December 21, 2022 • 35 mins
You may be getting ready to tuck into your favorite holiday movie, but not quite yet! There’s more to learn about Social Security, thanks to Retirement Equals Freedom’s very special Part III episode all about the gift that keeps on giving!
Host Josh Bretl, founder of FSR Wealth Strategies, is closing out the year with a recap and deeper dive into some of the variables we all need to weigh when deciding when to tap federal benefits.
He’s explaining the potholes that often trip up retirees and suggesting strategies to consider when making these all-important decisions, including a look at the financial legacies we want to leave and the amount of taxes we want to pay (or avoid paying) Uncle Sam.
You’ll also enjoy some fun revelations about how Josh and Dave (that’s co-host, high school bestie and all-around impresario Dave Schmidt) relax their minds (interesting revelations!) and why having a good coach is important when it comes to making tactical decisions (about both passing the ball and maximizing our assets in retirement).
Time to celebrate the season with more Retirement Equals Freedom wisdom – and a cup of good cheer! And we look forward to seeing you in the year ahead!
This episode was fueled by Cometeer Coffee!
Click here to learn more about or listen to previous episodes of The Retirement Equals Freedom Podcast. Don’t forget to sign up for the show’s new weekly email at this link and definitely come join the conversation at our new private Facebook group, which you can find here.
Click here to explore the services that FSR Wealth Strategies offers and schedule a discovery call with one of the team’s CPAs. When it comes to living your best life, it’s never too early to get started!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Josh Bretl (00:01):
I'm actually going to argue this will
be the most importantepisode on social security.
And when you shouldtake social security?
I tell this toclients all the time.
It's equal part science to art.
It's not a defined, " Thisis when you should do it."
It's also not like somefloofy like, "Ooh, what about
this, or this, or this?"
(00:21):
backed by good logic andgood numbers, but there's
a lot of unknowns that youhave to kind of adjust for.
And so today I want to talkabout those variables that
people don't think about.
Dave Schmidt (00:35):
Get your eggnog ready, y'all, cuz there's more
to learn about social security!
In part three of everyone'sfavorite topic, Josh dives
deep into things most peopledon't think about, before they
turn on their social security.
What are some common pitfallsthat trip up retirees?
(00:55):
Are there any non-mainstreamstrategies that could help
you with this decision?
And what type offinancial legacy are you
interested in leaving?
It's time to celebrate theseason with more Retirement
Equals Freedom wisdom and fun.
This is The Retirement EqualsFreedom Podcast, and your
(01:16):
host, Josh Bretl, is the ownerof FSR Wealth Strategies.
And for the last fewdecades, Josh has been
helping fine folks like youthrive in your retirement.
And me?
Well I'm Dave.
Josh's longtime friend, co-host,and self-proclaimed Buddy the
Elf of the podcast industry.
(01:38):
So now let me, let you, letme end this introduction so
y'all can enjoy the show.
FSR Wealth Management is aregistered investment advisor
located in Elmhurst, Illinois.
Information and opinionscontained in this audio
have been arrived atby FSR Wealth advisors.
All information herein isfor informational purposes
and should not be construedas investment advice.
It does not constitute an offer,a solicitation or recommendation
(01:58):
to purchase any security.
FSR is not providing legal,tax, accounting, or financial
planning advice in this audio.
These views are as of thedate of this publication
and are subject to change.
(02:25):
Man, Josh, we areback in person and I'm
already feeling the flow.
I'm feeling thejuices going here.
Josh Bretl (02:33):
You were sick for a month kid.
Dave Schmidt (02:35):
All of November.
And listening to episode 27,you could hear it in my voice.
I sounded like death.
Josh Bretl (02:42):
And this is the only time that I talk
to you wearing headphones.
And I get your voice, thatit is in, now it just digs
deep into my ear canals.
That's kind of creepy.
Dave Schmidt (02:52):
Yeah, you like it.
Josh Bretl (02:53):
Hey Erin, last episode we gave
a shout-out to Finn.
Did he hear it?
Erin (02:58):
Yes.
He did.
He loved it.
Josh Bretl (02:59):
Did he?
Good?
Erin (03:04):
He was in the back seat and I could see his eyes.
Josh Bretl (03:04):
Right before we recorded our last
podcast, Erin told me thatFinn likes the song a lot.
We've mentionedthat last podcast.
So in my head I went, "Oh,I'm going to bring that up."
And I didn't know ifhe heard it or not.
Dave Schmidt (03:15):
Yeah.
Good.
I mean, so Finn makes number,I don't know, what is it?
74?
He's the 74th on a list ofpeople that want a signed
autograph t-shirt of me.
I think.
It's got to be up.
That number's got to be creepingtowards the seventies now.
Josh Bretl (03:29):
The other day we were, was with Maggie and she
said to me, she goes, "Dad,do you ever post something on
Facebook for your business?"
I said, "Yeah, Mags, we do."
And she goes, " Does thatmean you're internet famous?"
I was like, "No.
We get a hundred peoplethat look at it."
Dave Schmidt (03:48):
The mouths of babes.
Josh Bretl (03:50):
Well if you remember at that age,
you don't think there's aworld outside of your town.
And to know that there'sother people watching
you is kind of amazing.
Actually, I don't rememberat our age ever, I guess we
didn't have the internet so itdidn't really matter, but you
just wanted to play basketballand hang out with friends.
I don't know.
(04:10):
So Dave, I got areally funny email.
Actually Erin, got this emailand she forwarded it to me.
And this is from somebodywho I talk to, frequently.
He is an avid podcast listener.
Dave Schmidt (04:25):
My dad.
Josh Bretl (04:26):
Not your father.
I don't talk to him very often.
Dave Schmidt (04:28):
Alex.
Josh Bretl (04:29):
Not Alex.
We don't let him listento the podcast anymore.
Dave Schmidt (04:31):
Finn.
Josh Bretl (04:32):
Finn?
No.
Finn.
I don't think I've talked toFinn much in the last year or
really ever for that matter.
But this would be mysister's father-in-law, Dave.
He is an avid podcast listenerand he now has named himself
a friend of the show, and ourofficial podcast fact-checker.
Dave Schmidt (04:52):
Ooh, quite the lofty
self-proclaimed title there,
Josh Bretl (04:59):
Dave, actually, I'm a little embarrassed by
this because I talk a lot aboutsocial security and I tell a
story quite often during that,and I told it on a podcast about
the history of social securityand where the age 65 came from.
This came from a reputablesource, my story.
And it was all about ChancellorBismarck and the railroad, and
(05:20):
I didn't dig further becauseI trusted the source, but
Dave, sent us a screenshotof clipping from the Social
Security Administration website.
And I was wrong, it didnot officially come from
Chancellor Bismarck.
Dave Schmidt (05:35):
What?
Josh Bretl (05:36):
I know, and this is years and years
and years of being wrong.
I mean my kids areright, apparently because
I'm not always right.
Dave Schmidt (05:43):
Okay, so what, come on, don't
leave me hanging here.
Let's dig into this.
Josh Bretl (05:47):
So this comes from the social security website.
It's kind of interesting, butit says one persistent myth
about the German program.
It says...
We based with the Germanprogram, is that it
was adopted age 65 as astandard retirement age.
But in fact, Germanyinitially set age 70 as a
retirement age and Bismarckhimself was 74 at the time.
And it was not until27 years later, the
(06:09):
age was lowered to 65.
And by that time, Bismarck hadbeen dead for 18 years, so...
Yeah.
But it goes on furtherto say what is the
origin of 65 as the age?
And it said at that point therewas 30 states, that ran pension
systems and they had 65 aswell as railroad retirement.
A lot of the actuarialprograms inside of social
(06:32):
security is based off ofrailroad retirement, which is
pretty much social securityfor railroad employees.
They use 65.
So Dave Milburn, you areofficially our show fact-checker
and I'm embarrassed to admit it,but I'm also kind of excited.
It means we actuallyhave a fact-checker.
Dave Schmidt (06:51):
Do you think it had anything to do with the
fact I left such a lastingimpression on him when I sang
Biz Markie on the podcast?
Josh Bretl (07:00):
Dave, I'll see you at Christmas.
Let me know if you know whoBiz Markie is, because I really
don't know who it is either.
So we're good.
Dave Schmidt (07:06):
Dave.
Dave, "Oh baby, you..."
I'm not going to do it again.
You can go back and listen toepisode 25, I think six, 26.
But yeah, I've beenknown to sing a tune.
Josh Bretl (07:16):
You have been known to sing a tune.
So we were talking a littlebit earlier, we have this new
podcast table that we ordered.
It's going to be this reallynice studio, we can do this more
easily and things like that.
And it's been taking a longtime, but do you think in
the new year, and I'm goingto ask you something that
you weren't planning on, wecan commit to our listeners
(07:37):
to putting this up on video?
Dave Schmidt (07:39):
Yeah.
Josh, I...
Video, I've mentioned it before.
I adore video.
That's the whole reasonwe started a podcast.
I thought it was going to beexclusively a video podcast.
So 100%, I'm on board.
I will start going backand re-editing them for
video and slowly drippingthem onto YouTube.
Josh Bretl (07:55):
People don't even want them edited.
They just want to seeus, and our beautiful
studio that we have.
Dave Schmidt (08:01):
Actually this is studio version
four from when we started.
