March 24, 2025 • 29 mins
Social Security: To start or not to start, that is the question! – Deciding when to
claim your Social Security benefits might appear to be a simple decision, but making the
wrong decision can have a significant impact on your financial plan and your income
taxes. Chris Boyd, Jeff Perry, and Russ Ball have an in-depth discussion and respond to
the concept of taking Social Security at the earliest possible age and investing the
monthly benefit. Chris, Jeff, and Russ remind listeners that it is always best to seek the
advice of your financial advisor when making decision when to claim Social Security.
For more information or to reach Chris Boyd or Jeff Perry, click the following link:
https://www.wealthenhancement.com/s/advisor-teams/amr
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to something more with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president, financial advisor at Wealth
Enhancement Group, one of the nation's largest registered
investment advisors.
We call it something more because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:21):
Here he is your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
All right.
Welcome everybody to another edition of something more
with Chris Boyd.
I'm Chris Boyd, certified financial planner, practitioner, and
I'm here with Jeff Perry and Russ Ball.
We are all of the AMR team at
(00:43):
Wealth Enhancement Group and so glad to have
you with us.
Hope you listen every week, share our show
and rate it always helps us.
And if you didn't know, you can find
us on video now as well as audio.
And I hope you'll take advantage of whatever
medium you enjoy.
So you can find us on our website,
(01:05):
somethingmorewithchrisboyd.com or you can check us out
through the Wealth Enhancement Group's YouTube page as
well.
Yeah.
Look for us on Facebook too.
We're back on Facebook.
If you're not already following it, put in
team AMR, Wealth Enhancement Group, and you'll find
our page.
Love it.
All right.
Hope you'll join in on some of the
things we promote and talk about.
(01:27):
Um, it's always interesting topics going on from
one, one month to the next.
There is not a shortage.
How many, so you, how many, let's see,
17, 18 years you've been doing radio and
podcast, I don't know, 1100 podcasts probably out
there.
Have you, have you ever, not ever, but
is it customary that you don't have a
(01:47):
topic in your mind?
No, there's always something of interest, whether it's
news related or just good, um, financial education
that we can talk about.
I was agreeing with you.
Like, I didn't think you, I mean, it's
always like, what should we talk about?
Not like, is there anything to talk about?
(02:09):
Exactly.
Exactly.
Well, today we've got an interesting topic.
Um, this is one of your choice.
And I was like, I don't want to
talk about that.
And as, as we're talking about, it's like,
oh my gosh, we've got a lot of,
uh, interesting points of view to consider.
So it's a topic that, you know, when
you get to be almost of the age
to accept retirement, take retirement, claim retirement, whatever
(02:32):
the word should be.
You think about it?
I mean, I'm 62 in, uh, seven months
now, eight months.
And it's like, I can take social security.
Should I, well, I know what we kind
of think about, um, as financial advisors, but
then you read something, um, which I did,
(02:54):
which is simulating this inquiry.
Yeah.
I read something from a, uh, talk radio
shock talk show host, which doesn't give them
a lot of credibility, but I generally like
him and he's a credible, uh, person in
our industry.
Dave Ramsey.
I'm a disciple, I guess you'd call it.
Um, I, I listened to the show.
(03:15):
It's enjoyable.
I like his principles, especially around debt, but
you know, I don't agree with everything that
he says, right.
I don't agree with everything you say or
Russ says.
So yes, sir, I did.
I'm sorry.
That was my inside voice coming up.
Um, no, none of us agree, but you
know, we generally have this, these broad principles
and I was of the mindset that it
(03:37):
is always, or almost if you're in good
health, it's almost always best to delay taking
your social security to your 70.
Yeah.
It's not to say that there aren't exceptions
and circumstances, but that is our default, um,
counsel is to try to wait till full
retirement age and if possible delay till 70,
(04:01):
unless I'll put in a caveat and you
have a reason to think your health might
be compromised.
Um, and similarly, you know, you have to
think in terms of not just one person,
but two people, right.
If you're married, if who has the larger
social security, uh, check that one in particular
(04:21):
is worthy of consideration for delay, uh, to
maximize the benefits so that if either one
of you lives a long, longer lifespan, that
you'd get the maximum benefits.
Now we test these and, you know, look
at these circumstances.
(04:42):
I was really looking at one last night
and I ran the numbers, uh, on people
and I had them living till, you know,
94 92 and it really didn't make that
much difference whether they took it at full
retirement age or 70 normally are optimal is,
you know, somewhere closer to 70 when you
have a long lifespan assumed like that.
(05:03):
Right.
And just the math was like, nah, it's
not that much of a difference.
Right.
So in that scenario, I kind of defaulted
to full retirement age, but generally I would
be expecting most people benefit by a delay
or the idea of trying to maximize, because
by spending more of your own money early
(05:25):
in retirement, you might spend less of your
money over retirement and that's the premise you're
going to challenge.
I am.
And I just want to throw one more
caveat out.
There is most financial decisions.
You know, we meet with a lot of
clients and they're a theme certainly, but most
of them are very individualized.
(05:46):
We're all have our own unique circumstances.
I mean, you know, some people reach age
62, for example, and they are retired because
they can't work and they need the money.
Right.
So that's, that's all.
That's a very good point.
It's a very good point.
Circumstances can drive this and types of resources,
(06:08):
more pension, less pension, more assets, less assets.
There are variables that can drive this and
your point about the kind of work one
does and the demands that that can have,
you know, there there's, it's not one size
fits all to your point.
Right.
So if you hear something that doesn't make
(06:29):
sense, we agree and we can help you.
You know, we help our clients when they
come to this decision point in their lives
and say, you know, I'm thinking of retiring
at age, whatever.
Um, I'll have my 401k.
I have this, maybe I have a small
pension.
These are my assets.
When should I take social security?
And it is always, always an individual analysis
(06:51):
of their facts and circumstances, their goals, their
debt, their cash flows, everything before we give
somebody advice.
