April. When I was looking at this for myself, I asked this question, can I take it at 62? In my case, I could not because I was still working. So I would lose some benefits because it was more than the guidelines, roughly $19,000. I could take the benefit at full retirement age 66, or wait until 70. And what you can see on the screen that's about $750 a month more income if you wait. But for me, and what you've got to determine for yourself, folks is do you take it at full retirement age or you delay. Let's talk about why you might delay to 70. Higher benefit, but if you do not have adequate life insurance, or savings or investments to take care of the spouse.
In the intro, you mentioned survivor benefits. So that will be a reason to delay. But in my case, and for most people, I think this is true. I didn't want to wait, because the time value of money, I wanted that money now. But some people should wait. And that's where you get into planning. It's not just well, my friend told me I should take it at age 70. No, your friend has a different situation than you do. Let's analyze yours, and then put it in the mix of everything you have as far as income, savings, investments and retirement income streams.
April: Absolutely. And definitely you have to take a look at everything that's for sure. Let's look at this delayed retirement, if you, different full retirement ages. So again, like I said, If you delay taking Social Security past your full retirement age, it's going to go up by 8% every year. So this is also going to depend on when you were born and what's your full retirement age. So if you're age 66, and you delay to 70, well, your benefit is going to be 132%. If your full retirement age is 66 and six months, you don't have as long for it to grow. And so it's only going to be 128%. And if your full retirement age is 67 then it's going to be 124%. So it all kind of comes back to that full retirement age. And you know, when you're born, what's your full retirement age and how long are you going to have for it to delay.
The personal amounts for for you, if you start your benefit at age 62, full retirement age, at age 70. They're all going to be on your statement from Social Security. Okay. And there's really, there's no perfect retirement age that covers all people. The decision to delay or not to delay, it's completely up to you. But I will say this, you do need to review your own life, you need to review your own personal circumstances to take a look and make this decision. Unfortunately, we find a lot of people make decisions based off feelings and not off facts, okay. So we want to make sure that you know all your options that you have all the information available to you so that you can make the best decision.
So John, you were just talking about this a little bit. But let's talk about what are some considerations that people need to look at when they're thinking about taking their benefits early or delaying. So will you talk about, you know, what sort of income do you have? Are you going to have earned income? You know, you mentioned earlier if you claim it early at 62, but you're still you're still working in some capacity. Well, you can have reductions from Social Security, which we're going to talk about in a few minutes. Right.
So you got to take in the full picture of what is your income look like? We got to look at your health, that that plays a role. Right? Should someone take it early? Should someone delay? You need to think about your health. What are your other income sources? Do you have a pension? Do you have other investments? Other retirement accounts? What's, you know can you delay taking your Social Security, will that benefit you or not? Right? So one of the things that we look at in our planning is we look at it both ways. What does it look like for someone to take Social Security early? And what does it look like for them to defer taking Social Security?
John: That's where our retirement rehearsal is so important, because people can actually test drive retirement before they get there. I think it's a well what if I did this, what if I did this?
April: Right. And I know for us, we actually kind of look at it behind the scenes. And we'll look at multiple, sometimes we look at three, four or five different ways for someone to retire, to say hey which one is going to be the best. We always say it's kind of like putting a puzzle together, we get to throw all the financial pieces on the desk, try to rearrange them, put them together in the most efficient, effective way possible. It's kind of fun actually.
John: Sticking to the puzzle, when you buy a puzzle, there's always a picture on the lid. So sometimes, once people start building this puzzle, they realize that's not what they want. That this is not the puzzle picture I thought it was going to be. So sometimes you have to just kind of move those pieces out of the way and start from scratch.
April: You know, I'm thinking about one client I met with earlier this year, and she was intent on retiring this year. I want to retire this year, I'm going to retire this year, like no ifs, ands or buts about it. And so we actually was like, okay, great. So let's look at what it's gonna look like for you. But one of the questions I asked her was like, which one though, is more important? Is it I must retire this year at all costs, no matter what its gonna look like, how it's going to impact me financially. I must retire. Or is it more of no, I'm okay, waiting a few years, if it means I can have the lifestyle that I want. Okay.
