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Delaying Social Security Until 70

Finishing Well / Hans Scheil
The Truth Network Radio
November 30, 2024 8:30 am

Delaying Social Security Until 70

Finishing Well / Hans Scheil

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November 30, 2024 8:30 am

Hans and Robby are back again this week with a brand new episode! This week they discuss delaying social security until 70.

Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on CardinalGuide.com for free!

You can contact Hans and Cardinal by emailing hans@cardinalguide.com or calling 919-535-8261. Learn more at CardinalGuide.com. Find us on YouTube: Cardinal Advisors.

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This is the Truth Network. Welcome to Finishing Wealth, 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 Wealth, we'll examine both biblical and practical knowledge to assist families in finishing wealth, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.

Now, let's get started. With Finishing Wealth. Welcome to Finishing Wealth, certified financial planner Hans Scheil. Today's show, I love this idea, Delaying Social Security to 70. We get an example as this is the third installment of the Tom and Chelsea story. And, you know, the wonderful software and the way that that's used, and especially it shows in this particular example of somebody that was going to retire at 65.

And what do you mean? Well, maybe not, as you're going to find out in today's episode. I love the videos that they do, you know, with Cardinal, but along these same lines, again, this one being under the idea of Social Security. And what Tom says at the beginning of that video is if you get this decision wrong, it will affect you for the rest of your life. Of course, you know, when I first started thinking about retirement stuff, I didn't want to think about anything that was for the rest of my life.

But here's the interesting news that really, I think why the psalmist told us to count our days is that all the choices you make, especially when it comes to sin, if you choose any sin, whatever it may be, it affects you for the rest of your life. That may be your health. That may be your children. Of course, you know, you think your health doesn't affect your children. Well, I can assure you my dad's health surely affected me. In other words, the Bible itself, getting closer to God in prayer, helps us to make those decisions that affect us for the rest of our life. But also, when it comes to financial decisions, you know, it's pretty helpful to have a guy like Hans come along with his software and Tom to guide you so you don't make a decision that affects you for the rest of your life badly, right? Yeah. Well, so what we're on today is the third of the series of four videos profiling Tom and Chelsea and doing a financial plan for them.

And there's not seven of these because we just didn't want to put you through that. So we, you know, we picked out the income plan, and then we took the Roth conversions, and then the Social Security timing, and then the last one is going to be on taxes. And so we, because the software does such a good job of helping us with those decisions, and we really wanted to display the software in the process of making decisions about real people, you know, in the video. So today's is about the decision to delay Social Security, which can be, and we're going to do it in light of this example. Tom and Chelsea, if you'll recall, have got about $750,000 in taxable money. They've got $2.5 million in a tax deferred IRA, $230,000 in cash, and they've got a monthly spending that we're planning for $12,000 a month after taxes, and that is going to be inflation adjusted in the financial plan.

And Tom is an MD retiring. And so, and we start the thing with their current plan, before they met us, what they were going to do is they were going to start Social Security immediately for both of them. And we see a lot of people do this or planning on doing this because they go from a big income as a doctor running a practice to zero income, even though they got a big pot of money, it's just hard for people to deal with that psychologically. And so they're going to go ahead and take their Social Security, both of them, and had they done that, Tom's Social Security would be $3,000 a month, Chelsea's would be $1450 a month, they'd be getting $4411 a month for the rest of their lives. Now, granted, that would have an inflation adjustment. And then if Chelsea died first, or either one of them dies first, the survivor would be left with Tom's check only, which is $3000 a month. And we just didn't think that was the best use of their money, given the fact that they've got all these assets. So, the first thing we do when we're going to suggest delaying Social Security or proposing, we say, what are they going to live off of until they take it at 70?

