Episode Transcript
[00:00:00] Speaker A: Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
Welcome to Reyna Retirement. Reyna Reyes has dedicated her career to helping people make smarter financial decisions. Reina retirement is all about breaking down complex financial concepts into language you can actually understand.
Now here's the co founder of American Federal Benefits Consultants, Reyna Reyes.
[00:00:39] Speaker B: All right, my friends figured today we would chat about Social Security. Two words that sometimes don't always go together because we want to be social and we want to be secure. And a lot of times as we're growing up and you know, going through elementary and middle school and our parents are sometimes depending on our personality, they want us to be more social.
I had the opposite problem. They said, randy, you're too social, you talk too much. You got to calm down. You have to relax and do your work and focus. But we also want to be secure, right? And security sometimes can come in many forms. Maybe it's financial security, obviously physical security, emotional security. But today we're talking about Social Security. And that is a monthly lifetime income that you've earned by working what they call your 40 quarters. That's exactly what it sounds like. It's that, that much time, 40 quarters, 10 years where you've contributed, you've worked, you've put into the bucket, and then one day after you've put into the bucket for that length of time, you can take out of the bucket. So what we do remember about Social Security is that the longer you wait, the bigger it is. So let's look at some of the documents you're going to want to have when you go to meet with either myself or my team. And this document is easily obtained through the website SSA.gov it's exactly what it sounds. Social Security Administration.gov SSA.gov you are not too young to go ahead and log in and make your own little username, password the whole deal. So you can log in and see this one. This particular document is owned by this person, last name business, first name nunya.
We all know what nunya means. So this is nun your business. Just kidding. This, this obviously is someone's, someone's Social Security estimate. And everyone's is going to look different because everyone has a different income, a different timeline. They've had different years of service, they've had breaks in service, they've had raises, all those kinds of things. And remember, Social Security is an average of essentially 35 years of service, right? Long time, long time. Most people work for 30 plus years in their lifetime and then that will culminate in this whenever you retire. So when could you turn on Social Security? Any time after the age of 62. But you also don't want to be making too much money.
So we've heard of the earnings test and things like that, but that's not what we're talking about today. Today we want to zoom in on this bar graph and see what it looks like if you wait it, right? So remember, the longer you wait, the bigger it is. But you also took nothing while you were waiting.
So Confucius say, beware of he who dangle carrot. And I would say that this is definitely a carrot being dangled by the Social Security administration. Meaning if you wait a long time period, that monthly income will be bigger and bigger and bigger. Why don't you just keep waiting?
And the other shoulder, or the angel and the demon shoulder, right? The other side says, yeah, but how long am I supposed to wait? Because I don't know how long I'm going to. Go ahead and Fill in the blank, my friend. We don't know how long we're going to what? Live? They are waiting for us to. They want us to wait, wait, wait. Why somebody tell me this? They said they want us to wait, wait, wait till I die, die, die. And that could be what's happening. Let's do some of the math, right? If you waited until you were say, 66 in this example, you're going to receive 27 hundo every month for the rest of your life. But if I had turned it on at age 62, I'm just under $2,000 a month. What's the difference? $700 a month difference. Some people would say it's worth it. Some people say it's not.
First of all, remember, if you're going to work through these years, duh, you're not going to turn it on because of that earnings test. You got a job that's going to pay you more than 23,000 ish a year. Then no, you're not going to turn on your Social Security because you would eradicate it for yourself back down to nothing. It's not good. You would not do that. It's not beneficial. It doesn't behoove you. No bueno.
So waiting makes sense if you're working, right? The big W, if you're waiting, if you're working then you can wait.
But if you're going to retire and be done and never work again, many people say I'm just going to turn it on and get while the gettings good.
Now again with this let me big disclaimer here. There is no one size fits all. There's no one answer for everyone.
Some people are married and their spouse is making beaucoup dollars. They can afford to wait because they're not making a sacrifice.
Some people can only depend on themselves.
They are the one and only breadwinner of the family. They don't have other people on which they can on whom they can rely. So they have to turn on some type of income just to either I hate the make ends meet thing, but we have to sometimes replace the income you were making when you were working. And not everybody has a pension like my federal employees and postal employees do.
So sometimes this is just something that we need to have. If you are one of my federal and postal employees, don't be scared. Remember it's leg two of your three legged stool and you're going to probably just need to do it. It's just part of the program, right?
So the longer you wait, the bigger it is. But you've also taken zero for however many years that was.
So there was this idea called the break even concept which is 100% correct. How many years at the higher number do I need to live in order to make up for those years of zero?
So this is different for each person. And this is a big reason we get together and have meanings. Because sometimes we start looking at the math. If I waited one year, if I waited two years. But if you wait, what are you replacing that income with? Did you not need it at all?
Or are you potentially taxing yourself on money that is your bucket money like tsp or 401k or something like that?
Are you taking money out of your finite bucket in order to delay this monthly income that comes from a conceptually infinite bucket? But remember also if we start saying, let's not say it's infinite because what does the year 2035 mean to you?
Well, it means that on the Social Security website it's very clear, and we've known this for quite some time, that the trust fund is having issues and they say, oh, in the year 2035, we are prepared.
We meaning if the Social Security administration were personified and started speaking to you, it would say, well, we know the trust fund has issues and we are going to plan to decrease everyone's Social Security benefit come 2035 by around 22ish percent. Well, how mad are you if you're the guy who waited until 2034 to turn 70 to get the 3,600amonth for them to slash you by 20%? What's 20 at 36.62, that will be what, 720 bucks a month. So now you're back to the 200 and something. If you had turned it on when you were like 66. I'm pretty irritated if I'm the person who waited and then got slashed.