And for her, it actually worked out, it turned out rather, she wants to retire. But she wants to retire on her terms, and still be of the things that she wants to do. So we looked at it that actually, especially Social Security came was a big puzzle piece for her, you know when to put that in the mix. And she's not delaying long, but she's gonna delay six months to a year. And you what she looked at it, she said, oh, I can do that. Oh, that's no big deal. I could do six months, I could do another a year, that's no problem. Oh, you're telling me if I wait one year, this it what it's gonna look like? I said, yes. And she's like, that's what I want.
John: That's an example of someone being so hell bent on doing something. And in her case, she was willing to look at other options. So many times, we'll get the blinders on, this is what I'm going to do, no matter what. Don't want to hear it. And it costs us money or it causes us a lot of stress.
April: Right. Absolutely. So I'll just kind of circle back on this a little bit, that there are a lot of key considerations that you need to think about when it comes to making your decision around Social Security. And make sure you, before you make a decision that you have all the facts. You know how these puzzle pieces fit together.
John: Speaking of the puzzle pieces, sometimes we'll have people say, when should I take Social Security? They want us to do that in a vacuum. We can't answer that question. We have to see the whole thing. We're not like Social Security, or even the division of retirement with the state of Florida where they say these are your options, and they do it in a vacuum. We have to look at a macro approach tied into everything like you have listed that you just talked about. Your health. Longevity, and taxes. A lot of things there.
April: Absolutely. All right, let's move on. We're gonna talk about some of these other key benefits for Social Security. Okay, and so one of them is a cost of living adjustment. So Social Security has a cost of living adjustment. But let me just tell you this, it's not guaranteed. It is based on the CPI, the CPIW actually. And the CPIW is the consumer price index for urban wage earners and clerical workers. So this is not always the inflation that we hear quoted in the media. And there are, so there's been years in the past where we haven't had an increase. Like 2010, 2011, 2016. And I see here on our slide, it needs to get updated for 2022 because we have the 2021 COLA for 1.3% which was last year. But for 2022 it was actually a very big number. 5.9.
John: Correct.
April: Yeah, it was 5.9% was the was the cost of living adjustment for 2022. You can actually see back in 2009, it was 5.8. Okay, so we had a pretty high cost of living adjustment in 2009 as well, but the 5.9 for 2022 is the largest that we had seen like 39 years. So pretty big jump for this year.
John: And what else do we have that we've not seen for 39 or 40 years?
April: Medicare increases. Inflation.
John: That's right. A lot of issues going on. We have people tell us, well, I got a nice bump in Social Security, but my Medicare premiums went up. So I didn't really net much more, if any. In some cases people didn't net any more.
April: Absolutely. So the key thing here is that there is a cost of living adjustment in Social Security, but it's not guaranteed. So if you have, for example, like a pension through the state of Florida, you may have an automatic COLA that happens every July. Some pensions have automatic COLA, some don't. But for Social Security, it's based on the CPIW for that year. And they come out with it at the end of every year. And let's talk about taxes. Because there's, this gets very confusing about if your benefits taxed or not, how much is taxed.
So let's kind of walk through this for a few minutes. Now, you may owe taxes on a portion of your Social Security benefit. But it depends on how you file your taxes. And it depends on what your other income sources are. So let's walk through this for both if you file as a single, file as a single return or if you file a joint return. But the first thing you need to look at is what is your combined income. So your combined income, you take your adjusted gross income, you add in non taxable interest and one half of your Social Security benefits. And this is going to equal your combined income. And then if your combined income is between $25,000 and $34,000, okay, then you are going to be taxed on only 50% of your benefit. And if your combined income is over $34,000, then 85% of your benefit is going to be considered taxable income.
