Social Security: To start or not to start, that is the question

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Welcome to something more with Chris Boyd.

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Chris Boyd is a certified financial planner, practitioner,

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and senior vice president, financial advisor at Wealth

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Enhancement Group, one of the nation's largest registered

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investment advisors.

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We call it something more because we'd like

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to talk not only about those important dollar

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and cents issues, but also the quality of

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life issues that make the money matters matter.

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Here he is your fulfillment facilitator, your partner

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in prosperity, advising clients on Cape Cod and

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across the country.

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Here's your host, Jay Christopher Boyd.

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All right.

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Welcome everybody to another edition of something more

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with Chris Boyd.

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I'm Chris Boyd, certified financial planner, practitioner, and

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I'm here with Jeff Perry and Russ Ball.

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We are all of the AMR team at

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Wealth Enhancement Group and so glad to have

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you with us.

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Hope you listen every week, share our show

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and rate it always helps us.

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And if you didn't know, you can find

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us on video now as well as audio.

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And I hope you'll take advantage of whatever

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medium you enjoy.

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So you can find us on our website,

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somethingmorewithchrisboyd.com or you can check us out

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through the Wealth Enhancement Group's YouTube page as

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well.

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Yeah.

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Look for us on Facebook too.

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We're back on Facebook.

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If you're not already following it, put in

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team AMR, Wealth Enhancement Group, and you'll find

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our page.

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Love it.

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All right.

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Hope you'll join in on some of the

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things we promote and talk about.

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Um, it's always interesting topics going on from

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one, one month to the next.

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There is not a shortage.

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How many, so you, how many, let's see,

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17, 18 years you've been doing radio and

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podcast, I don't know, 1100 podcasts probably out

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there.

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Have you, have you ever, not ever, but

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is it customary that you don't have a

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topic in your mind?

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No, there's always something of interest, whether it's

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news related or just good, um, financial education

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that we can talk about.

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I was agreeing with you.

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Like, I didn't think you, I mean, it's

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always like, what should we talk about?

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Not like, is there anything to talk about?

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Exactly.

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Exactly.

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Well, today we've got an interesting topic.

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Um, this is one of your choice.

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And I was like, I don't want to

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talk about that.

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And as, as we're talking about, it's like,

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oh my gosh, we've got a lot of,

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uh, interesting points of view to consider.

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So it's a topic that, you know, when

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you get to be almost of the age

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to accept retirement, take retirement, claim retirement, whatever

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the word should be.

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You think about it?

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I mean, I'm 62 in, uh, seven months

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now, eight months.

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And it's like, I can take social security.

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Should I, well, I know what we kind

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of think about, um, as financial advisors, but

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then you read something, um, which I did,

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which is simulating this inquiry.

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Yeah.

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I read something from a, uh, talk radio

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shock talk show host, which doesn't give them

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a lot of credibility, but I generally like

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him and he's a credible, uh, person in

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our industry.

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Dave Ramsey.

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I'm a disciple, I guess you'd call it.

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Um, I, I listened to the show.

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It's enjoyable.

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I like his principles, especially around debt, but

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you know, I don't agree with everything that

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he says, right.

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I don't agree with everything you say or

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Russ says.

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So yes, sir, I did.

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I'm sorry.

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That was my inside voice coming up.

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Um, no, none of us agree, but you

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know, we generally have this, these broad principles

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and I was of the mindset that it

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is always, or almost if you're in good

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health, it's almost always best to delay taking

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your social security to your 70.

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Yeah.

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It's not to say that there aren't exceptions

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and circumstances, but that is our default, um,

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counsel is to try to wait till full

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retirement age and if possible delay till 70,

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unless I'll put in a caveat and you

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have a reason to think your health might

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be compromised.

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Um, and similarly, you know, you have to

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think in terms of not just one person,

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but two people, right.

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If you're married, if who has the larger

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social security, uh, check that one in particular

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is worthy of consideration for delay, uh, to

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maximize the benefits so that if either one

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of you lives a long, longer lifespan, that

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you'd get the maximum benefits.

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Now we test these and, you know, look

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at these circumstances.

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I was really looking at one last night

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and I ran the numbers, uh, on people

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and I had them living till, you know,

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94 92 and it really didn't make that

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much difference whether they took it at full

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retirement age or 70 normally are optimal is,

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you know, somewhere closer to 70 when you

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have a long lifespan assumed like that.

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Right.

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And just the math was like, nah, it's

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not that much of a difference.

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Right.

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So in that scenario, I kind of defaulted

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to full retirement age, but generally I would

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be expecting most people benefit by a delay

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or the idea of trying to maximize, because

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by spending more of your own money early

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in retirement, you might spend less of your

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money over retirement and that's the premise you're

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going to challenge.

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I am.

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And I just want to throw one more

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caveat out.

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There is most financial decisions.

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You know, we meet with a lot of

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clients and they're a theme certainly, but most

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of them are very individualized.

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We're all have our own unique circumstances.

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I mean, you know, some people reach age

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62, for example, and they are retired because

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they can't work and they need the money.

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Right.

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So that's, that's all.

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That's a very good point.

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It's a very good point.

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Circumstances can drive this and types of resources,

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more pension, less pension, more assets, less assets.

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There are variables that can drive this and

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your point about the kind of work one

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does and the demands that that can have,

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you know, there there's, it's not one size

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fits all to your point.

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Right.

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So if you hear something that doesn't make

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sense, we agree and we can help you.

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You know, we help our clients when they

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come to this decision point in their lives

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and say, you know, I'm thinking of retiring

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at age, whatever.

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Um, I'll have my 401k.

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I have this, maybe I have a small

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pension.

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These are my assets.

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When should I take social security?

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And it is always, always an individual analysis

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of their facts and circumstances, their goals, their

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debt, their cash flows, everything before we give

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somebody advice.

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So we're not giving any broad advice here.

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Uh, well said.

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Um, I think, you know, the, uh, keep

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that in mind.

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You know, we want to, anytime we want

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to make decisions like this, cause these are

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very significant to your financial life, it needs

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to be in the context of a financial

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plan and the, uh, the influences of all

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the moving parts that can help to define

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what's the right answer, what's the best possibility.

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And there's lots of room for, um, personal

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preferences in some of this.

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Right.

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And I, I'm going to say, oh, there's

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a right answer or the wrong answer.

