Social Security FRA

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CardinalGuide.com, Cardinal Advisors, and Hon Shile CFP sell insurance. This show does not offer investment products or investment advice. Welcome to Finishing Well.

It's certified financial planner Hon Shile and today's show is Social Security FRA or Full Retirement Age. You know, it's kind of interesting that when it comes to full retirement age, you can see kind of one of the big parts of that is for most of us is a matter of waiting. And so I was thinking about this idea of waiting and I heard recently, and it just got in my soul, I just love it, that the end of the word guidance is dance, right? And so if you think about God's guidance, right, his will to a great extent is a dance. But the issue is, if you don't wait on God, he will step on your toes.

I'm sure you've experienced that, I know I have many, many, many times. And so this idea of wait is mentioned many, many, many times in the Scriptures to wait on the Lord and obviously, or maybe not obviously, Psalms 27 and 14 is absolutely gorgeous. It says, wait on the Lord, be of good courage, and he will strengthen your heart.

Wait, I say on the Lord. And when it comes to our financial things, a lot of times we get real anxious and so what a neat opportunity we have to do this waiting. And the beautiful thing about waiting in Hebrew is it's this word kava. And to get a better understanding of the word kava, or waiting from a biblical standpoint, is to see the first time it's used in the Bible is when God separated the waters from the firmament, right? In other words, there were heavenly waters and there were waters in the ocean. And when he did that, it said he gathered the waters together. Well, that word gathered is kava, that word waited. So as we wait, we draw closer to God. And the closer you get to God, the more holy it is, I'm just saying. And so as you get into that holy dance and you draw closer to him while you're waiting for him to tell you, okay, it's time to take a step, then you begin this guidance. And often we are lucky enough to have people that will give us guidance in our life. And for me, that has been my good friend and certified financial planner, Han Shyle, especially on this subject, oh my goodness, social security, full retirement age. We need guidance, don't we, Hans?

Well, we do. And we were just talking, getting ready for the show. Just, I think that it's very easy for people that are first learning about the intricacies of social security to get cynical and to, like, why is this?

They throw their arms up. And just around the very topic, talking to a lady this morning, born in 1957. And her husband was born in 1957. And it took us a while to get to the point that her full retirement age is 66 and six months. She's talking to me today because she's turning 65 and going on Medicare. And so there was a day when full retirement age was 65 for social security.

And Medicare started at 65, both of them same date. Last time she checked, that was the deal. So now she's noticed that she goes on Medicare.

They got to do something in a few months. So now she's studying everything. And she just happened to be watching my YouTube videos. And I made probably the most sense to her of anybody that she's talked to. So that's why she called me this morning. But I just, I had to talk to her a little bit about her cynicism because she just, why is this so confusing, you know, on Medicare, part A and part B, and then part C and part D, and then plan G, and 80% and 20%.

And then we got over to social security, which we're talking about today on this show. Why is it 66 and six months? And why is my friend, who was born in 1959, 66 and 10 months? And, you know, why were my parents 65? And it's why, why, why, why? And it's almost like she wanted me to justify all the government's decisions since 1938.

And this made sense to her. I said, you know, social security came out in 1938. I believe that was the year. And when they were looking forward, which they were doing, is they were looking forward to people become, being 65, and then drawn a check. Because people, many people were dead before 65, back in 1938. I mean, that was a, that was a person that's having a long life.

And so it was the exception they were planning for. And, you know, it was really just some people made it to this, and then they didn't make it very long beyond there. And, of course, when you get down to 2022, it's a whole different ballgame. I mean, people are vibrant. I mean, you're 66, Robbie. And, you know, I'm almost 64.

And, you know, we're just, maybe in the twilight of our careers, but we're, I don't plan on stopping anytime soon. So, just trying to give her an answer of, look, this is a result, just this one little point of the moving date for full retirement age is something that was done to social security years ago. Were you even aware of that back in the 80s, when this stuff was all passed from? Yeah, I mean, I heard the urban legend stuff. Social security is running out of money. They're going to have to do it. People are stealing money from it.

You know, the senators are taking money, you know, all that stuff that turns out isn't true is kind of what I heard. And I was aware that they had changed it. But like, probably you at the time, I mean, what did one year and six months make a difference to me when I was 27 or 28 years old? I was like, well, that's no big deal.

