Social Security Maximization

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, and today's show, very cool, Social Security Maximization. And wow, I mean, I'm sure all of us could use a little bit of that. And as I was reviewing, you know, the reasons for this particular video, one of the things that was brought out is that, you know, our decisions, especially when it comes to Social Security, have long-term, like, lifetime consequences. And I couldn't help but note that, you know, we, I think, sometimes don't realize the magnitude of every little decision we have throughout the day can actually have things that echo in eternity. And the Bible's just clear of that kind of information of how God gives us such amounts of responsibility that really blows our mind that we really can affect things for a long, long-term period of time. When you take Joseph's brothers, for example, they thought, well, we'll just throw our brother in the pit and sell him off to be a slave. But, you know, the way God does things, if you sow the wind, you can reap a whirlwind.

Or if you, you know, sow an apple seed, you get a whole billions of apple seeds through the apples that would be coming. And so what happened to them, unfortunately, was their families ended up in slavery as a result for 400 years. Okay, and it worked out really well for them because eventually we got Jesus.

I get that, but in the meantime, you know, there were long-term consequences on their actions. And so when it comes to Social Security, Hans, that's exactly what we got here is something we need to be thinking about maximizing it. We need to be praying and considering, right?

We need to think about the long-term. I mean, it's just, you had mentioned that an example that I had in the video that preparing for this is think about your 92-year-old self. And some people just cut me off, oh, I'm not going to live to 92. Well, okay, you say that, but you might, or your spouse might, your wife or husband might. But think about your 92-year-old self and, you know, if the difference in the check of waiting till 70 is only 700 bucks a month, now with inflation, by the time you get to 92, it might be more than 700 a month, but just talk to your 92-year-old self and say, would I have been better waiting and just delaying for a bit?

And then your Social Security check would be $700 bigger. What would your 92-year-old self say? And I'm sure, I mean, I have a lot of experience in the work I do dealing with people in their 80s and 90s. And some of them have been clients for years. Some of them are the parents of my new clients.

I mean, I just have done a lot of work and met with these people. And I'm going to tell you that a lot of folks that are that age, they can't tell you numbers about their finances, or if they tell you numbers about their finances, they're off quite a bit. But if there's one thing they know, usually within $100 a month is how much their Social Security check is. I mean, you can just kind of wake them up and say, how much is your Social Security check? And it's $3,200 a month.

I mean, it's just, you know, or it's $2,600 a month or whatever it is. People in your old age, this stuff really matters. So what we're talking about today is if you're in your 60s or your 50s and you haven't taken Social Security yet, and most of our listeners are in that kind of age range. And a lot of people, when they come to us, they've got a strategy in mind, because that's one of the first questions we ask them.

What's your strategy with Social Security? And they're going to come out with it. And what my thinking is, is there's a lot of short-term thinking that goes on with that. And so in the show today, we're going to go through a couple of examples, two examples. One is a single person, Alice, and we're going to look at what her options are. And then the other one is a couple. And we're going to show Mary and George and what they would do if they were just left to their own devices.

And then we're going to show you what we're going to recommend for Mary and George. Yeah, right. It's an amazing set of circumstances to me that we are in this situation of receiving a check for every single month of your life based on what the government set up years ago. And the idea of that security, you know, not that our security lies in money at all, but this one from a financial standpoint, it comes in pretty, you say, very, very handy.

And so maximizing it and figuring out strategies to do that is really something that is going to bear a lot of fruit in your life. So here's Alice. She's 65. She's retired. Her full retirement age, which is the age at which she can get her full check, is 66 and 10 months.

So just close enough, we're going to call it 67. And Alice is in good health, has significant retirement savings, and she's just retired. And her at age 65 benefit that she was ready to go get had she not come into us was $3,292 a month, which sounds pretty good to somebody that has retired. And now they're facing the fact they got no income at all. They got no checks coming in. And their whole career, their whole life, their whole adult life, they've had a check coming in every two weeks.

And it's kind of scary. I don't care how much retirement savings you have. So it's just like I'm going to flip on Social Security, just so I got something coming in. And so I'm going to take the $3,292 a month and call it a day. And then I'm going to probably pull out some money out of my retirement savings to supplement it until I get up to the level that I need to live.

And so that is the plan that a lot of people come to us with. Now, what I'm going to add to this example for Alice is she has – if she would wait until full retirement, which would just be a year and ten months or essentially two years, her check would be $3,800 a month. And you know, you kind of look at that and you say, ah, it's just $500 a month for waiting two years. You know, $500 a month, that doesn't sound like that much. I think I'll just take the $3,292 now.

I mean, just left her on devices. On paper, it doesn't look that much. But the difference waiting from essentially $3,300 a month, two years to get $3,800 a month is that $500 a month difference is for the rest of your life.

Okay. So when you're 92, this decision you made back at 65 to start the $3,292 a month, you know, two years early has been costing you every year and every month $500 a month or $6,000 a year. And that's going to all be inflated by the time you reach that age.

