Navigating the intricacies of Social Security can feel like deciphering a complex puzzle...
But what if you had expert guides to help secure your financial future?
In this episode, John Curry and April Schoen explore the vital aspects of Social Security retirement benefits, offering insights on how to maximize them for a secure retirement amidst the backdrop of economic uncertainties.
In this episode, you’ll discover…
The impact of demographic shifts on the sustainability of Social Security
Strategies to maximize your Social Security benefits based on timing and work history
How to navigate spousal and survivor benefits effectively
The realistic concerns around the future of Social Security funding
Essential factors to consider when planning your retirement income strategy
Mentioned in this episode:
Transcript:
April Schoen: Hello, welcome. My name is April Schoen, and I'm sitting here today with John Curry.
John Curry: Hello, folks. Hey, April.
April: And glad you're joining us today. And the first thing is that what we're gonna be talking about today is about Social Security retirement benefits. We are gonna go through, like how to maximize them, what you need to know about the program so that you can make sure that you can secure your own retirement. Very important there.
Secure your own retirement. But before we get into this today, I want to talk about why is this important. Why is it important that we're talking about this today? And I just want to commend you for being here because you're taking time out of your schedule, out of your day, to learn about this important topic. If you are paying attention, you're in the news. You're Googling. There are lots of concerns about the future of Social Security. What's going to happen to it? Is it going to be there? Are our benefits going to be reduced?
So there's a lot of concerns around Social Security, even if you just go to try Google what's happening with it today. So it's important for us to understand that and know what's happening and understand some of those changes that might be coming down the line. And then what are things that you can do to protect yourself if we do see some of those changes.
John: But for those who've been doing this for 50 years, this is nothing new. It’s just getting recycled again, same topics, same issues, and we'll talk about some of that as we go through. Stuff I've heard in the past, stuff we're talking about today, and there are only a few things that can be done to fix Social Security, and we'll touch on those.
April: Absolutely. If you received our email about this talk today, one of the things I mentioned is that when John and I are talking to clients in our practice, new clients, specifically, they have concerns about Social Security. You know, we kind of hear the jokes. Oh, well, if it's going to be there, you know, these are not people who are retiring 10 or 15 years away. These are people who are retiring in the near term.
And someone even replied to the email and had concerns about the future of Social Security. And I had a great conversation with her and and she's actually retiring soon, in the next few years. And I said, look, I really don't think that you're gonna have a problem with Social Security because you're so close to retirement. It's those 10, 15 at my age, I'm 41, that's going to see these sweeping changes to Social Security.
John: I agree.
April: So, let's kind of get into this today.
John: But I've been saying that ever since the ‘80s, when Ronald Reagan pushed Congress to make the first major change in Social Security in many, many years since it was founded, actually. And they didn't go far enough at the time to be honest about it. If they had, we would not have the problems we have today. And if there's time, we'll talk about that some.
April: Sounds great.
John: That's one advantage of being 72 years old and in business 50 years. You got a lot of experience in helping people do this stuff.
April: That's right. Lots of experience for us. So, these are my two boys. They are now, they're actually going to be nine and 12 this year, which is crazy. And pictures from a few years ago when they went on their first flight to Phoenix. They had a great time, but they couldn't help but feeling they were super excited, but they were also nervous about it, because they never phoned before. They didn't know what to expect.
And we took some time to talk about it. We even watched YouTube videos so that they could see what does it look like in the plane. You may find this funny. We even talked about the bathroom situation. We're going to be on a long flight to Phoenix. We're going to have the bathroom. How does all that work on a plane? Because it was all this, this new experience for them.
And overall, we had a pretty good experience on the flight. Except our first flight out of Tallahassee, we got delayed. Delayed by about 30 to 45 minutes. I couldn't believe it. It was because of a paperwork issue, which just makes me laugh. It wasn't a mechanical issue. It wasn't that we didn't have a crew member. It had to do with paperwork.
And so we're sitting there waiting to take off, and then I'm starting to get nervous because I knew that our layover in Atlanta wasn't very long. And so the longer that we were sitting on that jet way in Tallahassee, I knew the shorter amount of time we had in Atlanta to get to our next flight. And so when we landed in Atlanta, we had five minutes to reach our next gate.
So I was just obviously cutting it close, as you can imagine. So I told the boys, I was like, hey, give me your backpacks, and we're just gonna run through the airport together. I was determined we were gonna make it on time. And I told my oldest, I was like, you just hold Connor's hand, I'm gonna hold your hand, and we're gonna run as fast as we can.
John: Like a train.
April: That's right. Zoom, zoom, zoom. And we made it in time. We were one of the last few people to get on that next flight. But I was thinking back about it. It's interesting. They weren't nervous at all. They actually found it to be very fun. It added a thrill and excitement to it. And part of the reason that they weren't worried is because they had me with them, who had, you know, obviously, I've been flying a lot.