Now let's talk about what happens if you file a joint return. If your combined income, nothing about the joint return though, this is combined income on your joint return. So if your combined income is between $32,000 and $44,000, then 50% of your benefit is considered taxable income. And if your combined income is over $44,000, then 85% is considered taxable income. Very important. One thing that some people don't know too is that you can actually ask Social Security to withhold taxes. So we had a situation where the new client we're starting to work with and she was talking about taxes, and she was actually getting a penalty from the IRS, she had a penalty from the IRS because she wasn't having taxes withheld from her Social Security benefit and she didn't do any sort of quarterly tax payments along the way. So very important.
John: Very important. And just a little bit of trivia here folks. At one time you'd pay no income taxes on Social Security. That changed in the 1980s, under the Reagan administration, when all of these changes were made to Social Security. Because prior to that, full retirement age for everyone was 65. So a lot of changes are made. And I predict that in the next three to seven years, you're going to see even more changes made because of what's happening with the economy, what's happening with taxes. And if there's time at the end I've got some thoughts I want to throw in on that.
April: Absolutely. So let's talk about what happens if you're working and you take Social Security. So there's a lot of information we can go through here. So I'm going to kind of for the sake of time, I'm gonna keep this short. Just know this, if you take your Social Security benefits early before your full retirement age, and you're continuing to work, and you have wages over certain limits around $19,000, then you're gonna have a reduction from Social Security, okay. However, if you start taking benefits in the year that you take, the year you turn your full retirement age, the reduction isn't as much, but you could still see a reduction in that year. If you take it before you've actually attained your your full retirement age.
But if you wait until the month that you're your full retirement age or later to take Social Security, there's no earnings limit. So let me give an example. My birthday is in December. So if my full retirement age was this year, if I wait to start taking Social Security in December of this year, it doesn't matter how much I earn, I can make a million dollars a year and there's no reduction from Social Security. If I take it earlier than the month that I turned full retirement age, we want to make sure, you just want to make sure that you know what those earnings limits are and how that's going to impact your benefits.
John: And we see a lot of people get surprised with that one. They're gonna retire the middle of the year like, in your example, and we say wait a minute. It's okay, but are you aware? And many times they don't know. Sometimes I'm impressed that they do know. Yes, it's gonna be reduced. But it's not that much so I'm going to do it anyway.
April: Right. Sometimes these other, these other factors in your overall situation come into play. And it makes more sense to do that.
John: And usually what we hear is I want the money now. I don't work anymore, I want the income, so I'm willing to take a little bit less now and enjoy it.
April: That's right. Alright, let's get into the fun part here, which is talking about some different payment scenarios. So the first thing we're going to talk about is some spousal benefits. So if you or your spouse have 40 credits, again, that's about 10 years of work history, then you both qualify for Social Security and for Medicare. So the way that the spousal benefits work is that you are eligible for benefits under your own record, or your spouse's record, okay. And you're under the spousal benefits, you're eligible for 50%, five zero, 50% of what your spouse's benefit is. So let's kind of talk through this a few minutes. And also talk about the deeming rules that Social Security has now.
So first, Social Security has what's called deeming rules. And what that means is that they are deemed to pay you the highest benefit available to you. Okay, so that's the first thing you need to know, you don't have to do some crazy calculations here. Social Security's gonna pay you either under your own record or your spouse's record, whichever is higher. Okay. Well, let's just talk about the spousal benefits for a second. My husband's name is Brian. So I'm gonna use April and Brian as an example. So let's say my husband's, Brian's, Social Security benefit is $1,000 a month. And mine is only $250 a month. Just to keep the math simple. No, but let's keep the math simple.
So in that case, that's for me, by the way, I need to keep the math simple. So in that case, his benefit is $1,000. Mine under my own record, would be $250. But because I qualify for a spousal benefit then I would actually get $500 from Social Security. So it's going to be half of what his would be, or mine, whichever is greater. Now, there are also some widow and widower's benefits available as well to surviving spouses. Okay, and a couple of things to consider here, if you are eligible for widow or widower's benefits. If you do remarry, if you remarry when you're 60 or older, you're still eligible for spousal benefits under your previous spouse. But the way the widow and widower's benefits work is you're eligible to receive 100% of the highest benefit.