And in their case, we had two choices. One is we could pull it out of the IRA, and then they'd pay tax every month on that amount. They'd get the check, and we could even set up the check so that the net check would be, after taxes, would be the amount of the Social Security, we could set it any amount they want when they have this kind of money. And what they chose to do was to get a check to replace the Social Security and a whole lot more of their spending, guaranteed for five years. So they brought a single premium immediate annuity, and they put almost $600,000 in there, like 500, I was over $600,000, about $650,000, and that generates $12,500 a month, and $11,200 of that is tax-free, and only $1,300 of it is taxable. So it's a little bit complicated, but not to them, because they just get a check for $12,500 a month for five years, and that replaced the need for the Social Security check. And so what we showed them, by waiting five years to take Social Security, now Tom's check would be $5,331, Chelsea's would be $2,150 a month, or their combined checks would be $7,481 a month, as opposed to five years earlier at $4,411 a month. So it's like getting a $3,000 a month raise that lasts for life, just by waiting five years. Do you want to react to that a little bit? Yeah, it's an amazing thing when you look at it.

I love when Tom, he takes you through this with the software and the video, again, along those same lines at cardinalguide.com, of, you know, people have all these questions. You know, if I'm waiting that long, you know, then obviously there are checks I'm not getting. And he goes into great explanation to show you that, wow, if you're leaving this money here, you're getting an 8% return on it.

And again, it's an 8% return for life. And, you know, he goes into all these different variables that we never would think about, that like if you were the first one to pass and you're left with your wife. And again, that was my situation. And the reason why I delayed my Social Security was, you know, my wife is seven years younger than me. And so, yeah, I may not live to be 90, but certainly, you know, what she would be going for for the rest of her life by waiting on Social Security made a huge impact. And again, from my standpoint, one of the greatest things I learned from you, Hans, that I, you know, feel so much better about her going on with that larger Social Security check, it's like you said, for the rest of her life.

Oh, yeah. And her stops if that scenario happens. And then she gets yours, she gets your larger check. And, you know, we didn't really go through this in the video, but Tom and Chelsea have foregone life insurance for the last few years because they just felt like they had enough money.

And they do. That either one of them, if one of them died, they would have been fine taking this money and Social Security on one of them and planning the whole thing out just like they did for one person. But still, when we sat here and looked at it, if they had taken their Social Security at 65 and Tom would have passed away some point in the reasonably near future or just in his 70s, and then Chelsea would have to live on that $3,000 a month check that he took at 65. Whereas if he'd have waited, she would enjoy the $5,331,000. So that's a $2,300 a month raise in the survivor benefit for the surviving spouse. I mean, and that's for life too. She could live to be 100.

Right. And therein lies the security of Social Security for those of us who are looking at, wow, my wife's going to have that. And plus, as I now have understood that I've been getting Social Security for a little bit, that the inflation, they keep adjusting it up as well. And so by the time she actually gets it, it's going to be higher than that, right? Oh, yeah. Yeah, now these at 70 amount includes an inflation projection.

Okay. But then, I mean, so they're not exact, but then if they do wait till 70 and then Tom gets the $5,331 a month, Chelsea gets the $2,150 a month, they get the $7,481 together, that amount, the $7,481, or individually, they'll be adjusted for inflation for the rest of their life. So we don't get into projecting those amounts other than we do it in the software when we're doing the income plan because we're adjusting up their needed spending as well. So the software does that for us automatically based upon historical increases of Social Security. Yeah, that's the beauty of having that kind of software is it's not only figuring, oh, here comes the income up, but you're going to need it too because guess what?

Inflation's going to affect everything you're spending as well. Well, and the software is figuring the taxes on your Social Security relative to your other income because that's how you pay taxes on Social Security. And Trump has campaigned on that he's going to try to eliminate taxes on Social Security. And if he's successful in doing that, it's going to be great for the seniors collecting Social Security. But we're not going to count on anything until it's law. And so I think a better way to get around that is to plan to have not have a lot of other taxable income to drive up your taxes on your Social Security.

So in other words, if you've done what we talked about last week on the show with Roth conversions and you have other income coming out of Roth accounts, it's conceivable to pay no taxes on your Social Security or very little. So Social Security is a big issue in a retirement plan, even for people with this much money. Oh, it's a huge issue. And it's interesting that it always comes first. And it's a good point to mention that if you go to cardinalguide.com and you look at the seven worries tab, am I right that Social Security is the first one?

It is. And because it is sort of the foundation around so many other things, because it's a source of income that obviously goes for the rest of your life. So today's show is under that Social Security one, as well as, again, this video we're talking about that shows you the software they put your whole financial plan in there, and especially Social Security, and work around that.