I think we have fourdifferent settings.
Josh, listeners, let's do video.
Absolutely.
Now, there are a few differentstyles and I won't go into
the now, but maybe I'll playwith the format a little bit.
Josh Bretl (08:14):
Man, if you think I'm boring when
I talk about taxes.
Dave, talking about videopodcast styles is really boring.
Dave Schmidt (08:21):
Oh gosh, you hurt my feelings so often.
Josh Bretl (08:24):
But, you know what's not boring, Dave?
Dave Schmidt (08:26):
Taxes.
Josh Bretl (08:27):
No, those are pretty boring.
Dave Schmidt (08:28):
Oh.
Josh Bretl (08:29):
Social security.
Dave Schmidt (08:30):
Oh my God.
Josh Bretl (08:34):
And it's so not boring, that I'm making
you do a third episode.
Don't worry, there is nofourth episode on this that
is really, really deep in theweeds, if we want to go fourth
episode on social security.
Dave Schmidt (08:49):
I have vivid memories of the
first two parts to this.
So I am on the edge of my seat.
What are we going tolearn about today?
Josh Bretl (08:57):
Well, I'm actually going to argue this
will be the most importantepisode on social security.
And when you shouldtake social security?
I tell this toclients all the time.
It's equal part science to art.
It's not a defined, "Thisis when you should do it."
It's also not like somefloofy like, "Ooh, what about
(09:19):
this, or this, or this?"
But it's equal partarts to science.
It's backed by good logicand good numbers, but there's
a lot of unknowns that youhave to kind of adjust for.
And so today I want to talkabout those variables that
people don't think about.
So the last episode, wetalked about some of the
acronyms, PIA and FRA.
(09:40):
We talked about how socialsecurity is calculated.
We talked about whathappens if you wait
longer, if you start early.
We talked a little bitabout spousal income, but
there's other things thatgo into that decision-making
process, that you have totake into consideration.
Dave Schmidt (09:58):
Cool.
Josh Bretl (09:59):
This episode hopefully can drive home
all of the things thatwe talked about before.
Social security is a large partof most people's retirement.
In fact, for well over 90%of the population, it can
represent the vast majority ofsomeone's retirement income.
And so that decision is notsomething to be made lightly.
(10:20):
And there are lots ofcalculators out there on
Google that you can go outto and type in, "When should
I take social security?"
And where I find the mostvalue in those calculators,
is if you have a complexsocial security situation.
So if you have a pension likea teacher in Illinois, but you
also worked on the side, soyou have other earned income.
Or if you have a husbandand wife and one has a big
(10:44):
social security one hasa small social security.
I mean, there's some thingsthat can be really helpful for.
But what that's going totell you is always how
to take the most moneyfrom the US government.
What our argument is, is thatit's not how much money you can
get from the Uncle Sam, but it'show secure and how comfortable
you can make your retirementutilizing social security.
(11:07):
So does that make sense?
Dave Schmidt (11:08):
Makes sense.
I do love the opening quoteI put from last episode.
You said people think they wantto get the most out of social
security, but that's not,that should not be their goal.
Josh Bretl (11:17):
Yeah.
I'm not saying it's a mini,you don't want to minimize it.
You need to know how itworks, but there's other
things that go into it.
So let's get intoa few of those.
First is, you justplain need the money.
There have been numerous timeswhere we've talked to someone in
their mid-sixties and maybe theyjust got laid off, maybe they've
(11:41):
been retired and they aredrawing down assets like crazy.
They're spending their savings,they're spending their 401k
and they don't have a tonof it, but they're trying
to wait and wait and waitand take social security.
We've even seen situationswhere people are going into
debt, they're putting moneyon credit cards because
they don't have the income.
If that's the case,start social security.
(12:04):
I mean you need to live, Buttaking into consideration
your other assets.
So knowing what else youhave, because this is where
the part art comes into play.
You don't have tostart social security.
You can draw down yourother assets and if you
have other assets thatyou want to draw down.
So if you want to draw down your401k or if you want to draw down
(12:25):
your savings account or whateverthey may be, that allows you
to let social security grow.
But you will getless years of it.
All right?
So knowing what otherassets you have, making sure
they all work together andcoordinating the distribution
is extremely important.
So this is where we'vetalked about this on a
(12:46):
prior episode, having anincome plan really matters.
So tying social security in towhere your income comes from,
is probably one of the singlemost important things you can
do in retirement planning.
Dave Schmidt (13:01):
Yeah.
Sure.
Josh Bretl (13:05):
Now, here's another one that very
few people think about.
Is it important for you toleave money to your kids or
a charity or a loved one?
Or whatever it might be.
Dave Schmidt (13:17):
Or in your case, a really good friend
you've known since highschool and you love dearly.
Josh Bretl (13:21):
Yes.
Yes.
In that case.
Murray, really I wantto take care of him.
Dave Schmidt (13:26):
Oh no, that hurt.
Josh Bretl (13:29):
But there's a lot of people who, they want to
leave money to their kids.
They want to leave money totheir grandkids, they want to
take care of somebody else.
When you start social security,you don't have a beneficiary.
The only person who benefitsfrom you waiting is your spouse.
You need to take intoconsideration both
people's longevity.
But let's say you wantto leave money to Landon.
All right?
You've got some money andyou say, "Hey, I'm going to
(13:51):
wait till I'm 70 to startsocial security because
that's what the Googlecalculators tell me to do."
And between 65 and 70, youneed to spend down your
massive 401k you built up.
So your 401k, let's, I'musing round numbers here,
starts at a million bucks.
And at age 65 and you haveto draw down five years
(14:12):
worth to get to age 70.
All right?
Now, let's say you needed60,000 bucks a year.
Dave Schmidt (14:18):
To live.
Josh Bretl (14:19):
To live.
Now, because you haven't startedsocial security, it's all
got to come out of your 401k.
So that's 60,000 bucks a year.
Now, your 401k, let's saybecause of market fluctuations
and everything is now $800,000.
Dave Schmidt (14:31):
Multiply that by 20, if you're talking
about me personally.
Josh Bretl (14:33):
Yeah.
Personally.
Yeah.
Personally.
But that $800,000, you can't getback what you've spent there.
And so now you at age 70, youdon't have to take out as much.
Maybe now you're only taking out$20,000 a year because you've
got social security to take up-
Dave Schmidt (14:48):
I see a good chunk of that.
Gotcha.
Josh Bretl (14:49):
But you're starting from $800,000, whereas when, and
then at some point in time youpass away, you have a smaller
amount most likely that it'sgoing to be left to Landon
and your other loved ones.
Dave Schmidt (15:02):
And just to be clear, social security,
unlike a pension, does notpass down to beneficiaries.
Josh Bretl (15:08):
And pensions usually don't either except for spouses.
Spouses, do have acontinuation on social
security in most pensionsdepending upon the election.
Dave Schmidt (15:18):
Got it.
Josh Bretl (15:19):
All right?
But let's say, you startat 65 and or you start
your social security at 65.
Now, you're going to get less.
Let's say you're onlygoing to get $30,000 as
opposed to 40,000 bucks.
But now we only have todraw down $30,000 in.
So we're drawing down lessmoney, which leaves a larger
(15:39):
pot available to earn andto grow, and at some point
in time when you pass away,you will pass away with
a larger chunk of money.
Dave Schmidt (15:48):
I see.
I see.
Josh Bretl (15:51):
Now, another consideration in this, and it
kind of goes along with it, iswe're seeing this a lot right
now, is market fluctuations.
We talk with retirees a lotabout sequence of returns risk,
where when you're drawing moneyout, if you start in a down
market, it has a huge negativeimpact on your retirement.
Well if you start socialsecurity, you don't have
(16:12):
to draw down as much and itdoesn't have as great of a
sequence of returns risk.
So like the volatile marketthat we're having right now,
for a lot of our clients turningsocial security on, even though
it may get them less socialsecurity in the long run,
provides a heck of a lot moresecurity because we don't have
as much sequence of returns riskin the assets being taken out.
Dave Schmidt (16:34):
Ooh man, this is getting deep.
I like it.
Josh Bretl (16:37):
So I mean, Google's not going to tell you that.
Google doesn't know what'sthe volatility in the market
and what are you spendingand where's your money coming
from and all that stuff.
This is where the equal partsart to science comes into play.
Dave Schmidt (16:48):
This is why I still use AOL
as my search engine.
They tell you thisstuff specifically.
Josh Bretl (16:57):
I want to know how many of our listeners still
have an AOL email account.
The last thing I want totalk about today, I think we
need a little bit of Alex.
Alex (17:09):
Hashtag tax nerd.
Josh Bretl (17:11):
Because even with social security, taxes
come into consideration.
Dave Schmidt (17:15):
I love taxes, Josh.
Josh Bretl (17:17):
You never thought you would ever
have a career where youcared so much about taxes?
Dave Schmidt (17:23):
I was doing some research.
I think I might open up a taxrelated t-shirt shop online.
I think I can make it huge.
People just love to wear taxrelated quotes on their shirts.
Prove me wrong.
Josh Bretl (17:39):
Well, let's talk about the two tax
considerations becausethey're a little different,
but they do go hand in hand.
The first is what wecall strategic tax
bracket management.
And with 401ks and with IRAsthat money is yet to be taxed.