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There's not really a right answer or wrong

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answer.

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That's, you know, absolute.

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It's a matter of weighted priorities.

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Right.

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And choices, you know what I mean?

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So, uh, uh, by making this decision, there's

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a consequence is that fate more, more or

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less appealing to you.

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Yeah.

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Do you know what I mean?

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Uh, so let's, let's go into why, um,

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people might or might not want to start,

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uh, earlier than what I'm suggesting full retirement

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or, uh, even maximum, uh, retirement, uh, type

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of ages as the preferred way to do

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it.

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Uh, one of them I already mentioned, and

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that is, you may not have the health,

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uh, you expect to live long enough to,

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uh, recoup what, you know, what you don't

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get by delaying and by starting, you know,

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keep in mind when you start early, you

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discount your social security benefit.

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Yep.

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Uh, some, some potentially as much as like

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30%.

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Uh, I've seen, I've seen, oh, from full

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retirement age.

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Yeah.

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Almost 55% or something from maximum retirement

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age.

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Um, it was whole security turn on, you

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know?

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So, um, it, it's, it's, and then the

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inflation adjustments and everything is on a smaller

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amount, so it doesn't, um, you never catch

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up, so to speak.

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In one sense, your premise to this, from

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this article is maybe there's another way to

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approach this, right?

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So if you are, if you don't have

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a health condition and you are eligible to

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start collecting social security benefits at 62, and

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I'm going to say you're not working because

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that's another thing that we can add in

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later, so you're not working.

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And you, so the premise from Mr. Ramsey

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in his article is if you're not working

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and you can collect the social security at

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62 and you're not going to spend it,

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he's very clear in his comment.

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If you're just going to increase your lifestyle,

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don't do it.

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But if you're not going to spend it,

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you have that discipline, which I think 90

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% of the people, if they get a

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deposit into their checking account, well, likely going

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to spend it.

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But yeah, I think that's the challenge with

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this and you're laying it out very nicely.

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I think that's the biggest hurdle to whether

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or not this, this, this option really will

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play out is will people be disciplined, not

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spend that money, but actually take it and

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invest it.

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That's what acts that they'd have to incur,

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but put it to work, uh, you know,

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and saying, oh, if you invest it, you

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know, it's going to last longer because now

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it's going to grow into something more.

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And then when you turn on your social

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security benefits, you know, you've got this pool

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00:10:31,210 --> 00:10:33,410
of money that's also earning something.

271
00:10:33,930 --> 00:10:34,190
That's right.

272
00:10:34,290 --> 00:10:37,210
That's the premise of taking that $1,500,

273
00:10:37,390 --> 00:10:40,110
$2,000 a month that hypothetically someone is

274
00:10:40,110 --> 00:10:44,890
collecting at age 62 and putting it directly

275
00:10:44,890 --> 00:10:49,610
into an investment account into some, uh, investment

276
00:10:49,610 --> 00:10:49,910
mix.

277
00:10:49,910 --> 00:10:51,330
That's right for your risk tolerance.

278
00:10:51,330 --> 00:10:53,050
And that is, you know, part of that

279
00:10:53,050 --> 00:10:55,290
being exposed to the equity market.

280
00:10:55,290 --> 00:10:58,550
So you have some potential for gains that

281
00:10:58,550 --> 00:11:01,930
it'll last longer and be something that you

282
00:11:01,930 --> 00:11:04,050
could leave to your part of your legacy.

283
00:11:04,610 --> 00:11:07,830
If you didn't spend it all is more

284
00:11:07,830 --> 00:11:11,750
advantageous than waiting for a higher benefit later.

285
00:11:12,110 --> 00:11:14,450
And of course, if you pass away from

286
00:11:14,450 --> 00:11:17,670
62 to, you know, say 80.

287
00:11:18,630 --> 00:11:18,730
Yeah.

288
00:11:18,810 --> 00:11:21,590
Or, or even later, perhaps if you're actually

289
00:11:21,590 --> 00:11:22,750
doing this, that's right.

290
00:11:22,750 --> 00:11:25,350
It's more financially advantageous to do.

291
00:11:26,170 --> 00:11:26,270
All right.

292
00:11:26,270 --> 00:11:26,890
I get your point.

293
00:11:27,330 --> 00:11:29,310
Um, I think I take issue with the

294
00:11:29,310 --> 00:11:32,730
practical reality that will people actually do that?

295
00:11:32,770 --> 00:11:35,330
Because I, you know, experience tends to be

296
00:11:35,330 --> 00:11:37,990
that people don't tend to do that, but

297
00:11:37,990 --> 00:11:39,310
that's a possibility.

298
00:11:39,750 --> 00:11:42,930
Um, what about, there are some other variables

299
00:11:42,930 --> 00:11:44,490
that we need to consider.

300
00:11:45,090 --> 00:11:45,210
Yep.

301
00:11:45,370 --> 00:11:46,710
So you look like you're about to chime

302
00:11:46,710 --> 00:11:47,010
in though.

303
00:11:47,070 --> 00:11:48,370
I want to give you a chance to

304
00:11:48,370 --> 00:11:48,990
speak before.

305
00:11:48,990 --> 00:11:50,790
Well, I was thinking, you know, you have

306
00:11:50,790 --> 00:11:53,030
to be pretty exposed to the market to

307
00:11:53,030 --> 00:11:54,770
make up the difference in the return that

308
00:11:54,770 --> 00:11:57,310
you'd be getting between social security.

309
00:11:57,970 --> 00:12:00,130
If you're getting, it's like a 50 something,

310
00:12:00,270 --> 00:12:01,730
some odd percent difference between.

311
00:12:02,490 --> 00:12:02,590
Yeah.

312
00:12:02,650 --> 00:12:05,290
So you're, you're probably losing about a 6

313
00:12:05,290 --> 00:12:06,870
% discount is it per year.

314
00:12:06,930 --> 00:12:08,990
And then you'd be making 8% once

315
00:12:08,990 --> 00:12:10,350
you get past full retirement.

316
00:12:10,710 --> 00:12:12,490
Uh, so let's call it six and a

317
00:12:12,490 --> 00:12:14,770
half or seven, six and a half, whatever

318
00:12:14,770 --> 00:12:15,630
it might be.