So we're not giving any broad advice here.
Uh, well said.
Um, I think, you know, the, uh, keep
that in mind.
You know, we want to, anytime we want
to make decisions like this, cause these are
very significant to your financial life, it needs
(07:15):
to be in the context of a financial
plan and the, uh, the influences of all
the moving parts that can help to define
what's the right answer, what's the best possibility.
And there's lots of room for, um, personal
preferences in some of this.
(07:35):
Right.
And I, I'm going to say, oh, there's
a right answer or the wrong answer.
There's not really a right answer or wrong
answer.
That's, you know, absolute.
It's a matter of weighted priorities.
Right.
And choices, you know what I mean?
So, uh, uh, by making this decision, there's
a consequence is that fate more, more or
less appealing to you.
(07:55):
Yeah.
Do you know what I mean?
Uh, so let's, let's go into why, um,
people might or might not want to start,
uh, earlier than what I'm suggesting full retirement
or, uh, even maximum, uh, retirement, uh, type
of ages as the preferred way to do
(08:15):
it.
Uh, one of them I already mentioned, and
that is, you may not have the health,
uh, you expect to live long enough to,
uh, recoup what, you know, what you don't
get by delaying and by starting, you know,
keep in mind when you start early, you
discount your social security benefit.
(08:36):
Yep.
Uh, some, some potentially as much as like
30%.
Uh, I've seen, I've seen, oh, from full
retirement age.
Yeah.
Almost 55% or something from maximum retirement
age.
Um, it was whole security turn on, you
know?
So, um, it, it's, it's, and then the
(08:58):
inflation adjustments and everything is on a smaller
amount, so it doesn't, um, you never catch
up, so to speak.
In one sense, your premise to this, from
this article is maybe there's another way to
approach this, right?
So if you are, if you don't have
a health condition and you are eligible to
(09:19):
start collecting social security benefits at 62, and
I'm going to say you're not working because
that's another thing that we can add in
later, so you're not working.
And you, so the premise from Mr. Ramsey
in his article is if you're not working
and you can collect the social security at
62 and you're not going to spend it,
(09:39):
he's very clear in his comment.
If you're just going to increase your lifestyle,
don't do it.
But if you're not going to spend it,
you have that discipline, which I think 90
% of the people, if they get a
deposit into their checking account, well, likely going
to spend it.
But yeah, I think that's the challenge with
this and you're laying it out very nicely.
(10:01):
I think that's the biggest hurdle to whether
or not this, this, this option really will
play out is will people be disciplined, not
spend that money, but actually take it and
invest it.
That's what acts that they'd have to incur,
but put it to work, uh, you know,
(10:21):
and saying, oh, if you invest it, you
know, it's going to last longer because now
it's going to grow into something more.
And then when you turn on your social
security benefits, you know, you've got this pool
of money that's also earning something.
That's right.
That's the premise of taking that $1,500,
$2,000 a month that hypothetically someone is
collecting at age 62 and putting it directly
(10:44):
into an investment account into some, uh, investment
mix.
That's right for your risk tolerance.
And that is, you know, part of that
being exposed to the equity market.
So you have some potential for gains that
it'll last longer and be something that you
could leave to your part of your legacy.
If you didn't spend it all is more
(11:07):
advantageous than waiting for a higher benefit later.
And of course, if you pass away from
62 to, you know, say 80.
Yeah.
Or, or even later, perhaps if you're actually
doing this, that's right.
It's more financially advantageous to do.
All right.
I get your point.
Um, I think I take issue with the
(11:29):
practical reality that will people actually do that?
Because I, you know, experience tends to be
that people don't tend to do that, but
that's a possibility.
Um, what about, there are some other variables
that we need to consider.
Yep.
So you look like you're about to chime
in though.
I want to give you a chance to
speak before.
Well, I was thinking, you know, you have
(11:50):
to be pretty exposed to the market to
make up the difference in the return that
you'd be getting between social security.
If you're getting, it's like a 50 something,
some odd percent difference between.
Yeah.
So you're, you're probably losing about a 6
% discount is it per year.
And then you'd be making 8% once
you get past full retirement.
Uh, so let's call it six and a
(12:12):
half or seven, six and a half, whatever
it might be.
But, you know, are you going to make
that kind of rate of return, so to
speak?
That's your point.
And, and that's not a huge timeframe, you
know, it's, it's eight years, right?
So, and you have to be willing to
take on a significant amount of risk to
get that return.
Uh, you know, are you going to be
(12:32):
putting every paycheck that you get into the
S&P 500 or I don't know, some
kind of, yeah, I follow your point.
So you have to, you have to take
that into consideration too.
Are you going to, are you going to
be willing to risk your first, you have
to be willing to save the money.
So take them, take that check and invest
it.
Then you have to be willing to see
some volatility when that money is invested.
(12:52):
Yeah.
And it's like a pretty, you know, you
have to do pretty well year over year
in that eight year timeframe to get the
returns that you'd expect, which isn't to say
that you couldn't, it's just, um, there's a,
there's a, uh, a tolerance that you'd have
to incur and to be benefiting from.
Um, okay.
(13:13):
Good, good thought.
I saw you doing the calculator over there.
So I was like, all right, he's got
something he's cooking up.
Um, I was expecting sort of like you
were doing the time value of money or
something, you know, for a second.
The calculation, just to push back a little
bit is not that straight.
Meaning at the end of the time period,
(13:34):
although you're in a decreased, you remain the
rest of your life in that decreased benefit,
it continues on, right?
So it does forever at a discount, at
a discount, but not to the full amount.
You have to do the math.
That is, you don't have to make the
(13:55):
gain.
Your point, I think, let's see if I'm
saying this the way you're intending.
So the only thing we have to consider
is the difference between 62 and 70, if
in this scenario, um, that, that, that's the
Delta or whatever that you're talking about benefit
drawback.
Just say the benefit at 62 is 1500
(14:17):
and the benefit at 70 is 3000 round
numbers.
