Right, it’s now two minutes after the hour. So, good evening everyone. My name is Baptiste Brunner. I’m a Texas-based, Houston, Texas based financial consultant with Alliance and I’m just a part of the team of professionals at the credit union who give regular educational webinars. Like to start off by thanking all of you for taking the time to get a better understanding of your social security today, joining me in this later hour. We find that people appreciate this time. Let us know other times that you might prefer for us to do this. I like to do them on Saturdays and the evenings as opposed to putting it right smack dab in the middle of the, you know, in the middle of the day. But hey, we’re going to talk about social security today. How to avoid some very costly mistakes and just they do happen quite often. Um, this presentation’s typically about 45 to 50 minutes long. Might try to get out of here a little bit earlier. We might skip through some things that aren’t as pertinent. Of course, as always, going to reserve time at the end for Q&A. go ahead and identify the Q&A section or the chat section. Uh you can answer you can put your questions in either. Of course, I’ll get to them whenever that time comes.
And new slide here if you haven’t been on one where we’ve had this, but please don’t throw any AI notetakers in here. That’s a big no no. This is all proprietary info. But hey, I cannot stop you at home from taking a photo with your camera of a slide that it looks to be very knowledgeable or filled with great information. So, can’t stop you there. But if you have an AI note taker in here, please pull them out. All right, my next webinar is going to be on Thursday, September 3rd, 2 central, 3 Eastern. Going to go over IRA planning strategies to help you get more from your IRA. why maybe moving from an 401k to an IRA in retirement might be a better move. Investment options, costs, professional advice, etc., etc. And then here’s another great one. If you’ve been on one for Roth conversions or social security, this is a top three webinar for me. Going through tax planning changes, going through taxes in general. Taxes will be one of the biggest hits that you have in retirement. find ways to try to go ahead and beat the system there. There’s rules out there to help you take advantage of them. That’s going to be a Saturday one. Saturday, September 19th, 10:00 while the kids are watching the cartoons. Go ahead and throw that one on. Be a quick one, too.
And of course, our team at Alliant Retirement Investment Service. We’re focused on you, our members, on helping you understand the ins and outs of investing, saving for retirement, of course, much more. Just go ahead and take a look at our website. That’s Aerys, A R I S for Reliant Retirement Investment Services, but aerys.alliancreditun.com. Throw/events in there to see all of our webinars. It’s not just me who’s putting these on. It’s our entire team of 10, 11 adviserss who do these. Um, plenty of webinars out there. Go ahead and check it out. a lot of other topics. We also have our podcast, Invest Savvy. Plethora of information to be learned there. We also have our resource center. Check it out. A lot of tools and tricks in there. Go ahead and take a photo of this slide real quick if you’d like. I won’t hold it against you. Go check out all the resources available to you. They don’t cost anything. So, a lot to be learned through there.
All right. And just to go through this too, we can help in a lot of different ways. You’re members of the credit union. We’re financial consultants with the credit union. We are happy to do financial planning for you. We’re going to offer that to you at the end of this and how that could go ahead and help you solve when do you take out social security or how to take out social security? What are your options available for you if you are married or spousal benefits, divorce benefits, death benefits or social security? We can go through that. Estate planning is another big topic for us. How to leave the best legacy? How to save money in taxes? Do you need a trust or not? Show you another deal on that in a little bit. Of course, investment management, investment selections, advanced planning, seeing if there’s other ways for you to save taxes, increase your net worth further. We can help you with all of that. There are no cost meetings. We’re just here to help.
All right. So, again, welcome and thank you for coming. So today we’re going to talk about just savvy social security planning. You know what baby boomers or the future retirees of America need to know about their retirement income. And so when your parents retired, different generations, they probably didn’t have to think too much about social security. They worked for one or two companies their entire lives. They got a pension and then you know they went down to their local office as soon as they turned 65 or maybe 62 if they retired early and they applied for benefits. They lived off of social security and their pension very comfortably and they might have even saved a couple bucks on the side, but they took their benefits for granted and they didn’t have to ask very many questions. But your generation and the generation right before you and really the generations to come, you have to take a much different approach to the social security question in a different way. and it’s a creating a problem for me. We’re seeing a lot of people claiming at the wrong time or just not really fitting into their plan. So, I’m putting up this brain teaser here before we start just to get you thinking a little bit before we dive in. So, if you haven’t yet thought about these two questions, take a second and answer them to yourself. But in life, would you rather be early or delayed or would you and then also would you rather pay a penalty or get a bonus? Seems pretty straightforward. So think to yourself, would you rather be early or delayed? And then also ask yourself, would you rather pay a penalty or get a bonus? I’ll be returning to this question later. So many people make social security claiming decisions without fully understanding all of their options. And this is the main challenge we’ll try to solve tonight. But before we do, I just want to address a couple things about this presentation. You know, first, you may be wondering, why is a financial planner, financial consultant here to talk about a government program like social security? That’s a great question. And here’s my answer. There’s a big need for social security education. The government’s not giving it to you. And boomers and future retirees, soon to be retirees are very interested in this topic as your own presence here confirms that. And many retirees also miss opportunities to coordinate social security with their broader retirement income plan. And then also you poor social security decisions can make my job as an adviser very difficult when I assist clients to develop a retirement income plan to correct for a lower you know than necessary social security benefit. But I also want to make you guys two guarantees. One, I’m just trying to make people smarter about their Social Security benefits and when to claim, and I believe you will be better prepared to make a good decision after this presentation, but two, want to assure you there’s not going to be any selling here. This is purely an educational event. So, we’re here to help. We want to take care of our members. That’s what all these webinars are for. I just felt the need to reassure you of that.
