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2022 EP1029 | Financial Updates | Peter Richon & Erin Kennedy | Social Security Increase for 2023

Planning Matters Radio / Peter Richon
The Truth Network Radio
October 29, 2022 9:00 am

2022 EP1029 | Financial Updates | Peter Richon & Erin Kennedy | Social Security Increase for 2023

Planning Matters Radio / Peter Richon

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October 29, 2022 9:00 am

Social Security just announced an 8.7% cost of living adjustment for retirees! The COLA increase will be applied to benefits in January of 2023. That's the largest inflation adjustment since 1981, when it was 11.2%. Peter with Richon Planning explains to Erin Kennedy why this year's Cost of Living Adjustment, or #COLA, is so high and whether this change should affect your claiming strategy.

If you'd like to speak with Peter to determine when you should claim Social Security, Richon Planning actually specializes in running very personalized analyses to determine your most "financially optimal" strategy. Please feel free to reach out for a complimentary consultation by calling (919) 300-5886 or by visiting

#SocialSecurity #Retirement #WealthManagement #SocialSecurity2023


We want you to plan for success. Welcome to Planning Matters Radio.

Peter, big news. We are talking about the biggest Social Security Cola increase in decades. Social Security just announced an 8.7% cost of living adjustment for retirees. That is the largest inflation adjustment since 1981 when it was 11.2%.

Take a look at that. So the Cola adjustment is going to be applied to benefits in January. But Peter, I want to know why is this year's Cola so high? Well, because of inflation. I mean, we've talked about how a lot of our current economic situation rhymes with things that were going on in the late 1970s, early 1980s with inflation, with interest rates, with market volatility.

I think it was Mark Twain, among other famous quotes, who said, history does not repeat, but it often rhymes well back in the early 80s. They had a large Social Security increase to account for and offset the potential impacts of inflation for retirees. And very similarly, we are seeing the same thing today. Now Social Security was intended as an anti-poverty measure. It was to keep people just above a poverty level standard of living. So it's not meant to account for all of everything that everybody needs. On the contrary, it's to basically give you a minimal subsistence. And what this increase in the cost of living adjustment is saying is that just to survive, it takes more money these days because of inflation.

Right. So I was surprised to learn, Peter, that 42% of adults said they plan to tap their benefits early. That's up from 36% in 2021 because they're concerned that the Social Security benefits are going to run out. Considering this year's COLA increase, or next year's COLA increase, is that a valid concern? Well, it's not going to help the Social Security Trust Fund stay solvent for longer if more people run out and grab it early. And it's not going to help the solvency if those benefits are increased either, especially in a period of time where we're seeing market volatility and raising interest rates.

But I think that the thought process behind that has some credence. In fact, the Social Security Administration on the annual statements, now they just revised the annual statements so they don't appear the same way, but on last year's edition of those annual statements right on the front cover, they were not trying to make any secret about it. In bold print, it said that by the year 2033, the Social Security Administration Trust Fund will only be able to pay out about 75 cents on the dollar of promised benefit. And that number kept getting less and less as far as a percentage, and it kept getting closer and closer to the present time, not only because we're getting there, but because they kept bringing that number and that date for the year back. And so people are justifiably concerned.

And if you missed it on the outside cover, by the way, they printed it again in bold on the inside right under your estimate. So I think that there is some legitimacy to concern over the solvency of Social Security. They've even told us that there is. What I haven't seen is any significant measure or attempt to address that. And I think that there are several things that they could potentially do.

A couple of them, which they have proven they're already willing to do. Number one is raise Social Security's full retirement age. Now they used to have that at 65, today at 67, but life expectancies have gone significantly longer than that adjustment in full retirement age. So I fully expect that maybe by the time I get there, I'm 42. And certainly by the time my son gets there, that that full retirement age will be older, will be significantly older by several years.