Yeah.
Just for a ballpark.
Yeah.
Right.
So you're only the difference.
The Delta is 1500, not 3000 when you're
doing the math.
Actually, I think that even overstates it.
Sorry.
Um, cause isn't it, it's a 50%
increase in benefit.
So if it was 1500, it would be
(14:38):
3000.
That's a double, uh, the benefit, right?
Right.
And I, that's a hundred percent.
Uh, so it'd be like, it'd be, you
know, seven 50 more.
I'm going to age 70, not age 66
or 67.
Yeah.
All right.
I think we're saying the same thing.
I just think we're coming up with a
(14:59):
different number.
That's fine.
I get the Delta, whatever it is.
And that's a variable number too.
It's not a simple double or 50%
or whatever the calculation is.
It is your individual Delta.
Yeah.
I mean, that is calculable and it is
consistent.
The, what those particulars numbers are will differ
(15:21):
from one person to the next, right?
All I'm saying is you don't have to
just to stick with my numbers.
If it's 1500 and then 3000, the money
that you save and invest for those years,
you're only having to make up in your
investment gains, what you would have gotten if
you had waited.
(15:45):
Um, so that is the, in your numbers,
which, you know, we can discuss whether the
right numbers we should use or that's just
illustrative purposes.
It's $1,500, uh, per month.
Correct.
And I think it's actually two 20, uh,
um, it would be more like seven 50.
(16:06):
Okay.
Okay.
And in this scenario, but seven 50 a
month, we need to be saying, did, did
my accumulated wealth generates efficiently that I can
derive more than or seven 50 a month
for the rest of my life and then
have money left over.
Correct.
Starting at 62.
(16:27):
Right.
Once again, I think this is going to
go back to the question that always goes
in the beginning of a social security decision
is how long am I going to live?
Right.
Yeah, exactly.
Certainly in the early years, it's beneficial if
you get the average return of a, you
know, a portfolio.
Yeah.
Another clue, another, um, your, your point about
(16:48):
sequence and returns and so forth, that's certainly
relevant.
Right.
Um, but another consideration for people to think
about is, uh, are they working?
That's a big one.
Um, even part-time, uh, you know, there's
a threshold by which if you exceed a
certain amount of income between that 62 to
full retirement age, let's call it 67.
(17:11):
Um, then you're going to, uh, be penalized
and, and lose, uh, essentially a lot of
that social security will become taxable, right?
Yeah.
And that is a, it's kind of an
unspoken mistake that so many people make.
I'm in Florida as our regular listeners know.
(17:32):
And I know a lot of people who
retire to Florida before full retirement age, and
they're taking their social security.
I mean, the data is pretty strong.
That shows a lot of people take social
security at 67 and 62.
62 I think is, uh, is very common,
right?
The winner or the loser.
(17:52):
It's, it's the choice that a lot of
people make.
Yeah.
And so they make it, they retire, not
just to Florida, but they retire and they
think that they're not going to work.
Right.
And a lot of people go back to
work either because of social reasons, you know,
they want that interaction or they want, or
extra money, inflation, you have some people back
to work, whatever the, whatever the reason is,
(18:15):
or their employer calls them and say, Hey,
can you work halftime or whatever the situation
is, and they never knew, or they never,
they never contemplated that part of their social
security would then be subject to tax.
So the good news in that scenario is
if that happens to you, you can suspend
your benefits and there is virtue.
You can get benefit from that later on
(18:36):
when you turn it on later on, you
know, back at a full retirement age or
after, um, you know, you could, uh, benefit
from that.
I would also argue that, you know, um,
for many people when they start, uh, their
social security earlier than they, they're, they discontinue
(18:56):
work earlier.
Um, just generally not necessarily the social security
topic per se, but the notion that you're
drawing from your portfolio that much sooner, um,
that it has a compounded consequence.
Uh, it's not just, Oh, I'm not saving.
It's not just, it's not that it's not
(19:17):
growing.
It's, and then you're, you're withdrawing from it.
And there's a ripple effect that can have
a consequence to that.
So that's a little off the social security
part of this, but timing of your retirement
or lack of work perhaps, uh, can really
be affected, uh, affect some of these things.
(19:37):
And so how much you have is a
variable, right?
Uh, what are my sources of cashflow?
Do I have a pension?
Do I have other resources too, uh, could,
could be meaningful in this kind of consideration
also.
Right.
Absolutely.
And back to the tax issue and suspending,
(19:58):
which is a good option for people who
find themselves going back to work unexpectedly and
don't want to have that social security income
subject to taxation or at least part of
it in this scenario of this hypothetical idea.
Um, if you do that, then you're off
that plan because the plan is that you
(20:18):
take the money, you invest it in equity,
exposed investments to get the return.
You do not touch it until age 70
and Dave, uh, Ramsey scenario.
Yeah.
It requires a, you know, pretty rare, like
you said, level of discipline and, you know,
(20:40):
these things come up, uh, all the time,
like something happened with the car and I
recently had an issue with the tires, my
car unexpected expense, you know, and these things
will come up and then to keep using
those funds and keep investing them regardless, challenging.
I think, um, just psychologically, I think to,
to be getting that check in the, in
the mail every month or, um, you know,
(21:02):
it's just, people are more likely to spend
it than, than save it on the, on
the whole.
And I think, yeah, I've read some, some
research around, uh, that kind of thinking and,
you know, when people are getting those monthly
checks, it's more likely that they're going to
feel that they can spend it.
Well, yeah, go ahead, Russ.
Sorry.
No, I think it's just, yeah, it just
(21:23):
speaks to what you were saying that, um,
you know, it's a, it's a smaller percentage
of people that are going to be likely
to do, to do this successfully and, and
capitalize on that difference in Delta.
I mean, you gotta remember the category that
Mr. Ramsey is talking about, that he's talking
about a category of people who don't need
the money, right?
Yeah.
