Social Security Do Over

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This is the Truth Network. 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, IRAs, 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. Today's show, a little different, Social Security Do-Over. I like that name, Do-Over. And, you know, Jesus used it really well when he was talking to Nicodemus at night.

Some people call that Nick at night. I mean, a lot of people stole that idea. But what he said was, you know, you must be born of the water and the Spirit. You must be born again. And what an idea that, like, for those of us who have accepted Christ, and I hope you have, that, oh, my goodness, your slate is clean. Your debt has been paid, and you're now a new creation, and you begin a new life, you know, as the son of the Father.

It's a beautiful thing. But whoever thought that, you know, Social Security would have a similar clause where you could get born again? You could do a do-over. Yeah, you could do a do-over.

So, Hans, how exactly does that work? Well, in golf, they call this a mulligan, you know? You get a do-over. So, it's really a Social Security timing issue, which we talk about a lot on this show, because that is something with regards to Social Security that you have control of.

And by that, the timing. So, do you file at 62, 63, 64 in four months, you know, 65 in two months, 66? I mean, you just got every single month. So, you got 96 chances to start your Social Security, starting at age 62 and ending at age 70.

And so, you got to pick one of the 96. And a lot of folks do this without a lot of thought and planning, or a lot of folks just think, well, okay, so I get Social Security when I retire. They're thinking that when I retire, then the next month I start getting a Social Security check. And it doesn't have to work that way.

You don't have to put those two things together. You're able to pick any one of 96 times. So, we have a lot of clients who make their Social Security decisions before they come into us, okay? Now, if somebody made it two years ago or three years ago at 62, and now they're coming into us because they're turning 65 and going on Medicare, and they're finding out about all this financial planning we do and senior and retirement planning, and they're covering all the issues. So, there's just a lot of folks that we get that just a few months ago they started their Social Security check, or six months ago, or they started the principal earner's Social Security check and they haven't done the spouse yet, or vice versa. So, people have done things. And once we start looking at things and looking at their income and their situation, it may work out that that wasn't the best decision.

So, and I'm going to talk about some examples later on the show today. But Social Security has this provision and most people don't know about it. It's actually officially called Withdrawal of Application, but we're calling it for the purposes of the title as Social Security Do-Over. So, if you've started your Social Security in the last 12 months, so you can't do this after, you know, if it's been more than 12 months ago that you started it, you can't take advantage of this. But if it's been less than that, you're eligible for a Withdrawal of Application. You can only do this one time in your lifetime, which is start your Social Security and then after several months, or a few months, or 12 months or less, you want to do a Do-Over. If you've already done this before, you can't do it again. And one of the requirements that creates a stop sign for some people is you've got to pay back everything you've got.

You don't have to pay any interest, but you've got to pay back everything you've got. Right. So, again, as I'm trying to follow, in other words, the reason that people would do that is they would go, oh my goodness, I didn't realize that this would really change my spousal benefits, or I didn't realize that they would call me back to work. You know, that would be something that could happen, right? I thought I was retired.

You're right. And then all of a sudden. I have a schoolteacher that that actually happened. And a lot of schoolteachers, they come back at them six months after they leave teaching school because they need schoolteachers and especially good ones, you know.

And so I have a lot of clients that are schoolteachers and they retire at like 63 or 64. And then, you know, after a period of time, the school wants them back and they kind of want to go back. I mean, maybe they left and they were burnt out or whatever, but, you know, they're ready to go back. And then this is perfect for them.

They can do this once. Yeah, I could see all sorts of reasons that somebody might retire. And then all of a sudden, some huge thing happened in their life when they're forced back into the worst force and go, wow, you know, if I'm within that 12 months, you know, this really might be a much better plan because as we've talked about before, if you're starting your Social Security while you're still working before you're at your full retirement age, right, you're giving back part of it before you even take it.

Yeah, you're going to want to do one of these if that happens within a year if it works out. I mean, first of all, you got to have the money on the sidelines to do this. And anybody who has no savings, they aren't going to be considering a do-over anyhow. I mean, it's a—but this is— They need the money.

They need the money and they have needed the money and they continue needing it forward. And I'll give you an example of a client that right now when I was preparing this show, I've got an ongoing client who she's just turned 65. She's buying a Medicare supplement from us and she doesn't have much of a work history.