So, first a few things to know about social security. You have many claiming options. One couple could conceivably have up to 18,000 ways to claim, but we normally look at the five most useful scenarios. Your decisions also have farreaching consequences. Most decisions are irreversible after 12 months, too. And your in and your choice does impact both spouses. If you’re married, it affects you and your spouse. Also, Social Security is not bankrupt. It’s not a Ponzi scheme. It’s also not the best system ever put in place in the world, but not bankrupt, not a Ponzi scheme. Definitely could have been implemented better, but that was 100 years ago. Look, some of your friends and family probably been helped by Social Security benefits, too. And at the same time, few of your friends have expertise on social security. Because they’re claiming doesn’t mean that they know everything. And what we’re seeing is that baby boomers want to know, will social security be there for you? And you’ve been told for years that the system is going broke, but now that it’s almost your turn to collect, is that really true? And you also want to know how much you can expect to receive. And before you can retire, you’ve got to know how you’re going to support yourself. And that means doing a budget, lining up all your income sources and knowing how much you can expect to receive from each. And because the system is a relatively known quantity, it represents the foundation of that plan. And you’re also probably asking when you should apply for social security. May have heard that if you apply early, your benefit will be lower than if you apply later. But is it worth missing out on all those extra checks to have a higher benefit later on? And we’re going to shed some light on this important question today, too. But something your parents probably never asked is how it is possible to maximize benefits. And there’s absolutely nothing wrong with using the Social Security rules to your advantage. But today, we’re going to talk about five ways that you can maximize your benefits simply by knowing the rules and making smart decisions. And finally, you might be wondering if Social Security will be enough to live on in retirement. And you probably already know the answer to this, but Social Security represents about 40% of the average retirees total income. But by coordinating social security with the rest of your retirement income plan, you can pursue a comfortable, worry-free retirement. Now, most people tend to minimize the value of social security. They believe that they are likely to get something back from the system at all. They think it will be a minimal amount and not really enough to count on. But social security is far more valuable than most people realize. You know, every dollar you receive in social security is a dollar you don’t have to pull out of your 401k, IRA, bank account. And some people are worried that social security just won’t be around when they retire. And this has led to a lot of misunderstandings and irrational fears about the solveny of the social security system. But let’s look at what the social security trustees say. And every year they publish a comprehensive report showing the long range outlook for the SSA system.
So, the system was designed as a pay as you go system. Payroll taxes from current workers go into a trust fund and then are immediately paid out to current retirees. But because baby boomers have been in their peak earning years, the trust funds accumulated more than needed for current benefits. You know, right now the trust fund holds about $2.5 trillion which is invested in special issued treasury securities. And as baby boomers start retiring, these trust fund assets will gradually be drawn down. Over the next 75 years, costs will begin to exceed income, and there are enough reserves that the system will be able to pay 100% of promised benefits until 2034. After that, if nothing is done to reform the system, income will be sufficient to cover around 80 81% of promise benefits.
And although the social security system is not in imminent danger, most people agree that the earlier reforms are instituted, the less painful they will be for everyone. And here are just a few of the ideas that have been proposed. You know, one is to increase the maximum earnings subject to social security tax. Currently, only $184,500 in earnings are subject to that 6 and a4% tax paid by you. And then your employer matches you at 6 and a quarter as well. So about 12 1/2% of your pay. Another reform proposed calls for raising the normal retirement age as life expecties are increasing. Currently, full retirement age is 67 for people born in 1960 or later. Instead, another reform proposal would change the benefit formula so that future increases would just happen at a slower pace and this would affect the benefits of those future retirees. And some are talking about changing the formula for cost of living adjustments. And this could give retirees smaller benefit increases going forward, although the changes are expected to be minimal. And you can learn more about this in the Social Security website as well.
But most current reform discussions focus on preserving benefits for current retirees and those who are nearing retirement, i.e. more than likely you on this call. Although future legislative changes remain uncertain. I.e. my generation pie in the sky. We have no idea what’s going on. But after thinking about that, you might be rightfully saying, what’s a clearer way to think about social security? Well, here’s a straightforward definition. Social Security is inflationprotected income that you cannot outlive. Even after your death, your benefit could continue in the form of a survivor benefit. and we’ll go through that. But your premium or tax, it’s listed in your paycheck receipt under your FICA, which stands for, of course, the Federal Insurance Contribution Act. And given your employers have paid premium in every paycheck, so you want to be smart about how and when to collect his earned benefit. Let’s look at some of its various features, too. So, first, Social Security is one of the few sources of income that you can’t outlive. And if you’re worried about running out of personal assets in your old age, you need not have that fear of social security because it’s going to continue until you pass away. And of course, the longer you live, the more you’ll extract from the system itself. And if your benefit starts out at $2,000 per month, and if you live 10 more years, you’ll receive nearly $300,000 in lifetime benefits. If you live 20 more years, receive nearly 600k in benefits. If you live 30 more years, you’ll receive nearly a million dollars over the course of your lifetime. This course is assuming annual cost of living adjustments or colas of about 2% which is a safe average. Some years they don’t give you one, some years it’s four or five 6%.
Second, Social Security offers annual inflation adjustments. So if your benefit starts I’m sorry. So if your benefit starts out at $2,000 per month and if annual colas are 2% in 10 years you will be receiving about $2438 per month and in 20 years your benefit will be 2972 and in 30 years your check will be about 3623. There’s no way of knowing exactly what future coals will be, but 2%’s a good reasonable number to just come up with as an average based off previous historical uh indicators. Next, let’s go ahead and look at how much you can expect to receive from the system. So when your social security benefit is calculated, it will be based on how much you earned over your working career and the age at which you apply for your benefits. And like I mentioned earlier, the formula for calculating social security, it’s pretty complex. You may or may not want to follow along with this part. We might not even go through the whole thing, but some people find the formula interesting. So in a moment, I’m going to show you a couple of ways to estimate your benefit. But the general process goes like this. Social Security looks at your annual earnings over your entire lifetime, indexes them for inflation, picks the 35 highest years earnings to include in the formula. The indexed earnings are totaled and divided by 35 to come up with an average. And if you don’t have 35 years of earnings, those missing years will be filled with zeros. And if anybody’s ever gotten a zero on a quiz or a test in school, you know how much that can drag you down. And that does have that effect of lowering your social security benefits for people who have taken time out of the workforce, maybe raised children, injured, etc. However, that you could be eligible for a spousal benefit. We can always review that oneonone. But then the formula is applied to your average index monthly earnings to determine your primary insurance amount. I’m going to refer to that as the PIA from here forward, but this is the amount you’ll receive when you reach full retirement age. Your primary insurance amount is your benefit at full retirement age which could be 66 or 67 some age in between just depends on when you are born and each year from there that cost living adjustment is implied. So here’s an example of how the benefit formula would work for a baby boomer who was born in 64 and who earned a social security maximum every year since the age of 22. Average index monthly earnings would work out to be about $14,35810.