(21:43):
So if, if you don't need the money,
that, that doesn't mean you're flush, but you
know, you just don't need it at the
moment for cashflow and that, that $2,000
pops in your checking account each month and
your neighbors are planning a cruise and they
ask you, and it's like, well, we couldn't
normally afford to take an extra cruise, but
this $2,000 is just sitting there.
(22:05):
We can skip a month, use it for
that.
I think that's, it's going to creep, right?
It's gonna, some of these discretionary things or
maybe an emergency, as you said, um, a
lot of people, most people would be tempted
to miss a couple months and take a
portion of it, which skews the whole model.
Yeah.
Yeah.
You know, and I bet if we were
(22:26):
having this conversation with Dave Ramsey himself, uh,
he probably wouldn't disagree with anything we're talking
about here.
No.
You know what I mean?
The, the practical realities versus the, the true,
who's going to be disciplined about this, who
actually doesn't need the money.
Um, it's not to say that there aren't
those people out there.
I'm sure there are, and, and that could
be a better math equation.
(22:46):
There are variables though.
You have to be willing to take risk
with those funds, not just park it in
a guaranteed account.
That's right.
Where you would not necessarily get the same
kind of return as if you were to
delay on the social security decision.
Yep.
Well, this just fits Dave's entire model of
being super disciplined, whether it's debt reduction or,
(23:08):
you know, whatever it is, it's a hundred
percent in, or it doesn't work.
Yeah.
Yeah.
All right.
Well, I don't know anything you want to
take it another direction, Jeff.
No, it's, it's an intriguing, it's an intriguing
option for people who don't need the money.
It's not like you're thinking about it yourself.
No.
(23:28):
Well, you know, most things that we think
about, we think in the context of ourselves
or someone that, someone that we know, right.
A client, maybe this is a certain client
and I'm turning 62 in January.
So, but I'm still working.
There you go.
And like most good red blooded Americans, I
do not like paying taxes.
There you go.
(23:49):
Yep.
So I don't think it's, I think I
have the discipline.
If anyone would, I think Jeff, we can
agree you would.
Yeah.
But I don't think I'd consider it because
of the tax consequence.
It's a dynamic calculation.
Certainly looking at Lisa's future social security benefits,
(24:10):
my social security benefits potentially working.
It's a dynamic calculation that I'll do.
Yes.
Yeah.
I'll dig through it.
But my guess is it's, it doesn't matter
enough.
And one just final thought about why you,
I might, I'd likely won't do it is
(24:30):
we think about social security as a fixed
amount of money.
When you think about where our income comes
from, you know, if we have a pension
that's fixed so that we feel positive about
that.
Some people have sold annuities, not that we
typically recommend them, but they choose an annuity
because it's fixed.
And then we think of social security is
fixed.
And then we think of our assets, our
(24:51):
investments, our 401ks, our IRAs as money that
we will withdraw from in the future.
But we understand that's not fixed.
So you're almost adding like half of your,
whatever the number is.
Yeah.
That's one of those fixed numbers.
You're moving toward a variable.
You're throwing it into the non-fixed category,
(25:12):
right?
Even if the math works it, you know,
you're going to get this.
Yeah.
That's a good, that's a good point at
a high level, just conceptual.
Right.
Do we really, do we want to have
more money in that bucket versus the absolute
kind of ranks?
So the social security thing, you know, naturally
it brings up the whole topic of 2033
(25:34):
or whatever that, you know, maybe we won't
dig into right now, but, you know, I
just, this is one of those variables that
it leaves investors on certain about, and this
is one of the reasons I think people
will say to me frequently, well, maybe that's
a reason I should start it sooner.
Cause I don't know what's going to happen
down the road.
Will there be a reduction in social security
(25:55):
benefits if they don't address the challenge that
exists right now, which is that there's insufficient
resources to make good on the promises that
have been made.
The full benefit, right?
The full benefit.
It's not saying that there won't be benefits,
just there won't be, it wouldn't be the
full benefit.
(26:16):
I don't think that's likely to happen, but
you know, I think that's, that's another variable
I guess you could add into this equation
that might influence somebody's judgment based on how
they see what's going to happen with social
security benefits in the future.
Yeah.
I remain fully committed to my opinion of
if a certain political party allowed social security
(26:38):
not to pay the full benefits, that would
be the end of that political party.
Yeah, certainly for a long time in the
party, they are the ones labeled with responsibility
for that.
Yeah.
It would be the end of that political
party or, so I don't see it.
I get it.
You know, we need to deal with it.
And I think we will.
Probably is the, they call it the third
(27:00):
rail for a reason.
It's like everybody makes, Hey, with the other
guys trying to take your benefit, you know,
that kind of thing.
And it, it, it leads to, you know,
unnecessary stress for, for, yeah.
Yeah.
There's a lot of people that's worried about
some of this stuff.
I've had a lot of calls just recently
with all that's going on in Washington these
(27:20):
days where clients are saying, you know, is
my social security going to be disrupted?
I don't think so, you know, but I,
you know, I get why people have anxiety
around it.
There's a lot of rhetoric.
Can't guarantee it, but it's highly unlikely.
Yeah, exactly.
And that's kind of the, just as you
described it, that's how I tend to frame
it for people.
(27:41):
It's like, it would be politically unpalatable for
any, you know, anyone to try to tank
those kind of benefits that people enjoy.
Whether or not it's a good decision or
not.
I think they'll borrow money before they got
benefits.
I think so too.
I think that's the likelihood.
Well, this was an interesting thought exercise.
(28:01):
Probably a few people that could maybe benefit.
Thinking like being really disciplined, maybe inclined to
do that.
I think it's worth thinking about.
But get some help with the decision.
As you see, we were, you know, stuck
on certain parts of it as well.
We're just talking it out for the first
time.
It is not a simple math formula.
It may look like one, but it is
not.
(28:22):
Yeah, and I think it's something that, you
know, a little bit of help goes a
long way.