And we looked at the whole thing or I didn't actually look at it. One of my young lieutenants was looking at it and she only gets 388 bucks a month and she just took it, you know, which is a little early at 65. Her husband's still working. He's only 60 and she never thought about the ramifications of him or retiring or any of that stuff. And they also have a good bit of money in a 401k plan that they've been planning to live off of.

Well, that's where I came in as we're sitting down. He'd like to retire and then we start looking at all this and they don't really have high income needs. So they're in good shape but having two Social Security checks is going to be less of a drain on that 401k because if we have the Social Security checks coming in as a base income—anyhow. So when we go through this because she's four years older than him, she's going to be able to get a $1,350 a month spousal benefit in a year and four or five months whereas he's getting a Social Security benefit at 62 of like $1,900.

So you put those two things together and you've got some pretty significant money. So again, if she'd stayed on her Social Security, which she was already in it and she was getting $300 and some odd dollars a month. What she did not know apparently was that if she would have waited 18 months, she would have been eligible. But my question in that is she'd have been eligible for half of her husband's benefit.

Now let's just say that she'd left it at $388. When it came up time, would she still— She can still do the spousal benefit, but it's a complicated formula and she's going to get less than the $1,350 a month because they're going to have her benefit filed early on the small thing and that's deducted out and then some sort of a corridor or a coverage to just get into the math of that. She still would have probably gotten like $1,100 a month or that's the way it is now, but I'm going down to see her and do a bunch of financial planning and I'm just going to sit with both of them and I'm going to say, look, we're going to recommend a Social Security do-over because she's only collected it since March, so March, April, May, June. I bet $388 compared to— It's just not that much money and so she's going to give back the 1,500 bucks that she's gotten and then they'll stop her payment and then she'll get that full benefit.

She can't get a spousal benefit until he applies and he can't apply until he's 62. You follow me? I follow you completely and who would have ever thought? I understand why they didn't—who would have, but it's just clear cut that, wow, when you come into this picture, that's the reason why you sit down with Hans and you give him all your stuff because, look, I mean, it's not just you. It's you and your spouse and all those things figure into the equation of what's— Look, these people need five grand a month or $60,000 to live. I asked her, is that before taxes or after taxes and she's kind of going, huh? She didn't really do it like that, but it's just— I said, well, because if 5,000 is after taxes, you're going to need eight grand coming in. I mean, I've got a plan for eight grand so that you can pay 3,000 in taxes. Right? Or it's the five grand before taxes.

People don't think about that, but when they come see me, they do. I would have said the same thing, huh? And so she's, I mean, five grand a month and now he can't get Social Security for a year and a half. So if he retires now, I've got a plan for five grand a month after taxes, which means we ran all the numbers. It's really only about $6,200, $6,500 and we're going to have to take that straight out of his 401K.

So consequently, he might wait another year before he retires and get a little closer to Social Security or wait until October 2022. The whole point being is that they're going to get two Social Security checks and you add those two together, it's almost 40 grand. And if you'll remember from earlier talking, you don't owe any taxes if all you have is Social Security and even if you have a little bit more. So we only have to withdraw 20 grand out of their 401K a year once they're on Social Security. They can do that for a long time and they're not going to pay much in taxes. I mean, it's just almost zero taxes using all those formulas and they were just delayed it. Yeah, so the idea again is that Social Security do-over, as we're talking about today, from Hans' book, The Complete Cardinal Guide to Planning for and Living Retirement, it's got the Seven of Worries chapter, today's chapter is Social Security. And so we've talked about it many times on the show that this is a formula. Like when do I start my Social Security?

When do my spouse start her Social Security? And today's show is talking about, wow, you could have a do-over if you started it and you found out you had something else that you possibly could do. And again, you can get Hans' book by just going to cardinalguide.com and emailing Hans, telling him you want the book.

So when we come back, there's going to be more on Social Security do-over. Hans and I would love to take our show on the road to your church, Sunday School, Christian or Civic Group. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans' expertise in qualified charitable contributions, Veterans' aid and attendance, IRAs, Social Security, Medicare and long-term care. Just go to cardinalguide.com and contact Hans to schedule a live recording of Finishing Well at your church, Sunday School, Christian or Civic Group. Contact Hans at cardinalguide.com.

That's cardinalguide.com. Welcome back to Finishing Well. Today's show, we're talking about a Social Security do-over. And so, wow, you know, you're thinking you started your Social Security and all of a sudden, you know, let's just take the guy who gets called back to work. And so how much you're going to make when you get called back to work, that all affects that decision, doesn't it, Hans?

