This is the Truth Network. Um Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAID, long-term care, life insurance, investments, and taxes.
Now, let's get started with Finishing Well. Welcome to Finishing Well with certified financial planner Hans Scheil. And today's show, really fun Social Security planning. What are seven items to know? And so everybody's got that decision on when are they going to take their Social Security?
And wow, I mean, it's got long-term ramifications. Once you make your decision, you know, that's a check that amount that you'll receive for the rest of your life affects your spouse that she'll receive if it's the larger check for the rest of her life. And so, you know, in Ecclesiastes 3:1, Solomon, through the Holy Spirit, gives us this wisdom that to everything there's a season and a time to every purpose. Under heaven. And timing is huge when it comes to this particular item.
And so I love this idea of the seven items that we're going to talk about today that help you make this decision, not just for how much you can get, but what's the right time for you. And your family, Hans?
So today But I like love the seven items as well. I mean, we've Done a show. on each of these seven things.
So if you go back into our our directory, you you can find a show about each of the seven. This show is like these are the seven things you need to look at before you even start Social Security. And I'm going to go through them real quick. And read them to you so you know what's coming. And then we're going to go back and we're going to go through and talk a little bit about each one.
So, number one is the age to file. And the earliest you can file for Social Security is 62. And the latest you can file for Social Security is 70. And we're going to talk a little bit about what that means to you. The second one, the maximum taxable Wage base.
What that is, is like around 2026. That's 184,500. Stay over here. Um We'll talk about what that means probably in 1983, 1984 when I look at my statement. That number was about $40,000.
So it's grown that much. Uh number three is Filed for Social Security too early. Like if you have filed for it and you just realized. that you've made a mistake. We can talk about what you can do about that.
Number four is really getting into spouse benefits and the ramifications. of all that and when your spouse is eligible. For a check. Based upon your record, or vice versa, when you're eligible based on your spouse's record. Number five is the cost of living adjustment that's associated with Social Security.
We're going to talk about that. uh estate planning We're going to talk about what happens when the first spouse dies. And number seven is the federal tax. And folks. learn this is that you you know, in many situations have to pay taxes.
On your Social Security check, and some of the planning we can do to weave in and around that.
So Let's get started with the first one, the age to file. Between 62 is the earliest you can file. and seventy is the latest you can file.
So Robbie, I'm just going to ask you, why would you want to wait till seventy when you can get a check at sixty two? No way. Yeah.
Well, you can go to your Social Security statement and see that, wow, in my case, I think it was like almost $22 or $300 difference. Between if I took it when I was 62 and if I'd taken it when I was 70, because I mean, it grows and grows. And not to mention that when you reach full retirement age, you know, a lot of the ramifications on it change in that. You know, your full retirement age is is changes that that if you're working past that, that you won't Have a tax penalty where you're actually giving back part of your social security if you're making over a certain amount.
So there's a lot that goes into that. 62 to 60 or to 70 decision for sure, but certainly before full retirement age.
Well the example we had at the video Um this person They took it at 62. It was $29.69 a month, or call it $3,000 a month.
So if they took it the earliest they could. three thousand a month. If they took it at full retirement age, which was sixty seven for this individual on the video in the example. It was $4,200 a month. And if they took it at 70, It was $51.81 a month.
And so when you just look at those numbers, And you say, well, I sure don't want to take it at 62. Um Because that's given up a lot. But sixty seven looks pretty good to me. And a lot of people do that, is when we do a financial plan, We're not just going to look at the numbers like I've just thrown out at you that you can get off your statement. We're going to look at your whole situation.
And one of the questions we're going to ask you: you need the money. Because if you need the money, We're going to take it.
Okay, and your spouse is going to take it. But if you don't need the money, If there's available other money for sources, then you're going to have the option to wait Yeah and just Way through the whole show. this is a this is the biggest decision that people are going to make is like when to file when to when to do it do i delay Ticket for retirement. Um And so Let's just move on. Number two is the maximum taxable wage base.
Well when I went over this example of this high earner The reason their Social Security check is so large is they've made a lot of money over there. or their working years. And so what Social Security does is they keep track of and they tax you. And they tax your employer. And in 2026 the maximum taxable Wage base is $184,500.