Right.
Interesting topic.
Thanks for bringing it up, Jeff.
Thanks all for being with us.
If you need a little help in your
financial planning or portfolio management, please reach out
to us.
That's why we're here.
We're happy to speak with you.
Until next time, everybody keeps driving for something
more.
(29:35):
Transcribed by https://otter.ai
Welcome to something more with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president, financial advisor at Wealth
Enhancement Group, one of the nation's largest registered
investment advisors.
We call it something more because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:21):
Here he is your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
All right.
Welcome everybody to another edition of something more
with Chris Boyd.
I'm Chris Boyd, certified financial planner, practitioner, and
I'm here with Jeff Perry and Russ Ball.
We are all of the AMR team at
(00:43):
Wealth Enhancement Group and so glad to have
you with us.
Hope you listen every week, share our show
and rate it always helps us.
And if you didn't know, you can find
us on video now as well as audio.
And I hope you'll take advantage of whatever
medium you enjoy.
So you can find us on our website,
(01:05):
somethingmorewithchrisboyd.com or you can check us out
through the Wealth Enhancement Group's YouTube page as
well.
Yeah.
Look for us on Facebook too.
We're back on Facebook.
If you're not already following it, put in
team AMR, Wealth Enhancement Group, and you'll find
our page.
Love it.
All right.
Hope you'll join in on some of the
things we promote and talk about.
(01:27):
Um, it's always interesting topics going on from
one, one month to the next.
There is not a shortage.
How many, so you, how many, let's see,
17, 18 years you've been doing radio and
podcast, I don't know, 1100 podcasts probably out
there.
Have you, have you ever, not ever, but
is it customary that you don't have a
(01:47):
topic in your mind?
No, there's always something of interest, whether it's
news related or just good, um, financial education
that we can talk about.
I was agreeing with you.
Like, I didn't think you, I mean, it's
always like, what should we talk about?
Not like, is there anything to talk about?
(02:09):
Exactly.
Exactly.
Well, today we've got an interesting topic.
Um, this is one of your choice.
And I was like, I don't want to
talk about that.
And as, as we're talking about, it's like,
oh my gosh, we've got a lot of,
uh, interesting points of view to consider.
So it's a topic that, you know, when
you get to be almost of the age
to accept retirement, take retirement, claim retirement, whatever
(02:32):
the word should be.
You think about it?
I mean, I'm 62 in, uh, seven months
now, eight months.
And it's like, I can take social security.
Should I, well, I know what we kind
of think about, um, as financial advisors, but
then you read something, um, which I did,
(02:54):
which is simulating this inquiry.
Yeah.
I read something from a, uh, talk radio
shock talk show host, which doesn't give them
a lot of credibility, but I generally like
him and he's a credible, uh, person in
our industry.
Dave Ramsey.
I'm a disciple, I guess you'd call it.
Um, I, I listened to the show.
(03:15):
It's enjoyable.
I like his principles, especially around debt, but
you know, I don't agree with everything that
he says, right.
I don't agree with everything you say or
Russ says.
So yes, sir, I did.
I'm sorry.
That was my inside voice coming up.
Um, no, none of us agree, but you
know, we generally have this, these broad principles
and I was of the mindset that it
(03:37):
is always, or almost if you're in good
health, it's almost always best to delay taking
your social security to your 70.
Yeah.
It's not to say that there aren't exceptions
and circumstances, but that is our default, um,
counsel is to try to wait till full
retirement age and if possible delay till 70,
(04:01):
unless I'll put in a caveat and you
have a reason to think your health might
be compromised.
Um, and similarly, you know, you have to
think in terms of not just one person,
but two people, right.
If you're married, if who has the larger
social security, uh, check that one in particular
(04:21):
is worthy of consideration for delay, uh, to
maximize the benefits so that if either one
of you lives a long, longer lifespan, that
you'd get the maximum benefits.
Now we test these and, you know, look
at these circumstances.
(04:42):
I was really looking at one last night
and I ran the numbers, uh, on people
and I had them living till, you know,
94 92 and it really didn't make that
much difference whether they took it at full
retirement age or 70 normally are optimal is,
you know, somewhere closer to 70 when you
have a long lifespan assumed like that.
(05:03):
Right.
And just the math was like, nah, it's
not that much of a difference.
Right.
So in that scenario, I kind of defaulted
to full retirement age, but generally I would
be expecting most people benefit by a delay
or the idea of trying to maximize, because
by spending more of your own money early
(05:25):
in retirement, you might spend less of your
money over retirement and that's the premise you're
going to challenge.
I am.
And I just want to throw one more
caveat out.
There is most financial decisions.
You know, we meet with a lot of
clients and they're a theme certainly, but most
of them are very individualized.
(05:46):
We're all have our own unique circumstances.
I mean, you know, some people reach age
62, for example, and they are retired because
they can't work and they need the money.
Right.
So that's, that's all.
That's a very good point.
It's a very good point.
Circumstances can drive this and types of resources,
(06:08):
more pension, less pension, more assets, less assets.
There are variables that can drive this and
your point about the kind of work one
does and the demands that that can have,
you know, there there's, it's not one size
fits all to your point.
Right.
So if you hear something that doesn't make
(06:29):
sense, we agree and we can help you.
You know, we help our clients when they
come to this decision point in their lives
and say, you know, I'm thinking of retiring
at age, whatever.
Um, I'll have my 401k.
I have this, maybe I have a small
pension.
These are my assets.
When should I take social security?
And it is always, always an individual analysis
(06:51):
of their facts and circumstances, their goals, their
debt, their cash flows, everything before we give
somebody advice.
So we're not giving any broad advice here.
Uh, well said.
Um, I think, you know, the, uh, keep
that in mind.
You know, we want to, anytime we want
to make decisions like this, cause these are
very significant to your financial life, it needs
(07:15):
to be in the context of a financial
plan and the, uh, the influences of all
the moving parts that can help to define
what's the right answer, what's the best possibility.