So in calculating that PIA, the first 1286, $1,286 would be multiplied by 90%. Amount between 1286 and 7749 or 6463 would then be multiplied by 32%. And the amount over 7,749 or 6609 would be multiplied by 15%. These amounts would be totaled to come up with a PIA of $4,216.90. And this is the amount the worker would receive at full retirement age. Told you guys this was complicated. Fortunately, you don’t have to figure this out for yourself. Some of you may be thinking, well, it’s good to know how they calculate benefits, but why shouldn’t I claim early at 62 instead of delaying the full retirement age or even 70? And it’s a good question. It’s also where some people start to get in trouble. That’s because your monthly benefit will be reduced if you claim early. It may also be reduced by taxes. Medicare premiums will be deducted and benefits could be withheld if you work. So if you continue to work while own social security. So what this means is that even when you maximize your claiming strategy, something I’m glad to help you with, the amount you actually receive will be smaller in reality because of taxes and parts of your Medicare coverage. And naturally, this raises a good very good question. When should you apply for benefits? And the decision of when to apply for benefits is one of the most important and most complicated. It can literally make a difference of thousands of dollars over your lifetime. It’s also important to realize that the decision of when to apply for social security depends on many factors unique to your situation. You know, these include your health status, your life expectancy, your need for income, whether or not you plan to work, and if you’re surviving spouse, whether you have personal resources. That last part about survivor needs though, which we’ll get into a minute. It also factors into the next question. For most people, Social Security benefits alone will probably not be enough to live on throughout retirement. But let’s just take a closer look how your claiming age does impact your benefit. So full retirement age is the age at which you can claim full unreduced benefits. When we say unreduced, we mean claiming it early or if you’re working still, they’re not going to be able to reduce them. And it’s used to be it used to be 65 for everyone, but now we’re seeing a higher full retirement age being phased in as a result of the 1983 amendment. So for everyone born between 1943 and 54, i.e. my parents, full retirement age is 66. For everyone born in 1960 and later, full retirement age is 67. For those born in 1955 through 1959, it’s 66 and a couple months. Just depends on what year. Closer to 55, closer to 66, closer to 59, closer to 67. Now, remember that I said earlier that your primary insurance, that PIA is the benefit you will receive at full retirement age. So, what happens if you have applied for social security before full retirement age? Well, your benefit’s going to be reduced and you’ll receive a percentage of your PIA depending on when you apply. So, if your full retirement age is 66 and you apply at age 62, you’ll receive 75% of your PIA. At 63, 80% and so on. If your full retirement age is 67 and you apply at 62, you’ll receive 70% of your PIA. And these amounts are actually prrated monthly. So you can apply at any time after the age of 62 and your benefit will be reduced by the appropriate amount. If difference between six there you’ll get a higher benefit at 62 and 2 months than you would at 62 on your birthday or at 63 and so on and so forth. On the other hand, if you apply for social security after full retirement age, you will earn delayed credits in the form of 8% for each year that you delay. So again, full retirement age 66 and you apply at 67, your benefit will be 108% of your PIA. At 68, it will be 116% and so on. But after the age of 70, you can’t earn any more delayed credits. So it doesn’t pay to wait until after age 70 to apply for Social Security. Anybody on here is 69 and coming up on 70 or already 70, apply for your benefits. If you’re 69, get ready to apply for those benefits ahead of time and just say, “I don’t want to claim it until 70, but get your check on your birthday.” Don’t let Uncle Sam hold on to your money any longer than he needs to. You’re already maxed out. No point in doing so. And I’m also guessing you’re probably not too interested in calculating by hand your your PIA and all these formulas and the reductions and credits for early or late filing or the annual cost of living adjustments that could raise your benefit in the future. There are ways you can easily find out approximately the amount of benefits you can expect to receive. You know, one, of course, you can refer to the social security statement. It’s one of the best tools you can have. Go to the ssa.gov website. If you haven’t set up an account, set up an account. You can see your benefit right on there. And it’s projection. By the way, the projection is not the actual amount yet. It’s close, but every year that you continue to work, it’s going to go up because you’re going to replace your higher earning year salary that you’re making now with one of those year one of those payments from 30 and 35 years ago. It does help. Also, you can use the retirement estimator on your social security account. This calculator taps into your specific earnings history. After you enter your personal identifying information, including your birthday, you can take it on from there. But just note that that annual statement, the retirement estimator, they don’t factor colas in. Our tools do, theirs do not. But this means your actual benefit will likely be higher than they indicate, but our calculators do adjust for cost of living adjustments. So if you know your PIA, we can help you project your future benefits. That’s a part of what we’ll do for you if you, you know, want some help with this. Also might want to try one of the three calculators on the Social Security website. Again, there’s a bunch of resources out there. We are a complimentary resource to you. The obvious advantage though to delaying benefits is that your monthly benefit will be higher. A baby boomer who has a primary insurance amount of $3,000, full retirement age of 67, they’d receive $2,100 per month if they applied at 62, but they would receive $3,720. they waited until age 70. The difference becomes even more dramatic if we multiply these amounts by the 2% annual colas. If cost of living adjustments average 2% over the next 8 years, you know, your age 70 benefit then jumps up to 4359. So there is benefit in waiting longer, but not that doesn’t mean everybody has to wait longer. Everybody’s different. You might have the same house and the same cars as your neighbor or as your friend. you think you might make the same money as them. Probably have two completely different stories still. Nobody’s the same. This is not a cookie cutter thing to approach here. Or my friend said that they did 62 and it worked out for them. I’m going to do it. Not how you approach this. But it might be hard to pass up social security checks though when you can start receiving them as early as 62. Going to get a lot more years of payments if you wait from 62. If you want to take it out at 65, but you take it out at 62, you get 36 extra payments. But if you live a long time, you’ll be very glad that you waited longer. And as you can see, the longer you live, the more income you’ll have by just waiting until a later date or until age 70 to apply. But naturally, you may be wondering, how can you maximize your benefits? Let’s just look at a couple of strategies here. First thing you can do while you still have time is improve your earnings record. So check those ear annual earning statements to make sure your earnings record is accurate. That’s one of the biggest things that you can do. Mistakes are very rare, but it’s the government. Let’s be honest, it happens. So because the earnings are on file, the social security office, more than likely there’s no issues, but they sub, you know, your employer submitted everything to the social security office. Just double check. Doesn’t hurt. Mistakes do happen, especially for the self-employed individuals whose earnings records are taken from tax returns, though. Next thing is to consider how you might be able to improve your earnings record. Well, if you don’t have those 35 years of earnings, can you work a few more years so they won’t be filled out with zeros? Remember what I said earlier about getting a zero in a quiz or homework? It really does drag you down. And if you had several years of low earnings early in your career, like everybody did, or like most people at least, you can work a few more years while you’re in these peak earning years, and you will see your benefit take off pretty well. But even if you start receiving social security, but continue to work, your earnings record will be updated. It’s just important to know that if you start receiving social security before reaching full retirement age, so if you start taking it out at 62, 63, 64 and you’re still working and you earn over $24,480.