So here's what we see quiteoften will happen and this
(17:59):
is a great situation to bein, but you could be better.
You retire in your mid to latesixties and you have enough end
savings or whatever it might be.
You don't need to spend your401ks or IRAs and you don't
turn social security on.
Both of those aregood decisions.
But you are really happybecause you have minimal
(18:19):
taxes, because you're not,don't have wages, you might
have interest dividends andcapital gains, but if you can
keep your income low enough,those are negligible and you're
just living pretty because,"Hey, I don't have wages, I
don't have social security.
I'm not taking moneyout of my IRA and 401k
because that's taxed."
Dave Schmidt (18:38):
Life is good.
Josh Bretl (18:39):
But then all of a sudden you get to RMD age and
at RMD age, all of a suddenyour social security gets taxed.
Your capital gains and yourdividends get a higher tax rate.
And now because of all ofthat, it throws your IRA
and 401k distributionsinto a higher tax bracket.
(18:59):
So you went from zero tothe worst possible case
scenario really fast.
And you were feeling really gooda few weeks ago, a few months
ago, a few years ago, and nowyou're really, really hurting.
So what we preach a lota strategic tax bracket
management where you wantto recognize those taxes.
So one of the benefits todelaying social security is it
(19:19):
allows you to do larger Rothconversions because you're not
collecting social security,because social security does
get added to your income.
Okay?
So by doing that, it does allowyou to do more Roth conversions.
Now, that is it pales incomparison to the taxation
on social security.
Dave Schmidt (19:39):
Is that the second part?
Josh Bretl (19:40):
That's the second part.
This is part-
Dave Schmidt (19:41):
that's taxation on social security.
Josh Bretl (19:43):
Taxation on social security, because social
security, it is that FICA taxyou see on your paycheck and
that money has yet to be taxed.
It's not like your 401k,it's not like your IRA.
That's money that'syet to be taxed.
And when social security wassigned to the law in 1935,
President Roosevelt promisedus that we'd never pay taxes
on social security, whilethose rules have changed twice.
(20:06):
And now we have what we callthe provisional income rule.
And so if your income islow enough, if you can keep
your income low enough andfor a married couple it
comes to about $42,000.
And so how they do thatis they take half of
your social security andpretty much all your other
income and they add it up.
And if you can keep it lessthan $42,000, you can get
(20:26):
away with zero to minimaltax in your social security.
And for a single personthat number's 34,000.
Now, what happens though iswith some strategic planning,
you're able to keep your socialsecurity low enough or even
time it to where we can keepyour provisional income low
and you'll pay no taxes onyour social security forever,
for however, as long you live.
(20:48):
But if you don't do anything upto 85% of your social security
may be added to your income.
So that could be, dependingon what it is, that could
be an extra six to $12,000 ayear in taxes that you pay.
Which means that money hasto come from somewhere else.
So that's a legitimate taxthat for a lot of people
you could avoid if youdo some planning with it.
(21:08):
And timing of when you take outsocial security can impact that
provisional income calculation.
So that's a big one that very,very few people talk about
or think about, and Googledefinitely doesn't look at.
Dave Schmidt: Definitely not Google. (21:22):
undefined
We had an episode wherewe talked about where
physically to retire?
What state, if you'regoing to stay in the US?
So we're talking all aboutall these taxes and whatnot.
Does that also play a factorinto this conversation?
Josh Bretl (21:37):
It can.
I mean, it really can.
So let's say you live ina state that taxes social
security and there's lessstates that tax social security.
A lot more states taxedretirement income than
tax social security.
But let's say you're goingto move to a state that
doesn't tax social security.
Maybe you want to wait a littlebit because you'll get more
money, but that's not as bigof a consideration, that's
more of a consideration asto where, And I did find out
(21:59):
recently, because we havea clients moving to Italy.
Social security is one of thefew things Italy doesn't tax.
Dave Schmidt (22:05):
Oh wow.
Josh Bretl (22:06):
I mean that's one benefit.
Italy taxes the snot out of you.
So that's a good one.
Dave Schmidt (22:09):
But I remember that, wasn't
it number 50% or higher?
Josh Bretl (22:12):
It's 43% for where this client is moving to.
Dave Schmidt (22:15):
Okay.
So it is so fascinating.
Josh Bretl (22:17):
It's crazy.
Yeah.
To wrap up our social securitytalk before I get to know
you a little bit better.
Dave Schmidt (22:26):
Yeah.
Because you barely know me.
Josh Bretl (22:27):
Barely.
Yeah.
People have to take all ofthese things into consideration.
It's not black andwhite for most people.
There are occasions whereit's more black and white,
but all of these thingshave to come into play.
And working with somebody whospecializes and works with
social security day in andday out is immensely helpful.
(22:48):
So we get a lot of clients whodid quite well their entire
lives, we're always able tomanage a portfolio, but how do
you coordinate taxes and socialsecurity and income and all that
stuff in your consideration?
That it's normal, it'sokay to ask for help
at that point in time.
this is why we specialize inretirees in our office, simply
because these variables becomeso much harder to manage at
(23:10):
that point in time in your life.
Dave Schmidt (23:12):
Let me reiterate something that
you all should know by now.
When Josh says, "Wehere in the office."
Not me.
If you come in...
Josh Bretl (23:20):
You can see Dave if you want.
It's like a circus animal.
We kind of keephim caged up but...
Dave Schmidt (23:25):
I'm Josh's shining new pet.
Yeah, no, don't ask mequestions on this because
I'll run away, screaming.
Josh Bretl (23:34):
But I am impressed.
I mean, I was interestedsitting here thinking about
this, your knowledge ofour old shows and stuff.
I feel like you've learnedmore financial topics just
doing this podcast with methan I ever thought possible.
Dave Schmidt (23:45):
Yes.
Those are three niceconsiderations we
got going on there.
However, this is better.
"Hey Mr.
Josh, let's take a break.
You've been talking for solong and my ears are sore.
Let's not make them snore.
Listening shouldn't be a chore.
So let's get to knowJosh and Dave and watch
(24:07):
our ratings soar!"
Josh Bretl (24:10):
The bird's my favorite.
Dave Schmidt (24:14):
I think you actually started
the bird last week.
I think you did a cuckoo?
Josh Bretl (24:18):
Was that me on the cuckoo?
Dave Schmidt (24:19):
I think it was you.
Josh Bretl (24:20):
I heard it on the show.
Dave Schmidt (24:22):
Yeah.
Josh Bretl (24:22):
I generally don't like to talk over those things
because I don't find myselffunny in those situations.
Dave Schmidt (24:26):
But it was really good.
How do you feel-
Josh Bretl (24:32):
cuckoo!
... Dave Schmidt (24:33):
about me leaving in the part where
I almost died on camera?
I thought...
Josh Bretl (24:38):
I did laugh at that.
Dave Schmidt (24:39):
It was so obnoxious, but I just couldn't
find it in me to delete that.
So I left it in.
Josh Bretl (24:45):
Oh man.
Dave Schmidt (24:47):
I'm still finding chunks of coffee all over my
floor and my desk at home.
Josh Bretl (24:51):
If we get this new podcast desk and you spit
coffee out of your nose and onall over it, I am really upset.
Dave Schmidt (24:56):
I'm in trouble.
I get it.
All right.
What you got for me, Josh?
Because...
Josh Bretl (24:59):
All right.
Dave Schmidt (25:00):
Yes, you will not let me choose cards anymore, so.
Josh Bretl (25:02):
I won.
I'd like to be in charge of it.
So now you and I haveboth talked about this.
We can both get stuckin our own head.
And so I was kind of curiousto find out what you do here.
So here's the question.
What do you do when you wantto get out of your own head?
Dave Schmidt (25:19):
What do I do when I want to
get out of my own head?
It has to just be one things,I do kind of have two go-tos.
Josh Bretl (25:28):
Yeah.
Look, give it to me.
I could learn a lot here.
Dave Schmidt (25:30):
The first is, I am a big meditation guy.
Josh Bretl (25:36):
I didn't...
Really?
Dave Schmidt (25:36):
Yeah.
So I'm not your typical,sit down and a pose, hold
your fingertips together.
But I have been this last yearjust been relying a lot on these
different apps on my phone.
It could be-
Josh Bretl (25:51):
which apps do you like?
Dave Schmidt (25:52):
I like Calm.
I like Insight Timer.
So yeah, I love to meditate.
Could even be two minutes.
I found that it doesn'thave to be so formal.
You could just literallyjust close your eyes and
just breathe for a fewminutes and you're good.
The other one is video games.
I'm still a kid atheart, so that just
helps me just zone out.
Josh Bretl (26:09):
Zone out.
Dave Schmidt (26:10):
Yep.
The world goes away.
Unfortunately, I found myselfplaying until two o'clock in
the morning the other nightand I woke up realizing, "Yeah,
I'm not 22 years old anymore.
Can't be doing that crap."
So that's a great questionJosh, how about you?
What do you do toclear your head?
Josh Bretl (26:25):
Well, I too meditate.
I can tell when I don't doit enough because my head
gets cloudy and crazy.
But actually in the summer whenit's nice out, I go, I'll get
up early and go for a long walk.
And there's a spot atElmhurst College that it
sits right in the quad.