And there's lots of room for, um, personal
preferences in some of this.
(07:35):
Right.
And I, I'm going to say, oh, there's
a right answer or the wrong answer.
There's not really a right answer or wrong
answer.
That's, you know, absolute.
It's a matter of weighted priorities.
Right.
And choices, you know what I mean?
So, uh, uh, by making this decision, there's
a consequence is that fate more, more or
less appealing to you.
(07:55):
Yeah.
Do you know what I mean?
Uh, so let's, let's go into why, um,
people might or might not want to start,
uh, earlier than what I'm suggesting full retirement
or, uh, even maximum, uh, retirement, uh, type
of ages as the preferred way to do
(08:15):
it.
Uh, one of them I already mentioned, and
that is, you may not have the health,
uh, you expect to live long enough to,
uh, recoup what, you know, what you don't
get by delaying and by starting, you know,
keep in mind when you start early, you
discount your social security benefit.
(08:36):
Yep.
Uh, some, some potentially as much as like
30%.
Uh, I've seen, I've seen, oh, from full
retirement age.
Yeah.
Almost 55% or something from maximum retirement
age.
Um, it was whole security turn on, you
know?
So, um, it, it's, it's, and then the
(08:58):
inflation adjustments and everything is on a smaller
amount, so it doesn't, um, you never catch
up, so to speak.
In one sense, your premise to this, from
this article is maybe there's another way to
approach this, right?
So if you are, if you don't have
a health condition and you are eligible to
(09:19):
start collecting social security benefits at 62, and
I'm going to say you're not working because
that's another thing that we can add in
later, so you're not working.
And you, so the premise from Mr. Ramsey
in his article is if you're not working
and you can collect the social security at
62 and you're not going to spend it,
(09:39):
he's very clear in his comment.
If you're just going to increase your lifestyle,
don't do it.
But if you're not going to spend it,
you have that discipline, which I think 90
% of the people, if they get a
deposit into their checking account, well, likely going
to spend it.
But yeah, I think that's the challenge with
this and you're laying it out very nicely.
(10:01):
I think that's the biggest hurdle to whether
or not this, this, this option really will
play out is will people be disciplined, not
spend that money, but actually take it and
invest it.
That's what acts that they'd have to incur,
but put it to work, uh, you know,
(10:21):
and saying, oh, if you invest it, you
know, it's going to last longer because now
it's going to grow into something more.
And then when you turn on your social
security benefits, you know, you've got this pool
of money that's also earning something.
That's right.
That's the premise of taking that $1,500,
$2,000 a month that hypothetically someone is
collecting at age 62 and putting it directly
(10:44):
into an investment account into some, uh, investment
mix.
That's right for your risk tolerance.
And that is, you know, part of that
being exposed to the equity market.
So you have some potential for gains that
it'll last longer and be something that you
could leave to your part of your legacy.
If you didn't spend it all is more
(11:07):
advantageous than waiting for a higher benefit later.
And of course, if you pass away from
62 to, you know, say 80.
Yeah.
Or, or even later, perhaps if you're actually
doing this, that's right.
It's more financially advantageous to do.
All right.
I get your point.
Um, I think I take issue with the
(11:29):
practical reality that will people actually do that?
Because I, you know, experience tends to be
that people don't tend to do that, but
that's a possibility.
Um, what about, there are some other variables
that we need to consider.
Yep.
So you look like you're about to chime
in though.
I want to give you a chance to
speak before.
Well, I was thinking, you know, you have
(11:50):
to be pretty exposed to the market to
make up the difference in the return that
you'd be getting between social security.
If you're getting, it's like a 50 something,
some odd percent difference between.
Yeah.
So you're, you're probably losing about a 6
% discount is it per year.
And then you'd be making 8% once
you get past full retirement.
Uh, so let's call it six and a
(12:12):
half or seven, six and a half, whatever
it might be.
But, you know, are you going to make
that kind of rate of return, so to
speak?
That's your point.
And, and that's not a huge timeframe, you
know, it's, it's eight years, right?
So, and you have to be willing to
take on a significant amount of risk to
get that return.
Uh, you know, are you going to be
(12:32):
putting every paycheck that you get into the
S&P 500 or I don't know, some
kind of, yeah, I follow your point.
So you have to, you have to take
that into consideration too.
Are you going to, are you going to
be willing to risk your first, you have
to be willing to save the money.
So take them, take that check and invest
it.
Then you have to be willing to see
some volatility when that money is invested.
(12:52):
Yeah.
And it's like a pretty, you know, you
have to do pretty well year over year
in that eight year timeframe to get the
returns that you'd expect, which isn't to say
that you couldn't, it's just, um, there's a,
there's a, uh, a tolerance that you'd have
to incur and to be benefiting from.
Um, okay.
(13:13):
Good, good thought.
I saw you doing the calculator over there.
So I was like, all right, he's got
something he's cooking up.
Um, I was expecting sort of like you
were doing the time value of money or
something, you know, for a second.
The calculation, just to push back a little
bit is not that straight.
Meaning at the end of the time period,
(13:34):
although you're in a decreased, you remain the
rest of your life in that decreased benefit,
it continues on, right?
So it does forever at a discount, at
a discount, but not to the full amount.
You have to do the math.
That is, you don't have to make the
(13:55):
gain.
Your point, I think, let's see if I'm
saying this the way you're intending.
So the only thing we have to consider
is the difference between 62 and 70, if
in this scenario, um, that, that, that's the
Delta or whatever that you're talking about benefit
drawback.
Just say the benefit at 62 is 1500
(14:17):
and the benefit at 70 is 3000 round
numbers.
Yeah.
Just for a ballpark.
Yeah.
Right.
So you're only the difference.
The Delta is 1500, not 3000 when you're
doing the math.
Actually, I think that even overstates it.
Sorry.
Um, cause isn't it, it's a 50%
increase in benefit.