Okay, so let's talk again, I'm a numbers person, let's talk through the numbers. I'll use me and Brian as an example again. So Brian gets $1,000. Remember, I'm getting $500, from my spousal benefits, and let's say Brian passes away. For me, as a surviving spouse, I don't get both anymore, the lower of the two goes away. So essentially, I then will only be collecting $1,000 from Social Security. If you want to know the nuts and bolts of it, they'll continue to pay me my benefit, and they just add money on top of it to get to the same amount. That's really how it works. But the amounts all work out to be the same, you're gonna get the higher of the two.
John: And this is important, April, because so many people think they will get both checks.
April: Correct.
John: And that's just not the case. And they don't plan for, okay, 10, 15, 20 years down the road, one of those checks disappear. So that we have to take that into consideration every time we do a retirement rehearsal.
April: You know, I'm thinking of one, some clients of ours that took option four with the pension, for the State of Florida pension. So what that means for them is that was one, that they both took option four, so when one of them passes away, their pension incomes are going to be reduced down to two thirds for both. And they're going to lose one of their Social Securities
John: Correct.
April: And some people don't realize the impact of how that's gonna be.
John: And that got their attention because they had, they knew it. And it's so much alive. I know that, I know. But are you doing that? Are you acting on it? So they knew it at the conscious level, but they didn't do anything to solve the problem until they came to work with us.
April: Correct. And I don't think they really saw the number, so when we were showing them in the retirement rehearsal about how that's going to impact one of them. Doesn't matter which one, it's going to impact one of them. It was really the husband and like the color drained from his face because he had not thought, he knew it was going to happen, but he didn't realize how big of an impact that was going to be.
John: Well, when you say reduced by 1/3 that's different than saying, let me show you. If you're going from $1,500, down to $1,000. When you see it disappear, that's when it gets your attention.
April: One other thing I want to bring up about widow and widower's benefits is there are some planning strategies that you can utilize here. We have clients who will actually claim the survivor benefit from Social Security and then let their benefit continue to grow until age 70. So if you're in that situation where you have a widow or widower's benefit available, come sit with us, let's walk through all the options and make sure you know how to maximize your benefits. There are, again, just for the sake of time, we're not going to spend too much time here. But if this is something that's that's relevant to you get with us, and we'll walk through it. The main key here is that there's different survivor benefits for widows and widowers.
Depending on if you're full retirement age or older, you can actually claim as early as 60, but there will be a reduction and then also for children as well. Here's another planning opportunity for you to consider is if you are divorced. So if you're divorced, and your marriage lasted for 10 years or longer, then you are eligible to have a spousal benefit as well, when you are age 62 and if you remain unmarried. So key points here for divorced spouses, the marriage needed to last 10 years or longer.
Okay. And if that's the case, then you may have a spousal benefit available for you under your ex spouse's record, as long as you remain unmarried. Okay, but this works exactly the same as it does on the regular spousal benefits. So it's 50% of the higher wage earner. And this benefit that gets paid to the ex spouse, it does not affect the other one's record. It doesn't affect them. If, let's say, um, you know, Brian's the higher wage earner. And he's remarried, right? Again, Brian's, my husband, he's remarried, I claim a spousal benefit under his record, it doesn't impact his benefit, and it doesn't impact if he had a case where he married, it doesn't impact his current spouse's benefit, either.
John: And this was one of those areas where I believe you'll see a change in the future. Because the administration has said, there's a lot of money going out because of so many divorces after 10, 12 years of marriage, and that's one area of stopping some of the outflow.
April: Correct.
John: And it wouldn't surprise me if that benefit goes away. Meaning that if one person's collecting, then the second one can't. We'll see if Congress will do that. There's some discussion about it.
April: And it's my understanding that 10 year mark is in stone, meaning there is no wiggle room, there is no give. We had a client who I think they had been they've been married nine years and nine months, and they did not qualify for a spousal benefit under their divorced spouse's record.