I even knew, you know what, even if we miss our next flight, no big deal. We're gonna find another flight out to Phoenix. And so they had need to help guide them, and that really took a lot of stress off of them, and they could just enjoy it. And you know, I tell you all of this to say because I think that experience of that flight can be similar, like we've all had experiences like that, and it can be similar to getting ready to retire.
Maybe we're stressed about it, maybe we're worried about it. Maybe we have unexpected delays, like paperwork issues. It's something we've never experienced before. But also being prepared, being able to adapt, seeking guidance, those are all the things that can really make a difference for someone, whether it's retirement or making it to Phoenix on a plane.
John: True. That's true about everything in life. That's why you hire personal trainers for fitness, things like that. You hire a nutritionist. Same thing. You hire somebody that knows more than you and that is willing to help keep you accountable.
April: That's right. So, today we're going to talk about how does Social Security work. Some of this you may know, but I think it'll be a good refresher so we can kind of understand the mechanics of it. We want to understand the key components of your own benefits and then what are some different payment scenarios on the program?
So how does Social Security work? Now, Social Security has been around since 1935. That's 90 years ago, and it's definitely had some changes throughout the years, but really the basis of how it works, has remained the same. And that's that the Social Security Trust Fund is primarily funded from the taxation of wages by the current workforce.
So current workers are paying current beneficiaries. And later, when we talk about one of the issues in the program, this is one of the issues that we face. Because in 1945, there were about 40 workers to one beneficiary. 40 to one. And Social Security estimates that by 2035, there will be, there'll be a two-to-one ratio, two workers for every one beneficiary.
John: In 10 years.
April: In 10 years. So you can see how that, in and of itself, is putting stress and pressure on the program. We're going to talk about that a little bit later too, about some of those issues, and what are some things that you can do around that. Now, how you qualify for Social Security is you earn what's called credits. You need 40 credits to qualify you and your spouse for Social Security and Medicare.
And with the credits, essentially, if you've been working for 10 years or longer, you and your spouse qualify for both Social Security and for Medicare. Social Security is going to take an average of your highest 35 years of work history, highest 35 years. And if you don't have 35 years of work history, then they're going to fill in zeros.
So you can see how that would really pull down your average over time. And sometimes I get questions, well, April, my income, you know, 35 years ago was so low compared to what it is today. And they do do a future value calculation of like, what your income was 30 years ago, and they bring it to today's current dollars, looking at looking at inflation, and they adjust it for that.
And if you go on to your benefits, which we're going to talk about in a second. You go onto the website, and you download your statement, you're actually going to see your earnings history listed on your statement. If you've never been on Social Security's website, we recommend you go and create a login. They don't mail paper statements anymore, but you can download them right on the website.
We recommend that you don't just use their retirement estimator. It's just a calculator where you can put in your current salary, and it'll give you some estimates. But actually go and get your statement, your own record, so you can see everything. That's going to be a better estimate for you. And it's going to break down for you, this is actually an old picture of a statement because today, what it does is it shows you every age, starting at age 62, that's the first year that you could start Social Security.
It shows you at every age, from 62 to 70, what your benefit would be. Now, when we think about Social Security, let's talk about what we should know about this program. And the first thing you need to figure out is what is your full retirement age, and the year you were born determines your full retirement age. So if you were born between 1943 and 1954, then your full retirement age is 66.
And then if you were born in 1960 or later, it is age 67, and if you're born somewhere in between, they, uh, they extended it from 66 to 67. So you might be 66 and four months, six months, eight months, etc. And this is going to determine how you receive your full benefit. But you can claim it early, like we talked about a minute ago.
You can start your Social Security benefit as early as age 62, but your benefit will be reduced, and it's a permanent reduction. Sometimes people think I started at 62, and it's a lower amount, and then when I get to full retirement age, they increase it. But that's not accurate. It is a reduced benefit, a permanent reduction. And then you can also delay taking Social Security until age 70.
That is the latest that you can delay taking your benefit. And we're going to look at an example of what that looks like. So, let's say you were born between 1943 and 1954. If you took your Social Security benefit at your full retirement age, which would be age 66, then your benefit, these are current numbers for 2025. Then, the maximum monthly benefit available would be $4,018.
If you took it early, you can take it as early as 62, you can see here your benefit would be reduced at 75% of what you would have received at your full retirement age. And if you take it at 63 or 64 or 65, they have calculations that are going to show what that reduction would be. And then you can delay taking Social Security every year that you wait past your full retirement age, which increases it by 8% per year.