It kind of backs up into acorner and you're surrounded
by bushes and you look outover the quad and you see
(26:47):
Hammerschmidt Chapel overthere, which is really pretty.
And I can sit there,5:30 in the morning.
I'll meditate for 20 minutesor so and then I just kind
of sit there and space out.
And you can see the sun willcome up and it comes over
and it hits Hammerschmidt,it's the most beautiful,
wonderful start to the day.
I love that.
So I didn't know youmeditate every day.
Dave Schmidt (27:04):
Yeah.
Josh Bretl (27:05):
That's actually cool.
Yeah.
See I learned somethingnew, really new about you.
Dave Schmidt (27:08):
Funny story about Hammerschmidt Chapel.
Erin, I'm not sureif you were with us.
We were leaving our annual teammeeting, and we are going to
our cars and Diane was with us.
It's you, me, Diane, and Erinand I can't remember who else.
And I'm like, "Oh!
I'm so turned around.
I just don't know whereI parked or where I am."
And Diane looks at me, shepoints, she goes, "Dave,
(27:28):
that's where you got married."
Pointing toHammerschmidt Chapel.
I'm like, "Oh.
Yeah, you're right.
My bad."
I told Carla and shecould not stop laughing.
She's like, "You idiot,how could you forget?"
I'm like, "I'm sorry itwas a long time ago."
Josh Bretl (27:43):
but the other thing I really do, because I guess
we're both giving two here, isI will actually love to cook.
And Missy will knowthis sometimes she'll be
like, "You need to cook."
And I will spend all Sundayafternoon cooking, making a
giant disaster of a mess, andit just makes me so happy.
Dave Schmidt (28:01):
Now, do you clean up your mess
or does Missy kind of...
Josh Bretl (28:04):
Well, since Missy doesn't actually listen to
this, I can say yes I do.
But if she ever does, she'dsay, "Not well enough."
Dave Schmidt (28:12):
oh God.
We have this joke where Carlacooks like her mother and it is
just hazmat city in our kitchenafter she's done kit cooking.
I mean, I never knew it took14 spoons and eight knives
just to make a pot of rice,but Carla finds a way to do it.
Josh Bretl (28:28):
Oh it does.
Not a doubt.
I mean it does.
Dave Schmidt (28:30):
It does.
Josh Bretl (28:30):
We're now living in our basement and we have a
hot plate that you can't run atthe same time and turn Zach's
fan on two stories above.
Or the Christmas lightsoutside are apparently
on the same circuit too.
So cooking becomes a lot moreof an adventure right now.
Dave Schmidt (28:48):
Yeah.
So I was just sittinghere thinking like, "Dave
relates to retirees, yeah."
There are many considerationsa retiree and soon to
be retiree must make.
And you did a great job, Josh.
I mean, I commend you forpresenting these three different
variables and considerations,but I can relate.
Josh Bretl (29:11):
Oh good.
Dave Schmidt (29:12):
There is a time circa 1997, 1998.
I'm going back there.
Josh Bretl (29:16):
Oh, we're going to high school.
Okay.
Dave Schmidt (29:17):
Going high school.
Where you and I playedbasketball together and there
were many considerations Ihad to make on a day-to-day
basis, whether it be practiceor whether it be a game.
When it came to practice, Imean, I'm not sitting here
saying it's as important asyou know, "Oh, do I have to
play basketball because oneday I'll have a kid that I have
to give my basketballs to."
(29:37):
No, it was more like, " Hmm,I see Josh over there, he's
a beefy looking fellow.
Now, we're about todo a loose ball drill.
Should I just benice or should I...
No I'm going to go tackle him."
So I made this decision totackle you in the middle of
practice to prove to you that,"I am the alpha male here, I'm
a senior, you're a junior, I'mgoing to take you down son."
So I did just that.
Now, anotherconsideration to make.
(29:58):
This is certainly way moreimportant than tackling you in
practice was, we played a fewminutes together on the court.
Not many.
A few.
And there was one point whereI said, " I could pass to Josh
or I could take the shot myselfand get just pad my stats."
And do you remember what I did?
Josh Bretl (30:15):
Oh, without a doubt.
You padded your stats.
Dave Schmidt (30:17):
Incorrect.
This one game Ipassed you the ball.
I mentioned beforein the podcast.
I passed it to you, you gotthe layup and I was mad at
you because you didn't pointto me and give me credit for
giving you that pass, butI thought, "You know what,
Dave, be the bigger man here.
You're still going toget your 14 to 16 points.
Josh, well, he doesn'tplay that often.
Let's throw him a bone."
So that was a bigconsideration I had to make.
(30:38):
So Josh, I can't imagine there'sany way possible to be in touch
with retirees as much as I am.
So what do you think?
Josh Bretl (30:49):
So David.
Dave Schmidt (30:50):
Yeah.
Josh Bretl (30:52):
We were discussing before we started the
podcast how you were goingto relate to retirees and
I thought, I know wherehe's going to go with this.
Dave Schmidt (30:58):
And, did I?
Josh Bretl (30:59):
I was right.
Dave Schmidt (30:59):
Oh, man.
Josh Bretl (31:00):
I didn't think he'd bring out the loose
ball drill again, but-
Dave Schmidt (31:05):
It's one of my finer moments in life.
Josh Bretl (31:08):
It is equal parts art to science.
For a retiree, they haveto worry about themselves
and they have to make surethat what they want to have
happen is taken care of.
And sometimes it's difficultto actually understand
what you want or whatyou need in retirement
to make those decisions.
Kind of like you onthe basketball court.
I mean, are you going forfame and glory or are you
(31:32):
going to try and win the game?
Dave Schmidt (31:35):
Or be a good teammate?
Josh Bretl (31:35):
Yeah.
I mean either way.
But even if you were tryingto be a good teammate and pass
it to me, I mean my shootingpercentage was pretty darn
low, even from 10 feet away.
So there was that toconsider too, but it's
not all black and white.
Dave Schmidt (31:50):
Yeah.
I get it.
Josh Bretl (31:51):
As we said there.
Dave Schmidt (31:52):
That's a nice gray area.
Josh Bretl (31:53):
So, I do hope that the retirees are as
happy with their decisionas you were to pass to me.
But like us on that team,we had a coach and the
coach said, "David, goodjob passing that ball."
Dave Schmidt (32:07):
He sure did.
Josh Bretl (32:08):
And you made a good decision.
Dave Schmidt (32:09):
I did.
Josh Bretl (32:10):
Well, if you retirees, if they need a coach,
now is a great time to do it.
Dave Schmidt (32:15):
Whoa.
Josh Bretl (32:16):
Did not see that one coming.
Dave Schmidt (32:17):
No.
Josh Bretl (32:17):
That one just came out of nowhere.
Dave Schmidt (32:19):
Great job, Joshua.
Josh Bretl (32:23):
Well, so we just finished our third
social security episode.
I don't have a fourth in me.
And I actually thinkthis was the best social
security episode we've done.
So hopefully your editingmakes it sound that way.
If it doesn't.
It's your fault.
Dave Schmidt (32:38):
My fault.
This episode will post afew days before Christmas.
So those that celebrateChristmas, Merry
Christmas, Happy Holidays.
All that good stuff.
I am a little shocked I didn'tget any mentions of my necklace.
Josh Bretl (32:52):
Well, I know since this isn't going on video that
I didn't have to bring it up,but this is the third time I've
seen Dave in the last week,and every single time you've
had that specific necklace on.
And what am I going to say?
I mean, that hasn'tbeen said already.
Dave Schmidt (33:08):
Right.
Yeah.
I mean, I aspire tobe like Buddy the Elf.
I'm just in theJolly Holiday spirit.
Josh Bretl (33:15):
You are a little buddy the elfish.
Dave Schmidt (33:16):
I'm a little buddy the elfish.
Yeah.
So this is not aChristmas episode per se.
I know we thought aboutdoing one like that,
but maybe next year.
Josh Bretl (33:25):
Yeah.
I mean, we wentwith taxes instead.
Dave Schmidt (33:29):
That there's a gift that keeps on giving.
But what's your go-toChristmas movie in your house?
Do you guys have one as afamily you traditionally watch?
Josh Bretl (33:38):
Well, I just learned this, that whenever
my kids go to my parents'house, they watch Elf, which
I think is kind of funny.
I didn't realize that.
My mother apparently loves Elf.
You know what they love, is onDisney they have these little,
I think they call it Mickey'sChristmas or something, and
it's three or four, 10, 15minute little things all in
(34:00):
a row, all about Christmas,and they just love it.
So it's one of their favorites.
Also, The ChristmasChronicles on Netflix.
Dave Schmidt (34:05):
Yeah, those are really good.
Yeah, Kurt Russell isthe best Santa ever.
Josh Bretl (34:09):
He is awesome in that.
Even I get stuck, I sitthere, I'm like, "Oh
man, I love the show."
Dave Schmidt (34:13):
yeah.
For sure.
We're just Christmas moviefanatics, all of them.
We watch all of them.
However, this Friday night,we just watched a Christmas
Story Christmas, it's a sequelto Christmas Story on HBO
Max, Carla and Landon fellasleep within 10 minutes
because they were overtired.
I loved it.
I had low expectations going in.
Josh Bretl (34:33):
Really?
Dave Schmidt (34:34):
I laughed so hard and through some cheesy
moments, but I thoughtit was really well done.