Well, it does. And so any time we have somebody who's younger than full retirement age, which is right now about 66 and six months or whatever. I mean, you fit in that category right now, where you're not quite at full retirement age.

I'm over 65, but I haven't reached the full whacker yet. Right, right. And so any time we have somebody starting it, and you can do it as early as 62, or has started it, we're going to sit down and we're going to give them this counseling, is that if you have a year where you make more than $19,200 in money from a job, what they call service income, you're going to be giving a bunch of your Social Security check back to just account for the Social Security Administration doesn't like that. People taking it early, but they're really not retired. And then they're making a whole regular income and they're getting their Social Security check.

They're going to ask for that back. When you think about the whole picture, it's kind of crazy. Well, it is kind of crazy. Because if you're making $40,000, say, for example, then you're paying in Social Security on that. Oh, sure you are. And you're taking back a smaller check that you're stuck with now for the rest of your life. And you're paying taxes on your Social Security that you're now giving back. It's complicated. And your employer's paying Social Security.

So it's like the triple threat. This is just one reason for a do-over, like you get called back to work. And if that happens within a year, then you can take advantage of this. But now that we're talking about that, we've got to get clear, is that if you take it early, only take it if you're planning to make less than $19,200.

I mean, it's like a part-time jobs fine or a consulting gig or something. But if you are going to make money, reasonable money, from a job and from work, even if it's much less than you made in your real job, then you probably want to wait to take Social Security until you're at full retirement age. Because once you reach 66 in six months or 66 in eight months or whatever, 67, once you're there, you can take it and still work. Because once you get past full retirement, this is only for the people that take it early. And now the do-over is for anybody.

I mean, if you took it in the last year, you can pay it all back and start over again. It's not quite that simple. But I got another client that we met back in March or April, and I think he's listening to the podcast or picking me up on YouTube. He's out in California, a really good guy. Everybody in California makes a good income because you – You couldn't live?

You couldn't live, yeah. He's up in a six-figure income for being something like the custodian or in charge of the facility or something at a hospital out there. And the guy's retiring. He's moving to Oregon. He's got all kinds of stuff going on that I'm helping him with. But we just kind of agreed to just let this thing sit for like 60 days because the retirement date is July 1st. So I'm just talking to him this week, and I find out we're going over this and that and the health insurance for the wife and the move to Oregon and the Medicare supplement and talking about long-term care insurance, his qualified money, his pensions, his taxes in Oregon versus California. I find out he started his Social Security check, and he's just putting that like a given. And I try not to act too disappointed. I mean people can do whatever they want to do, but you really didn't ask me. And it's just – so he fits right in that category of a month ago.

So it hasn't come in yet, but I think it's set to go, so it'll qualify as a do-over. And this guy's got some 401K money and some IRA money, and so he has plenty of stuff to live on besides Social Security, and not for the rest of his life. One of the real kickers he's got, his wife is like 63, and she needs to buy Obamacare, healthcare.gov health insurance. And we handle that too. I mean they pay us in quarters out of a little clicker thing because they're in much in it, but we handle that just simply for clients like this because I don't want to send them to somebody else. So even though I don't get paid much, I want to be able to serve them. And so the real key with that is the subsidy. I mean this stuff is going to be probably $1,200, $1,400 a month for her. That's a big deal, $1,000 a month for two years. And so if you qualify for a subsidy, you can get a subsidy. If your income was 30 grand a year, you can get a subsidy of like 80% of it or 90% of it. If you qualify for no subsidy because you've got, and they count your social security and your other income and your pensions. And so this guy would have the option of doing a do-over, stopping his social security. Right, because that social security is going to add towards, right, these qualifications for the, right.

Drive him up for he and his wife. And then what they can live off of is some of the qualified money or the IRA where we can set your income at like $30,000 a year. And then we can withdraw the other money because he's got some savings built up too that he just has and he just sold his house and he's buying a less expensive one in Oregon. And he's got other money that he's just put back. And so we're going to live off of that plus the 30 grand that we pull out of the IRA.

So we fill out our tax return. It's going to be 30 grand as he's going to look like he's low income. He's going to get a full subsidy for her, almost full subsidy. And he's going to be living, money's money. And then he's going to be getting a larger social security check in two years because of that.