I'll be all right. In 1983, I was 25. And I was early on in the business.

I was in this business. And I remember this, and I remember talking about it to my dad. And, you know, what my dad was most happy about is they were telling in the news, they were saying these social security changes that went in effect, it was 1983, are going to have the biggest effect on the young people. They're not going to affect people who were 60 years old or something at the time, which he was. And he was happy about that.

They're going to affect me, not him. And then the second thing that they did was going to affect him is they started taxing social security as part of this amendment. So they're saying the people that have some reasonable other income during retirement, which he did, we're going to start making you pay tax on this social security benefit. So that was 40, what, almost 40 years ago, 39 years ago, that they made this major change in social security, and it's still not fully implemented yet. Yeah, because there's still those who are, what, it ends up in 1950, the people born in 1959, that's the last group that... 66 and 10 months, 1959, and then in 1960, and after, the full retirement age is 67. So let's talk about what does full retirement age mean, okay?

What are we talking about here? So we're going to start at the end and work backwards a little bit, is full retirement age is the age which you can get your check. I mean, that's just, everything is targeted for you to retire at 67 if you were born 1960 and after. And for me, I was born in 1958, so it was targeted for me to get my full retirement check at 66 and 8 months. Now, if I elected to, and same with you, is we could have started our check at 62, but we chose not to. So why did you choose not to take your check at 62 or one of the dates after that?

Because I was still working mostly, and since I was working, it would be taxed just like what you just described, the social security benefits, so you would be getting this money and giving it back at whatever, 25, 26% of it, you'd hand write back to them in taxes plus, the scarier part for me personally and probably the bigger reason, is once you lock in at 62, it's going to be at a greatly reduced rate and you're going to have that same rate for the rest of your social security benefits. So by waiting till full retirement age, the benefit is substantially increased, it stays increased, and in my case, I'm going to wait even further till 70 to actually get the maximum benefit that will be there actually, not just for me, but for my wife, who's significantly younger than me, which is very important to me as long as she lives. So they didn't change that way back when, and the way back when was age 62. That's been the same since the beginning, as you could take early retirement and you could take a smaller check if you in fact were retired at 62 or 63 or 64, and you can still do that to this day. So that's been pretty consistent all the way through social security, is early retirement option starts at 62, and then it's not just 62 or nothing, it's every month from there till you're 70, you can make an election. And every month you wait, you get a little bit more, and it's all targeted toward this FRA, full retirement age, and that's a moving target and been a moving target for about 40 years. At first, they took it from 60 to 65 in two months, and guess what's after that? 65 in four months, and then 65 in six months, and they gradually worked it up, and then when they got it to 66, they left it there for about 12 years. So everybody that's in that kind of middle area, their FRA or full retirement age was 66, and then it started over at 66 in two months, four months, so and so, and we're still not through with this, and we won't be through with this phase-in until 2027.

So when folks are looking at this right now, they're just seeing the tail end of a 44-year phase-in. Does that clarify a little bit? Yeah, absolutely, and it's a great point to mention that you can find out all this information at Hans's website, which is cardinalguide.com. He has a very wonderful video along these lines at YouTube, which is under Cardinal Advisors, which again is going to be full retirement age for 2022 and, of course, this book, The Complete Cardinal Guide to Planning for and Living in Retirement is available there at his website, cardinalguide.com, as well as all the ways to get up with Hans, and so we're going to take a short break, and when we come back, we will finish up with full retirement age of Social Security. Hans and I would love to take our show on the road to your church, Sunday school, Christian, or civic room. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans's 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 with certified financial planner, Hans Scheil, and today's show is Social Security Full Retirement Age, understanding the ramifications of that and getting guidance on how to work around this information, and plus give it, hopefully, a little understanding to what's gone on in the past to make all this happen, right, Hans? It all goes back to 1983. They passed some regulations or amendments, a Social Security amendment, and they did that to shore up the financial stability of Social Security well into the future. And they did that by raising the retirement age and moving it from 65 to 67. And you wouldn't think that a two-year movement in the retirement age would have that big of an effect on the financial stability of the whole program, but it's huge. You could still draw your Social Security at 65.

