Social Security-Unlocking the Secrets-Timing Your Benefits

Episode Transcript

Speaker 1 (00:00):
And Happy Thursday. Our phone lines they are open to
you if you've got questions for our retirement planning professionals
from Class Financial love to have you check in and
join us this morning. All I gotta do is pick
up phone dial six oh eight three two one thirteen ten.
That's six oh eight three two one thirteen ten. Gonna
be talking about social Security this week, but the if

(00:20):
you've got any type of question, whether it's about specific
topic at hand or anything related to retirement planning, it's
a great opportunity to have our friends from Class Financial
answer your question again the telephone number six so eight
three two one thirteen ten. That's six oh eight three
two one thirteen ten. Learn more about Class Financial. They've
got a great website. It's class financial dot com. That's

(00:41):
coss k l aas Financial dot com. Hope you get
a chance today to check that out. You can learn
more about the team at COSS Financial. You can sign
up for the weekly market Paul's newsletter. You can also
listen back to this and previous shows. The podcasts available
right at classfinancial dot com and their telephone number six
oh eight four four two five six three seven. Don't
forget no charge for that initial get to know your

(01:02):
appointment tech Coss Financial. It will be complimentary to you
again their number six oh eight, four four, two, five, six,
three seven. Join this week by Eric Schwartz and Kyle
Kite of Class Financial.

Speaker 2 (01:13):
Eric, how you doing this morning?

Speaker 3 (01:15):
I'm doing great, Sean. How are you doing?

Speaker 1 (01:16):
I'm doing really good. Great to talk with you, Kyle.
It's been a bit great to check in. Great to
hear from you.

Speaker 2 (01:20):
How you been.

Speaker 4 (01:22):
I've been doing well, Sean. Yea, it has been a
little while looking forward to it.

Speaker 1 (01:25):
Yeah, We've got an exciting conversation for sure this morning
as we talk about social security, and I know we
get a lot of questions about social Security. We'll talk
about things like full retirement age, which is a really
important age there before, after and during we'll get those
kind of those details about why that FRA matters so much.
On this week's program mentioned the phone lines are open

(01:47):
to you. Another great thing going on on the program
is the Class Quiz Question of the Week your chance
to win a fantastic prize this week no exception, our
friends from Class Financial have provided a twenty five dollars
gift cards to Best Buy.

Speaker 2 (01:59):
Tell you a little bit later on.

Speaker 1 (02:00):
In the segment a little bit later on the show,
how you can win that gift card to best Buy.
A little tip though, if you listen closely to the program,
just about every show, the question and answer come up
during that week's program. This week's probably going to be
no exception. Speaking of the class quiz question week. Before
we get rolling on this week's topic, let's actually go
back to last week's show get a overview of the

(02:21):
question and answer there as well.

Speaker 3 (02:23):
Eric, Yeah, se on one of these weeks we're gonna
have to leave the answer out of night fill and
see if people can get it right. But our winner,
our winner last week was Gloria, So congratulations to Gloria.
Thank you everyone for listening. The question last week was
true or false. Multi factor authentication, which is sometimes called
two factor authentication is like having two locks on your

(02:46):
doors instead of only one, and Gloria knew the answer
was true, So thank you to everybody again for listening.

Speaker 2 (02:52):
Nice work, Gloria.

Speaker 1 (02:53):
I've been doing this show, we've got to be coming
up on ten years now, and I don't think we've
ever we've ever missed the answer during the program, but
who knows. Yeah, it's again got to pay close attention.

Speaker 2 (03:06):
To that stuff.

Speaker 3 (03:07):
Catalyst.

Speaker 4 (03:08):
Yes, yes you do.

Speaker 1 (03:09):
And again that great opportunity this morning as we talk
with Kyle and Eric of klass Fans, a great opportunity
to get on there with their question six eight three
two one thirteen ten. That's six o'h eight three two
one thirteen ten And Kyle, let's talk about the big
topic of course on a lot of folks' minds, which
is social security. Kind of narrowing that down a bit,
what exactly full retirement age is and should we consider

(03:33):
starting our benefits before, you know, maybe before that age,
maybe as early as sixty two.

Speaker 2 (03:39):
What are some of the details? What do we need
to know there?

Speaker 4 (03:42):
Yeah, Sean, it's this is literally a million dollar question.
Depending on how long you live and when you decide
to take Social secure, gosh you big time. So deciding
when to start collecting social Security is one of the
most important decisions for retirees. For most people, this is
going to be a large part of their retirement income,
and for some it's even their only source of income.
So you want to make sure you get this thing right.