It did not takeitself too seriously.
Highly recommend it.
And it's safe for our kids.
I mean, there's a couple badwords, but it's a solid PG.
Christmas Story Christmas.
Yeah.
Josh Bretl (34:49):
Nice.
Dave Schmidt (34:49):
It was so good.
Josh Bretl (34:50):
Okay.
Dave Schmidt (34:51):
So anyways, Josh, I hope your kids don't
see Mama kissing Santa Claus.
And with that we will say, bye.
Holly Jolly Josh.
Erin (35:02):
That's great.
Josh Bretl (35:02):
That was a pretty good one.
Erin (35:03):
That's a good one.
Dave Schmidt (35:03):
That was a really good one.
Alex (35:04):
Hashtag tax nerd.
I'm actually going to argue this will
be the most importantepisode on social security.
And when you shouldtake social security?
I tell this toclients all the time.
It's equal part science to art.
It's not a defined, " Thisis when you should do it."
It's also not like somefloofy like, "Ooh, what about
this, or this, or this?"
(00:21):
backed by good logic andgood numbers, but there's
a lot of unknowns that youhave to kind of adjust for.
And so today I want to talkabout those variables that
people don't think about.
Dave Schmidt (00:35):
Get your eggnog ready, y'all, cuz there's more
to learn about social security!
In part three of everyone'sfavorite topic, Josh dives
deep into things most peopledon't think about, before they
turn on their social security.
What are some common pitfallsthat trip up retirees?
(00:55):
Are there any non-mainstreamstrategies that could help
you with this decision?
And what type offinancial legacy are you
interested in leaving?
It's time to celebrate theseason with more Retirement
Equals Freedom wisdom and fun.
This is The Retirement EqualsFreedom Podcast, and your
(01:16):
host, Josh Bretl, is the ownerof FSR Wealth Strategies.
And for the last fewdecades, Josh has been
helping fine folks like youthrive in your retirement.
And me?
Well I'm Dave.
Josh's longtime friend, co-host,and self-proclaimed Buddy the
Elf of the podcast industry.
(01:38):
So now let me, let you, letme end this introduction so
y'all can enjoy the show.
FSR Wealth Management is aregistered investment advisor
located in Elmhurst, Illinois.
Information and opinionscontained in this audio
have been arrived atby FSR Wealth advisors.
All information herein isfor informational purposes
and should not be construedas investment advice.
It does not constitute an offer,a solicitation or recommendation
(01:58):
to purchase any security.
FSR is not providing legal,tax, accounting, or financial
planning advice in this audio.
These views are as of thedate of this publication
and are subject to change.
(02:25):
Man, Josh, we areback in person and I'm
already feeling the flow.
I'm feeling thejuices going here.
Josh Bretl (02:33):
You were sick for a month kid.
Dave Schmidt (02:35):
All of November.
And listening to episode 27,you could hear it in my voice.
I sounded like death.
Josh Bretl (02:42):
And this is the only time that I talk
to you wearing headphones.
And I get your voice, thatit is in, now it just digs
deep into my ear canals.
That's kind of creepy.
Dave Schmidt (02:52):
Yeah, you like it.
Josh Bretl (02:53):
Hey Erin, last episode we gave
a shout-out to Finn.
Did he hear it?
Erin (02:58):
Yes.
He did.
He loved it.
Josh Bretl (02:59):
Did he?
Good?
Erin (03:04):
He was in the back seat and I could see his eyes.
Josh Bretl (03:04):
Right before we recorded our last
podcast, Erin told me thatFinn likes the song a lot.
We've mentionedthat last podcast.
So in my head I went, "Oh,I'm going to bring that up."
And I didn't know ifhe heard it or not.
Dave Schmidt (03:15):
Yeah.
Good.
I mean, so Finn makes number,I don't know, what is it?
74?
He's the 74th on a list ofpeople that want a signed
autograph t-shirt of me.
I think.
It's got to be up.
That number's got to be creepingtowards the seventies now.
Josh Bretl (03:29):
The other day we were, was with Maggie and she
said to me, she goes, "Dad,do you ever post something on
Facebook for your business?"
I said, "Yeah, Mags, we do."
And she goes, " Does thatmean you're internet famous?"
I was like, "No.
We get a hundred peoplethat look at it."
Dave Schmidt (03:48):
The mouths of babes.
Josh Bretl (03:50):
Well if you remember at that age,
you don't think there's aworld outside of your town.
And to know that there'sother people watching
you is kind of amazing.
Actually, I don't rememberat our age ever, I guess we
didn't have the internet so itdidn't really matter, but you
just wanted to play basketballand hang out with friends.
I don't know.
(04:10):
So Dave, I got areally funny email.
Actually Erin, got this emailand she forwarded it to me.
And this is from somebodywho I talk to, frequently.
He is an avid podcast listener.
Dave Schmidt (04:25):
My dad.
Josh Bretl (04:26):
Not your father.
I don't talk to him very often.
Dave Schmidt (04:28):
Alex.
Josh Bretl (04:29):
Not Alex.
We don't let him listento the podcast anymore.
Dave Schmidt (04:31):
Finn.
Josh Bretl (04:32):
Finn?
No.
Finn.
I don't think I've talked toFinn much in the last year or
really ever for that matter.
But this would be mysister's father-in-law, Dave.
He is an avid podcast listenerand he now has named himself
a friend of the show, and ourofficial podcast fact-checker.
Dave Schmidt (04:52):
Ooh, quite the lofty
self-proclaimed title there,
Josh Bretl (04:59):
Dave, actually, I'm a little embarrassed by
this because I talk a lot aboutsocial security and I tell a
story quite often during that,and I told it on a podcast about
the history of social securityand where the age 65 came from.
This came from a reputablesource, my story.
And it was all about ChancellorBismarck and the railroad, and
(05:20):
I didn't dig further becauseI trusted the source, but
Dave, sent us a screenshotof clipping from the Social
Security Administration website.
And I was wrong, it didnot officially come from
Chancellor Bismarck.
Dave Schmidt (05:35):
What?
Josh Bretl (05:36):
I know, and this is years and years
and years of being wrong.
I mean my kids areright, apparently because
I'm not always right.
Dave Schmidt (05:43):
Okay, so what, come on, don't
leave me hanging here.
Let's dig into this.
Josh Bretl (05:47):
So this comes from the social security website.
It's kind of interesting, butit says one persistent myth
about the German program.
It says...
We based with the Germanprogram, is that it
was adopted age 65 as astandard retirement age.
But in fact, Germanyinitially set age 70 as a
retirement age and Bismarckhimself was 74 at the time.
And it was not until27 years later, the
(06:09):
age was lowered to 65.
And by that time, Bismarck hadbeen dead for 18 years, so...
Yeah.
But it goes on furtherto say what is the
origin of 65 as the age?
And it said at that point therewas 30 states, that ran pension
systems and they had 65 aswell as railroad retirement.
A lot of the actuarialprograms inside of social
(06:32):
security is based off ofrailroad retirement, which is
pretty much social securityfor railroad employees.
They use 65.
So Dave Milburn, you areofficially our show fact-checker
and I'm embarrassed to admit it,but I'm also kind of excited.
It means we actuallyhave a fact-checker.
Dave Schmidt (06:51):
Do you think it had anything to do with the
fact I left such a lastingimpression on him when I sang
Biz Markie on the podcast?
Josh Bretl (07:00):
Dave, I'll see you at Christmas.
Let me know if you know whoBiz Markie is, because I really
don't know who it is either.
So we're good.
Dave Schmidt (07:06):
Dave.
Dave, "Oh baby, you..."
I'm not going to do it again.
You can go back and listen toepisode 25, I think six, 26.
But yeah, I've beenknown to sing a tune.
Josh Bretl (07:16):
You have been known to sing a tune.
So we were talking a littlebit earlier, we have this new
podcast table that we ordered.
It's going to be this reallynice studio, we can do this more
easily and things like that.
And it's been taking a longtime, but do you think in
the new year, and I'm goingto ask you something that
you weren't planning on, wecan commit to our listeners
(07:37):
to putting this up on video?
Dave Schmidt (07:39):
Yeah.
Josh, I...
Video, I've mentioned it before.
I adore video.
That's the whole reasonwe started a podcast.
I thought it was going to beexclusively a video podcast.
So 100%, I'm on board.
I will start going backand re-editing them for
video and slowly drippingthem onto YouTube.
Josh Bretl (07:55):
People don't even want them edited.
They just want to seeus, and our beautiful
studio that we have.
Dave Schmidt (08:01):
Actually this is studio version
four from when we started.
I think we have fourdifferent settings.
Josh, listeners, let's do video.
Absolutely.
Now, there are a few differentstyles and I won't go into
the now, but maybe I'll playwith the format a little bit.
Josh Bretl (08:14):
Man, if you think I'm boring when
I talk about taxes.
Dave, talking about videopodcast styles is really boring.
Dave Schmidt (08:21):
Oh gosh, you hurt my feelings so often.
Josh Bretl (08:24):
But, you know what's not boring, Dave?
Dave Schmidt (08:26):
Taxes.
Josh Bretl (08:27):
No, those are pretty boring.
Dave Schmidt (08:28):
Oh.
Josh Bretl (08:29):
Social security.
Dave Schmidt (08:30):
Oh my God.