So if it was 1500, it would be
(14:38):
3000.
That's a double, uh, the benefit, right?
Right.
And I, that's a hundred percent.
Uh, so it'd be like, it'd be, you
know, seven 50 more.
I'm going to age 70, not age 66
or 67.
Yeah.
All right.
I think we're saying the same thing.
I just think we're coming up with a
(14:59):
different number.
That's fine.
I get the Delta, whatever it is.
And that's a variable number too.
It's not a simple double or 50%
or whatever the calculation is.
It is your individual Delta.
Yeah.
I mean, that is calculable and it is
consistent.
The, what those particulars numbers are will differ
(15:21):
from one person to the next, right?
All I'm saying is you don't have to
just to stick with my numbers.
If it's 1500 and then 3000, the money
that you save and invest for those years,
you're only having to make up in your
investment gains, what you would have gotten if
you had waited.
(15:45):
Um, so that is the, in your numbers,
which, you know, we can discuss whether the
right numbers we should use or that's just
illustrative purposes.
It's $1,500, uh, per month.
Correct.
And I think it's actually two 20, uh,
um, it would be more like seven 50.
(16:06):
Okay.
Okay.
And in this scenario, but seven 50 a
month, we need to be saying, did, did
my accumulated wealth generates efficiently that I can
derive more than or seven 50 a month
for the rest of my life and then
have money left over.
Correct.
Starting at 62.
(16:27):
Right.
Once again, I think this is going to
go back to the question that always goes
in the beginning of a social security decision
is how long am I going to live?
Right.
Yeah, exactly.
Certainly in the early years, it's beneficial if
you get the average return of a, you
know, a portfolio.
Yeah.
Another clue, another, um, your, your point about
(16:48):
sequence and returns and so forth, that's certainly
relevant.
Right.
Um, but another consideration for people to think
about is, uh, are they working?
That's a big one.
Um, even part-time, uh, you know, there's
a threshold by which if you exceed a
certain amount of income between that 62 to
full retirement age, let's call it 67.
(17:11):
Um, then you're going to, uh, be penalized
and, and lose, uh, essentially a lot of
that social security will become taxable, right?
Yeah.
And that is a, it's kind of an
unspoken mistake that so many people make.
I'm in Florida as our regular listeners know.
(17:32):
And I know a lot of people who
retire to Florida before full retirement age, and
they're taking their social security.
I mean, the data is pretty strong.
That shows a lot of people take social
security at 67 and 62.
62 I think is, uh, is very common,
right?
The winner or the loser.
(17:52):
It's, it's the choice that a lot of
people make.
Yeah.
And so they make it, they retire, not
just to Florida, but they retire and they
think that they're not going to work.
Right.
And a lot of people go back to
work either because of social reasons, you know,
they want that interaction or they want, or
extra money, inflation, you have some people back
to work, whatever the, whatever the reason is,
(18:15):
or their employer calls them and say, Hey,
can you work halftime or whatever the situation
is, and they never knew, or they never,
they never contemplated that part of their social
security would then be subject to tax.
So the good news in that scenario is
if that happens to you, you can suspend
your benefits and there is virtue.
You can get benefit from that later on
(18:36):
when you turn it on later on, you
know, back at a full retirement age or
after, um, you know, you could, uh, benefit
from that.
I would also argue that, you know, um,
for many people when they start, uh, their
social security earlier than they, they're, they discontinue
(18:56):
work earlier.
Um, just generally not necessarily the social security
topic per se, but the notion that you're
drawing from your portfolio that much sooner, um,
that it has a compounded consequence.
Uh, it's not just, Oh, I'm not saving.
It's not just, it's not that it's not
(19:17):
growing.
It's, and then you're, you're withdrawing from it.
And there's a ripple effect that can have
a consequence to that.
So that's a little off the social security
part of this, but timing of your retirement
or lack of work perhaps, uh, can really
be affected, uh, affect some of these things.
(19:37):
And so how much you have is a
variable, right?
Uh, what are my sources of cashflow?
Do I have a pension?
Do I have other resources too, uh, could,
could be meaningful in this kind of consideration
also.
Right.
Absolutely.
And back to the tax issue and suspending,
(19:58):
which is a good option for people who
find themselves going back to work unexpectedly and
don't want to have that social security income
subject to taxation or at least part of
it in this scenario of this hypothetical idea.
Um, if you do that, then you're off
that plan because the plan is that you
(20:18):
take the money, you invest it in equity,
exposed investments to get the return.
You do not touch it until age 70
and Dave, uh, Ramsey scenario.
Yeah.
It requires a, you know, pretty rare, like
you said, level of discipline and, you know,
(20:40):
these things come up, uh, all the time,
like something happened with the car and I
recently had an issue with the tires, my
car unexpected expense, you know, and these things
will come up and then to keep using
those funds and keep investing them regardless, challenging.
I think, um, just psychologically, I think to,
to be getting that check in the, in
the mail every month or, um, you know,
(21:02):
it's just, people are more likely to spend
it than, than save it on the, on
the whole.
And I think, yeah, I've read some, some
research around, uh, that kind of thinking and,
you know, when people are getting those monthly
checks, it's more likely that they're going to
feel that they can spend it.
Well, yeah, go ahead, Russ.
Sorry.
No, I think it's just, yeah, it just
(21:23):
speaks to what you were saying that, um,
you know, it's a, it's a smaller percentage
of people that are going to be likely
to do, to do this successfully and, and
capitalize on that difference in Delta.
I mean, you gotta remember the category that
Mr. Ramsey is talking about, that he's talking
about a category of people who don't need
the money, right?
Yeah.
(21:43):
So if, if you don't need the money,
that, that doesn't mean you're flush, but you
know, you just don't need it at the
moment for cashflow and that, that $2,000
pops in your checking account each month and
your neighbors are planning a cruise and they
ask you, and it's like, well, we couldn't
normally afford to take an extra cruise, but
this $2,000 is just sitting there.