It's absolutely beautiful. It's all there at cardinalguide.com, as well as, of course, Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. And always my favorite is the contact Hans and Tom Page, because, again, all that gets a little complicated. The simpler thing is just let them put your situation, what your needs are, what your errors are, all that stuff in their software. And then you can get a chance to get a customized plan for that. It's all there at cardinalguide.com.

We're going to be right back with a whole lot more delays, Social Security to 70 example. 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. Today's show is Delay Social Security to 70 Example.

In other words, what happens with some folks who were planning on retiring at 65, i.e. Tom and Chelsea, we've talked about in the last two shows, and this is the third in the installment. And so this was another big part of their financial plan. The beauty of these shows is they combine into an overall plan and Social Security being one of the real building blocks, right Hans? That's exactly right.

And so we have our couple that we're preparing this plan for. Had they started their Social Security at 65, it would be almost 4,500 bucks a month between the two of them. And then by waiting till 70, it's almost 7,500 a month. So it's about a 3,000 a month increase in their Social Security. And that 3,000 month increase is going to continue and get inflated for the rest of their lives. And even beyond with the survivor is going to get a much bigger check.

We talked about that in the first part of the show. So what we've got to do in the beginning is we've got for these folks right now at 65 in 2024 is we need to replace that Social Security income, that $4,400 check that was going to give them that security that was going to be coming in. And the way we did that was we just took some of their money and we put it in a single premium immediate annuity with a little over $600,000. And that $600,000 is going to generate, putting that in there, a check for $12,500 a month every month for the first five years or until they start Social Security.

So what they're effectively doing is paying themselves. And we did that out of their already paid tax on the money bucket, the $750,000 so that they wouldn't have to pay any taxes or much taxes on the $12,500 a month. So they're living at very low tax rates and taxable amounts for the first five years. And we did that to create the Roth conversions that we talked about last week. So if we got low taxable income, we're going to be able to convert a lot of money every year during those five years.

So these are real important five years for these folks. And then we haven't really talked about is at $70,000, now their Social Security check starts and it's almost $7,500 a month. And so they still, if they're getting $12,500 a month out of the single premium immediate annuity and that stops at $70,000, well, where are they going to come up with the other five grand a month? I mean, you have $12,500 stop and $7,500 starting, you got a gap there. And then you also, if you've been inflating their need by 3% a year, you're actually going to need more than $5,000 a month. And we do that out of another annuity that we stick some money in, a big hunk of money out of that IRA, right there at $65,000 and then that produces a guaranteed income that starts at $70,000 and that's around $9,000 a month. And it's the $9,000 a month is for life, it's actually like $9,200 or $9,300 a month for life then. Okay. So that one doesn't stop in five years, it's just the checks keep coming in as long as either one of them is alive. So pretty nice.

Oh, yeah. When you add that to the social security, you see that they clearly reach their goal. And again, when you look at the software, when I watched this video, their plan that they had previously had, which was to take their social security at $65,000 and not do the Roth conversions and things we talked about in previous videos, excuse me, the previous radio shows, then what the software showed was they had a 90% chance of finishing in their retirement as planned. But fascinatingly, when you guys made these adjustments to social security and conversion to Roth IRAs and it went to 99% chance that they would meet their goals in retirement. And again, it's just one little small incremental change changes the whole directory for life.

Well, sure it does. And then what I can add on is this second annuity. They're putting a million dollars in there and just letting us sit there for five years. And then it's kicking out the like 92, 9,400 a month starting in that sixth year, just right at 70. And then it's guaranteed not to stop those payments for the rest of both of their lives. And so what I'm going to add about that is that's the money we're going to convert or some of the money we're going to convert.

Like if we did 200,000 a year for five years, that's assuming not much growth. But we could have that whole million dollar IRA annuity converted by the time they start turning on the income. And then those checks would be tax free for the rest of both of their lives. That makes sense? Oh, yeah.

And what a beautiful thing, right? Because, you know, since that already been taxed, obviously the income then for forever is, you know, tax free. And which makes their Social Security check pretty close or tax free because their other income to other taxable income is zero. So we can pull a bunch of these levers and a lot of it's by paying taxes early, forgoing Social Security.