Josh Bretl (08:34):
And it's so not boring, that I'm making
you do a third episode.
Don't worry, there is nofourth episode on this that
is really, really deep in theweeds, if we want to go fourth
episode on social security.
Dave Schmidt (08:49):
I have vivid memories of the
first two parts to this.
So I am on the edge of my seat.
What are we going tolearn about today?
Josh Bretl (08:57):
Well, I'm actually going to argue this
will be the most importantepisode on social security.
And when you shouldtake social security?
I tell this toclients all the time.
It's equal part science to art.
It's not a defined, "Thisis when you should do it."
It's also not like somefloofy like, "Ooh, what about
(09:19):
this, or this, or this?"
But it's equal partarts to science.
It's backed by good logicand good numbers, but there's
a lot of unknowns that youhave to kind of adjust for.
And so today I want to talkabout those variables that
people don't think about.
So the last episode, wetalked about some of the
acronyms, PIA and FRA.
(09:40):
We talked about how socialsecurity is calculated.
We talked about whathappens if you wait
longer, if you start early.
We talked a little bitabout spousal income, but
there's other things thatgo into that decision-making
process, that you have totake into consideration.
Dave Schmidt (09:58):
Cool.
Josh Bretl (09:59):
This episode hopefully can drive home
all of the things thatwe talked about before.
Social security is a large partof most people's retirement.
In fact, for well over 90%of the population, it can
represent the vast majority ofsomeone's retirement income.
And so that decision is notsomething to be made lightly.
(10:20):
And there are lots ofcalculators out there on
Google that you can go outto and type in, "When should
I take social security?"
And where I find the mostvalue in those calculators,
is if you have a complexsocial security situation.
So if you have a pension likea teacher in Illinois, but you
also worked on the side, soyou have other earned income.
Or if you have a husbandand wife and one has a big
(10:44):
social security one hasa small social security.
I mean, there's some thingsthat can be really helpful for.
But what that's going totell you is always how
to take the most moneyfrom the US government.
What our argument is, is thatit's not how much money you can
get from the Uncle Sam, but it'show secure and how comfortable
you can make your retirementutilizing social security.
(11:07):
So does that make sense?
Dave Schmidt (11:08):
Makes sense.
I do love the opening quoteI put from last episode.
You said people think they wantto get the most out of social
security, but that's not,that should not be their goal.
Josh Bretl (11:17):
Yeah.
I'm not saying it's a mini,you don't want to minimize it.
You need to know how itworks, but there's other
things that go into it.
So let's get intoa few of those.
First is, you justplain need the money.
There have been numerous timeswhere we've talked to someone in
their mid-sixties and maybe theyjust got laid off, maybe they've
(11:41):
been retired and they aredrawing down assets like crazy.
They're spending their savings,they're spending their 401k
and they don't have a tonof it, but they're trying
to wait and wait and waitand take social security.
We've even seen situationswhere people are going into
debt, they're putting moneyon credit cards because
they don't have the income.
If that's the case,start social security.
(12:04):
I mean you need to live, Buttaking into consideration
your other assets.
So knowing what else youhave, because this is where
the part art comes into play.
You don't have tostart social security.
You can draw down yourother assets and if you
have other assets thatyou want to draw down.
So if you want to draw down your401k or if you want to draw down
(12:25):
your savings account or whateverthey may be, that allows you
to let social security grow.
But you will getless years of it.
All right?
So knowing what otherassets you have, making sure
they all work together andcoordinating the distribution
is extremely important.
So this is where we'vetalked about this on a
(12:46):
prior episode, having anincome plan really matters.
So tying social security in towhere your income comes from,
is probably one of the singlemost important things you can
do in retirement planning.
Dave Schmidt (13:01):
Yeah.
Sure.
Josh Bretl (13:05):
Now, here's another one that very
few people think about.
Is it important for you toleave money to your kids or
a charity or a loved one?
Or whatever it might be.
Dave Schmidt (13:17):
Or in your case, a really good friend
you've known since highschool and you love dearly.
Josh Bretl (13:21):
Yes.
Yes.
In that case.
Murray, really I wantto take care of him.
Dave Schmidt (13:26):
Oh no, that hurt.
Josh Bretl (13:29):
But there's a lot of people who, they want to
leave money to their kids.
They want to leave money totheir grandkids, they want to
take care of somebody else.
When you start social security,you don't have a beneficiary.
The only person who benefitsfrom you waiting is your spouse.
You need to take intoconsideration both
people's longevity.
But let's say you wantto leave money to Landon.
All right?
You've got some money andyou say, "Hey, I'm going to
(13:51):
wait till I'm 70 to startsocial security because
that's what the Googlecalculators tell me to do."
And between 65 and 70, youneed to spend down your
massive 401k you built up.
So your 401k, let's, I'musing round numbers here,
starts at a million bucks.
And at age 65 and you haveto draw down five years
(14:12):
worth to get to age 70.
All right?
Now, let's say you needed60,000 bucks a year.
Dave Schmidt (14:18):
To live.
Josh Bretl (14:19):
To live.
Now, because you haven't startedsocial security, it's all
got to come out of your 401k.
So that's 60,000 bucks a year.
Now, your 401k, let's saybecause of market fluctuations
and everything is now $800,000.
Dave Schmidt (14:31):
Multiply that by 20, if you're talking
about me personally.
Josh Bretl (14:33):
Yeah.
Personally.
Yeah.
Personally.
But that $800,000, you can't getback what you've spent there.
And so now you at age 70, youdon't have to take out as much.
Maybe now you're only taking out$20,000 a year because you've
got social security to take up-
Dave Schmidt (14:48):
I see a good chunk of that.
Gotcha.
Josh Bretl (14:49):
But you're starting from $800,000, whereas when, and
then at some point in time youpass away, you have a smaller
amount most likely that it'sgoing to be left to Landon
and your other loved ones.
Dave Schmidt (15:02):
And just to be clear, social security,
unlike a pension, does notpass down to beneficiaries.
Josh Bretl (15:08):
And pensions usually don't either except for spouses.
Spouses, do have acontinuation on social
security in most pensionsdepending upon the election.
Dave Schmidt (15:18):
Got it.
Josh Bretl (15:19):
All right?
But let's say, you startat 65 and or you start
your social security at 65.
Now, you're going to get less.
Let's say you're onlygoing to get $30,000 as
opposed to 40,000 bucks.
But now we only have todraw down $30,000 in.
So we're drawing down lessmoney, which leaves a larger
(15:39):
pot available to earn andto grow, and at some point
in time when you pass away,you will pass away with
a larger chunk of money.
Dave Schmidt (15:48):
I see.
I see.
Josh Bretl (15:51):
Now, another consideration in this, and it
kind of goes along with it, iswe're seeing this a lot right
now, is market fluctuations.
We talk with retirees a lotabout sequence of returns risk,
where when you're drawing moneyout, if you start in a down
market, it has a huge negativeimpact on your retirement.
Well if you start socialsecurity, you don't have
(16:12):
to draw down as much and itdoesn't have as great of a
sequence of returns risk.
So like the volatile marketthat we're having right now,
for a lot of our clients turningsocial security on, even though
it may get them less socialsecurity in the long run,
provides a heck of a lot moresecurity because we don't have
as much sequence of returns riskin the assets being taken out.
Dave Schmidt (16:34):
Ooh man, this is getting deep.
I like it.
Josh Bretl (16:37):
So I mean, Google's not going to tell you that.
Google doesn't know what'sthe volatility in the market
and what are you spendingand where's your money coming
from and all that stuff.
This is where the equal partsart to science comes into play.
Dave Schmidt (16:48):
This is why I still use AOL
as my search engine.
They tell you thisstuff specifically.
Josh Bretl (16:57):
I want to know how many of our listeners still
have an AOL email account.
The last thing I want totalk about today, I think we
need a little bit of Alex.
Alex (17:09):
Hashtag tax nerd.
Josh Bretl (17:11):
Because even with social security, taxes
come into consideration.
Dave Schmidt (17:15):
I love taxes, Josh.
Josh Bretl (17:17):
You never thought you would ever
have a career where youcared so much about taxes?
Dave Schmidt (17:23):
I was doing some research.
I think I might open up a taxrelated t-shirt shop online.
I think I can make it huge.
People just love to wear taxrelated quotes on their shirts.
Prove me wrong.
Josh Bretl (17:39):
Well, let's talk about the two tax
considerations becausethey're a little different,
but they do go hand in hand.
The first is what wecall strategic tax
bracket management.
And with 401ks and with IRAsthat money is yet to be taxed.
So here's what we see quiteoften will happen and this
(17:59):
is a great situation to bein, but you could be better.
You retire in your mid to latesixties and you have enough end
savings or whatever it might be.
You don't need to spend your401ks or IRAs and you don't
turn social security on.
Both of those aregood decisions.
But you are really happybecause you have minimal
(18:19):
taxes, because you're not,don't have wages, you might
have interest dividends andcapital gains, but if you can
keep your income low enough,those are negligible and you're
just living pretty because,"Hey, I don't have wages, I
don't have social security.
I'm not taking moneyout of my IRA and 401k
because that's taxed."
Dave Schmidt (18:38):
Life is good.
Josh Bretl (18:39):
But then all of a sudden you get to RMD age and
at RMD age, all of a suddenyour social security gets taxed.