(22:05):
We can skip a month, use it for
that.
I think that's, it's going to creep, right?
It's gonna, some of these discretionary things or
maybe an emergency, as you said, um, a
lot of people, most people would be tempted
to miss a couple months and take a
portion of it, which skews the whole model.
Yeah.
Yeah.
You know, and I bet if we were
(22:26):
having this conversation with Dave Ramsey himself, uh,
he probably wouldn't disagree with anything we're talking
about here.
No.
You know what I mean?
The, the practical realities versus the, the true,
who's going to be disciplined about this, who
actually doesn't need the money.
Um, it's not to say that there aren't
those people out there.
I'm sure there are, and, and that could
be a better math equation.
(22:46):
There are variables though.
You have to be willing to take risk
with those funds, not just park it in
a guaranteed account.
That's right.
Where you would not necessarily get the same
kind of return as if you were to
delay on the social security decision.
Yep.
Well, this just fits Dave's entire model of
being super disciplined, whether it's debt reduction or,
(23:08):
you know, whatever it is, it's a hundred
percent in, or it doesn't work.
Yeah.
Yeah.
All right.
Well, I don't know anything you want to
take it another direction, Jeff.
No, it's, it's an intriguing, it's an intriguing
option for people who don't need the money.
It's not like you're thinking about it yourself.
No.
(23:28):
Well, you know, most things that we think
about, we think in the context of ourselves
or someone that, someone that we know, right.
A client, maybe this is a certain client
and I'm turning 62 in January.
So, but I'm still working.
There you go.
And like most good red blooded Americans, I
do not like paying taxes.
There you go.
(23:49):
Yep.
So I don't think it's, I think I
have the discipline.
If anyone would, I think Jeff, we can
agree you would.
Yeah.
But I don't think I'd consider it because
of the tax consequence.
It's a dynamic calculation.
Certainly looking at Lisa's future social security benefits,
(24:10):
my social security benefits potentially working.
It's a dynamic calculation that I'll do.
Yes.
Yeah.
I'll dig through it.
But my guess is it's, it doesn't matter
enough.
And one just final thought about why you,
I might, I'd likely won't do it is
(24:30):
we think about social security as a fixed
amount of money.
When you think about where our income comes
from, you know, if we have a pension
that's fixed so that we feel positive about
that.
Some people have sold annuities, not that we
typically recommend them, but they choose an annuity
because it's fixed.
And then we think of social security is
fixed.
And then we think of our assets, our
(24:51):
investments, our 401ks, our IRAs as money that
we will withdraw from in the future.
But we understand that's not fixed.
So you're almost adding like half of your,
whatever the number is.
Yeah.
That's one of those fixed numbers.
You're moving toward a variable.
You're throwing it into the non-fixed category,
(25:12):
right?
Even if the math works it, you know,
you're going to get this.
Yeah.
That's a good, that's a good point at
a high level, just conceptual.
Right.
Do we really, do we want to have
more money in that bucket versus the absolute
kind of ranks?
So the social security thing, you know, naturally
it brings up the whole topic of 2033
(25:34):
or whatever that, you know, maybe we won't
dig into right now, but, you know, I
just, this is one of those variables that
it leaves investors on certain about, and this
is one of the reasons I think people
will say to me frequently, well, maybe that's
a reason I should start it sooner.
Cause I don't know what's going to happen
down the road.
Will there be a reduction in social security
(25:55):
benefits if they don't address the challenge that
exists right now, which is that there's insufficient
resources to make good on the promises that
have been made.
The full benefit, right?
The full benefit.
It's not saying that there won't be benefits,
just there won't be, it wouldn't be the
full benefit.
(26:16):
I don't think that's likely to happen, but
you know, I think that's, that's another variable
I guess you could add into this equation
that might influence somebody's judgment based on how
they see what's going to happen with social
security benefits in the future.
Yeah.
I remain fully committed to my opinion of
if a certain political party allowed social security
(26:38):
not to pay the full benefits, that would
be the end of that political party.
Yeah, certainly for a long time in the
party, they are the ones labeled with responsibility
for that.
Yeah.
It would be the end of that political
party or, so I don't see it.
I get it.
You know, we need to deal with it.
And I think we will.
Probably is the, they call it the third
(27:00):
rail for a reason.
It's like everybody makes, Hey, with the other
guys trying to take your benefit, you know,
that kind of thing.
And it, it, it leads to, you know,
unnecessary stress for, for, yeah.
Yeah.
There's a lot of people that's worried about
some of this stuff.
I've had a lot of calls just recently
with all that's going on in Washington these
(27:20):
days where clients are saying, you know, is
my social security going to be disrupted?
I don't think so, you know, but I,
you know, I get why people have anxiety
around it.
There's a lot of rhetoric.
Can't guarantee it, but it's highly unlikely.
Yeah, exactly.
And that's kind of the, just as you
described it, that's how I tend to frame
it for people.
(27:41):
It's like, it would be politically unpalatable for
any, you know, anyone to try to tank
those kind of benefits that people enjoy.
Whether or not it's a good decision or
not.
I think they'll borrow money before they got
benefits.
I think so too.
I think that's the likelihood.
Well, this was an interesting thought exercise.
(28:01):
Probably a few people that could maybe benefit.
Thinking like being really disciplined, maybe inclined to
do that.
I think it's worth thinking about.
But get some help with the decision.
As you see, we were, you know, stuck
on certain parts of it as well.
We're just talking it out for the first
time.
It is not a simple math formula.
It may look like one, but it is
not.
(28:22):
Yeah, and I think it's something that, you
know, a little bit of help goes a
long way.
Right.
Interesting topic.
Thanks for bringing it up, Jeff.
Thanks all for being with us.
If you need a little help in your
financial planning or portfolio management, please reach out
to us.
That's why we're here.
We're happy to speak with you.
Until next time, everybody keeps driving for something
more.
(29:35):
Transcribed by https://otter.ai
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