So if your full retirement age was 66, you can delay for four full years, which would give you 132% of your benefit. That would make your Social Security monthly amount at age 70, $5,108. So let's look at these options that we've got for delaying our benefit. If my full retirement age is 66 and I delay to 70, it's going to be worth 132% of my original amount. If my full retirement age is 67, I've only got three years to wait to age 70, and so my benefit would be increased by 124%.
Now, some people think that you have to wait until you reach these specific ages, like it has to be on your birthday, and that's not accurate either. You can really start Social Security at any time, and these 8% increases, they'll increase it every single month. So if you waited to 67 and 10 months, you would have 10 months of an increase off that 8%.
When looking at your statement, this is, again, when we recommend that you look at your own numbers, because you'll be able to see what your amount is going to be at age 62, full retirement, age age 70. And there's really, there's no perfect age for retirement that covers everyone. This decision to delay your benefit, to take it early, is going to be up to you, and you need to review your own life and your own circumstances to help determine when is going to be the best time.
Now, this is an area in which we can help you. This is one of the big conversations that we have with clients is, hey, when should I take my Social Security? But there are some things you want to consider about, especially if you're considering taking your benefit early. Are you going to have any other earned income in retirement? Because, again, we're going to talk about this in a few minutes. If you take your benefits early, but you're still working, you have earned income. You may have a reduction in your benefits.
That's one of the questions. Am I going to have any earned income while in retirement? How's my health? What are my other income sources? If I don't take Social Security, do I have other things I can tap into to let my benefit continue to grow? Thinking about longevity, your family's longevity history. Is that something, hey, are we planning on living a very long time? I hope all of our clients live a very long time in retirement.
John: Absolutely.
April: And so planning on this longevity piece and taxes. So sometimes we are, oh, I'm gonna go ahead and start my benefit. I want to go ahead and start my get my benefits now and get my money now and then. Sometimes we'll ask the question, well, what are you going to do with it?
Well, I don't need the income. Well then, okay, now you're going to stop getting your accrued benefits. Or your delayed credits. Now you're going to start getting a benefit and have to pay taxes on it. So we don't have a problem with people taking Social Security. Let's just make sure that we're doing it in the right order.
John: Another issue that most people don't think about is, I've heard people say, well, I don't really need Social Security. I understand, so delay it as long as you can because of the survivor benefit if the other spouse has a lower income. And we see people who should have waited, they didn't, then we see people that, like, in my case, I didn't wait to 70. I took my full retirement age 66 because of the time value of money. I wanted it now. But there are reasons why people should delay it, and one of those is making sure that upon their passing, that there's a higher benefit for the spouse.
April: Absolutely.
John: And most people we talk to, they don't need thinking about that. Doesn't cross their mind.
April: And we're dealing with clients that not are only getting ready to retire, John and I really focus in on this retirement space and helping people who are getting ready to retire. Many of them are retiring from the state of Florida. We're located here in Tallahassee. So this question of what to do about Social Security comes up a lot. But then we also have clients who are already retired.
You know, we had a client this year, he was 80, and he passed away. And so his wife, she lost one of their social security benefits, which we're going to talk about in a little bit about the widow and widowers benefits and how that works. And so sometimes we forget that's going to happen too. That, hey, we're both getting Social Security today, but one day, one of us passes away, there's going to be less Social Security for the surviving spouse.
John: Well, we take it for granted. It's coming in, it's steady. We don't think about it. It's on autopilot. It just pops up every month, and then all of a sudden, it's gone.
April: And between that and then having higher taxes, you've got to have a plan on how to handle those things, especially for the surviving spouse.
John: You just said something. Take just a moment to talk about the higher taxes.
April: This is something we don't think about, too. But when we have, when our spouse passes away, or we pass away, and now it's left to our spouse, what happens is we've now gone from filing a joint return to filing a single return. But we may not have a big change in our income. So yes, you're going to lose Social Security, but if you've got two pensions, you've got money coming in from retirement accounts.
There are a lot of things that are just going to continue to be the same. And if you look at the tax rates on similar incomes versus a married filing jointly and a single income. That single income you hit higher tax brackets much faster on the same income that's been coming in.
John: And many people say that is unfair, especially to a widow or widower. All of a sudden, you've already lost the income anyway. So I have less income, but I'm in a same bracket or higher.
April: That's right. So definitely something you got a plan for on that. Now, what are some reasons why people would take Social Security at an early age? Or, you know, why are some reasons that they may want to delay it? When I think about taking it at 62, actually, I think about my dad. My dad took his benefit at 62, but that's because he had retired a few months, about 10 months earlier, and he was having some, he had hurt his back and couldn't work anymore.