And the right mix is different for everybody. So, again, we don't recommend everybody wait to do their Social Security till age 70. And we might even have Chelsea, in this example, taking her Social Security at full retirement is her working money. Like if she worked for a number of years, then she had some kind of a benefit.

We might be going ahead and taking her benefit at full retirement. And so we'll get a little money during those five years of delay without compromising the ultimate check. I mean, so there's a lot of little tweaks that can be put in here because everybody gets a different plan.

And then people have different preferences when they're coming into us. And that's why in the financial planning process, we have a lot of meetings and we talk to each other and we explain things. We lay out things. We learn your preferences. We learn your fears.

And then we tweak the whole thing to meet your objectives. Yeah, and I love that 99% idea of like, wow. Oh, yeah. You know, that's an amazing thing to think, okay, I've got this income. And again, I like that in this case of the doctor that, you know, they looked at enjoying their lives. In other words, they didn't put that $12,000 a month needed to be able to spend because, you know, they earned it.

You know, why not enjoy it? And that's a big part of what some folks struggle with, right, Hans? They don't have it in the plan to enjoy all the money that they save. Well, yeah, and then a lot of them, they have it kind of in the plan. That's why they set the number, but they don't actually spend it. They end up just living off of Social Security and a little bit of other money because they don't want to pay any taxes.

And then the results of that is they die with the richest person in the graveyard. And, you know, what these annuities do, and this would be appealing to this couple as well, is every month you get a check for $12,500 or $12,000 or some amount, and you can spend it all because next month you're going to get another one for the same amount and then the next month and the next month. And so it really encourages people to spend and enjoy because we haven't used all their money to create this income. There's a whole bunch of other money that's just sitting there unused, and that's being invested.

Yeah, absolutely beautiful. But, you know, again, they can, you know, do what they anticipated doing with their life, especially, you know, that whole idea of pay me now or pay me later is all figured into the equation. And the beauty of that software is you've got the experience of all these different people you've worked with all over the years in order to find it, right? That's where most of our content comes from our show is that I get people asking me all over the industry when I go to meetings, how do you keep coming out with a video every week? You know, there's only so much stuff in the book we all study.

You know, they don't really say that, but I mean that's what they're thinking. And it comes from our practice because we just have people calling in and coming in and we learn about all kinds of situations and people are in, and then these things bubble up and then we decide, oh, we're going to make a video about that. And frankly, we have a whole bunch of videos on the shelf that we haven't even had yet. I mean, we got way more content than we're doing.

I just figure a lot of people, they really don't want to hear from us more than once a week. Well, and again, the idea is, you know, just like when we learn something wonderful in the Bible, we want to get out there and share it with people because once you've, you know, tasted and seen how good God is, right, you want to share that. And that's the thing I love about you guys is that you've tasted and seen how good this stuff is for folks. And so you're out there sharing it. I mean, that's the idea. Yeah, it's wonderful.

And it doesn't, you know, it comes with no strings. I mean, we put all our stuff out there to teach. And I think it's cool that people that I'm never going to meet, never going to talk to, never going to have as a client, they're watching these things, they're liking them, they're learning things and they're making good decisions.

I think that's wonderful. Again, that whole idea of social security, we've done lots of shows on it. Again, we want to remind you that this show, like all of them, are brought to you by cardinalguide.com. If you go to cardinalguide.com, there you're going to find the seven worries to have, the first of which is social security because it's such a building block. And again, the video along these lines, really, really neat to watch this software in action and think about what it might be to see yours involved, as well as, of course, Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, and, of course, the contact information to make it all real simple so you can get up with Hans and Tom.

It's all there at cardinalguide.com. Great show, Hans. Thank you and God bless you.

Bless. 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 Whale is designed to provide accurate and authoritative information with regard to the subject covered. 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. We hope you enjoyed Finishing Whale 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 Whale radio show on the website and send us a word. Once again, that's CardinalGuide.com. CardinalGuide.com. This is the Truth Network.
Whisper: medium.en / 2024-11-30 10:26:55 / 2024-11-30 10:37:09 / 10

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