So it's a big deal. And then for Alice at age 70, her benefit is $4,610 a month if she would wait till 70. So now we've got a difference of $1,300 a month, which she's not going to do any of these decisions if she didn't have significant retirement savings.

I mean, of delaying. She's going to just go ahead and take the money. But as we run into a lot of people that retire at 65 and people that have significant retirement savings, and she doesn't want to touch those because she's got to pay taxes. And she's going to get this or she's just going to take a little bit out to supplement the money, but we're going to get her to look at it in a whole different way. So we're going to say, you have the option of pulling any amount you want by the month out of your retirement account to live off of. So we can set it up so you'll have a check coming in. We could set up your retirement account that's going to send you $5,000 a month and just send you a check every month.

And then people, oh, I don't like that because I don't know what that thing is going to do and what the market is going to do. And so if we want to get even fancier to just get people open to waiting, I mean, we can set up an immediate annuity for five years that pays her $5,000 a month. That's going to cost about a quarter of a million dollars of her retirement savings, but we can just send her a $5,000 a month check right now and send that check every month until she's age 70. So she really doesn't have an income problem because she's got such significant retirement savings. She has a decision problem.

And so I'm looking at this example. If she would wait now and delay her taking her Social Security five years, she's going to get an increase of $1,300 a month starting at age 70. And that $1,300 a month is every month for the rest of her life. And, you know, I did say in the example that she has good health. Now, because she's single, if she had poor health and she really didn't think that she was going to live all that long, then our advice would be completely different. We might encourage her to go ahead and take the Social Security check now and not delay because if she's going to pass away at 73 or 74 or 75, she will have been better off taking the Social Security check now, the $3,292 a month. But if there's a chance or a relatively good chance that she's going to live up at least till 80, she's going to be better off delaying and just living off of her retirement savings.

So what do you have to say to that, Robbie? Well, you always say this and so I'll just jump on the bandwagon that this would be a good time to jump in there and say, you know, this show is brought to you by Cardinal Guide, cardinalguide.com. And at cardinalguide.com, they have the seven worry tabs. And one of those tabs is Social Security. And so if you go to that Social Security tab, you're going to see the video that they did on Social Security maximization in the show notes there, show these two examples, give you all the math, give you all that information. Of course, it's all there at the seven worries tabs at cardinalguide.com, as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. And my personal favorite, right, because we got Social Security is is is one of those things that might your situation changes.

And I can tell you for me personally, what I thought was going to be my strategy actually changed. I could pick up the phone and call 1-800-HANS because I had gone to cardinalguide.com to get the contact information. So again, cardinalguide.com will be right back with a whole lot more Social Security maximization. Investment Advisory Services offered through Brookstone 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 Hans Scheil. And today's show is Social Security Maximization. And so it's one thing when you're single, but it's a little bit different when you're married, right, Hans?

Well, it is. So the second example that we're going to go over today is a couple. And so we've got George and Mary, and both of them are 65, both of them are retired, and they didn't really know what to do with their Social Security. And like Alice in the earlier show, they have significant retirement savings. But they, like most people, are worried about running out of money. I mean, it's just most people in their 60s or late 50s that are coming into this and they're retiring, they go ahead and retire, and they've got this big retirement savings account, and they have the ability to take Social Security. And in this case, two Social Security chests, two nice ones. And their plan before they met us was just really to start their Social Security now a little bit before full retirement at age 65, and just live off of that and delay taking anything out of their retirement account.

And so they asked us what we thought, and we said, well, okay, so we're in business to implement for you what you want to do, but if you really want to know what I think about this, I got a better plan. And what that plan is, is we're going to study the whole thing, and because you have significant retirement savings, and you're both in good health, we're going to consider delaying the Social Security checks, at least for one of you, and we're going to consider doing that, and then the way we're going to live between now and 70 is we're going to live off of your retirement savings. And it's not real expensive to buy a five-year annuity, so it's just basically where they're going to send you a check every month.

You're sending yourself a check through a withdrawal out of your retirement savings, and you're paying taxes on it as you get it, and so we're going to use your retirement account to replace the Social Security check during the time we're waiting. But that's going to be a staggered deal because this couple has got this big retirement savings. They also have some other savings, some cash in a high-interest yield savings account, and that's what they've been living off until they came in and saw us.

And so what are we going to recommend for them? Well, Mary's – what we're going to recommend – well, let's go through, first of all, is Mary's full retirement age check, which is 66 and 10 months, is $3,600 a month, okay? So if Mary would delay – well, first of all, she was going to delay her full retirement age anyhow, which is $3,600 a month, and we're going to talk to her about waiting until age 70, and she'll get 45, 84 a month. So that's about 900, almost 1,000 a month increase in the check of waiting from essentially 67 to 70.

So that's quite an increase in the check for just an additional delay of three years. Now, George, his full retirement age check is $2,000. So Mary was the higher earner in this couple. George is going to accept $2,000 a month, and we're going to suggest to George or recommend that George start his check at $2,000 a month at 66 and 10 months for 67, and they're going to collect George's check for three years, and then at age 70, they're going to file for Mary's check of 45, 84, and then that will come in in addition to the $2,000 that George gets. So they'll get 65, 84 essentially for the life of both of them.