He was like, I remember us having a conversation about it, and him saying, I don't know what my life expectancy is. I don't know how long I'm going to be here. Now, knock on wood. He's 74, and he's still with us today, which is wonderful. So he's been getting those Social Security benefits for the last 12 years. I still think he made the right decision. Like you said, time value of money earlier. He wasn't working. Go ahead and get that income coming in for him, then.
And then a lot of times, when we're talking with clients about this, I like to say, if you're saying, hey, April, here's my two choices. I'm either going to start Social Security, or I'm going to tap into my retirement accounts or my investment accounts. I say, tap into Social Security. Go ahead and start your Social Security benefits. That way, you're leaving your investment accounts, your retirement accounts, on your balance sheet.
John: I would argue one point there. It depends on what you think the tax bracket is going to be in the future on your retirement account because that's the most heavily taxed thing we have. That's the only thing I would challenge.
April: Yeah, but most people already have everything in retirement accounts. They don't have a lot of non-taxables, so.
John: We see that a lot.
April: We see that a lot. So it's kind of a moot point.
John: How to balance everything in retirement.
April: And then you may want to look at taking it at full retirement age if you've got two spouses and like when they're going to retire and being able to take those spousal benefits, which we're going to talk about in a little bit. And then, deferring to age 70, as John mentioned, if someone is a higher income earner. We want to have a higher benefit that goes to the surviving spouse.
Maybe they don't have as much life insurance, and this is going to provide that benefit for them as well, or if they're continuing to work. What I'd recommend here is, if you're questioning when should I start Social Security, I'd recommend that we schedule a time for us to have a call. This is something that we help clients with.
Throughout the week, whenever we're meeting with clients and working on having them develop a plan for retirement. And we'll talk about this at the end of the call too, how to do this, but scheduling a time for a discovery call so that we can take a look and answer your questions that you've got about Social Security. What kind of concerns that you may have and talking through this and when is going to be the best time for you to take Social Security.
Now, Social Security does have a cost of living adjustment, a COLA. It's not guaranteed to have a COLA every single year, but they base it on the CPIW. So the COLA, the cost of living adjustment for this year, was two and a half percent. But we've definitely had years where we've had zero increase in benefits. 2011, 2016 are some examples of when we've had no increase in Social Security. So, yes, there is a cost of living adjustment, but it's not guaranteed. It is going to be tied to that CPIW. Your benefits are taxable, and how they do this taxable portion is complicated.
They didn't make it the easiest to figure out how your benefit is going to be taxed. But we're going to walk through a few key things for you to know on how much your benefit would be considered taxable income. It's going to depend first on how you file your taxes. Do you file an individual or a joint return? And then, you have to figure out what your combined income is.
And Social Security defines your combined income as your adjusted gross income plus any non-taxable interest plus half of your Social Security benefit. They didn't make it easy. And that is your combined income, and depending on the level of your combined income, is going to tell you if you have to pay taxes on your Social Security benefit, and then how much of that is considered taxable income.
So if you file a single return, and your combined income is less than 25,000, no taxes. If it is not taxable, excuse me, it's not taxable income. If the combined income is between 25,000 and 34,000, then 50% of your benefit is considered taxable, and if your combined income is over 34,000, then 85% of your benefit is considered taxable income.
Now, if you have a joint return, you file a joint return, and your combined income is less than 32,000, then your Social Security would not be considered taxable income. If it's between 32 and 44,000, then 50% would be considered taxable income, and combined income over 44,000, 85% of the benefit would be considered taxable income.
You can have Social Security withhold taxes from your benefit. We had a client a few years ago who she didn't realize she could have Social Security withhold taxes. She actually got some penalties from the IRS because she wasn't having enough withheld for taxes.
John: Piece of trivia, real quick. Before the ‘80s, before Social Security was overhauled, there was no income tax on your Social Security. It was all tax-free. And there's discussion now about going back to that.
April: Going back to that. Now, if you are continuing to work and you're taking your Social Security, know that depending on when you start your Social Security, if you are working, you've got earned income, then they may reduce your benefits. So if you claim Social Security before your full retirement age and you earn over a certain limit, then they reduce your benefits.
So if you took Social Security at 62 but you had wages over $22,230 in 2025, then Social Security is going to reduce your benefit $1 for every $2 over that limit. They also have another calculation if you take your benefit in the year you turn your full retirement age, but you haven't hit your birthday yet. So, I'll give an example. My birthday is in December.
So if I started my benefit earlier in the year that I turned 67 in my case, but it wasn't December yet, then I may have a reduction if I'm over the limit. And then if I start my benefit in the month I turn my full retirement age. So for me, December of when I'm 67, then there's no earnings limit. I receive 100% of my benefit. They don't care if I make a million dollars a year, I'm gonna get my full benefit from there on. Sometimes, we have clients here that will retire early.