319
00:12:15,630 --> 00:12:17,190
But, you know, are you going to make

320
00:12:17,190 --> 00:12:19,650
that kind of rate of return, so to

321
00:12:19,650 --> 00:12:19,890
speak?

322
00:12:20,030 --> 00:12:20,530
That's your point.

323
00:12:20,870 --> 00:12:23,030
And, and that's not a huge timeframe, you

324
00:12:23,030 --> 00:12:25,430
know, it's, it's eight years, right?

325
00:12:25,630 --> 00:12:27,290
So, and you have to be willing to

326
00:12:27,290 --> 00:12:29,130
take on a significant amount of risk to

327
00:12:29,130 --> 00:12:30,430
get that return.

328
00:12:31,170 --> 00:12:32,530
Uh, you know, are you going to be

329
00:12:32,530 --> 00:12:35,590
putting every paycheck that you get into the

330
00:12:35,590 --> 00:12:37,510
S&P 500 or I don't know, some

331
00:12:37,510 --> 00:12:38,950
kind of, yeah, I follow your point.

332
00:12:39,330 --> 00:12:40,630
So you have to, you have to take

333
00:12:40,630 --> 00:12:41,850
that into consideration too.

334
00:12:41,890 --> 00:12:42,870
Are you going to, are you going to

335
00:12:42,870 --> 00:12:44,690
be willing to risk your first, you have

336
00:12:44,690 --> 00:12:45,890
to be willing to save the money.

337
00:12:46,470 --> 00:12:48,270
So take them, take that check and invest

338
00:12:48,270 --> 00:12:48,490
it.

339
00:12:48,610 --> 00:12:49,570
Then you have to be willing to see

340
00:12:49,570 --> 00:12:52,110
some volatility when that money is invested.

341
00:12:52,550 --> 00:12:52,650
Yeah.

342
00:12:52,890 --> 00:12:54,750
And it's like a pretty, you know, you

343
00:12:54,750 --> 00:12:56,650
have to do pretty well year over year

344
00:12:56,650 --> 00:12:59,070
in that eight year timeframe to get the

345
00:12:59,070 --> 00:13:01,890
returns that you'd expect, which isn't to say

346
00:13:01,890 --> 00:13:05,430
that you couldn't, it's just, um, there's a,

347
00:13:05,530 --> 00:13:07,810
there's a, uh, a tolerance that you'd have

348
00:13:07,810 --> 00:13:11,510
to incur and to be benefiting from.

349
00:13:11,510 --> 00:13:13,750
Um, okay.

350
00:13:13,990 --> 00:13:14,990
Good, good thought.

351
00:13:15,070 --> 00:13:16,890
I saw you doing the calculator over there.

352
00:13:16,910 --> 00:13:18,030
So I was like, all right, he's got

353
00:13:18,030 --> 00:13:19,030
something he's cooking up.

354
00:13:19,790 --> 00:13:22,030
Um, I was expecting sort of like you

355
00:13:22,030 --> 00:13:24,690
were doing the time value of money or

356
00:13:24,690 --> 00:13:25,910
something, you know, for a second.

357
00:13:26,230 --> 00:13:28,570
The calculation, just to push back a little

358
00:13:28,570 --> 00:13:31,490
bit is not that straight.

359
00:13:31,890 --> 00:13:34,750
Meaning at the end of the time period,

360
00:13:34,810 --> 00:13:38,130
although you're in a decreased, you remain the

361
00:13:38,130 --> 00:13:40,670
rest of your life in that decreased benefit,

362
00:13:41,350 --> 00:13:43,370
it continues on, right?

363
00:13:43,870 --> 00:13:47,930
So it does forever at a discount, at

364
00:13:47,930 --> 00:13:52,010
a discount, but not to the full amount.

365
00:13:52,210 --> 00:13:53,290
You have to do the math.

366
00:13:53,430 --> 00:13:55,670
That is, you don't have to make the

367
00:13:55,670 --> 00:13:56,070
gain.

368
00:13:56,830 --> 00:13:58,770
Your point, I think, let's see if I'm

369
00:13:58,770 --> 00:14:00,410
saying this the way you're intending.

370
00:14:00,770 --> 00:14:03,690
So the only thing we have to consider

371
00:14:03,690 --> 00:14:07,190
is the difference between 62 and 70, if

372
00:14:07,190 --> 00:14:10,590
in this scenario, um, that, that, that's the

373
00:14:10,590 --> 00:14:13,730
Delta or whatever that you're talking about benefit

374
00:14:13,730 --> 00:14:14,630
drawback.

375
00:14:15,030 --> 00:14:17,030
Just say the benefit at 62 is 1500

376
00:14:17,030 --> 00:14:19,710
and the benefit at 70 is 3000 round

377
00:14:19,710 --> 00:14:20,090
numbers.

378
00:14:20,110 --> 00:14:20,370
Yeah.

379
00:14:20,410 --> 00:14:21,430
Just for a ballpark.

380
00:14:21,550 --> 00:14:21,650
Yeah.

381
00:14:21,670 --> 00:14:21,950
Right.

382
00:14:21,990 --> 00:14:25,250
So you're only the difference.

383
00:14:25,350 --> 00:14:28,010
The Delta is 1500, not 3000 when you're

384
00:14:28,010 --> 00:14:28,690
doing the math.

385
00:14:29,310 --> 00:14:31,230
Actually, I think that even overstates it.

386
00:14:31,270 --> 00:14:31,490
Sorry.

387
00:14:32,030 --> 00:14:34,390
Um, cause isn't it, it's a 50%

388
00:14:34,390 --> 00:14:35,570
increase in benefit.

389
00:14:35,570 --> 00:14:38,610
So if it was 1500, it would be

390
00:14:38,610 --> 00:14:39,510
3000.

391
00:14:41,520 --> 00:14:44,580
That's a double, uh, the benefit, right?

392
00:14:45,480 --> 00:14:45,800
Right.

393
00:14:45,880 --> 00:14:47,560
And I, that's a hundred percent.

394
00:14:48,060 --> 00:14:51,460
Uh, so it'd be like, it'd be, you

395
00:14:51,460 --> 00:14:52,900
know, seven 50 more.

396
00:14:53,040 --> 00:14:55,000
I'm going to age 70, not age 66

397
00:14:55,000 --> 00:14:55,740
or 67.