So I just kind of spit out a lot of numbers at you, but how are we going to live in the meantime? Well, we're going to set up however much they need to live coming out of an immediate annuity for five years. I mean, it's the same way we took care of Alice, but now it may have to be a larger amount because we're supporting two people, and in the middle of this annuity, after it's two years old, then they're going to have an additional check of $2,000 coming in from George. So the lower earning spouse is going to file at full retirement age. The higher earning spouse is going to wait until 70. So let's just take a little break here.

Robert, can you react to that a little bit? Yeah, again, those things are affected by the ages of the two spouses, right? And I love the idea of you got the larger check coming for life for both people, right? You get it all the time that they're both clearly still married and together and all that, but when the one passes away, then you continue to get the larger check. When, again, the one passes away, a lot of things changes. Your tax status changes. You go to single. You lose that one check, and if there was ever a point where you wanted that check to be maximized, I mean, it's right there at the point of that, like, man, you find yourself single, and here you are.

A lot changes, right? Well, yeah, and that's why we took George's check at full retirement age at 67, essentially, three years before Mary's, because his is a smaller check, and his will not survive the first death. So in other words, if Mary dies first, George, his check is going to stop, and he's going to get Mary's check for the rest of his life, and vice versa. If George dies first, then his check is just going to stop, and Mary's going to continue getting her larger check. So now we've got two life expectancies on the larger check with a couple, and we generally do this for couples where there's a difference in the size of their checks, just where we're taking care of that survivor. Now, that's what we're really doing, and there are a lot of things that change for the survivor, and most of the time when I'm sitting with couples, that's their number one concern.

They're not really sure, and none of us are sure who's going to die first, but, you know, in all likelihood, one of them is going to go before the other, and then the survivor might live on for a lot of years. We want to maximize that larger check is really what we're doing here. And because they have significant retirement savings, we're just going to set up an income stream for them that out of their own money that is just going to pay them that monthly check while they're delaying, and people are generally satisfied with this. Yeah, and it's, again, I love the fact that we got this decision, you know, every month between 62 and 70, and, you know, there's so many different strategies for folks that have been savers that can enter into the equation to make sure that all that happens in a long-term financial plan, but a lot of folks, right, it boils down to something simpler because of a large health concern or a big, big difference in the age of the spouse and those things enter in, and that was the case, right, with my situation is that, you know, I'm significantly older, seven years older than my wife, and so I wanted to make sure that, you know, that she had the most check that I could possibly get for her because chances are, you know, she would be the one using the larger amount, right?

Yeah, and this is, you know, so I just want to point out, number one is these people are in good health, both of them. They don't have to be perfect health, but good health means there's a lot of people alive today that are going to live longer than they think they're going to live. I mean, just because increasing life expectancy is medical, people are taking better care of ourselves these days, we understand what to eat and not to eat, and we have medicines that people are just living longer, and especially when you're talking about two people, the chances of one of them living a long time is increased, and some couples, both of them do, and so we're trying to maximize this thing for specifically the older person because a lot of people get real technical about this stuff and they want to know the break-even point. How long do I have to live to make sure that this is a good decision, okay? And people will do this on their own, you know, in other words, with this couple is, I can just tell you right now, Mary and George, is both of them have to live, or one of them has to live up to about 80, or in other words, if both of them died before 80, then this will have been a bad decision, okay?

And you won't know it's a bad decision because you're going to be deceased, but it will have been a bad decision. So a lot of people treat this like they're financing something and they come up with a break-even point or starting a business, and what I would say to that is this is your life here, and who I'm most concerned about is that person that lives up to 85, 92, 95, and who knows what's going to happen with that retirement savings and their spending patterns and the economy and the stock market and, you know, who knows what that's going to be at 85 or 90, it might be great, and then this really isn't going to matter that much, but it might not be real great, and you may have spent a lot of it, you may have had long-term care expenses, there may have been bad market performances, you could have made some bad decisions. There's all kinds of things, and the Social Security check is something that that older person can really identify with and it gives them a sense of security.

So I like doing this if one or both of them in the couple is in good health, even if the other one is in poor health, and what I might add is if they really feel the need for some check coming in right now, we might start George's Social Security immediately, and so instead of getting 2,000 a month by waiting to 67, George might just start it and get 1,500 a month. Yeah, wow. It's often the case we've run out of time before we ran out of show, but we're going to take this moment to remind you that the show was brought to you by cardinalguide.com.

If you go to cardinalguide.com, there you're going to find the seven worries tabs, and one of those worries, obviously, is Social Security, and so if you click on that, you're going to find a video along those lines with show notes and detailed numbers as to these two examples that we gave today, as well as Hans' contact information and his book, The Complete Cardinal Guide to Planning for and Living in Retirement. Great show, Hans. Thank you, and God bless you. God bless.

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, 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.