So these are not gospel truths to say you must turn it on. That's not the point here at all. That's to say there are some factors you want to take into consideration when we, and I say we, because we should have a meeting to go over these options for you. Amongst all the other things. Pension, 401, TSP, all the stuff, Medicare, everything.
We should take all these factors into consideration in determining whether or not it makes sense for you to turn on your Social Security straight away or if you want to delay and if so, why? That's a question I would have you ask at least seven times of yourself. Yeah, I'm going to do this. Why? Because of this. Well, why? Well, because of that. Well, why that?
Once you get to the true heart of the matter, sometimes it helps to really make that decision because you know for real why you're making that choice.
So beyond this, this is interesting. So this is after retirement, right? You've got all these choices. When do I turn it on? Well, remember there's a teeter totter in retirement. One side is the hard side, which is just dollars and cents because if it don't make dollars, it don't make sense. But on the other side of that teeter totter is the soft side of retirement, which is your heart and your soul and your emotions. Not everyone is ready to retire in terms of their emotional state, right?
So if the money makes sense but you're not emotionally ready to go, then none of this even matters because you're just not ready to go. Many people are in that position, hey, I'm comfortable to go, but I'm just not ready.
Now this is if you're over 62 and you're able to turn on your retirement and you're not working anymore or whatever. Now there's some other portions of sociality that you want to take into account.
What if you're not old enough or even if you are over 62 and you separated from your job or you retired because of Some injury or ailment. Well, you'll see it and this is a zoomed in version on the bottom left hand side of your form. You see here the disability benefits where if you separated now notice the now they're not going to put it in bold because they're not that excited about you taking more money. But, but if you got approved for Social Security disability, that monthly income would be 2375. If I can flip back to the bar graph, what was the age 62 number?
1986. This person I just happened to know when they pulled this document was in their early 40s.
So if you go back, I could take 2,300 now if I'm injured and incapable of work or I can wait till stinking 62 and take 19 Honda.
Which option would you choose if you had a legitimate injury or illness that was truly preventing you from doing your job? I want to liberate your mind knowing that you don't just have to take the cards you've been dealt in terms of a pension or just continuing working. You don't have to army crawl on your elbows into work. If you have legitimate health issues, don't forget you have the ability to apply to Social Security disability.
Underage, over age, all the way up to really age 65, you can apply for Social Security disability and if you are approved, remember some of the cool things that happen. Number one, you start making money.
Yes, Social Security disability is still a taxable income depending on how much money you make throughout the year. A lot of people like, oh, disability is not taxed. Yeah, it sure is.
It definitely is. But some people make enough or make a low enough amount from Social Security disability where they're under the threshold for taxation. So that's what some people are familiar with.
But number one, you can start taking money. What else does disability mean? If you get approved through the Social Security administration. Well, after two years of having Social Security disability, what else do you get?
Shabam Medicare.
That's an extra health insurance plan. That is a federal government administered plan that will then allow you to have additional coverage like Med Advantage, Med Supp, drug plans, all the fun things. And you come me for all those things as well, or you should.
And then that's kind of interesting because again, even in your youth, if you were injured or ill and it's something that prevents you from doing your job for what's the threshold like a year and Social Security disability approves you, you've got some other recourse money, additional health benefits.
And then there are some additional benefits for the family as well.
So it's definitely something to consider. This, my goal in this is for you to see, number one, if you're about to have a meeting with me, grab this document so we at least have hard numbers to look at based on future planning. If you come to meet with us and you're in your late 50s, this is not going to feel real to you because it's not truly touchable yet other than the disability, if you have a legitimate reason to apply.
But they always say start with the end in mind. So there's going to be segments of your life you're going to have now while you're working, then you're going to retire and maybe you have the supplement if you're one of my fed or postal people. But then we got to prep for how much increase in income you'll have when you do turn on Social Security and when will that be? And this helps us determine those segments of your life. We want to create a future timeline. We've already got the past history. We want to project what the future is going to look like. And if you haven't looked at your Social Security numbers, if you haven't made those plans in any way, I would say today's the day. There's no time like the present. That's why it's a gift. So get started. SSA.gov major profile and reach out to me. You can, you can text me at 850-450-6500 and I'm pretty sure that I've got my website here and you've got, you know, all kinds of social media reach out. We can get scheduled to go over all your stuff. You may see in my little name. I'm an nssa. I probably should have started with that. All that means is I'm a national Social Security advisor. So I am able to kind of talk on this with a little bit of, you know, authority. But when we get together to go over the options, we also want to look at numbers and grids in the spreadsheets, but we also want to make it very tangible and make sense for you and your family. Which option makes the best sense and when. Reach out. Let's talk and make a plan for you so we can plan for now and forever.
[00:14:16] Speaker A: Thanks for listening to Reyna Retirement. With a strong commitment to ethical standards, Raina works hard to find the right solution for each individual or family who reaches out for advice. To contact rena directly, call 850-450-6500. That's 850-450-6500 or to reach the team at American Federal Benefits Consultants, call 1-800-872-8857. That's 1-800-872- 8857. You can also go online to americanfederal.org not affiliated with the United States Government. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. The information is intended to be educational in nature and does not provide a guarantee or specific result. All copyrights and trademarks are the property of their respective owners. American Federal Benefits Consultants is an independent organization, not a government agency or affiliated with the Federal Government or any state government. The terms CSRs, FERs, FELI, and FEHB are all registered trademarks of the U.S. office of Personnel Management. American Federal Benefits Consultants, agents, consultants, or any independent contractors do not provide tax, legal or investment advice and do not engage in the solicitation or sale of securities. Consult with your tax advisor or attorney regarding specific situations.