They take their Social Security benefit, and they are going to work in some capacity, and they just choose to, hey, I'm going to work enough and keep my earnings under that limit. Maybe they work part-time. Maybe they're doing consulting, and they're saying, yep, I'll do enough work to hit that limit and not go over it.
John: I'm thinking about our friend right now, he'll say, nope, I can't take that job this year. See me next year. See me next year. Can't take it because I've already hit my limit. That's right.
April: That's right. Now, let's go through some different payment scenarios. The first is that there is a spousal benefit. So as we said earlier, if you qualify for Social Security once you've got 40 credits, you and your spouse both qualify for Social Security. And what the administration does is they're first going to look at your spouse's benefit record, which is based on his or her salary history.
And if the benefit amount equals less than 50% of your benefit, the administration is going to increase their benefit to an amount that equals half of yours. So let me give you an example. Let's say I'm spouse A, and my Social Security is $1,000 a month. And let's say spouse B, my husband's name is Brian. Spouse B works perfectly. So spouse B, let's say that his social security benefit was only $250.
Well, as a spousal benefit, he is entitled to receive half of mine, the amount equal to half of mine. So if mine's 1000 that he's gonna get 500 under the spousal benefit, not just his own record. And Social Security today has what's called deeming rules, and they're deemed to pay you the highest amount. So they're going to take a look at that when you go to file for Social Security and look to see, hey, should you take your own record, or should you take a spousal benefit.
A few things to note is that to activate the spousal benefit, the higher earning spouse has to also be taking Social Security at the time. So if Brian's retired, but I haven't retired yet, I'm not taking my benefit. He can't activate the spousal benefit yet. He can take his own personal benefit on his own record, and then when I start Social Security, then he can start the spousal benefit. But the higher income-earning spouse does have to be collecting at the time to make that work.
There is a widow or widower's benefit where you are entitled to receive 100% of the highest earning spouse's benefit. So again, my example earlier, let's say I'm getting $1,000 a month, and then Brian's getting 500 a month because he's getting the spousal benefit. If I passed away first, Brian doesn't get both. He's gonna get an amount equal to the higher of the two. So he'd get $1,000 a month in that case.
So you can take widow or widower benefits early, even as early as age 60, but there is a reduction for that. And then also, if you have earned income, you may not qualify. That is the one thing with the widow and widower's benefit is they do have not income limits where they just reduce your benefit, but they have income limits where they'll say, no, you can't take it yet. You have to wait until the full retirement age.
There are also payments for divorced spouses. So as long as you are married for at least 10 years or longer, the lower records and the lower record spouse remains unmarried, then that spouse is entitled to the same spousal benefit as if they had continued to be married. So, again, let's use my example with Brian. We've been married this year will be 13 years actually.
So let's say we got divorced, we get to retirement, he would still be entitled to a spousal benefit off of my record, as long as he's not married at the time. He didn't get remarried. If I am remarried myself, then my spouse, my current spouse, is also entitled to a benefit, and it does not impact one another. You can have divorced spouses, current spouses, and there's no impact there.
I've heard where in divorce and say someone tries to say in a divorce decree, if you don't do this, I'm gonna make it where you can't get my Social Security benefit. It was a client of mine who called me to ask me some questions about this is what her soon to be ex husband was telling her. And I was like, well, that's not accurate. He doesn't have control to say that you're not entitled to that.
John: Correct.
April: Now, let's talk about some issues around the program. One that we talked about earlier is the ratio of workers to beneficiaries and how it's shrinking over time. If you go to Social Security's website and you read their trust fund report, they're very honest about the situation. They're very honest about they expect that the trust fund will be exhausted by 2034. That date does change.
Sometimes it's 2033, 2034, 2035, depending on kind of the current status, they update that every year. But like we talked about before, in 1945, there were about 40 workers for every beneficiary. And now, by 2035, they estimate there's only going to be two workers per each beneficiary.
And what they're estimating will happen if nothing changes in the Social Security program at all between now and, say, 2034, that they estimate that they'll be collecting enough payroll taxes to pay about 76 cents for each dollar of scheduled benefits.
So, I want you to think about that for a second. If your or someone's Social Security benefit was $1,000 a month, and this were to happen, and we start seeing a reduction. Now, instead of getting $1,000, they're going to get 70, excuse me, they're going to get $760. That's a 25% reduction.
John: Big drop.
April: So, let's talk about some changes that we could see coming to the program to solve that problem.
John: Some of the things that they talked about every time this comes up, going way back to the Great Commission, back in the 80s, you could increase the age at which you're entitled to a benefit. I personally think that nobody should ever have been allowed to take it at 62 unless they were of disability, which there's a provision for that. I think the system made a big mistake by allowing 62.