For every dollar over $24,480 that you make, it will be withheld. They’ll withhold $1 for every two that you make above that. So, if you made $5,000 above that, you made $29,480, they’re going to withhold $2,500 of benefit from you, two for one.
And applying for benefits at the optimal time is the best way to maximize your social security benefit. And the chief reason for delaying benefits is cuz that will result in the highest lifetime benefit for you and your survivor. There is no one-izefits-all answer to this question. The important thing is to apply at the time that is optimal for you. And did you know that social security benefits can be taxable? Let’s look at a way to maximize your benefit by minimizing your taxes. Mentioned earlier, that’s going to be probably your biggest headache in in retirement. But while the earnings test isn’t truly a tax, it is a way in which the government takes back some of your income. So, we’re including in this discussion, but it is different from true taxation of benefits, which we’ll get to next. But one important consideration in deciding when to apply for benefits, is whether or not you plan to work. Now, if you apply before your term, full retirement age in 2026, again, $1 in benefits can be withheld for every $2 that you earn over $24,480. And it’s important to know that this money isn’t truly taken away. rather your benefit would just be adjusted upward once you turn full retirement age to make it as if you had applied for it later. So you get the money back, but it does hurt for that time being. Just know if you’re going to make less money in retirement, claim early, take a smaller job. You might end up having your benefit reduced because you went from making 100K to 50K working part-time and you’re on social security. It’s not always just adding those two together. something to consider. So again, this means that if some of your benefits are withheld due to the earnings test, your new benefit will be higher as if you’d start at 63 or 64 or 65 instead of at 62. Just don’t let that annual earnings test discourage you from working, though. More money you earn, more money you’ll have. Social Security doesn’t really penalize you for working. You’ll get the benefit later. You know, once the adjustment is made, you’ll end up with a higher earning benefit for the rest of your life. And of course, the earnings themselves will continue to contribute to your financial well-being. Then you get a better cost of living adjustment, too, down the road. Just to avoid the earnings test entirely, wait until your full retirement age or later to apply for benefits.
Now, on to the true tax on social security benefits. And this table shows the taxation of social security benefits based on various income levels. Income in this case means provisional income which includes adjusted gross income plus one half of the social security benefit plus any tax exempt interest. So if your provisional income is under 32k for a married couple no benefits are subject to taxation. If that provisional income is between 32 and 44,000 up to about 50% of a married couple’s benefits are then subject to tax. And if provisional income is then over 44,000 up to 85% of benefits are then subject to tax. The thresholds for a single individual are 25,000 and 34,000. But in the case of married filing separately and living with spouse, up to 85% of your social security is taxable regardless of income level being taxed on a tax and that is government work for you. But the important thing to remember here is that up to 85% of your social security benefits can be subject to tax depending on how much other income that you have. And you can minimize taxes on social security by just lowering your other income. It’s not that easy, but especially your investment income, too. But you should be aware that municipal bond interest, which is usually tax-free, it does count as income for the purpose of calculating your social security benefit. It’s part of your modified adjusted gross income. But anticipate the required minimum distributions from your IRA, which will cause you to be at a higher tax bracket. May cause some of your social security benefits to then be taxable, too. So consider drawing down your pre-tax funds, those pre-tax IAS and 401ks before you’re the age of 73 if you were born in the 50s or earlier or if you were born, you know, at 75 for those who were born in 1960 and later or just converting a traditional IRA to a Roth IRA. One of the best things that anybody can do, Roth conversion. That’s how you save money in taxes. That’s how you get tax-free income down the road, which doesn’t affect your your, you know, put jumping you in a new tax brackets for social security. But delaying claiming social security will reduce the number of years that your benefits are subject to tax. And think about how to reduce your expenses, pay down debt, adopt a simpler lifestyle, you can make do with less income, continue to manage taxes throughout retirement, not just those first few years. And as always, consult with a tax advisor and your professional consultant, financial consultant about your individual situation. But remember, if you are 65 or older and enrolled in Medicare, your Part B monthly premiums will be deducted from your Social Security check. As you can see here, if you can claim early, your Medicare Part B will always eat up a larger percentage of your benefit than if you wait until full retirement age or later to claim your Social Security benefit. Then
the when to apply question is very complex and and really requires a customized analysis. But here are a few points to remember. If you apply early, your benefit starts out at some fraction of your PIA, 75, 80%, whatever, and remains at that percentage for the rest of your life. It does not go up to 100% when you reach full retirement age. And then the cost of living adjustments then magnify the impact of early or delayed retirement because the annual cost of living adjustment is applied to either the lower or higher amount. 2% increase on $2,100 is a lot less than a 2% increase on $3,000. This causes that disparity to increase with each passing year though should you go too early. And your benefits can be taxed and further reduced by Medicare premiums. Just don’t let the earnings test discourage you from working. It’s actually helpful for many. And finally, delaying benefits may give the surviving spouse more income. And that’s an important point to consider, especially if you’re thinking something like this. I’m not going to live long, so why shouldn’t I just claim my benefit while I can? And the typical answer to this question is for couples, you should always maximize the higher earners’s benefit to protect the surviving spouse who will step into that benefit at after the higher earner passes. The higher earning spouses are therefore encouraged to delay their benefits to age 70 because that will give their spouses the highest benefit after they pass. First, we’re going to start by looking at how some spousal benefits work. One thing I want to let know here, you know, I did have a client who wanted to take it at 62. He was adamant on it because no male in his family lived past 65 because they had a terrible heart disease that was hereditary. He wanted to take it at 62. It made sense just because he knew that he was only going to live 3 to four more years. He did pass away. Made sense in his case. Not everybody really has that option of really knowing that they’re not going to live much longer, but it’s something to consider is that there’s always, you know, again, not cookie cutter. There’s always different situations here though to consider.