(04:05):
So let's start at the beginning of how you can
even look up your benefit. And they used to mail
this stuff out to you every year and a little
white piece of paper that had a green bar at
the top of it. But they've obviously gotten away, like
many places, from mailing them out all the time. But
you can still log into their website, which is SSA
dot gov, and then create an account and view your
personalized estimates and your full retirement age. So this will

(04:26):
have all of your earnings records on it and stuff
like that. We highly recommend people get on there and
at least set up a username and password and start
looking at this to make sure that it's right. So, yeah,
what is full retirement age? We'll start there, and then
we'll kind of talk through some of these other ages
that are important when it comes to Social Security. So
your full retirement age, it actually depends on the year
you were born. So if you were born from nineteen

(04:48):
read in nineteen fifty four, your full retirement age is
sixty six. If you were born between nineteen fifty five
and nineteen fifty nine, it's sixty six in some number
of months, so two months, four months, six months, eight months,
so on and so forth. But then if you were
born in nineteen sixty or later. Your full retirement age
is sixty seven. So your full retirement age, what it

(05:10):
actually is is this is when you're eligible for one
hundred percent of your Social Security benefit without taking any reductions.
This is when you can go and make as much
money as you want. Some people call this double dipping.
You can pull your full Social Security at your full
retirement age and then still go work if you want to.
But then there's obviously you can really so the earliest
you can start is actually age sixty two, which is

(05:34):
obviously different than that full retirement age. But if you
start early, there's a few things that you need to
be aware of. You're usually gonna you're not usually you
are going to take a reduction in benefits because you're
collecting over over more years and Social Security wants to
adjust for that. And how much that is actually depends
on when exactly you start, because it's actually changing each

(05:57):
month that you wait. So if you take it at
six two and eight months, you're going to get a
bigger benefit than you would if you started at age
sixty two. And when is the best time to start? Well,
this isly you know the big question, and I joke
with clients all the time. Tell me the day you're
going to die, and I can tell you when we
should start Social Security, right, it's a lot easier to
figure that part out. So it really depends. But generally,

(06:20):
waiting until your full retirement age or even later means
a bigger monthly payout. So, for instance, somebody that was
born in fifty five retirement age of sixty six and
two months, if they wait until sixty six and two months,
they'll receive their full benefit amount. And then obviously the
other option is to wait past your full retirement amounts.
So for those of you that are long time listeners,

(06:41):
you've heard us talk about these delayed retirement credits are
drcs if you wait past your full retirement ages. We
were just talking about. Those delayed retirement credits are eight
percent per year all the way up until age seventy.
And Eric and I don't have an investment that we
can guarantee you in eight percent return on for as
much as we'd like to, and like I said, it's guaranteed,

(07:03):
so we can't. We don't have any other investments that
can promise that, So it may make sense to hold
off till seventy, even if it means spending down your
other assets a little bit to get that highest rate possible.
And so the bottom line is once you get to
seventy though, there's no reason to wait past that, that's
the maximum amount. It will not grow up to seventy
one or seventy two or anything like that.

Speaker 1 (07:25):
Great insight this morning talking with Kyle Kite and Eric Schwartz.
They are our retirement planning professionals from Class Financial. Their
website Class financial dot com that's coss k l aas
financial dot com. Mentioned earlier the opportunity to get to
know the team mentioned, of course, the importance of subscribing
to podcast at classfinancial dot com. I had mentioned and
I made a mistake there. I should definitely do this

(07:47):
right off the bat because Class Financial has several different divisions.
You can actually learn more about those all online at
cossfinancial dot com that's coss k l aa s financial
dot com. Now they're tough number six, so eight four
four two, five, six three seven and so Eric, as
we get all that helpful information from Kyle, How then
can my individual benefit? How can that be calculated? And

(08:09):
will that grow over time?

Speaker 2 (08:10):
Will it go up? Over time. What's some of the
nuances there.

Speaker 3 (08:14):
That's a really good question. And first off, to get
any benefit at all out of Social Security, you do
need to qualify by working enough and paying into the system.
So you earn credits when you work and pay Social
Security taxes. So in twenty twenty five, you get one
credit for every one dollars in earnings that you have,
and you can get up to four credits per year.

(08:36):
Most people need forty credits or about ten years of
work in order to qualify for benefits. Now, these don't
all have to be you know, consecutive years or anything
like that. Your credits stay on file and if you
leave the workforce for a while and you come back later,
you can continue earning them. You're not starting at zero
or anything like that. Your benefit is actually calculated on

(09:00):
a thirty five year average of your highest earnings years.

Speaker 2 (09:04):
Okay.