398
00:14:56,220 --> 00:14:56,620
Yeah.

399
00:14:56,740 --> 00:14:57,080
All right.

400
00:14:57,100 --> 00:14:58,540
I think we're saying the same thing.

401
00:14:58,600 --> 00:14:59,600
I just think we're coming up with a

402
00:14:59,600 --> 00:15:00,040
different number.

403
00:15:00,120 --> 00:15:00,520
That's fine.

404
00:15:00,620 --> 00:15:02,840
I get the Delta, whatever it is.

405
00:15:02,860 --> 00:15:04,200
And that's a variable number too.

406
00:15:04,200 --> 00:15:06,640
It's not a simple double or 50%

407
00:15:06,640 --> 00:15:08,400
or whatever the calculation is.

408
00:15:09,760 --> 00:15:12,240
It is your individual Delta.

409
00:15:14,100 --> 00:15:14,620
Yeah.

410
00:15:14,740 --> 00:15:17,340
I mean, that is calculable and it is

411
00:15:17,340 --> 00:15:18,020
consistent.

412
00:15:18,440 --> 00:15:21,320
The, what those particulars numbers are will differ

413
00:15:21,320 --> 00:15:23,180
from one person to the next, right?

414
00:15:23,360 --> 00:15:25,300
All I'm saying is you don't have to

415
00:15:25,300 --> 00:15:27,400
just to stick with my numbers.

416
00:15:27,400 --> 00:15:30,720
If it's 1500 and then 3000, the money

417
00:15:30,720 --> 00:15:32,860
that you save and invest for those years,

418
00:15:33,420 --> 00:15:36,240
you're only having to make up in your

419
00:15:36,240 --> 00:15:40,240
investment gains, what you would have gotten if

420
00:15:40,240 --> 00:15:40,820
you had waited.

421
00:15:45,360 --> 00:15:50,380
Um, so that is the, in your numbers,

422
00:15:50,480 --> 00:15:52,700
which, you know, we can discuss whether the

423
00:15:52,700 --> 00:15:54,760
right numbers we should use or that's just

424
00:15:54,760 --> 00:15:55,760
illustrative purposes.

425
00:15:56,380 --> 00:16:00,840
It's $1,500, uh, per month.

426
00:16:01,000 --> 00:16:01,500
Correct.

427
00:16:02,120 --> 00:16:04,340
And I think it's actually two 20, uh,

428
00:16:04,520 --> 00:16:06,200
um, it would be more like seven 50.

429
00:16:06,960 --> 00:16:07,440
Okay.

430
00:16:07,480 --> 00:16:07,840
Okay.

431
00:16:07,880 --> 00:16:09,800
And in this scenario, but seven 50 a

432
00:16:09,800 --> 00:16:13,100
month, we need to be saying, did, did

433
00:16:13,100 --> 00:16:17,980
my accumulated wealth generates efficiently that I can

434
00:16:17,980 --> 00:16:21,640
derive more than or seven 50 a month

435
00:16:21,640 --> 00:16:23,380
for the rest of my life and then

436
00:16:23,380 --> 00:16:24,520
have money left over.

437
00:16:24,980 --> 00:16:25,460
Correct.

438
00:16:25,500 --> 00:16:26,660
Starting at 62.

439
00:16:27,540 --> 00:16:28,020
Right.

440
00:16:28,100 --> 00:16:30,040
Once again, I think this is going to

441
00:16:30,040 --> 00:16:31,740
go back to the question that always goes

442
00:16:31,740 --> 00:16:34,080
in the beginning of a social security decision

443
00:16:34,080 --> 00:16:35,440
is how long am I going to live?

444
00:16:36,940 --> 00:16:37,180
Right.

445
00:16:37,460 --> 00:16:38,240
Yeah, exactly.

446
00:16:38,440 --> 00:16:40,580
Certainly in the early years, it's beneficial if

447
00:16:40,580 --> 00:16:43,060
you get the average return of a, you

448
00:16:43,060 --> 00:16:44,180
know, a portfolio.

449
00:16:44,820 --> 00:16:44,960
Yeah.

450
00:16:45,840 --> 00:16:48,940
Another clue, another, um, your, your point about

451
00:16:48,940 --> 00:16:51,080
sequence and returns and so forth, that's certainly

452
00:16:51,080 --> 00:16:51,480
relevant.

453
00:16:51,480 --> 00:16:51,800
Right.

454
00:16:52,420 --> 00:16:55,620
Um, but another consideration for people to think

455
00:16:55,620 --> 00:16:57,560
about is, uh, are they working?

456
00:16:57,960 --> 00:16:58,940
That's a big one.

457
00:16:59,500 --> 00:17:02,760
Um, even part-time, uh, you know, there's

458
00:17:02,760 --> 00:17:05,520
a threshold by which if you exceed a

459
00:17:05,520 --> 00:17:08,300
certain amount of income between that 62 to

460
00:17:08,300 --> 00:17:10,460
full retirement age, let's call it 67.

461
00:17:11,579 --> 00:17:15,619
Um, then you're going to, uh, be penalized

462
00:17:15,619 --> 00:17:18,960
and, and lose, uh, essentially a lot of

463
00:17:18,960 --> 00:17:21,780
that social security will become taxable, right?

464
00:17:21,839 --> 00:17:22,099
Yeah.

465
00:17:22,319 --> 00:17:25,440
And that is a, it's kind of an

466
00:17:25,440 --> 00:17:27,880
unspoken mistake that so many people make.

467
00:17:28,600 --> 00:17:32,040
I'm in Florida as our regular listeners know.

468
00:17:32,260 --> 00:17:33,940
And I know a lot of people who

469
00:17:33,940 --> 00:17:37,720
retire to Florida before full retirement age, and

470
00:17:37,720 --> 00:17:39,120
they're taking their social security.

471
00:17:39,220 --> 00:17:40,780
I mean, the data is pretty strong.

472
00:17:40,800 --> 00:17:42,540
That shows a lot of people take social

473
00:17:42,540 --> 00:17:46,520
security at 67 and 62.

474
00:17:47,140 --> 00:17:49,780
62 I think is, uh, is very common,

475
00:17:50,040 --> 00:17:50,220
right?

476
00:17:50,520 --> 00:17:52,800
The winner or the loser.