And they graduated that when they did that previously. I think that they will likely make more of Social Security taxable. If you have certain levels of income in 1983 under Reagan and then in 1993 under Clinton, they put in two tiers where Social Security income itself could be 50% taxable and then up to 85% taxable, depending on your income. I think at some point in time, there'll be an income level put in place where 100% of your Social Security benefits are probably taxable. And then there's a cap on your earnings and how much you actually pay into Social Security. So somebody making $140,000 a year pays into Social Security on nearly 100% of all of their income, whereas somebody earning $14 million a year pays in on only a fraction, a very small portion of their income.

And I have to think that at some point in time that gets addressed as well. Now by the way, if you run out and claim and collect early, there could be penalties. If you are not full retirement age, if you are capable and able-bodied, the government gives you a full retirement age when you are eligible to claim and collect. Now they give us the ability to claim and collect early, but if you are out there working and earning income, they don't view that as just taking what you're entitled to. They view that as double dipping. And there is a penalty for earning too much money and claiming collecting Social Security early.

So just a cautionary warning there. If you plan on working and earning income and collecting Social Security, you may want to double check what that penalty is for you and how it's likely to affect your lifelong benefits. Right.

Okay. So let's talk a little bit more about those lifelong benefits, Peter, because as we've said before, and as you've mentioned just now, the earlier that you claim, the less your lifetime benefits. So how does this call it increase affect our claiming strategy? Yeah, well, it'll increase that number across the board. Whatever you individually were entitled to, it will increase all of those numbers across the board with the key being the full retirement age. The reduction, if you claim and collect early will be impacted and the benefit of waiting longer will be even more pronounced because a 10% increase or in this case, an 8% increase on any given dollar amount means more if that dollar amount is higher. So because they increase the full retirement number, then all of the benefits across the board will be increased and the potential impact of waiting longer is that much more significant for those who are still deferring and delaying that decision. If we've already made that decision, it's simply an increase for what you are receiving this year as compared to what you will be receiving next year after the increase. And because I always like to end on some good news, Peter, there is some good news for Medicare enrollees.

Tell us about that. Well, they had priced in a new Alzheimer medication into the premium rates for Part B last year that we paid throughout this year. If you are a Medicare Part B recipient, there's premiums for that and the standard premium this year was about $171.

Well, they found out that not as many people needed that medication and that it was not as expensive as they sort of estimated it would be. So Medicare Part B premiums are actually receiving a reduction simultaneous to this increase in Social Security and typically the two are tied if Social Security goes up. So do the Medicare Part B premiums. In this case, we're going to see an increase in Social Security, a decrease in those Part B premiums means that retirees who are eligible for both get more money in their pocket. There you go. That is good news. All right, Peter, if somebody has questions about anything that we've talked about today or figuring out their financially optimal time to claim Social Security, what's the best way to reach you?

Yeah, give us a call. This is such an important consideration. I mean, the difference between a well thought through strategy for Social Security that's incorporated into your income plan versus just a knee jerk kind of reaction, I'm going to go out and get it while the getting is good. That can literally make the difference in hundreds of thousands of dollars over the course of your retirement and Social Security has implications on you, on your spouse, on your family members and legacy, your beneficiaries, because that money is either going to come from Social Security or it's going to come from your investment accounts.

I always believe that there's not one universal answer, take it at 62 or take it at 70. I think you take it when it makes sense in part of that well thought through income plan. The folks down at the Social Security Administration office, it is not their job to help you figure out if you've come in on the best day for you.

It's their job to file the paperwork on the day that you come in. Do some planning, do some research, sit down and really get that review and analysis and we do offer that as part of our complimentary review and retirement planning strategy session. You can give us a call at 919-300-5886, 919-300-5886 or you can email me peter at You can also set up a complimentary review from our website is what it looks like. Perfect. Thank you. Always a pleasure.

Thank you. This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible laws of principle. Advisory services offered through Brookstone Capital Management, a registered investment advisor. The fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission which may result in a conflict of interest regarding compensation.
Whisper: small.en / 2022-11-08 15:10:01 / 2022-11-08 15:12:34 / 3

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