John: Yes. And I remember one where it was very nasty, because the lady realized what had happened and he was intentional, she felt. And he could have waited. She should have said, I'm not signing the damn forms until I got to ten years. Had she had known it, she would not have signed.
April: Alright. Let's talk about some issues around the program. We talked about this one earlier. But really one of the main issues that Social Security has is it's running out of money. It's this issue of this ratio of workers to beneficiaries is going to shrink over time. And if you go to Social Security's website, they have all the information available for you there. You can take a look at information on the trust fund and how it's doing. But they estimate that by about the year 2034, 2035, that there again, there's only going to be about two workers for each beneficiary.
And so that's when they think that the trust fund will be exhausted. And right now, they estimate they're only going to be able to pay 76 cents for each dollar of scheduled benefits. So what does that mean? That means if you're receiving $1,000 for Social Security today, and if no changes are made and the trust fund become, is exhausted, then your benefit goes from $1,000 a month to $706 a month. It's a big difference.
John: And if you really are a geek about this stuff like we are, you can get the trustee’s report and really dig deep and it's pretty heavy information. So most people won't do that. But if you want it, visit the website.
April: Absolutely. So this is where we think they will have some, make some changes to the program where we could see higher taxation, we could see them raising the full retirement age, we could see a lot of changes along the way for Social Security. Although they'll probably wait till the very last minute. Hopefully not. But I've been saying that for a couple years now. And here we are in 2022.
John: We'll get to the end. Instead of kicking the can down the road, let's kick it around.
April: And this is exactly one of the actual issues around the program is that Social Security becomes that political football, it's subject to political agenda. So every time we've got elections, what do you hear about, its plans for Social Security, and what's going to happen to it. So that's definitely an issue for Social Security. It's this political agenda. And then one of the other problems that it has is the CPI, I think there's a lot of changes that they could make there. I wish it wasn't tied to CPIW, it should really be tied to what's called the CPIE, that would be more relevant for those collecting Social Security. They could do a lot to change that as well. Now, there's one other issue, let's say with Social Security, but this isn't really with the program itself, it has more to do with your retirement, okay.
And the issue here is that Social Security was never meant to be your sole source of income in your retirement. And if you look on your Social Security statement, they tell you in black and white, that it was not it is not meant to be your sole source of income, and that you have to have other assets. So this data I'm gonna walk through this is from the Social Security website, and this was based on people retiring in 2018. And what Social Security did is they looked at three different groups of people, and they based it on their pre retirement income levels. And then they said, okay, if someone pre retirement, well, I'm just going to use the middle one here, just for illustration for illustrative purposes.
Let's say your income pre retirement was about $86,000. Okay, so Social Security estimates that Social Security benefits will replace only about 32% of your pre retirement income. Okay, that's about $28,000 per year, and the remaining 67 or $58,000. Okay, that's going to have to come from other sources. That's why this is so important. Again, not necessarily an issue with the program itself, but more has to do with your retirement. Okay, so let's talk about other sources of income. Pensions, retirement accounts, investments, savings, real estate, there are a lot of things for you to look at here. Okay. So that's why we talked about different options with Social Security and looking at the big picture,
John: Think back to 2008, 2009. People getting ready to retire the year before. And there were losses in the market, big time. My 401k was down 43%. Some were down more, some less, depending on what you're invested in. But I'm thinking as you're going through this, that timing is so important, but yet we can't time the market. You're talking about these retirement accounts, we can't sit there and say, okay, I know for a fact that when I retire it will be X amount of money. That artificial number we're told about all the time, it will take care of me.
And if we can get to people in time, and help them do some planning, they can put themselves in a position. I'm thinking about our little lady we saw at 10 o'clock this morning. She has so many streams of income coming in, but she doesn't have any worries about income. It gives her the freedom to give away some of the money now to her three children and watch them enjoy it, compared to waiting until she dies. So it comes down to what do you want? And how do you build it to satisfy your needs and your desires?
April: Absolutely. Absolutely.