You were just going to get less than you otherwise would have. And they have to put these kind of changes into the future. They couldn't go to the people that were 65 then and say, okay, we're going to cut your check, or we're going to make you, you know, you're 64. You thought you could retire at 65.

Guess what? Now you've got to wait till 67. So they didn't make any changes for the people that were right at retirement.

All these changes were made for the future. And I remember my dad, again, he just, he thought, well, this is going to affect you, Johnny. And it's not going to affect me because I'm right there.

I'm taking mine. And I didn't think much about it. And now that I'm that age where I'm coming up on 66 and eight months, it's not really having that big of an effect on me because I'm still working like a lot of people at that age. A lot of people of our age, a few years in mind, Robbie, are still working and plan to continue working.

And the ones that aren't, many of them, if they've saved for retirement, they're delaying their check anyhow so they can get more. Yeah. So actually, the plan worked out quite well, you know, from that perspective. But it looks like we're facing the same thing again, right?

Well, we are. And, you know, they're probably going to do something similar again. I mean, if you think about it for a minute is that what you hear, and we do the report, we'll probably be doing that in April or May where we'll take the numbers from last year from the Social Security Trust Fund and go over and really make sense of this whole theory that Social Security is running out of money.

And it's just not. And it's 2022, and they said that it will, the trust fund is going to run dry in 2035 if we don't do anything. And what I would propose is they're going to do, one of the moves they're going to make, that is the Congress has to pass this, and then the President has to sign it, is just to move the retirement age again. But they're not going to remove it for you and me and people born in, you know, the 50s or the 1960s. It's going to move for the people probably born in 1970 and after, maybe even a little further than that.

And it's just going to move a little bit at a time. And it's probably going to take them another 44 years or 47 years or whatever to implement the full age change. And it'll probably end up at 70. And I think that people that are 25 now, I think they're going to be fine with it.

I mean, they may grumble a little bit, but it's the last thing that's on their mind. And they've got plenty of years to prepare for it. And see, there's a whole other piece of this, is nobody could have predicted people living into their 90s like they are now in their late 80s, past 100. I mean, so Social Security, if somebody retires today, and they were born in 1955, and they were, you know, at 66 and two months, and so they retired, they retired back a year or two ago, and they're collecting their check, and then they subsequently live till they're 95 or 100, they're going to be paying that check out of that trust fund for a long time. You know, you look at that, and then if they die, their spouse is probably going to collect on their check and live to a ripe old age. So you've got it on the other end, is Social Security is paying everyone a lot longer. Now, if that trend changes for the people that, you know, a lot of these folks that are 25 think that global warming is going to kill them by the time they're 70 or something.

I mean, let's just assume that doesn't happen. And let's think that life expectancies continue to grow. Social Security needs to prepare for that. And one way to do it is to delay retirement or delay full payments for retirement.

Does that make sense? Yeah. I mean, you can see it coming, and, you know, I never would have dreamed, I don't know what you thought about when you were young, but I never would have dreamed that I would be working into my 70s, but now I can't even imagine not working into my 70s. In fact, I don't want to imagine not working into my 70s, right? Yeah. I mean, you go look at the name of all these programs and they got the word AGED in there, A-G-E-D. And do you look upon yourself as AGED?

No, not at all. But of course, you know, that's a relative term, I suppose. Well, these are for the AGED.

I've been thinking about, you know, a guy hobbling around or a lady hobbling around and using a walker and just coming out to get the mail, that kind of thing. And, you know, it, I mean, it's just, so this program is set up, Social Security, to provide money for old age. And when people can't work, or they're not intended to work, and the whole thing is a moving target. So I'm not trying to make everybody like this.

It just is. But look for another phase in like this to shore up Social Security. Now, let's talk about the here and now, because most of the people that we're talking to, you're in your 50s, 60s. And, you know, if you're in your 70s, you're probably already collecting Social Security and this whole conversation may be boring you. But, so the decision you've got right in front of you is, do I start my Social Security at 62? Do I start it at 63? Or do I start it at full retirement age, which is now, you know, going to be pretty close to 67? Or do I delay it even beyond there and get a larger check?