Your capital gains and yourdividends get a higher tax rate.
And now because of all ofthat, it throws your IRA
and 401k distributionsinto a higher tax bracket.
(18:59):
So you went from zero tothe worst possible case
scenario really fast.
And you were feeling really gooda few weeks ago, a few months
ago, a few years ago, and nowyou're really, really hurting.
So what we preach a lota strategic tax bracket
management where you wantto recognize those taxes.
So one of the benefits todelaying social security is it
(19:19):
allows you to do larger Rothconversions because you're not
collecting social security,because social security does
get added to your income.
Okay?
So by doing that, it does allowyou to do more Roth conversions.
Now, that is it pales incomparison to the taxation
on social security.
Dave Schmidt (19:39):
Is that the second part?
Josh Bretl (19:40):
That's the second part.
This is part-
Dave Schmidt (19:41):
that's taxation on social security.
Josh Bretl (19:43):
Taxation on social security, because social
security, it is that FICA taxyou see on your paycheck and
that money has yet to be taxed.
It's not like your 401k,it's not like your IRA.
That's money that'syet to be taxed.
And when social security wassigned to the law in 1935,
President Roosevelt promisedus that we'd never pay taxes
on social security, whilethose rules have changed twice.
(20:06):
And now we have what we callthe provisional income rule.
And so if your income islow enough, if you can keep
your income low enough andfor a married couple it
comes to about $42,000.
And so how they do thatis they take half of
your social security andpretty much all your other
income and they add it up.
And if you can keep it lessthan $42,000, you can get
(20:26):
away with zero to minimaltax in your social security.
And for a single personthat number's 34,000.
Now, what happens though iswith some strategic planning,
you're able to keep your socialsecurity low enough or even
time it to where we can keepyour provisional income low
and you'll pay no taxes onyour social security forever,
for however, as long you live.
(20:48):
But if you don't do anything upto 85% of your social security
may be added to your income.
So that could be, dependingon what it is, that could
be an extra six to $12,000 ayear in taxes that you pay.
Which means that money hasto come from somewhere else.
So that's a legitimate taxthat for a lot of people
you could avoid if youdo some planning with it.
(21:08):
And timing of when you take outsocial security can impact that
provisional income calculation.
So that's a big one that very,very few people talk about
or think about, and Googledefinitely doesn't look at.
Dave Schmidt: Definitely not Google. (21:22):
undefined
We had an episode wherewe talked about where
physically to retire?
What state, if you'regoing to stay in the US?
So we're talking all aboutall these taxes and whatnot.
Does that also play a factorinto this conversation?
Josh Bretl (21:37):
It can.
I mean, it really can.
So let's say you live ina state that taxes social
security and there's lessstates that tax social security.
A lot more states taxedretirement income than
tax social security.
But let's say you're goingto move to a state that
doesn't tax social security.
Maybe you want to wait a littlebit because you'll get more
money, but that's not as bigof a consideration, that's
more of a consideration asto where, And I did find out
(21:59):
recently, because we havea clients moving to Italy.
Social security is one of thefew things Italy doesn't tax.
Dave Schmidt (22:05):
Oh wow.
Josh Bretl (22:06):
I mean that's one benefit.
Italy taxes the snot out of you.
So that's a good one.
Dave Schmidt (22:09):
But I remember that, wasn't
it number 50% or higher?
Josh Bretl (22:12):
It's 43% for where this client is moving to.
Dave Schmidt (22:15):
Okay.
So it is so fascinating.
Josh Bretl (22:17):
It's crazy.
Yeah.
To wrap up our social securitytalk before I get to know
you a little bit better.
Dave Schmidt (22:26):
Yeah.
Because you barely know me.
Josh Bretl (22:27):
Barely.
Yeah.
People have to take all ofthese things into consideration.
It's not black andwhite for most people.
There are occasions whereit's more black and white,
but all of these thingshave to come into play.
And working with somebody whospecializes and works with
social security day in andday out is immensely helpful.
(22:48):
So we get a lot of clients whodid quite well their entire
lives, we're always able tomanage a portfolio, but how do
you coordinate taxes and socialsecurity and income and all that
stuff in your consideration?
That it's normal, it'sokay to ask for help
at that point in time.
this is why we specialize inretirees in our office, simply
because these variables becomeso much harder to manage at
(23:10):
that point in time in your life.
Dave Schmidt (23:12):
Let me reiterate something that
you all should know by now.
When Josh says, "Wehere in the office."
Not me.
If you come in...
Josh Bretl (23:20):
You can see Dave if you want.
It's like a circus animal.
We kind of keephim caged up but...
Dave Schmidt (23:25):
I'm Josh's shining new pet.
Yeah, no, don't ask mequestions on this because
I'll run away, screaming.
Josh Bretl (23:34):
But I am impressed.
I mean, I was interestedsitting here thinking about
this, your knowledge ofour old shows and stuff.
I feel like you've learnedmore financial topics just
doing this podcast with methan I ever thought possible.
Dave Schmidt (23:45):
Yes.
Those are three niceconsiderations we
got going on there.
However, this is better.
"Hey Mr.
Josh, let's take a break.
You've been talking for solong and my ears are sore.
Let's not make them snore.
Listening shouldn't be a chore.
So let's get to knowJosh and Dave and watch
(24:07):
our ratings soar!"
Josh Bretl (24:10):
The bird's my favorite.
Dave Schmidt (24:14):
I think you actually started
the bird last week.
I think you did a cuckoo?
Josh Bretl (24:18):
Was that me on the cuckoo?
Dave Schmidt (24:19):
I think it was you.
Josh Bretl (24:20):
I heard it on the show.
Dave Schmidt (24:22):
Yeah.
Josh Bretl (24:22):
I generally don't like to talk over those things
because I don't find myselffunny in those situations.
Dave Schmidt (24:26):
But it was really good.
How do you feel-
Josh Bretl (24:32):
cuckoo!
... Dave Schmidt (24:33):
about me leaving in the part where
I almost died on camera?
I thought...
Josh Bretl (24:38):
I did laugh at that.
Dave Schmidt (24:39):
It was so obnoxious, but I just couldn't
find it in me to delete that.
So I left it in.
Josh Bretl (24:45):
Oh man.
Dave Schmidt (24:47):
I'm still finding chunks of coffee all over my
floor and my desk at home.
Josh Bretl (24:51):
If we get this new podcast desk and you spit
coffee out of your nose and onall over it, I am really upset.
Dave Schmidt (24:56):
I'm in trouble.
I get it.
All right.
What you got for me, Josh?
Because...
Josh Bretl (24:59):
All right.
Dave Schmidt (25:00):
Yes, you will not let me choose cards anymore, so.
Josh Bretl (25:02):
I won.
I'd like to be in charge of it.
So now you and I haveboth talked about this.
We can both get stuckin our own head.
And so I was kind of curiousto find out what you do here.
So here's the question.
What do you do when you wantto get out of your own head?
Dave Schmidt (25:19):
What do I do when I want to
get out of my own head?
It has to just be one things,I do kind of have two go-tos.
Josh Bretl (25:28):
Yeah.
Look, give it to me.
I could learn a lot here.
Dave Schmidt (25:30):
The first is, I am a big meditation guy.
Josh Bretl (25:36):
I didn't...
Really?
Dave Schmidt (25:36):
Yeah.
So I'm not your typical,sit down and a pose, hold
your fingertips together.
But I have been this last yearjust been relying a lot on these
different apps on my phone.
It could be-
Josh Bretl (25:51):
which apps do you like?
Dave Schmidt (25:52):
I like Calm.
I like Insight Timer.
So yeah, I love to meditate.
Could even be two minutes.
I found that it doesn'thave to be so formal.
You could just literallyjust close your eyes and
just breathe for a fewminutes and you're good.
The other one is video games.
I'm still a kid atheart, so that just
helps me just zone out.
Josh Bretl (26:09):
Zone out.
Dave Schmidt (26:10):
Yep.
The world goes away.
Unfortunately, I found myselfplaying until two o'clock in
the morning the other nightand I woke up realizing, "Yeah,
I'm not 22 years old anymore.
Can't be doing that crap."
So that's a great questionJosh, how about you?
What do you do toclear your head?
Josh Bretl (26:25):
Well, I too meditate.
I can tell when I don't doit enough because my head
gets cloudy and crazy.
But actually in the summer whenit's nice out, I go, I'll get
up early and go for a long walk.
And there's a spot atElmhurst College that it
sits right in the quad.
It kind of backs up into acorner and you're surrounded
by bushes and you look outover the quad and you see
(26:47):
Hammerschmidt Chapel overthere, which is really pretty.
And I can sit there,5:30 in the morning.
I'll meditate for 20 minutesor so and then I just kind
of sit there and space out.
And you can see the sun willcome up and it comes over
and it hits Hammerschmidt,it's the most beautiful,
wonderful start to the day.
I love that.
So I didn't know youmeditate every day.
Dave Schmidt (27:04):
Yeah.
Josh Bretl (27:05):
That's actually cool.
Yeah.
See I learned somethingnew, really new about you.
Dave Schmidt (27:08):
Funny story about Hammerschmidt Chapel.
Erin, I'm not sureif you were with us.
We were leaving our annual teammeeting, and we are going to
our cars and Diane was with us.