477
00:17:52,900 --> 00:17:55,180
It's, it's the choice that a lot of

478
00:17:55,180 --> 00:17:55,780
people make.

479
00:17:56,020 --> 00:17:56,320
Yeah.

480
00:17:56,320 --> 00:17:58,500
And so they make it, they retire, not

481
00:17:58,500 --> 00:18:00,940
just to Florida, but they retire and they

482
00:18:00,940 --> 00:18:02,700
think that they're not going to work.

483
00:18:03,080 --> 00:18:03,520
Right.

484
00:18:03,680 --> 00:18:05,280
And a lot of people go back to

485
00:18:05,280 --> 00:18:07,680
work either because of social reasons, you know,

486
00:18:07,700 --> 00:18:10,260
they want that interaction or they want, or

487
00:18:10,260 --> 00:18:12,900
extra money, inflation, you have some people back

488
00:18:12,900 --> 00:18:15,000
to work, whatever the, whatever the reason is,

489
00:18:15,020 --> 00:18:16,760
or their employer calls them and say, Hey,

490
00:18:16,800 --> 00:18:19,300
can you work halftime or whatever the situation

491
00:18:19,300 --> 00:18:22,560
is, and they never knew, or they never,

492
00:18:22,620 --> 00:18:25,340
they never contemplated that part of their social

493
00:18:25,340 --> 00:18:27,220
security would then be subject to tax.

494
00:18:27,880 --> 00:18:29,500
So the good news in that scenario is

495
00:18:29,500 --> 00:18:31,920
if that happens to you, you can suspend

496
00:18:31,920 --> 00:18:34,280
your benefits and there is virtue.

497
00:18:34,480 --> 00:18:36,380
You can get benefit from that later on

498
00:18:36,380 --> 00:18:39,120
when you turn it on later on, you

499
00:18:39,120 --> 00:18:41,580
know, back at a full retirement age or

500
00:18:41,580 --> 00:18:45,500
after, um, you know, you could, uh, benefit

501
00:18:45,500 --> 00:18:45,880
from that.

502
00:18:45,980 --> 00:18:48,900
I would also argue that, you know, um,

503
00:18:49,260 --> 00:18:53,640
for many people when they start, uh, their

504
00:18:53,640 --> 00:18:56,680
social security earlier than they, they're, they discontinue

505
00:18:56,680 --> 00:18:57,500
work earlier.

506
00:18:58,060 --> 00:19:01,440
Um, just generally not necessarily the social security

507
00:19:01,440 --> 00:19:04,120
topic per se, but the notion that you're

508
00:19:04,120 --> 00:19:08,300
drawing from your portfolio that much sooner, um,

509
00:19:08,400 --> 00:19:11,780
that it has a compounded consequence.

510
00:19:12,220 --> 00:19:14,540
Uh, it's not just, Oh, I'm not saving.

511
00:19:14,600 --> 00:19:17,140
It's not just, it's not that it's not

512
00:19:17,140 --> 00:19:17,660
growing.

513
00:19:17,880 --> 00:19:20,220
It's, and then you're, you're withdrawing from it.

514
00:19:20,220 --> 00:19:23,100
And there's a ripple effect that can have

515
00:19:23,100 --> 00:19:24,080
a consequence to that.

516
00:19:24,220 --> 00:19:26,080
So that's a little off the social security

517
00:19:26,080 --> 00:19:30,120
part of this, but timing of your retirement

518
00:19:30,120 --> 00:19:34,760
or lack of work perhaps, uh, can really

519
00:19:34,760 --> 00:19:37,080
be affected, uh, affect some of these things.

520
00:19:37,220 --> 00:19:39,840
And so how much you have is a

521
00:19:39,840 --> 00:19:40,660
variable, right?

522
00:19:40,760 --> 00:19:43,920
Uh, what are my sources of cashflow?

523
00:19:44,100 --> 00:19:44,920
Do I have a pension?

524
00:19:44,920 --> 00:19:49,500
Do I have other resources too, uh, could,

525
00:19:49,820 --> 00:19:52,620
could be meaningful in this kind of consideration

526
00:19:52,620 --> 00:19:53,260
also.

527
00:19:53,560 --> 00:19:53,660
Right.

528
00:19:54,380 --> 00:19:54,620
Absolutely.

529
00:19:55,080 --> 00:19:57,960
And back to the tax issue and suspending,

530
00:19:58,120 --> 00:19:59,560
which is a good option for people who

531
00:19:59,560 --> 00:20:03,200
find themselves going back to work unexpectedly and

532
00:20:03,200 --> 00:20:05,180
don't want to have that social security income

533
00:20:05,180 --> 00:20:07,100
subject to taxation or at least part of

534
00:20:07,100 --> 00:20:11,440
it in this scenario of this hypothetical idea.

535
00:20:11,440 --> 00:20:15,720
Um, if you do that, then you're off

536
00:20:15,720 --> 00:20:18,860
that plan because the plan is that you

537
00:20:18,860 --> 00:20:22,380
take the money, you invest it in equity,

538
00:20:22,400 --> 00:20:24,640
exposed investments to get the return.

539
00:20:24,960 --> 00:20:29,880
You do not touch it until age 70

540
00:20:29,880 --> 00:20:31,680
and Dave, uh, Ramsey scenario.

541
00:20:31,680 --> 00:20:32,320
Yeah.

542
00:20:32,800 --> 00:20:37,640
It requires a, you know, pretty rare, like

543
00:20:37,640 --> 00:20:40,660
you said, level of discipline and, you know,

544
00:20:40,660 --> 00:20:42,680
these things come up, uh, all the time,

545
00:20:42,740 --> 00:20:44,440
like something happened with the car and I

546
00:20:44,440 --> 00:20:46,680
recently had an issue with the tires, my

547
00:20:46,680 --> 00:20:49,200
car unexpected expense, you know, and these things

548
00:20:49,200 --> 00:20:51,380
will come up and then to keep using

549
00:20:51,380 --> 00:20:54,640
those funds and keep investing them regardless, challenging.

550
00:20:54,880 --> 00:20:58,020
I think, um, just psychologically, I think to,

551
00:20:58,080 --> 00:20:59,460
to be getting that check in the, in

552
00:20:59,460 --> 00:21:02,320
the mail every month or, um, you know,

553
00:21:02,320 --> 00:21:04,420
it's just, people are more likely to spend

554
00:21:04,420 --> 00:21:06,100
it than, than save it on the, on

555
00:21:06,100 --> 00:21:06,380
the whole.