John: Well, why the hell are you retiring? The word retire means to you pull back, take away. So if you're going to retire, why not make sure it's the way you what you want it to be?
April: Absolutely. Let's recap. Everything we went through today, because we went through a bunch. So the first thing is that Social Security is funded by the taxation of wages. They take into, they look at your highest 35 years of salary to come up with your benefits. You've got to have at least 40 years of credits or 10 years of work history for you and your spouse to qualify. And take a look at your statement to see all your benefit amounts and ages. Your full retirement age depends on the year you are born. And when you start taking Social Security is going to affect your benefit. There is, could be a cost of living adjustment, though it's not guaranteed every year.
And there may, you may have to pay taxes on your benefit. And then as well as working and claiming Social Security early may cause you to have a reduction in your benefit. There's different payment scenarios, we mostly focused in on spousal benefits, widow/widower benefits and divorce benefits. There's also some issues with the program, so far as funding issues for future benefits. Okay, and then part it's obviously subject to those political agendas we talked about earlier. And then not to mention, it's not meant to replace all of your income in retirement. Okay. So today, we really talked about a lot of different options and available to you when it comes to taking your Social Security and how, what does that really going to look like for you?
But the question really comes down to is, which is right for you? Is it to take it at 62? Is it to take it at full retirement age, or is it to wait to age 70. And, as I said earlier, most people they make these decisions based on feelings. And you really want to make your decisions based on facts. Based on knowing all of your options. And evaluate which one is going to be the best for you. That way, you can make a decision based on what's important. And that's how we can guide you. So no matter where you are, no matter if you think you can wait or not. The truth is you have to be proactive with your money, you have to be proactive with your decisions, so that you can know your choices, okay, and know which is going to be the right decision for you. So let's think about this for a second.
Let's say that you wanted to buy a house, and you want to buy a house three years from now. 2025. But in those three years, you don't think about it, you don't look at it, you don't look at your income, you don't look at houses and try to figure out anything, you don't look to see, you don't care about your credit card, excuse me, your credit score. You don't see how much you're gonna need for a downpayment or what closing costs can be. You don't look at anything. And then we wake up three years later, I got news for you, you're not buying a house tomorrow, right? But let's think about if you were proactive about it.
What about in the next three years, you start meeting with realtors, and mortgage brokers and you start gathering information? And you start thinking about, hey, what neighborhood do I want to live in? Right? Do I want to live in the city? Do I want to live in the country? Do I want to be in a family friendly neighborhood? Do I want to be in a 55 and older community? What kind of neighborhood do you want to be in? What kind of house do you want? Do you want a big house where everybody can come stay for holidays and gather around? Do you want a condo? Do you want some land? Do you want to move out to be more rural and have some land? What kind of house do you want?
So if you start thinking about what that's gonna look like, and then you start looking at price ranges for these houses, and you know what your options are, and how you're going to finance it. If you do that, if you're proactive about it, and start thinking about it now, it is going to make all the difference in the world to you. And that's why we would suggest too those on the call, you're hearing this later, to schedule a time for a strategy session. So we can help walk you through this. So let me tell you a little bit about the strategy session and how it's going to help you. First what we're going to do is we're gonna get clarity about what are your goals? What are your concerns?
So this earlier, it's your retirement, it's not mine. We got to look and see what are, what are your wishes? What do you want to make sure is carried out? Okay. And then once we know what your goals and concerns are, we take a look and talk about what opportunities are available for you? We circle that back to when to take Social Security. Again, it's one of the most important decisions you're going to make about retirement. What's holding you back? Are there any roadblocks in the way? Anything that's going to prevent you from having the retirement that you want? And then what specific steps do you need to take to save you time, to save you money, and get you the results that you want?
Okay, now, I don't know if we're right, a good fit for you because I'll be honest, we're not the right fit for everyone. But the way we can find that out is by having a strategy session. They're usually about 30 minutes long. And this way we can talk about goals and concerns and determined if this is a good fit for you, a good fit for us to work together. So this is for you if you're motivated, you know, you're committed to reaching your goals, you know, you want to have that lifestyle and retirement that you want. If you're coachable, you're willing to be open minded and learn. And if you take action. John and I love working with action takers, so fun.