And what that means is during 2026, If you're still working and you have a high income, They're going to tax you and tax your employer until you get to $184,500. And if you reach that point in August. You just reached it. For the rest of the year, you're not going to pay that 6%. uh social security tax.
your check's going to go up effectively. And so, when we look historically, that's how they arrive at what your Social Security check is. As I mentioned earlier. Back in 1984, that maximum taxable wage base was about $40,000.
So, if you're a person that in 1984 made $50,000. You only pay tax on $40,000, which was a lot of money back then. And you gotta credit.
So yeah. one of 35 credits that they're going to use. for the maximum you earned the maximum in 1984. it's they're going to look at your highest thirty five years relative that maximum taxable wage base. Yeah.
That's what's going to determine what your check is on. And the maximum earner that we used in the example in the video. Yeah, and it's in the show notes of the video. that person had already earned the maximum for thirty-five years. I mean, they'd already their check is not going to get any bigger based upon.
Current earnings. Um But it's something that in 1991 I had in the video that was. 53,400.
So that's gone up quite a bit. over the years But it's your really your earnings history that's going to determine your social security check. Let's The third question is Did you file Social Security too early?
Okay. You know, like we we have this happen all the time where people come into us And they've already started their Social Security because they've already retired. And they didn't really consult anybody, they just Said, man, I'm quitting my job. I won't have a paycheck coming in. I want to start my Social Security, so they did it.
And it's been coming in and now they're you know, maybe they come to us about Medicare. Yeah.
So we're going through Medicare and we start looking at everything and we say, okay, so you already started your Social Security. And they say, oh, yeah, and they give all their reasons, and my spouse has started it as well.
Well, and then we start doing the financial planning. And we show them. Had they waited, It would have been this. They said, Well, what would I live off of?
Well, we can pull money out of your IRA. Alternatives And if you discover this and you filed within the last year, Social Security lets you do a withdrawal of application.
So I don't want to spend too much time. We've done another show on this, but If you've already filed for Social Security, And then you really want to reconsider. If you do it within one year, Social Security lets you go back and we call it a duo.
So you've got to pay back all the money, no interest. You've got a request to withdraw all of applications, pay back all the money. And then you can Pick any tone you want.
So Um and you can only do it once.
So if you've already done that. Or a year's already passed, you can't do it. But if you've already done a withdrawal of application, you can't do it again. Black. Hello.
The fourth area, which I really want to spend some time on, which is the spouse benefit. And this is an area that people are somewhat naive. What's good? First of all, if you and your spouse have a similar earnings record or your spouse is just a little bit less than you. Or even you know, somewhat less than you, but it's You you have relatively equal checks.
Then The spouse benefit is not going to come into play till one of you dies. Like in my own situation M my wife has spent most of our Marriage. for forty-one years taking care of the kids, taking care of the house, enjoying the money that I was making doing the work. She did the work at home. and her social security check is just short of 800 bucks a month.
Yeah, so it's You know, and she just reached full retirement.
So check all by yourself eight hundred bucks a month 'cause it just reflects a limited number of years of working history and a relatively small income.
So she's eligible. for the spousal benefit. This is where she's eligible for Fifty percent. of my full retirement age, Jack.
Okay, so you know, which is about four thousand a month.
So, my Social Security check at full retirement aid, my full retirement age. about four thousand a month. But I didn't file at full retirement age 'cause I was waiting till seventy. 'Cause I wanted to get the big check. And I wanted to do that also so that if I die She's gonna get the big check.
for the rest of her life. There are all kinds of reasons to wait till seventy for me. and for us, but one of them that ran contrary She couldn't get that spousal benefit. Until I filed. This would be a good time to remind our folks this show is brought to you by CardinalGuy.com and at CardinalGuy.com.
You're gonna find the seven worries tabs, which include Social Security is number one. And so you click on that tab, you're gonna find a wonderful video. On um This exact title, Social Security Planning, or the seven items. And That's fine. There are show notes, all kinds of details, again, to give you more information on these seven items that figure into how you're going to choose the time that you file for your Social Security.
And you're going to find that all at CardinalGuide.com, as well as Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement, and of course, the. My favorite, contact Hans or Tom Page. Right there at cardinalguide.com. We'll be right back with a whole lot more Social Security planning. What are the seven items to know?
Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Han Scheil and today's show, Social Security Planning, What Are Seven Items to Know?
And so When we left off, we were talking about you know what does it mean for your spouse and i i'm like very much like hans that my wife Um Actually, had the greater job of raising our children, the next generation, et cetera. And so, you know, my check was significantly larger than hers.
So the cool thing is when she reaches it, which still she isn't there yet, but when she does reach full retirement age, you know, wow, she's going to get a significantly better check. But The real issue for us was in filing That Um When the two people, or one of the two passes away, the smaller check goes away. And so You know, in my case, this was a huge part of the reason I waited as long as I possibly could to file because. My wife is seven years younger than me. Or even arguably eight, if you ask her.
And so. You know, as she goes on in the whole situation, we've talked about the widow tax and many different shows, et cetera, et cetera. I wanted her. To be as secure as she possibly could. And this isn't the gift that just keeps on giving for me.
It would be the gift that keeps on giving for my family. And I think one of the huge reasons to strongly do some planning around this idea to look at all this and not only how it affects you, but how it affects your whole family, especially your spouse.
Well yeah, I mean If you just look at it, our checks A very significant I mean it's like 4,300 bucks. For me. And 2000. Sure far from it. You know, so that's 6,300 a month.
That we got From now till The first one of us passes away. And we obviously don't need the money now. because I'm still working. Doing my business.
So we're paying taxes on that and we're just saving on. Yeah.
What I'm doing is just pumping it into. annuities and Sounds good. When I do retire. It's just going to make up for the fact that I took it at 68 instead of waiting till 70. I mean the annuities are going to be more than make up that difference.
and the annuities are going to continue until both of us are gone.
So But just The thing that you just pointed out This is a big reason to delay till seventy. Or get as close as you possibly can because you want to drive up that larger check. Because when the first one of you dies, the smaller check stops.
So Um that survivor is going to live on one check. And you want that one check. to the going to that person in their eighties and nineties and be as big as a bus book.
Okay. Um The fifth area or item that we're talking about is the cost of living adjustment. for Social Security. And what I did is I just took the last eight years And I'm just going to read it to you. Because there's a big variance.
So in 2026 The cost of living adjustment was 2.8%. 25. was two and a half percent. 24 it was 3.2 percent see around 3 percent But in 2023 it was 8.7%. That's when we had that high COVID inflation.
Yeah.
But 8.7 is a lot. And then in 2022 it was 5.9%. 2021 The 1.3%.
So that's when we were You know, we were almost at no inflation and interest rates were close to zero during COVID. 2020, 1.6%, 2019, 2.8%.
So What I did is I created an eight-year average.
So I took the last eight years. And I averaged them. 3.6%. And that's kind of a more reasonable expectation. And I would draw that down.
Even a bit. lower than that and I would get down to like three percent. is what we can reasonably expect inflation to be. on your or your the code let it be on your Social Security check. still it it's hu it's huge when you think about it 'cause if it's 3% average per year.
In 10 years, your check's going up 30%. Yeah, it's actually even more than that when you compound it. Right. It's a lot.
So And you can count on that and most pensions and annuities are not inflation adjusted.
So if your largest you know, a big part of your check and I don't care how well to do people are, their social security check matters. And You know, to to have an inflation adjustment of that is going to really matter to you significantly when you get to an advanced age.
So The sixth Item that we need to look at, and we already talked about this, but it's a state plane: the smallest check stops. at the death of the first spout.
So You know, and you just look around in an independent living or an assisted living or a continuing care retirement community, you look around, who's there. It's women. I mean, there's some men in there. But they're usually couples. Yeah.
But uh They're long-term survivors. A lot of times are women. I don't think. for some reverse situations, but you know, when you start when we're doing financial planning, This is the biggest area that I am zeroed in on. is the surviving spouse.
And the first thing we're going to do i you know, in that planning We got a knockoff as that smaller of the two Social Security checks stopped.
So that's the negative. The positive is that the larger check lives on. And so that's again back to what we said earlier. big reason in your 60s to delay as long as you possibly can. taking care of that survivor that's living off of one check.