At one time, you couldn't do it. It was 65. I think also, another thing you can see is much greater increase in the earnings cap on Social Security. Currently, there's a cap. I forget the exact number this year. I want to say it's like 150.
April: I think it's at 180.
John: 180. That could become unlimited, just like Medicare. You could find that some of the spousal benefits you talked about earlier could be attacked. There's been discussion of that before about why should two people be collecting as a spousal benefit? And that's one of the reasons that the system met with 10 years. Said okay if you've been married 10 years, surely you should get something.
And you know, just this morning, I heard an economist that we follow, Brian Westbury is his name, talking about these very issues. Some people are back on the track of pushing forward to be privatized. I don't think that will ever happen. I could be wrong, but every time it's been brought up, it's been shot down. Everybody agrees, Democrat, Republican, independents, that something has to happen.
The problem is, are you willing to risk what is involved politically to take a stand? And that's why nothing has happened all these years. Talk, talk, talk, no action. And this is something I've been following for, well, since 1982. Paying attention to it and learning and studying, read everything I can get on it.
April: I do feel like they're gonna make changes before 2034. I don't think they'll just let it go the way it is and then see a reduction. I really don't see that as an option. The reason I don't see that as an option, and then, even when people say Social Security is going away, the reason I don't see that as an option either is there are too many people. It's their only source of income.
John: It will never go away.
April: It will never go away. No.
John: Tax rates might be much higher, and the amount you pay tax on could be higher. You might even see a change in the cost of living adjust. So there's a lot of tweaks that could be done that would make it last much longer, or maybe make it permanent without having a lot of pain, if the people in charge, i.e Congress, would get off their butts and do something about it. And I'm talking about all of them. I'm not taking sides here. Every damn one of them needs to be locked in a room and say you can't leave until six.
April: So you talked about the taxes earlier. So the limit for this year your tax for Social Security on your first $176,000. So that has been proposed several times about increasing that to $400,000. That's been thrown around, of just increasing that limit to just a flat $400,000 of income. Or making it unlimited as well. I could see them doing that before they change ages.
John: I agree.
April: Because that's like an easier change. Instead of saying, okay, we're going to get rid of 62 or now we're going to change the full retirement age from 67 to 68 or 69 or something along those lines.
John: And would be the easiest to do, and it would be the least political pushback doing it that way. That's been a big discussion many times over the years.
April: Yep, absolutely. And, you know, you just kind of brought up something about it being like the subject to these political agendas. I know you've called it before: political football. We hear about it, one every election cycle, and then it's also been a very hot button this year as well.
John: Well, let's talk about some of those political footballs. The talk right now, current administration is saying no tax on Social Security. That would be wonderful if there's a way to pay for it. But everything that's being discussed, and again, I don't care if you're Democrat, Republican, you know, independent, or whatever, you can talk a good game, but you have to show how to pay for it.
And if you can find a way to pay for it, go for it. But unfortunately, we're spending money as a country and as individuals. I just saw this morning, again, the same economist talking about how the household debt today is the highest it's ever been, which is crazy. And it's getting worse, but yet we keep spending as a nation as if it were not a problem.
So I don't say that to be doom and gloom, because I'm the kind of person I believe that once people get the facts and they see what's really happening, they'll make changes. How many times we've seen that when dealing with clients? Once they get the facts, they go, I got to make a change. Coach me, guide me, help me make a change.
April: We want people to make decisions based off facts, not feelings.
John: Correct
April: A lot of times, we make decisions based off feelings.
John: I think the majority of people do. You have to train yourself to be analytical enough to say, wait a minute. I'm reading a good book now about how Warren Buffett and Charlie Munger always invested. They removed the emotion from it, and either one of them had the right to kill the deal. They said, no, we're not doing it. We're going to rethink this.
And you have to have that ability to look at it from almost like cold hearted, take the emotion from it, and you'll make a better decision when it comes to your finances, investing, retirement, things like that. That's difficult. That's why we should have someone else look at it. That's why I have you look at my stuff because I want to make sure I remove the emotion out of it. So I think this is what I want to do. What do you think? Give me your feedback.
April: Unbiased. I was working on something yesterday about just off topic, but something came through that that I thought was so applicable, either to thinking about, like, retirement planning, our own financial planning, and this had to do with the, it actually to do with scheduling your time and time blocking and things like that in your work week. And the quote essentially was something like, every time you deviate from your blocked schedule, you're stealing from your future self.
John: I like that. It's true.
April: I really resonated with that, not just thinking about okay time scheduling, whether that's like for business or personal, because what happens is I have a tendency then to set some boundaries, and then I let things kind of creep into it. And so it was every time that I do that I'm stealing from my future self.