John: Absolutely. They are fun to work with, because they say this is what I want, show me how to get it. And then let's go.
April: And get it done. It's fun to see it come to fruition, it really is. And to have all these, we could spend hours talking about all the different clients we've helped over the years and helping them get there. Not we want, but what they want. The retirement they want
John: It doesn't matter what we want. We can guide and coach but it comes down to what does the individual want? What does the couple want? If they are working as a married couple. It comes down to first finding someone, whether it's us or someone else, that will ask the right questions. And they have the courage to challenge you. Because I can tell you right now, we're not yes, people. We're not gonna say yes, whatever you want dear. Whatever you want. No, we're going to challenge your thinking. That's what you need. That's what you want.
April: Absolutely. So now I've talked just a few minutes ago about how you know if this strategy session is right for you. So I also want to talk a little bit about how if it's not right for you. Ant that's okay, too. I hope you learned a lot today. I hope you found it impactful. And I hope we continue to work together. But this is how this is not for you, scheduling a strategy session is not for you. If you're not coachable, you're not willing to listen to other ideas. And if you're just expecting a lot of unpaid consulting, right. So very important for us to kind of look at everything. But again, like I said, we're not the right fit for everybody. So let's talk about how to schedule a call.
You can do it a couple ways. Okay, the easiest would probably just call our main office, which is 850-562-3000. You're going to get to speak with Crystal or with Zac, and just let them know you were on the webinar or you heard the webinar. And you wanted to schedule a strategy session. You can schedule that with me or with John. Okay, so again, the best way, the easiest, by the way to do is just call 850-562-3000. You can also send us an email, you should have our email from some of the webinar communication. I can get that out to everybody. And you can also go to our website, which is johnhcurry.com/call. That's johnhcurry.com/call. And what I'll do, John, I'm just gonna, I'll make sure I send an email out after the webinar. And that way everybody has the phone number and has the link too if that's easier for them. Just click on the link and schedule.
John: Very good.
April: Great. Well, thank you, everyone, for joining us on the webinar today. I'm glad you were here. Hope you found it impactful and we hope to talk to you real soon.
John: Have a good day, folks. It was a pleasure being with you.
April: Bye bye.
Voiceover: If you'd like to know more about John Curry's services, you can request a complimentary information package by visiting johnhcurry.com/podcast. Again, that is johnhcurry.com/podcast. Or you can call his office at 850-562-3000. Again, that is 850-562-3000. John H Curry chartered life underwriter, chartered financial consultant, accredited estate planner. Master's in science and financial services. Certified in long term care. Registered representative and financial advisor of Park Avenue Securities LLC. Securities, products and services and advisory services are offered through Park Avenue Securities a registered broker dealer and investment advisor. Park Avenue Securities is a wholly owned subsidiary of Guardian. North Florida Financial Corporation is not an affiliate or subsidiary of Park Avenue Securities. Park Avenue Securities as a member of FINRA and SIPC. This material is intended for general public use. By providing this material we are not undertaking to provide investment advice for any specific individual or situation or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation. All investments contain risk and may lose value. Past performance is not a guarantee of future results. Guardian, its subsidiaries, agents or employees do not provide legal, tax or accounting advice. Please consult with your attorney, accountant and or tax advisor for advice concerning your particular circumstances. Not affiliated with the Florida Retirement System. The Living Balance Sheet and the Living Balance Sheet logo are registered service marks of the Guardian Life Insurance Company of America. New York, New York. Copyright 2005-2020. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities or Guardian and opinions stated are their own.
The Social Security Administration has not endorsed, approved or authorized this presentation. There is no charge to attend this event or subsequent consultations. Contact the Social Security Administration for complete details regarding eligibility for benefits. April is also a registered representative and financial advisor with Park Avenue Securities financial representative of guardian.
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