But social security was instituted in a much earlier era when most married women didn’t work to give, you know, it was put there to give women a measure of financial security in their older age. And the program offers spousal benefits. And it’s important to note that spousal benefits apply to either gender, including same-sex spouses, too. And the same the spousal benefit is 50% of the worker’s PIA if she applies for it at her full retirement age. So if John John here on the left, if John’s PIA is 2,000 and Jane’s PIA is 800, and if Jane applies for social security at her full retirement age, her benefit will be equal to 50% of Jon’s PIA or $1,000 a month. It’s $200 more than if her benefit based on her own work record. Now, if she goes earlier, it’s reduced by that same amount. So waiting, going earlier, you might not get as good of a spousal benefit. Again, we can help you figure out when’s the best time to take a spousal benefit, when’s the best time to retire. We’ll get into all that though, but we can help you figure that out on an individual basis if you’re still asking yourself this question. And here are the basic rules for spousal benefits. Primary worker must have filed for benefits. The lower earning spouse has to be at least 62 for a reduced benefit or full retirement age for the full spousal benefit. and spousal benefits do not earn delayed credits after FRA. So, I’m sure you have lots of questions about spousal benefits. Let’s look at some ways to maximize those.
The goal is to maximize income for both of you while alive and maximize income for the survivor after one of you passes. And it can be quite complicated. But by understanding all the considerations and doing some calculations, it is possible for married couples to come up with that right solution, that sweet spot for their needs. Looking at a couple strategies here. First thing to look at when you’re ordinating spouse benefits is this. Is the lower earning spouse’s PIA more or less than 50% of the higher earning spouse’s PIA? If the lower earning spouse’s benefit is more than 50% of the higher earning spouse’s PIA, the way to maximize lifetime benefits is in fact for both spouses to claim their benefit at 70. Now, our calculators will show that about both spouses have average or longer than average life expecties. This will then maximize benefits for both of them over their lifetime. But if the lower earning spouse’s PIA is less than 50% of the higher earning spouse’s PIA, you may want to do a hybrid strategy. And here the lower earning spouse goes ahead and claims early. And this gets income started as soon as the lower earning spouse turns 62 or whenever that spouse decides to stop working. But the higher earning spouse still claims at 70 in order to maximize that higher benefit over both lifetimes. You know, my grandma lived 12 years longer than my grandpa. That them take using this strategy benefited her greatly. But let us help you determine that right strategy. We’re here to help you with it. People at Social Security office can’t answer these questions, but do your own homework. Come to us, whatever. Just don’t do this willy-nilly and say 62 or 65 sounds great. That’s where we start seeing issues. It can be very complicated, especially with some recent rule changes. You really just need to run the numbers.
All right. Well, here’s another story, though. you know, focus on maximizing one benefit for that situation. But you might be thinking as well, you know, well, I’m widowed or I’m divorced, so how does that impact my social security claiming strategy? And it’s an interesting question. In fact, a couple people have already asked about that in the chat. And there’s a satisfying answer. If you’re widowed or divorced, you can be eligible for survivor benefits, divorce spouse survivor benefits or divorce spouse benefits. By coordinating these benefits with your own record, you may be able to increase your total benefit. But first, let’s look at the basic survivor benefit a spouse would receive and hopefully after maximizing the other spouse’s benefit. So survivor benefits can be somewhat complicated, but it’s important to understand how they work because decisions you make now can influence the amount of survivor benefit later on. And there are two factors that influence the amount of the survivor benefit. First factor is the age at which the deceased spouse claimed his own retirement. If he or she originally applied for social security before full retirement age, that survivor benefit will then be limited to his or her actual benefit of 82 and a half% of their PIA, whichever is higher in this case. But if the deceased applied at his full retirement age, survivor benefits then equal to 100% of the PIA, that full retirement benefit. If he or she applied at 70, survivor benefit will include those date delayed credits. We’ll see an example here in a second. But second factor influencing the amount of the survivor benefit is the age at which the widow claims the survivor benefit. If he or she claims it at 60 or 50 if they’re disabled, survivor benefit will equal about 71.5% of the decadence PIA. If they claim at full retirement age or later, survivor benefit will now equal 100% of the original amount. And they may of course apply at any time between age 60 and 70. And the reduction will then be prrated. But if both spouses are receiving benefits and one spouse dies, the other spouse can then switch to the higher benefit. So a hypothetical example, let’s say Joe and Julie are married, both are over full retirement age and currently receiving Social Security benefits. Joe’s benefits $3,600 a month. Julie’s benefits $1,800 a month. Joe dies, Julie’s $1,800 benefit will stop, but she’s just going to hop on Joe’s and she’ll start receiving 3,600 a month. One important note about survivor planning is the loss of one benefit. Most widows and widowers need at least twothirds of the amount of income they’re receiving as a couple. So, it’s important to plan for the loss of one spouse social security benefit. Even though it’s often the higher benefit that will be retained, death of a spouse means still it’s the loss of one social security check regardless, which means less money coming into the household. Let’s see what would happen if the deceased spouse had delayed the start of social security. So in this hypo in this hypothetical example, Joe files for social security aid at age 70. His benefits $124% of that $3,600 a month PIA for a total benefit of $4,464. Now if he dies, Julie survivor benefit will be equal to Joe’s benefit of $4,464. And survivor planning is just a very important part of savvy social security planning. So decisions that you make now can influence the surviving spouse’s standard of living later in life. I said this early before you 5 minutes before 6 your time. Maybe this is one of the bigger decisions of your life. Do not take it lightly. You can see how one decision can affect the next 30, 40 years of your life and not just yours but your spouses. Do not take this decision lightly. And here are some rules for survivor benefits. So in order for the surviving spouse to receive survivor benefits, marriage must have lasted at least 9 months unless the death is then ruled an accident. To start benefits though, survivor must be at least age 60 or 50 if they’re disabled. However, if the widow or widowerower applies before full retirement age, benefit will be reduced as it is for regular retirement benefits. Some of the same principles that go into deciding when to apply for regular retirement benefits also apply to survivor benefits. And if you remarry before age 60, you’re not going to be able to receive a survivor benefit based on your previous spouse’s earning record unless your remarage ends. Uh if your remarage ends, then you get to jump on there. But if it doesn’t, sorry. And then we also have divorce spouse survivor benefits. They are available if the marriage lasted at least 10 years. See, one person was asking about 13. You’re good. Let’s look at that a little more since many people have been divorced like myself. And it’s not a widely known or understood benefit though. So, a divorced spouse can in fact receive social security based on their expouse’s work record providing the marriage lasted at least 10 years. and the person receiving benefits currently unmarried. Now remember, men can receive divorce spouse benefits, too. If the divorce occurred more than two years ago, the expouse doesn’t need to have filed for his benefit. However, he or she must be at least 62 years old.