I really thought about it, in financial planning or retirement planning, we do the same thing. Because everything is fighting for us today. It's the mortgage, it's the groceries, it's the kids need help. Everything feels so important today, and it is. Feels urgent right now. And then we get to retirement, now retirement feels urgent.
John: Well, during my career, the two biggest issues were always saving for college for my kids, and planning for my retirement. But these two were at odds because if I put money aside for the kids to go to college, I'll have less money for retirement, which is true if you look at it that way.
So then we have to be analytic. And I said, wait a minute. How can we have both? Maybe you have to put some in each account now and then, once college is taken care of, kids are gone, then you redouble your efforts for retirement.
April: One of the things that we talk about with Social Security, and along this financial planning or retirement planning, is an issue of how much Social Security is going to replace your income. And this isn't necessarily an issue with the program itself because Social Security was never meant to be your sole source of income in retirement. It was just meant to be a baseline or to add support.
And this actually, this chart here actually comes from Social Security based off information in 2019, and this shows different pre retirement levels of income, and then how much of that income from Social Security is going to be replaced from Social Security, and how much is going to need to come from other sources.
So I just want to look at this like middle option here, this middle income that those that have pre retirement income of $86,000. Yeah, that's pre-retirement income. Social Security would replace 32% of that pre-retirement income. So that's about $28,000 a year, $2300 a month. And then that remaining 67%, that remaining $58,000 per year is gonna have to come from other sources.
And this is why it's so important that we do focus in on our own retirement plan to make sure that we are setting things up correctly. So, let's talk about what are some of those other sources of income? Where could it come from? First, it could be a pension. Maybe you have a pension. If you're retiring from the state of Florida, for example, you could be in the pension plan.
You could be in the investment plan. You could have retirement accounts. You could have a 401k, 403b, 457, things that you've been saving along the way. You could have a non-retirement account that you've been saving. You could have real estate. You could have just savings accounts.
There are other sources of income, but it's important for us to start looking at this, and the earlier we look at this, the better. So that we can have an understanding of what is our retirement income going to be in retirement. That's a lot of retirements. Retirement income in retirement.
John: Retirement income in retirement.
April: So if you're questioning that. If you're saying, hey, I don't know what my other income sources are going to be. I don't know even what my retirement income is going to be, this is where we can help you. Because one of the things that we do for our clients is something called a retirement rehearsal.
Where we fast forward you to retirement, the day you're stepping off into retirement. And we're going to play what if. We're going to throw all your financial pieces on the table. I like to think of it like a puzzle. All the pieces are on the on the table. How do we put it together in the best way possible?
John: We throw you into the retirement swimming pool and say swim.
April: I was talking with a client yesterday, and she's planning to retire in about four years, and she has the same questions. I don't know, you know, what's my income gonna be? Is it gonna be enough? She's like, you know, I wanna continue living my same lifestyle. It's not like I want to go travel all around the world all the time. I just want to continue living my same lifestyle.
And she's just trying to make sure, like, hey, that I'm going to be able to do that. And I think her words were, I don't want to have to move in with my daughter. I don't want to have to be, so we hear that a lot. I don't want to be a burden on someone. I don't want to have to go back to work at 80 if I don't want to. It's one thing if you want to go back to work, but not having to for financial reasons.
So we talked through about, hey, let's look at it. Let's fast forward you and put all these things on the table. She's retiring from the state. She's going to have her pension, her Social Security, she's going to have her DROP. She doesn't know what to do with it, so we want to talk about what she's going to do with her DROP. She's going to have deferred comp.
So like, hey, yeah, you've got a lot of pieces here. Let's figure out how to put it together. I think about the order of operations. If I am going to take money from somewhere, where am I going to take it from first? What are the best places for me to take it from, and how? So that's something that we help clients, coach them through as part of our planning process and as part of our retirement rehearsal. Anything else you want to add here?
John: The only thing that I think about when I see that graph is how many people believe that Social Security is going to be their primary source of income. The higher the income you're getting less and less replaced. But yet, the higher your income, you're paying more and more in tax. And that's just a fact. And if we do see the cap increased or totally removed, then you're going to see that number be really different.
So just understand that you're paying for Social Security. You pay your taxes, employers are paying the tax on it, and you need to monitor it. I mean, you don't see it like a 401k or an IRA, but you're paying into a system, and most people look at it, they fuss about how much income tax they're paying. The Social Security withholdings, but they don't give it any more thought than that.
April: It's important to pay attention to what it is and what's happening with Social Security. What's that amount going to be? How is that going to impact your retirement? We think of Social Security as a retirement foundation because it's guaranteed streams of income. Pension, Social Security, this is really going to be someone's baseline, because it's going to be that foundation for them.