And if I can delay it as far as 70, I'm going to get a really significant check. Tom Scott Yeah, can you, the one sticking point in the whole thing that I think really clarifies for me, why full retirement age is a big, huge deal, is that there's a big difference in taxes on, you know, your Social Security if you take it before full retirement age and after retirement age, right? Full retirement age.

But the FRA is a... David Morgan So there's a difference. There's really no difference in taxes is that some of your Social Security is going to get taxed based upon your other income. So if you take it while you're still working, you're going to pay income tax on your Social Security by the amount of your other income. But if you take it before full retirement age, which is pretty close to 67, not only are you going to pay taxes on the benefit, you're going to have to give some of the benefit back if you make more than $19,560. It's like a double tax.

Tom Scott Yeah, that's the part that I wanted some clarification on because that to me is like, oh my goodness, like if you're working before full retirement age and you're taking your Social Security, you got that double tax that is like the double whammy. David Morgan Well, yeah, I mean, it's like your friend that's making maybe $40,000 a year and he just thought, I'm going to take my Social Security at 62, I'm going to get mine with a getting's good. Maybe he gets $1,500 a month. So he's got $18,000 of Social Security income that came in. If that's all he had, he wouldn't pay any tax. But the $18,000 is going to be taxed based upon the other $40,000 that he makes at his job. So he's going to pay taxes on the Social Security. Plus, since he made $40,000 from a job, it's more than the $19,560. By the time he's all done, he's given most of it back to the government. Tom Scott Therein lies why that date is a big deal for those people that are wanting to take advantage of their Social Security before waiting to age 70, right?

David Morgan Yeah. If you're still working, you don't want to take your Social Security check until you're at full retirement age, which is pretty close to 67. I mean, for starters. Now, if you retire or you're not working or you've lost your job or whatever happened, something bad happened to you that is causing you or you just flat need the money and you don't have this other income, well then you can take it. And then you're going to reduce your benefit for your whole life.

And then if you go back to work, you're going to end up being like the guy we just described. Now, when you get to full retirement age, which you're already there, Ravi, and you could start taking your check, but you're not taking your check because you've decided to let it accumulate even more all the way to 70. And so you're going to get a much more significant check. And you'll probably still be working at 70, but there's no more delaying.

You're just going to take it. And then you'll probably, you'll pay some tax on it. And if the plan stays to hold, you're going to save that amount for all the money you make in the 70s from Social Security. You're just going to save that for later.

Right. And it's kind of cool because you can just continue with the annuity idea, which my ignorance coming into doing this show, I guess two and a half years ago, whenever it started, was I had no clue what an annuity is or that Social Security is like a really cool annuity. Like, oh my goodness, you know, we can be investing in annuities which have that same type of thing. It pays out as long as you live. And so the idea that we can create an income source for the rest of our life is just absolutely beautiful. Like, I don't have to worry that it will run out. Yeah, you don't.

It's coming in. And then it's going to stop when you pass away unless your wife is still alive. And if she's still alive, she's going to get your increase check for the rest of her life. You know, it's about the best annuity that you can do. And people ask me all the time, well, when should I take Social Security? And you know, my answer to that is I don't know enough about you yet.

Because, and that's why I have to laugh when so many of these people that come on my thing and they make comments, oh, you ought to take it at this age, and you ought to take it at this age. And for everybody, it's different. So I can't answer that question for any person. I know a lot about you, Robbie. So it's been pretty easy to make a recommendation.

You got the option anywhere between 62 and 70 to take these things. And there's ramifications of your decision. And you know, if you want help with that decision and you come and get to know you a little bit better before I make a recommendation. Yeah, the idea of getting back to guidance.

Getting somebody that you're comfortable dancing with, that it's okay, you can trust them. And so that's why we do this, that we provide these services at Cardinal Guide, like that's the name of the website, cardinalguide.com. Or again, the YouTube videos are at Cardinal Advisors, and Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement is full with guidance. And so that's available too at cardinalguide.com.

And again, we've run out of time before we ran out of show, but so much fun, Hans. Thank you. Thank you. Finishing well is a general discussion and education of the issues facing retirees. cardinalguide.com, Cardinal Advisors, and Hans Shile, CFP, sell insurance.

This show does not offer investment products or investment advice. 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 Hans' bestselling 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.