556
00:21:06,380 --> 00:21:10,000
And I think, yeah, I've read some, some

557
00:21:10,000 --> 00:21:13,080
research around, uh, that kind of thinking and,

558
00:21:13,280 --> 00:21:14,840
you know, when people are getting those monthly

559
00:21:14,840 --> 00:21:17,340
checks, it's more likely that they're going to

560
00:21:17,340 --> 00:21:19,000
feel that they can spend it.

561
00:21:19,540 --> 00:21:21,080
Well, yeah, go ahead, Russ.

562
00:21:21,120 --> 00:21:21,280
Sorry.

563
00:21:21,680 --> 00:21:23,900
No, I think it's just, yeah, it just

564
00:21:23,900 --> 00:21:25,760
speaks to what you were saying that, um,

565
00:21:25,940 --> 00:21:27,320
you know, it's a, it's a smaller percentage

566
00:21:27,320 --> 00:21:29,580
of people that are going to be likely

567
00:21:29,580 --> 00:21:32,500
to do, to do this successfully and, and

568
00:21:32,500 --> 00:21:35,900
capitalize on that difference in Delta.

569
00:21:36,380 --> 00:21:37,640
I mean, you gotta remember the category that

570
00:21:37,640 --> 00:21:39,280
Mr. Ramsey is talking about, that he's talking

571
00:21:39,280 --> 00:21:41,900
about a category of people who don't need

572
00:21:41,900 --> 00:21:43,280
the money, right?

573
00:21:43,720 --> 00:21:43,820
Yeah.

574
00:21:43,960 --> 00:21:46,340
So if, if you don't need the money,

575
00:21:46,520 --> 00:21:48,880
that, that doesn't mean you're flush, but you

576
00:21:48,880 --> 00:21:49,900
know, you just don't need it at the

577
00:21:49,900 --> 00:21:53,760
moment for cashflow and that, that $2,000

578
00:21:53,760 --> 00:21:56,260
pops in your checking account each month and

579
00:21:56,260 --> 00:21:57,900
your neighbors are planning a cruise and they

580
00:21:57,900 --> 00:22:00,120
ask you, and it's like, well, we couldn't

581
00:22:00,120 --> 00:22:02,420
normally afford to take an extra cruise, but

582
00:22:02,420 --> 00:22:05,600
this $2,000 is just sitting there.

583
00:22:05,700 --> 00:22:08,300
We can skip a month, use it for

584
00:22:08,300 --> 00:22:08,460
that.

585
00:22:08,560 --> 00:22:10,300
I think that's, it's going to creep, right?

586
00:22:10,360 --> 00:22:13,360
It's gonna, some of these discretionary things or

587
00:22:13,360 --> 00:22:16,660
maybe an emergency, as you said, um, a

588
00:22:16,660 --> 00:22:19,040
lot of people, most people would be tempted

589
00:22:19,040 --> 00:22:22,260
to miss a couple months and take a

590
00:22:22,260 --> 00:22:24,600
portion of it, which skews the whole model.

591
00:22:24,780 --> 00:22:25,060
Yeah.

592
00:22:25,100 --> 00:22:25,280
Yeah.

593
00:22:25,320 --> 00:22:26,520
You know, and I bet if we were

594
00:22:26,520 --> 00:22:30,180
having this conversation with Dave Ramsey himself, uh,

595
00:22:30,180 --> 00:22:31,840
he probably wouldn't disagree with anything we're talking

596
00:22:31,840 --> 00:22:32,280
about here.

597
00:22:32,420 --> 00:22:32,660
No.

598
00:22:32,780 --> 00:22:33,420
You know what I mean?

599
00:22:33,500 --> 00:22:36,180
The, the practical realities versus the, the true,

600
00:22:36,320 --> 00:22:37,940
who's going to be disciplined about this, who

601
00:22:37,940 --> 00:22:39,980
actually doesn't need the money.

602
00:22:40,440 --> 00:22:42,380
Um, it's not to say that there aren't

603
00:22:42,380 --> 00:22:43,220
those people out there.

604
00:22:43,280 --> 00:22:45,260
I'm sure there are, and, and that could

605
00:22:45,260 --> 00:22:46,680
be a better math equation.

606
00:22:46,900 --> 00:22:48,440
There are variables though.

607
00:22:48,540 --> 00:22:50,340
You have to be willing to take risk

608
00:22:50,340 --> 00:22:52,580
with those funds, not just park it in

609
00:22:52,580 --> 00:22:54,260
a guaranteed account.

610
00:22:54,360 --> 00:22:54,840
That's right.

611
00:22:54,960 --> 00:22:57,580
Where you would not necessarily get the same

612
00:22:57,580 --> 00:22:59,640
kind of return as if you were to

613
00:22:59,640 --> 00:23:01,340
delay on the social security decision.

614
00:23:01,840 --> 00:23:02,280
Yep.

615
00:23:02,960 --> 00:23:05,720
Well, this just fits Dave's entire model of

616
00:23:05,720 --> 00:23:08,480
being super disciplined, whether it's debt reduction or,

617
00:23:08,580 --> 00:23:10,860
you know, whatever it is, it's a hundred

618
00:23:10,860 --> 00:23:12,280
percent in, or it doesn't work.

619
00:23:12,860 --> 00:23:13,160
Yeah.

620
00:23:13,380 --> 00:23:13,840
Yeah.

621
00:23:15,000 --> 00:23:15,680
All right.

622
00:23:15,800 --> 00:23:18,080
Well, I don't know anything you want to

623
00:23:18,080 --> 00:23:20,560
take it another direction, Jeff.

624
00:23:20,800 --> 00:23:23,300
No, it's, it's an intriguing, it's an intriguing

625
00:23:23,300 --> 00:23:25,820
option for people who don't need the money.

626
00:23:25,920 --> 00:23:27,220
It's not like you're thinking about it yourself.

627
00:23:27,520 --> 00:23:27,840
No.

628
00:23:28,860 --> 00:23:30,600
Well, you know, most things that we think

629
00:23:30,600 --> 00:23:32,540
about, we think in the context of ourselves

630
00:23:32,540 --> 00:23:34,500
or someone that, someone that we know, right.