It's you, me, Diane, and Erinand I can't remember who else.
And I'm like, "Oh!
I'm so turned around.
I just don't know whereI parked or where I am."
And Diane looks at me, shepoints, she goes, "Dave,
(27:28):
that's where you got married."
Pointing toHammerschmidt Chapel.
I'm like, "Oh.
Yeah, you're right.
My bad."
I told Carla and shecould not stop laughing.
She's like, "You idiot,how could you forget?"
I'm like, "I'm sorry itwas a long time ago."
Josh Bretl (27:43):
but the other thing I really do, because I guess
we're both giving two here, isI will actually love to cook.
And Missy will knowthis sometimes she'll be
like, "You need to cook."
And I will spend all Sundayafternoon cooking, making a
giant disaster of a mess, andit just makes me so happy.
Dave Schmidt (28:01):
Now, do you clean up your mess
or does Missy kind of...
Josh Bretl (28:04):
Well, since Missy doesn't actually listen to
this, I can say yes I do.
But if she ever does, she'dsay, "Not well enough."
Dave Schmidt (28:12):
oh God.
We have this joke where Carlacooks like her mother and it is
just hazmat city in our kitchenafter she's done kit cooking.
I mean, I never knew it took14 spoons and eight knives
just to make a pot of rice,but Carla finds a way to do it.
Josh Bretl (28:28):
Oh it does.
Not a doubt.
I mean it does.
Dave Schmidt (28:30):
It does.
Josh Bretl (28:30):
We're now living in our basement and we have a
hot plate that you can't run atthe same time and turn Zach's
fan on two stories above.
Or the Christmas lightsoutside are apparently
on the same circuit too.
So cooking becomes a lot moreof an adventure right now.
Dave Schmidt (28:48):
Yeah.
So I was just sittinghere thinking like, "Dave
relates to retirees, yeah."
There are many considerationsa retiree and soon to
be retiree must make.
And you did a great job, Josh.
I mean, I commend you forpresenting these three different
variables and considerations,but I can relate.
Josh Bretl (29:11):
Oh good.
Dave Schmidt (29:12):
There is a time circa 1997, 1998.
I'm going back there.
Josh Bretl (29:16):
Oh, we're going to high school.
Okay.
Dave Schmidt (29:17):
Going high school.
Where you and I playedbasketball together and there
were many considerations Ihad to make on a day-to-day
basis, whether it be practiceor whether it be a game.
When it came to practice, Imean, I'm not sitting here
saying it's as important asyou know, "Oh, do I have to
play basketball because oneday I'll have a kid that I have
to give my basketballs to."
(29:37):
No, it was more like, " Hmm,I see Josh over there, he's
a beefy looking fellow.
Now, we're about todo a loose ball drill.
Should I just benice or should I...
No I'm going to go tackle him."
So I made this decision totackle you in the middle of
practice to prove to you that,"I am the alpha male here, I'm
a senior, you're a junior, I'mgoing to take you down son."
So I did just that.
Now, anotherconsideration to make.
(29:58):
This is certainly way moreimportant than tackling you in
practice was, we played a fewminutes together on the court.
Not many.
A few.
And there was one point whereI said, " I could pass to Josh
or I could take the shot myselfand get just pad my stats."
And do you remember what I did?
Josh Bretl (30:15):
Oh, without a doubt.
You padded your stats.
Dave Schmidt (30:17):
Incorrect.
This one game Ipassed you the ball.
I mentioned beforein the podcast.
I passed it to you, you gotthe layup and I was mad at
you because you didn't pointto me and give me credit for
giving you that pass, butI thought, "You know what,
Dave, be the bigger man here.
You're still going toget your 14 to 16 points.
Josh, well, he doesn'tplay that often.
Let's throw him a bone."
So that was a bigconsideration I had to make.
(30:38):
So Josh, I can't imagine there'sany way possible to be in touch
with retirees as much as I am.
So what do you think?
Josh Bretl (30:49):
So David.
Dave Schmidt (30:50):
Yeah.
Josh Bretl (30:52):
We were discussing before we started the
podcast how you were goingto relate to retirees and
I thought, I know wherehe's going to go with this.
Dave Schmidt (30:58):
And, did I?
Josh Bretl (30:59):
I was right.
Dave Schmidt (30:59):
Oh, man.
Josh Bretl (31:00):
I didn't think he'd bring out the loose
ball drill again, but-
Dave Schmidt (31:05):
It's one of my finer moments in life.
Josh Bretl (31:08):
It is equal parts art to science.
For a retiree, they haveto worry about themselves
and they have to make surethat what they want to have
happen is taken care of.
And sometimes it's difficultto actually understand
what you want or whatyou need in retirement
to make those decisions.
Kind of like you onthe basketball court.
I mean, are you going forfame and glory or are you
(31:32):
going to try and win the game?
Dave Schmidt (31:35):
Or be a good teammate?
Josh Bretl (31:35):
Yeah.
I mean either way.
But even if you were tryingto be a good teammate and pass
it to me, I mean my shootingpercentage was pretty darn
low, even from 10 feet away.
So there was that toconsider too, but it's
not all black and white.
Dave Schmidt (31:50):
Yeah.
I get it.
Josh Bretl (31:51):
As we said there.
Dave Schmidt (31:52):
That's a nice gray area.
Josh Bretl (31:53):
So, I do hope that the retirees are as
happy with their decisionas you were to pass to me.
But like us on that team,we had a coach and the
coach said, "David, goodjob passing that ball."
Dave Schmidt (32:07):
He sure did.
Josh Bretl (32:08):
And you made a good decision.
Dave Schmidt (32:09):
I did.
Josh Bretl (32:10):
Well, if you retirees, if they need a coach,
now is a great time to do it.
Dave Schmidt (32:15):
Whoa.
Josh Bretl (32:16):
Did not see that one coming.
Dave Schmidt (32:17):
No.
Josh Bretl (32:17):
That one just came out of nowhere.
Dave Schmidt (32:19):
Great job, Joshua.
Josh Bretl (32:23):
Well, so we just finished our third
social security episode.
I don't have a fourth in me.
And I actually thinkthis was the best social
security episode we've done.
So hopefully your editingmakes it sound that way.
If it doesn't.
It's your fault.
Dave Schmidt (32:38):
My fault.
This episode will post afew days before Christmas.
So those that celebrateChristmas, Merry
Christmas, Happy Holidays.
All that good stuff.
I am a little shocked I didn'tget any mentions of my necklace.
Josh Bretl (32:52):
Well, I know since this isn't going on video that
I didn't have to bring it up,but this is the third time I've
seen Dave in the last week,and every single time you've
had that specific necklace on.
And what am I going to say?
I mean, that hasn'tbeen said already.
Dave Schmidt (33:08):
Right.
Yeah.
I mean, I aspire tobe like Buddy the Elf.
I'm just in theJolly Holiday spirit.
Josh Bretl (33:15):
You are a little buddy the elfish.
Dave Schmidt (33:16):
I'm a little buddy the elfish.
Yeah.
So this is not aChristmas episode per se.
I know we thought aboutdoing one like that,
but maybe next year.
Josh Bretl (33:25):
Yeah.
I mean, we wentwith taxes instead.
Dave Schmidt (33:29):
That there's a gift that keeps on giving.
But what's your go-toChristmas movie in your house?
Do you guys have one as afamily you traditionally watch?
Josh Bretl (33:38):
Well, I just learned this, that whenever
my kids go to my parents'house, they watch Elf, which
I think is kind of funny.
I didn't realize that.
My mother apparently loves Elf.
You know what they love, is onDisney they have these little,
I think they call it Mickey'sChristmas or something, and
it's three or four, 10, 15minute little things all in
(34:00):
a row, all about Christmas,and they just love it.
So it's one of their favorites.
Also, The ChristmasChronicles on Netflix.
Dave Schmidt (34:05):
Yeah, those are really good.
Yeah, Kurt Russell isthe best Santa ever.
Josh Bretl (34:09):
He is awesome in that.
Even I get stuck, I sitthere, I'm like, "Oh
man, I love the show."
Dave Schmidt (34:13):
yeah.
For sure.
We're just Christmas moviefanatics, all of them.
We watch all of them.
However, this Friday night,we just watched a Christmas
Story Christmas, it's a sequelto Christmas Story on HBO
Max, Carla and Landon fellasleep within 10 minutes
because they were overtired.
I loved it.
I had low expectations going in.
Josh Bretl (34:33):
Really?
Dave Schmidt (34:34):
I laughed so hard and through some cheesy
moments, but I thoughtit was really well done.
It did not takeitself too seriously.
Highly recommend it.
And it's safe for our kids.
I mean, there's a couple badwords, but it's a solid PG.
Christmas Story Christmas.
Yeah.
Josh Bretl (34:49):
Nice.
Dave Schmidt (34:49):
It was so good.
Josh Bretl (34:50):
Okay.
Dave Schmidt (34:51):
So anyways, Josh, I hope your kids don't
see Mama kissing Santa Claus.
And with that we will say, bye.
Holly Jolly Josh.
Erin (35:02):
That's great.
Josh Bretl (35:02):
That was a pretty good one.
Erin (35:03):
That's a good one.
Dave Schmidt (35:03):
That was a really good one.
Alex (35:04):
Hashtag tax nerd.
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