Because he waited. And then we won't have to take money out of the qualified money. I mean it's just simply a math problem in figuring out all this stuff mixed up. So I'm probably going to recommend a do over to him to the point where, because he's going to be hating on me when I tell him up in Oregon this is going to be $1200 a month. He already knows that because he's looked at COBRA because he can get COBRA from the hospital. He already knows how expensive it is. And what he didn't understand is how well subsidized these healthcare.gov programs are.

And we handle those all across the country just simply for spouses or adult children that are tied in with the parents. We handle it as a service to our clients and so we've studied it real well and we use it to help people. Well obviously I read a lot about social security and all these topics that I talk about.

I'm sure that it's not interesting enough to most people to read about it but it's my job and my business. I just listened to a guy, he said a statement in an article that he put out, a guy that has the same job as me, a financial planner. And he said that just right from the social security manual that social security provides information.

Social security does not provide advice. And you think about the difference between advice and information. I mean all the stuff I've been rattling off at this show, that's all in their manual. I mean it's all accessible online.

You could find everything I talked about in about a second by putting the words into Google and searching it right at their site. So they make available information but what they don't give is advice. They're not going to tell you, you know, it'd be smart for you to start your social security check now. Or they're not going to tell you it'd be smart for you to wait because of your wife and this. That's advice.

They don't give it. And that's really what we do. And a lot of financial people don't give advice on social security because they've got liability. I mean anytime I'm giving advice to people, and I'm not doing that by the way on the radio just to the world. I mean you're really going to need to sit down with me to get that advice.

Yeah we're going to make that clearer. There's a whole lot as we can tell that go into giving real advice because each situation is different. Yeah I mean I take all the information that I know and then all the information I know about you.

And then all these other factors like taxes and income and Medicare and all those things. And then I plug all that into my brain and then in conversation with you and what you want and then I give you advice. I say this is what you ought to do.

So that's what we do. And when it comes to social security, the social security office and administration, they don't give advice ever. And I think some of their people kind of do that because they have their own little opinions and all that. So I think they actually do give some of that on the sly. But it's not and this is advice and the social security do-over is just one little exception that we have at our disposal when we get clients where they've already done things. And now they're coming to us or just wanting us to look at everything and we're saying hey wait a minute.

You could be living off of your 401k money or you could be living off of your savings and then you could give this money back and wait and this could be later. Now we don't give that advice to everybody but it's just in certain situations this is a godsend. It's a blessing. And health concerns are obviously based on the scenarios you described in both cases.

That was a critical aspect. Well yeah for healthcare but as soon as you say health concerns, people that have terminal illnesses or illnesses that are probably going to have them going to see God sooner than their 90s. Sometimes those people are better off filing early because they've only got so many years to collect. So the advice is different for every person in every situation and we're not giving it on the radio. We're just giving you general information and education about it and then the way you get it. I had no idea you could get a social security do-over. I mean it sounds too good to be true but it really isn't.

I mean there it is. What do they call it? Remove of application. Withdrawal of application.

They always have these words so you withdraw all your application even though you made it six months ago it's still an application to them. Yeah and listen I make videos about all the radio shows and we send them out to our clients. You could ask to get on our mailing list and it'll be a little different than the radio show part in the podcast which you can obviously listen to. I'm also on YouTube and all these get posted and they're starting to get a lot of traction. Yeah well your mailing list your people are thinking it's email. It's email. Right and since I'm on that you know I get it.

So it really is quite handy. You know you're going to get almost weekly. Well it is weekly. You're going to get the radio show on the podcast and you're going to get that video that's also posted on YouTube and then you're going to get a little bit of learning with that and it just shows up in your email box. It goes to all our clients and everybody that's asked to be part of our mailing list. And you know you can if you wanted to go on YouTube and you just put Cardinal Advisors O-R-S. Cardinal Advisors and then I think you could just type Hans Shiel as well and up is going to come probably 120 YouTube videos where we're going over all this stuff.

Maybe a little shorter than the radio show but people tell me they're great. Yeah because again you're going to Ed Slot and getting this information. Of course there's always the book The Complete Cardinal Guide to Planning for and Living in Retirement. You can get that also at cardinalguide.com. It's Cardinal Advisors on YouTube.

I get confused but yeah that's kind of where that goes. But great show today Hans. Thank you.

Yeah thank you. 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, I.R.A. 's, long term care, life insurance, investments and taxes as well as Hans 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 Hans 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. This is the Truth Network.