John Curry: I like to ask this question occasionally. What would happen if it went totally away? I ask myself that question. I'm 72 years old. I say, okay, if I could not rely on Social Security, what would I do? I would have to start tapping into the other retirement assets sooner. There'd be pressure on those assets about how long that would last. Going back to what you said earlier about what the trustees report is. If benefits were reduced down to 76%, I think we should go through that exercise as individuals.
What if it did happen? I don't think it will. But what if it did? Plan for it. Because then, if you plan for it, you acknowledge it, you hit it head on. It's less fearful, and you say, well, you know that did happen. I can adjust. I looked at my numbers. I can. So if they make that change, then I'd have to take money out of other assets. Do I want to? No. Could I? Yes. So it's a matter of planning for that.
April: Hope for the best and plan for the worst.
John: Absolutely. How many times have we said that?
April: And if we can be okay in that worst-case scenario, which is not likely to happen, then it's going to be even better.
John: All of my working career, every time I had to make a choice about something, even buying a house, I would ask this question: what's the worst that could happen? Okay, I remember the first time I had a mortgage. I was like, boy that's big. What's the worst that could happen? Well, I lose my job and I don't have the money, and I can't pay it. Or I would come disabled.
Well, I've got disability income insurance at the time. Or I die. Family loses it. Well, I've got life insurance, so that's not going to be an issue. So if I lose my job, I can't work, I've got savings that would take me through six months, nine months. So it's not likely to be an issue, okay, I'm good with it.
But I've always had that mentality of thinking it through. And maybe it's because of being an aircraft mechanic when I was in the Air Force, I don't know. But it's questioning everything and asking myself, what is the worst thing that can happen? And then I'm good with it. Okay, if that's the worst that can happen, and I can live with that, let's do it.
April: Great advice.
John: And I think our retirement rehearsal helps people with that. Because you could see that if you continue on the track you're on, you will see the numbers. And now the numbers come to life. It's not just well, in the future you'll have X amount. You can actually see it coordinating with Social Security, pension, IRA, 401k, 403b, whatever you've got. You actually see your own numbers, and they're your numbers, and they're based on what you want, not what we want.
April: Yeah, I think it's helpful seeing black and white.
John: We can talk about tax rates, talk about inflation. We haven't talked much about inflation today. Accept the COLA. The COLA helps, but it's not enough.
April: Inflation cost for health care, lots of moving pieces to put in there, for sure. So what I would recommend is that those of you listening to this, if you've got questions about Social Security, you've got questions about, hey, what is my income going to look like in retirement. Questions, concerns, then I would suggest scheduling a time for a discovery call.
This is a 30 to 45 minute call where we just go through and talk about, what are your goals, what are your concerns. We can talk about, hey, what what opportunities are available to you, what's holding you back? What are some things and steps that you can take to save you time? To save you money? To help you get to where you want to be even faster.
And usually in these calls, we're able to give a few tweaks or ideas for you. And it also really helps us figure out, hey, should we continue working together in some capacity. Right now, I don't know if we're the right fit for you, but I can tell you that after a 30 to 45-minute call, we can figure out together if it makes sense for us to move forward in some capacity. And then we'll be sure to share with you, too. How do we work with clients? What are your options?
For a lot of our clients, we put together a financial plan, and we charge a fee for that, but we have different schedules and different plans available depending on the complexity of your financial situation. And so we're usually able to find something that works for everybody.
There are a couple of ways you can schedule this call. You can call our main office number, 850-562-3000. You'll talk to Luke or Leslie, just let them know that you heard our talk on Social Security and you would like to schedule a time for a discovery call. You can also go to our website, which is curryschoenfinancial.com, and there's a big button that says, schedule a call.
And you click on that, it's gonna take you to a link to my calendar, and you can pick a time for us to do a phone call. You can pick a time for a Zoom meeting as well. And again, that's curryschoenfinancial.com. So, thanks again for joining us today to hear us share our thoughts on Social Security, and we look forward to talking to you soon.
John: And I want to end with this. Just a reminder. Watch the news, be informed. But don't let either side of the political aisle scare you and make you do things that you shouldn't be doing. If you find that you're getting anxious, give us a call. Come see us. Let us help you do your planning.
April: Bye, now.
John: Bye.
Voiceover: The Social Security Administration has not approved, endorsed or authorized this material. Contact the Social Security Administration for complete details regarding eligibility for benefits. This promotional information is not approved or endorsed by the Florida Retirement System or the division of retirement. Neither Guardian nor its affiliates are associated with the Florida Retirement System or the division of retirement. This material is intended for general public use. By providing this content, Park Avenue Securities, LLC, and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, you can visit our website at curryschoeninancial.com, or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial, and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address: 1700 Summit Lake Drive, Suite 200, Tallahassee, Florida, 32317. Phone number 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America, New York, New York. Park Avenue Securities is a wholly owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.
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