Now there's some other things that happen to the widow or widower. Yes.
So the smallest check stops, but then the The widow's text, which we've talked about repeatedly on the show, Which means that You go from a married filing jointly Tax situation. to a single tax file. And so if you've got any amount of money in an IRA, and that you inherit plus your own. as a widower widower Now you've got the same Required minimum distribution or about the same amount, but now you're paying higher taxes on it. Because you're a single tax fund.
That's So there's a lot of things that reflect negatively financially to a widow. And and and so we need a plan for this. And we do when we're creating a financial plan. There's various ways to cope with that. One of them is a rough IRA.
or we have built up that we didn't touch. We could start tapping that tax-free. Um For the widower widower of me. Um The seventh area that I want to talk about is the federal tax on Social Security. I say federal tax because in most states There is no tax on Social Security.
There's 14 states Is that also taxed the Social Security with a state income tax. But there's thirteen Yeah. I guess thirty eight in the double. Oh. Uh it's thirty-sex window.
Bones here.
So most things you got to deal with federal income taxes. And if you've got of relatively low or moderate income. You're not going to pay any taxes. on your Social Security at all. I mean, people that are living primarily off of Social Security and then they've got some other income.
Pretty good chance. They're not going to pay any federal taxes at all. 'Cause I don't know. The reason that Roth conversions are so important Is that If you're living off of your Social Security and you have a Roth IRA, When you take distributions out of that IRA, it doesn't affect It's no way, there's no tax, it doesn't f affect your income at all. As opposed to if you take money out of a traditional IRA then all of a sudden that's just like any other income, it's going to be taxed.
Well yeah, and it's going to drive tax on your Social Security. Right. So it's important when we're doing planning to understand this and predict it. I mean, if you just have a high income. And you have your Social Security.
and you can't do anything about your high income. Other than maybe turn it into Roth or that kind of thing. I mean, there's some people we do planning for. Just accept the fact you're going to pay taxes. And you're social security or something taxable.
But then there's people that a lot of folks would look at him and say, Well, they got a high income. They're not paying much tax.
Well, and it's you know, if we take somebody at one hundred and fifty thousand dollars a year.
Okay. I can't remember. Yeah, they're living off of it. They're not paying a lot of tax, and even if that $150,000 a year. is seventy, eighty thousand dollars worth of social security.
sixty thousand dollars worth of Social Security. They're not paying much tax on the Social Security and they're not paying that much tax on the income. By the time we put all the deductions and all the stuff in here.
So You really need to have A pretty high income, over $200,000 to start paying significant tax. on your social system here. Um I mean that's kind of an oversimplification, but we've done videos and other videos where Tom's actually gone into the software. And run the tax and showing you the tax. And you may go back and look at some of those if you want, have a few numbers supporting that.
Um Yes, we do. And there's a complicated formula that the Social Security Administration publishes. about how the federal taxation and social security worked. It's not really very helpful. Here's the point I want to make.
This is that it's going to lead you to believe you're going to pay more taxes. than you really are and you're so secure. It's a great time to remind you all that This show is brought to you by Cardinal Guide, CardinalGuide.com. And if you go to CardinalGuide.com, you're going to see the seven worries tabs, the first of which is Social Security, which is the show we're doing today. And if you click on that tab, you're going to see A wonderful YouTube video on exactly the same subject, the Social Security planning, what are the seven items to know.
And they've got amazing show notes that you can drill down on each of these and see. You know, more of the facts and the numbers and resources that are available to you. And again, that's all there under the Social Security tab, loads of information. But you can get the whole enchilada by getting Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement. And there's a workbook that goes along with that, really, really helpful information.
And of course, what I would highly recommend everybody do if they're making a decision, because it's once you make it, you've made it, the decision of when you're going to take your Social Security, go to the Contact Ons or Tom page. And by all means, They would love to help you with it. They got a computer. They can put these numbers in, and it'll spit out exactly when the maximum time is for you. It's amazing stuff.
And it's all there at CardinalGuide.com. Great show, Hans. Thank you, and God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you.
Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook. Once again, for dozens of free resources, past shows, or to get Han's book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word.
Once again, that's CardinalGuide.com. CardinalGuide.com.