631
00:23:34,540 --> 00:23:36,940
A client, maybe this is a certain client

632
00:23:36,940 --> 00:23:38,800
and I'm turning 62 in January.

633
00:23:39,060 --> 00:23:41,720
So, but I'm still working.

634
00:23:42,120 --> 00:23:42,600
There you go.

635
00:23:42,900 --> 00:23:46,460
And like most good red blooded Americans, I

636
00:23:46,460 --> 00:23:47,940
do not like paying taxes.

637
00:23:48,360 --> 00:23:48,880
There you go.

638
00:23:49,140 --> 00:23:49,360
Yep.

639
00:23:49,580 --> 00:23:51,680
So I don't think it's, I think I

640
00:23:51,680 --> 00:23:52,540
have the discipline.

641
00:23:53,560 --> 00:23:56,040
If anyone would, I think Jeff, we can

642
00:23:56,040 --> 00:23:56,800
agree you would.

643
00:23:58,080 --> 00:23:58,420
Yeah.

644
00:23:58,600 --> 00:24:02,300
But I don't think I'd consider it because

645
00:24:02,300 --> 00:24:04,060
of the tax consequence.

646
00:24:04,460 --> 00:24:05,980
It's a dynamic calculation.

647
00:24:06,580 --> 00:24:10,040
Certainly looking at Lisa's future social security benefits,

648
00:24:10,160 --> 00:24:13,580
my social security benefits potentially working.

649
00:24:14,100 --> 00:24:17,060
It's a dynamic calculation that I'll do.

650
00:24:17,840 --> 00:24:18,400
Yes.

651
00:24:18,640 --> 00:24:18,900
Yeah.

652
00:24:18,920 --> 00:24:19,940
I'll dig through it.

653
00:24:20,200 --> 00:24:22,980
But my guess is it's, it doesn't matter

654
00:24:22,980 --> 00:24:23,500
enough.

655
00:24:23,500 --> 00:24:27,640
And one just final thought about why you,

656
00:24:28,020 --> 00:24:30,560
I might, I'd likely won't do it is

657
00:24:30,560 --> 00:24:33,680
we think about social security as a fixed

658
00:24:33,680 --> 00:24:34,420
amount of money.

659
00:24:34,420 --> 00:24:36,140
When you think about where our income comes

660
00:24:36,140 --> 00:24:38,080
from, you know, if we have a pension

661
00:24:38,080 --> 00:24:40,420
that's fixed so that we feel positive about

662
00:24:40,420 --> 00:24:40,680
that.

663
00:24:40,760 --> 00:24:43,080
Some people have sold annuities, not that we

664
00:24:43,080 --> 00:24:45,480
typically recommend them, but they choose an annuity

665
00:24:45,480 --> 00:24:46,620
because it's fixed.

666
00:24:48,140 --> 00:24:49,540
And then we think of social security is

667
00:24:49,540 --> 00:24:50,000
fixed.

668
00:24:50,000 --> 00:24:51,640
And then we think of our assets, our

669
00:24:51,640 --> 00:24:55,280
investments, our 401ks, our IRAs as money that

670
00:24:55,280 --> 00:24:56,960
we will withdraw from in the future.

671
00:24:57,100 --> 00:24:59,140
But we understand that's not fixed.

672
00:24:59,740 --> 00:25:03,240
So you're almost adding like half of your,

673
00:25:03,780 --> 00:25:05,220
whatever the number is.

674
00:25:05,360 --> 00:25:05,460
Yeah.

675
00:25:05,500 --> 00:25:07,300
That's one of those fixed numbers.

676
00:25:07,560 --> 00:25:09,580
You're moving toward a variable.

677
00:25:09,820 --> 00:25:12,100
You're throwing it into the non-fixed category,

678
00:25:12,160 --> 00:25:12,460
right?

679
00:25:12,580 --> 00:25:14,420
Even if the math works it, you know,

680
00:25:14,440 --> 00:25:15,320
you're going to get this.

681
00:25:15,320 --> 00:25:16,040
Yeah.

682
00:25:16,120 --> 00:25:17,520
That's a good, that's a good point at

683
00:25:17,520 --> 00:25:19,440
a high level, just conceptual.

684
00:25:20,260 --> 00:25:20,360
Right.

685
00:25:20,560 --> 00:25:22,960
Do we really, do we want to have

686
00:25:22,960 --> 00:25:26,700
more money in that bucket versus the absolute

687
00:25:26,700 --> 00:25:27,920
kind of ranks?

688
00:25:28,840 --> 00:25:32,080
So the social security thing, you know, naturally

689
00:25:32,080 --> 00:25:34,500
it brings up the whole topic of 2033

690
00:25:34,500 --> 00:25:36,860
or whatever that, you know, maybe we won't

691
00:25:36,860 --> 00:25:39,280
dig into right now, but, you know, I

692
00:25:39,280 --> 00:25:41,100
just, this is one of those variables that

693
00:25:41,100 --> 00:25:44,240
it leaves investors on certain about, and this

694
00:25:44,240 --> 00:25:45,720
is one of the reasons I think people

695
00:25:45,720 --> 00:25:47,780
will say to me frequently, well, maybe that's

696
00:25:47,780 --> 00:25:49,080
a reason I should start it sooner.

697
00:25:49,080 --> 00:25:51,560
Cause I don't know what's going to happen

698
00:25:51,560 --> 00:25:52,580
down the road.

699
00:25:52,820 --> 00:25:55,100
Will there be a reduction in social security

700
00:25:55,100 --> 00:25:59,100
benefits if they don't address the challenge that

701
00:25:59,100 --> 00:26:02,460
exists right now, which is that there's insufficient

702
00:26:02,460 --> 00:26:07,540
resources to make good on the promises that

703
00:26:07,540 --> 00:26:08,140
have been made.

704
00:26:08,460 --> 00:26:09,240
The full benefit, right?

705
00:26:09,340 --> 00:26:10,140
The full benefit.

706
00:26:10,300 --> 00:26:12,100
It's not saying that there won't be benefits,

707
00:26:12,200 --> 00:26:13,780
just there won't be, it wouldn't be the

708
00:26:13,780 --> 00:26:14,320
full benefit.