And here are the rules for those divorce benefits. More than one ex- spouse can receive benefits on the same worker’s record. So, if your ex-husband or ex-wife is remarried a few times, all three ex-wives can claim divorce spouse benefits as long as each marriage lasted at least 10 years. And the benefits paid to one ex- spouse do not affect those paid to the worker. So, the current spouse or the other expouse is, you know, you do not need to know where your ex- spouse’s whereabouts are. You only need to know enough identifying information. Social Security office people can look up their records. You also need to provide documentation showing the dates of the marriage and divorce. County records office has that for you. And if you’re receiving divorce spouse benefits and you remarry, your divorce spouse benefits will stop. However, you may then be eligible for spousal benefits based on your new husband, new wife’s work record, or you can just switch to your own benefit, of course, if you also qualify for social security. So, if you’re thinking right now to yourself, gee, this is really more complicated than I realized, I understand. I didn’t realize a lot of this stuff until I educated myself because it’s part of my job. But it was clear to me what an important role getting social security right plays into people’s retirement income plans. This is the money that you should be spending first. Can’t give the gift this to anybody else past your spouse. You can’t use these month funds first. Other money that you’ve saved up through your 401k, IRA, brokerage account, cash, savings, etc. that you can give away to somebody else. Spend the government money first. You’ve been paying into this for four or five decades. But this brings us back to our social security brain teaser. You may have heard the phrase behavioral finance, and it’s the study of the influence of psychology on the behavior of investors. So, for our brain teaser questions, people would usually say they’d rather be early than delayed for many things in life, and they’d rather get a bonus instead of paying a penalty. I mean, hey, that makes sense, right? But as we’ve seen in our presentation today, when it comes to social security claiming strategy, early to penalty as delayed is to bonus. The government didn’t set the phrasing up this way intentionally, but it certainly has influenced people who have only seen their claiming choices described as early verse delayed. And we don’t normally see the claiming question position as one of penalty versus bonus. But I think you can see the value of framing the question in that manner, though. And I think this little brain teaser is a good way to loop back to our original problem review what we’ve learned to review what we’ve learned also and then close the solution. So, one second before I start really jumping into it.
All right. So, this is where what we started with as our course challenge. Many people make social security claiming decisions without fully understanding all their options. Then we went through four insights designed to help us get an understanding of the problem and develop a belief in a solution that might work. So in brief, those insights were social security offers inflation protected income for life and possibly survivor benefits. Your monthly benefit can be reduced if you claim early. Couple should maximize the higher earners benefit for the surviving spouse. And if you’re widowed or divorced, you can be eligible for benefits that can increase your check. So with that understanding of the problem, that brings us to the solution. Many people benefit from a personalized social security claiming analysis to understand how and when to apply and how their monthly benefit will fit into their overall retirement income plan. And it’s important to consider social security in the context of your other retirement resources including your pensions, your IAS, your 401ks, those required minimum distributions with all that pre-tax money that you have cuz Uncle Sam wants his cut. You’ve been putting this money away for 50 years. He’s ready to get his cut finally. you haven’t paid taxes on it yet, he’s going to force you to do it at 73 or 75, make you pull money out, you might jump a tax bracket down the road. All of these resources should be coordinated to give you the income you need for the rest of your life. So, don’t be afraid to ask for help. Retirey planning is really easy when it’s a matter of stashing part of your salary into a 401k or IRA. But when the time comes for you to convert that nest egg into an income stream that you want to last for the rest of your life, you want to make sure it doesn’t run out. And social security may be the bedrock of your retirement income plan, but it has to be coordinated with all of your resources to give you the stability and security that you deserve. They’re called golden years for a reason.
Social Security personnel, they can be helpful, but they can’t make recommendations. It’s not their job to do long range social security planning cuz they don’t know and what’s going they also don’t know what’s going on with the rest of your life either. We can help you with that. We absolutely can. And look, I I hope you learned a lot today, but you’re probably still wondering. You might have a better understanding right now, but you’re still probably asking yourself questions. one being still when should I take it? Should I take it at 62? Should I delay? I’m pretty well set up. I think I can do 62, but social security is too important for guesswork. So, let us help you protect your nest egg, maximize your investment income. It’s just too important. Best way we can do that quick analysis. I’m going to send out a poll here. We offer complimentary meetings where we will make a financial plan for you. If you want to retire at 62, we can let you know if 62 works. If 62 isn’t the greatest idea, we might tell you 63, 64. But we’re here to help. So, to learn more, here’s a poll that I’m sending out right now. If you say no, that’s fine. You’re not hurting my feelings. My goal is to help out all of our members. Click yes. I’ll reach out to you tomorrow. We’ll set up a meeting. We’ll review your finances. We’ll cover everything. We’re going to do financial planning. Figure out if social security is right to take out at 62. Wait till 70. If you want to make sure that you’re going to take care of your spouse fully, let’s cover that. It’s complimentary. We’re just here to help our members. That’s why we’re the greatest credit union in the country, if not the world. All right, with that, let’s get to the fun part. Oh, before I get to questions, here’s something that’s fun that we’re doing now. We do a lot of estate planning webinars. I do a lot of estate planning. Somebody wants to leave money for their kids, want to make sure their wife’s taken care of. They want to see if a trusted or is right or a will. We can do that planning, but we also now have access to this company, Trust and Will. Uh, think of them as Turbo Tax is to doing taxes in your own. Trust and will is to doing estate planning and trust and wills. We have access to this for those who do investments with us and our clients, not our members, but those who become investment clients, they have free access to this and you’ll be able to set up your trust and set up a will through this platform. There are attorneys that are accessible through this platform as well. If you want to learn more, shoot me an email, which is on this slide. So, if you want to just jump the gun and schedule an appointment with me, there’s a QR code. If you have any questions for me, there’s my email. put your hand over that photo because that’s me 80 pounds ago, more like 40, but still terrible photo. Give me a shout in the direct number there. I’m here to help. Let’s get into your questions. There are a lot. And if everybody can answer the poll for me, just about everybody has. I like to look good when the boss looks at my numbers and sees that everybody answered the poll. Again, doesn’t offend me if you say no or not at this time. If you ever have questions to those folks, holler whenever. But if everybody can answer the poll, makes me look really good with the boss man. All right, let’s get into the thick of these.