709
00:26:16,020 --> 00:26:18,220
I don't think that's likely to happen, but

710
00:26:18,220 --> 00:26:21,060
you know, I think that's, that's another variable

711
00:26:21,060 --> 00:26:23,080
I guess you could add into this equation

712
00:26:23,080 --> 00:26:27,420
that might influence somebody's judgment based on how

713
00:26:27,420 --> 00:26:30,440
they see what's going to happen with social

714
00:26:30,440 --> 00:26:31,680
security benefits in the future.

715
00:26:31,920 --> 00:26:32,020
Yeah.

716
00:26:32,060 --> 00:26:35,080
I remain fully committed to my opinion of

717
00:26:35,080 --> 00:26:38,500
if a certain political party allowed social security

718
00:26:38,500 --> 00:26:40,340
not to pay the full benefits, that would

719
00:26:40,340 --> 00:26:42,200
be the end of that political party.

720
00:26:42,200 --> 00:26:45,600
Yeah, certainly for a long time in the

721
00:26:45,600 --> 00:26:49,260
party, they are the ones labeled with responsibility

722
00:26:49,260 --> 00:26:49,900
for that.

723
00:26:50,080 --> 00:26:50,200
Yeah.

724
00:26:50,760 --> 00:26:52,140
It would be the end of that political

725
00:26:52,140 --> 00:26:54,620
party or, so I don't see it.

726
00:26:54,640 --> 00:26:55,340
I get it.

727
00:26:55,380 --> 00:26:56,840
You know, we need to deal with it.

728
00:26:57,020 --> 00:26:58,160
And I think we will.

729
00:26:58,380 --> 00:27:00,200
Probably is the, they call it the third

730
00:27:00,200 --> 00:27:01,160
rail for a reason.

731
00:27:01,220 --> 00:27:04,040
It's like everybody makes, Hey, with the other

732
00:27:04,040 --> 00:27:05,880
guys trying to take your benefit, you know,

733
00:27:05,880 --> 00:27:06,720
that kind of thing.

734
00:27:06,720 --> 00:27:10,720
And it, it, it leads to, you know,

735
00:27:11,300 --> 00:27:14,760
unnecessary stress for, for, yeah.

736
00:27:15,060 --> 00:27:15,500
Yeah.

737
00:27:15,500 --> 00:27:17,160
There's a lot of people that's worried about

738
00:27:17,160 --> 00:27:17,720
some of this stuff.

739
00:27:17,780 --> 00:27:19,120
I've had a lot of calls just recently

740
00:27:19,120 --> 00:27:20,840
with all that's going on in Washington these

741
00:27:20,840 --> 00:27:23,020
days where clients are saying, you know, is

742
00:27:23,020 --> 00:27:25,040
my social security going to be disrupted?

743
00:27:26,260 --> 00:27:29,640
I don't think so, you know, but I,

744
00:27:29,780 --> 00:27:31,400
you know, I get why people have anxiety

745
00:27:31,400 --> 00:27:31,780
around it.

746
00:27:31,840 --> 00:27:32,980
There's a lot of rhetoric.

747
00:27:33,200 --> 00:27:35,600
Can't guarantee it, but it's highly unlikely.

748
00:27:35,600 --> 00:27:36,600
Yeah, exactly.

749
00:27:36,780 --> 00:27:38,540
And that's kind of the, just as you

750
00:27:38,540 --> 00:27:40,220
described it, that's how I tend to frame

751
00:27:40,220 --> 00:27:40,920
it for people.

752
00:27:41,060 --> 00:27:46,140
It's like, it would be politically unpalatable for

753
00:27:46,140 --> 00:27:48,400
any, you know, anyone to try to tank

754
00:27:48,400 --> 00:27:51,640
those kind of benefits that people enjoy.

755
00:27:52,160 --> 00:27:54,000
Whether or not it's a good decision or

756
00:27:54,000 --> 00:27:54,220
not.

757
00:27:54,300 --> 00:27:56,040
I think they'll borrow money before they got

758
00:27:56,040 --> 00:27:56,540
benefits.

759
00:27:57,000 --> 00:27:58,160
I think so too.

760
00:27:58,220 --> 00:27:59,340
I think that's the likelihood.

761
00:27:59,840 --> 00:28:01,740
Well, this was an interesting thought exercise.

762
00:28:01,740 --> 00:28:05,020
Probably a few people that could maybe benefit.

763
00:28:05,320 --> 00:28:08,800
Thinking like being really disciplined, maybe inclined to

764
00:28:08,800 --> 00:28:09,200
do that.

765
00:28:09,360 --> 00:28:10,740
I think it's worth thinking about.

766
00:28:11,080 --> 00:28:12,680
But get some help with the decision.

767
00:28:12,920 --> 00:28:15,280
As you see, we were, you know, stuck

768
00:28:15,280 --> 00:28:17,060
on certain parts of it as well.

769
00:28:17,140 --> 00:28:18,440
We're just talking it out for the first

770
00:28:18,440 --> 00:28:18,680
time.

771
00:28:18,720 --> 00:28:20,240
It is not a simple math formula.

772
00:28:20,360 --> 00:28:21,700
It may look like one, but it is

773
00:28:21,700 --> 00:28:21,980
not.

774
00:28:22,660 --> 00:28:24,200
Yeah, and I think it's something that, you

775
00:28:24,200 --> 00:28:25,300
know, a little bit of help goes a

776
00:28:25,300 --> 00:28:25,720
long way.

777
00:28:25,980 --> 00:28:26,100
Right.

778
00:28:26,780 --> 00:28:27,520
Interesting topic.

779
00:28:27,680 --> 00:28:29,140
Thanks for bringing it up, Jeff.

780
00:28:29,440 --> 00:28:30,840
Thanks all for being with us.

781
00:28:30,840 --> 00:28:32,140
If you need a little help in your

782
00:28:32,140 --> 00:28:35,220
financial planning or portfolio management, please reach out

783
00:28:35,220 --> 00:28:35,580
to us.

784
00:28:35,640 --> 00:28:36,340
That's why we're here.

785
00:28:36,420 --> 00:28:37,540
We're happy to speak with you.

786
00:28:37,840 --> 00:28:40,380
Until next time, everybody keeps driving for something

787
00:28:40,380 --> 00:28:40,720
more.

788
00:29:35,340 --> 00:29:39,300
Transcribed by https://otter.ai