How frequent is the cola given? Oh, question answer. But colas are given just about every year. They’re not an entitlement, though. They don’t always give them. Uh I want to say they didn’t do one in 2021 or 2022, but they did do a really big one during co Um, but on average it’s about 2%.
If I claim social security at full retirement age and I’m married filing separate, will I be taxed 85% or no tax since I live in Texas? Okay. There are some states and God bless Texas. There are some states that do tax social security from the state level. Colorado, Vermont, I want to say Oregon maybe in the mix like eight or nine. West Virginia randomly is in there. I think what we’re talking about that 50 85% zero. That’s based on the federal level, not the state level. So at the federal level, you can be taxed on up to 85% of your social security depending on how much you’re making outside of social security. If you’re living solely on social security and you’re not pulling anything out, there’s not going to be any taxes there because you’re just living off of your social security. It’s based off of that additional other provisional income.
Yeah. If the what if the surviving spouse benefits are higher than the deceased spouse, you’re just going to retain the the the higher benefit. You know, they they designed it this way. I’m well aware we live in 2026 right now, but it was designed this way because women did not make as much men back in the day and now they do. And hey, it men die first. Let’s just be honest. We die on average at 76. Women die on average at 79. They want the surviving spouse to at least have more money. They’ll get rid of one check, but at least she’s getting more money. It was designed that way. So you don’t get any additional benefit if you’re the higher earning spouse or the higher PIA and the lower social security amount passes away first unfortunately.
Okay, here’s a great one. If I get my benefit at 62 and I keep a job that provides about 30K a year, i.e. about $5,500 above that threshold. They understand that 2:1 ratio, but will it be reversed only at FRA or when I stop working, say at 64? Great question. It will be reversed at the end of the or beginning of the next year after you quit working. You’re going to claim that you made um money that year, but the next year you’re not going to be making anything anymore. Make sure to let the Social Security office know that you retired. they’ll go back to giving you, you know, your normal amount. So, it will increase because you would have been um you would have had that reduction for 2 years in this scenario. You still get two years of increases because you still paid into social security at that time frame, but you also had a reduced benefit because you went a little bit over. So, you’ll get it again around 64 65. Um but yeah, you know what? Meet with me or send me an email. I want to learn about this one a little bit more. um if you’re interested be something I can look into a little bit more for you and see if 62 is really the best route. If you’re going to keep working until 64 in your case and you can live off of that, you might just want to just push off until 64 and get that much better of a benefit. All right. I was married 13 years. We’re now divorced. I know that I can collect his social security if it turns out more than mine. However, what if I remarry him? Then what happens to that? Well, it’s if you remarry him,
never mind. That’s a personal thing. If you remarry him, then just goes right back to it. You’ll just get back to you you’ll go from divorce spouse benefit to a spousal benefit getting half of his based off of whenever you retire or whenever he retires in that case. But it’s if you wait till 67 to claim, you get half of his PI of his full PIA.
I know you said your financial advising is complimentary. Does that also apply to business income and taxes help? So, I’m not a CPA. CPAs file taxes. They do that. What I do is tax planning. How can I help you save money in taxes down the road? Not allowed to do tax preparation though because you have to go to school and for that specifically and go get your CPA license. But I do assist a lot of my clients with I have a a small business on the side of this uh aside from financial planning. So I know a lot of tax breaks and I utilize a lot of tax breaks for my business income because you can get an LLC that generates a little bit of money. See all the tax write offs come through. But I can give you some tax planning advice, some business income strategies. We can go through all of that. just I need to know as much as you’re willing to dulge because the more I know, the better the advice I can give you. As the saying goes, more the input, the better the input, the greater the output.
Again, folks, got about six people that still need to answer the poll. If you don’t mind, I appreciate it. Great turnout today. Love all the questions. Got like four more to go through. And please keep asking them if you’d like to. I will stay on here as long as I need to. My wife works for an independent school district here in Houston area. It is it true that she has to decide between social security survivor benefits and her TRS but cannot receive both. Not anymore. Um they used to have a big gosh that was I I used to be a financial adviser for the school districts. I do their 403b plans and their 401ks. Oh, I’m sorry. If you can’t see the poll, it might be behind one of your other windows. If not, if you’re looking to say no, you can just let me know in there and I won’t be hurt. But if you want to say yes and you want to meet with me and you can’t answer the poll, just use the QR code right there on the screen. You can schedule the blink with me. We’ve been having an issue with that. All right. School districts in Texas and in Florida and a couple other states, if you work for a school district, more than likely you’re not paying into social security. So, you won’t get social security. Not going to be an issue. You can still get spousal benefits though. For the few school districts in Texas that do pay into social security really didn’t help them at all because the windfall provision basically reduce their social security their TRS amount their pension to zero. So they’re paying into two federal a federal and a state pension and they’re really only to claim one. It was an absolute scam. Fortunately, Congress recently fixed that. They got rid of the windfall provision. So if you have you’re not going to get penalized for having two different government pensions, as you shouldn’t. you paid into it, you should get it back. But they got rid of that. Let’s talk more on that one because I don’t know if I know everything that’s behind that. If you scheduled a meeting with me, we’ll discover it. We’ll discuss that. But if you didn’t, send me an email or schedule a quick one with me. I want to look into this one deeper to make sure that we’re answering this question fully. If benefits were started at 62, can the benefits be repaid to SSA to reset the benefits age to 67 and 70? I’d like to know how old you are now, but if you started at 62 and it’s been less than 12 months, you can get off within 12 months and you can stop and you can get back on later and you can keep increasing your amount. I if you’re 60, if you started 62 and now you’re 65 66, I don’t think you can do a whole lot from there, but be happy to go through that one with you in a 101.
What are the new changes to the military retirees with regards social security in particular to an ex-wife and her eligibility for her? Okay, so you are the ex-wife of a veteran. You want to know about new changes to military retirees with regards to social security. There’s no change there, I don’t believe. I mean, it’s just still going to be spousal benefits based off their social security. If you’re trying to talk about military pensions, that’s another conversation to have, though. But as far as social security goes, it doesn’t matter if you’re a vet or work in the private sector or the public sector. It’s social security benefits in this case.
If both my husband and I are drawing our social security, can I get a spousal benefit and draw on my husband social security? No. So, you get to pick between whichever one’s best. Refer to that one, that example that we had earlier. If your benefits $800, if you both retired at full retirement age, your benefits $800 a month, your B your spouse’s is 2,000, you get a,000. Don’t take the lower benefit, take the higher. But you don’t get to get the spousal benefit plus your own benefit. But you can enhance your benefit if your spouse’s benefit’s great enough to where your 50% of his is better than yours. And it happens all the time. Um, but we can review that oneonone. be happy to do that with you too just to understand that one better. I know I say that a lot but you know I really don’t give people answers to things without until after I’ve met with them for 30 to 45 minutes and have a full 10,000 foot view of their situation because again better the input better the output i.e. my answers to you married more than 10 years. Okay. Yeah. Okay. That was referring to that one. Yeah. meet with me. Let’s discuss that. If if there is something that I don’t know about it, I’d love to look into it for you, too. And I have all the tools and resources to find that answer for you. As far as the U spousal benefit for veterans and social security, if I am eligible for spousal benefits and I remarry but divorce after my ex dies, am I still eligible or must be unmarried at the time of death? Yeah, that’s that’s the thing. So if you remarry, you kind of end it right there. So I mean, if your new husband or new wife has a better benefit, doesn’t matter. Then you step up. But if it’s less, could be affecting yourself right there. I’d be happy to go through that one with you, too, on a one-on-one. That’s our last question. Um, I’m going to stick on here for a little bit longer. But look, folks, again, don’t make this decision lightly. If you already have a financial adviser, go ask them. If you don’t think they’re worth anything or they they if they’ve never brought up social security planning to you, they’re not doing you a service. So, just come talk to us. It doesn’t have to be me. Most people don’t like my face. That’s fine if I’m joking. But come meet with us. There’s 10 of us. We’re here across the country. We’re here to help. I cover Texas to Virginia. Um basically the entire Gulf Coast and part of the eastern seabboard. We’re here to help our members. So, if you need any help with understanding when’s the best time to take out your funds, how do you not run out of money, how do you get your best benefit, the best use of your benefit at least from Social Security, cuz hey, 12 and a half% of your pay has been going into the system your entire career. It’s a decision you should not take lightly. So, at the very least, set up a meeting with us. It’s complimentary. Make sure that you’re making the right decision. That is why we are here to help you all. All right. Thank you. I’m glad I could help. And I do appreciate everybody that said thank you. Really do. Um, as confident as I sat sound right now. Really, I’m just like shaking my legs over here. I’m joking again. Terrible jokes. But look, any questions you have, it doesn’t even have to be about social security. We’re here to help with all of your personal finances. So, thank you very much. I appreciate it. Look, I’m I like to do this one about four times a year. Um, I if if you want to learn more about tax planning and I if you haven’t retired yet, if you haven’t moved anything over to an IRA yet, join us for IRA planning in two weeks. But please join me for the tax planning one in on September 18th. It’s on a Saturday while the grandkids or the kids are watching cartoons. Hop on with me. It’ll be beneficial. Um, I’ll be updating my retirement topics or my webinar topics in the near future, but uh, we’ll get there. We’ll be more available Friday than Florida. All right, I will reach out to you then. Thank you very much for providing your info. All right, folks. Look, have a wonderful day. Um, what is coming up? I don’t see you until September. Happy college football season. Hope your team doesn’t ruin your season by week three. Um, outside of that, have a wonderful day. Can you share those other webinars again for future? Sure, let’s do that. Close your eyes so I don’t give anybody a seizure while going through 80 slides real quick. So go. This is the website here. Aerys.alliancreditun.com/events.
That is how you see everybody’s webinar. I talk to my colleagues up in Chicago or Denver or California. As far as the Southeast goes, that’s me. I also have another buddy uh Mike who is another colleague of mine who’s here in Houston. We’re the ones basically covering everything east of the Mississippi as well as Texas and uh Nebraska and Kansas and places like that. But we’re here to help our members. Let us know what we can do. So that’s the webinar link right there. See our entire list. This is the big boy right here. I like this one. We’re going to talk about tax planning, tax planning changes. Um, I believe we’re even going to cover the additional benefits from the big beautiful bill from a couple years ago. Um, where, hey, now that you’re a senior, you get an extra tax break. Let’s take advantage of those guys. You’ve been paying taxes for four or five decades now. Let’s get you your money back and save you some money in taxes and we’ll figure that all out later. All right. Outside of that, folks, it has been a pleasure. We love doing this. Happy that we had a great turnout today. Again, for those who said yes, I will reach out to you tomorrow whenever I get the list of those who said yes. Um, and we will set up an appointment from there. Otherwise, see you then. See you for the next webinar. Have a wonderful evening. Thanks for joining today. All right, for those left, thank you very much. I’m going to sign off now since there’s no more questions coming on through. Thanks again, folks. Y’all have a wonderful day.