Speaker 3 (09:05):
The other important thing to keep in mind about this
is it's adjusted for inflation. Okay, So people will often
say like, well, you know, I'm working, maybe in two
thousand and five I earned X amount of dollars and
it looks like a much smaller number. But when you
adjust that for twenty years of inflation. It actually is

(09:25):
a lot more buying power than you might think. So
it is a thirty five year average of your highest
years earnings. It's not the last five years, it's not
the last ten years. We hear all these kind of Oh,
I thought it was just this, or I thought it
was just that. It is a thirty five year average
of your highest years. Your benefit will increase over time.

(09:46):
So Social Security has a cost of living adjustment or
a COLA, and those start being applied once you turn
sixty two, even if you don't collect until later. So
for example, in twenty twenty four, the cost of living
adjustment was three point two percent, and then coming into
twenty twenty five it was two point five percent. They're
announced each October and they pretty closely follow follow inflation.

(10:11):
So that's the idea of adjusting the benefit over time
to keep up with rising costs. Now that we do
have a special note here for public workers, this is
new information from twenty twenty five. It's actually pretty interesting.
As listeners probably know, we have an office here in Madison,
but we also have one down in Love's Park, Illinois,

(10:32):
and this is something that actually impacts more of our
clients down in Illinois due to the way the State
of Illinois pension is structured. But the Social Security Fairness Act,
which was signed into law on January fifth of this year,
it repeals what's called the Windfall Elimination Provision or the
WEB and the Government Pension Offset or the GPO. Yeah,

(10:57):
so this means that retirees who receive pensions from non
covered employment, which can include government jobs at times, will
no longer have their Social Security benefits reduced based on
those earnings. So when we say non covered employment, we
mean roles where people are paying into a pension rather

(11:17):
than paying into Social Security. This change affects retirees who
receive pensions from public service jobs. So this is you know,
in some cases teachers, firefighters, and police officers, is as
well as those who work whose work was covered by
a foreign social security system. Now, just to be clear,
in Wisconsin, our teaching staff is not affected by this.

(11:40):
They are they pay into Social Security and the Wisconsin
retirement system. But there are there are situations, for example,
just just down in our Illinois office, where that's not
exactly the case. So, starting in February of this year,
Social Security began to pay retroactive benefits, and they're actually
increasingly benefit payments to those whose benefits have been affected

(12:03):
by these changes. If a beneficiary is due retroactive benefits
as a results of the new law, they will receive
a one time retroactive payment that'll just get deposited right
into the bank account that they have on file for
you by the end of March earlier this year, and
that payment will cover the increase in their benefit amount
back all the way back to January of twenty twenty four,

(12:25):
which is the month they decided that this would would
no longer apply. Now. Remember Social Security benefits are paid
one month behind, so most benefited, most affected beneficiaries will
begin receiving their new monthly benefit amount in April of
twenty twenty five, or they did start receiving that benefit
earlier this year.

Speaker 1 (12:43):
Interesting, And for folks that are wondering about your cost
financial office and Loves Park, anyone that's decided to skip
the toll on I ninety, you drive right past the
office there, which I may have done a number of times.
So there's that, by the way, just a completely off topic.
That that state park, that rock Cut State Park, that's

(13:03):
right down there, looks really really cool. I gotta stop
there one of these.

Speaker 4 (13:08):
Yeah. It's actually the largest state park in Illinois.

Speaker 2 (13:10):
It's a really fast yeah learned.

Speaker 1 (13:14):
Sometimes you'll learn things that you didn't expect, very very
cool stuff. As we talk with our retirement planning professionals
Kyle Kite and Eric Schwartz, of course they do come
from Class Financial conftuents from Class Financial. Of course their
office right here in Madison, just off Seminole Highway. Tell
for number six so eight four four two five, six
three seven. No charge for that initial get to know

(13:34):
your appoyment at COLSS Financially, it will be complimentary to
you again their number six oh eight four four two
five six three seven. We're going to continue our conversation
with Eric and Kyle, will talk a little bit more
about social Security, maybe wondering how exactly, uh you figure
out the right age to start taking benefits. We'll get
some details from Eric and Kyle. We will do that
next as Money in Motion with COSS Financial continues right

(13:56):
here on thirteen ten w ib A talking with our
retirement planning professionals Kyle Kite and Eric Schwartz. Of course,
Eric and Kyle come to us from Class Financial their
website class financial dot com. That's Class k l aas
financial dot com. Tel for number six oh eight four
four two, five, six three seven.

Speaker 2 (14:15):
No charge for that.

Speaker 1 (14:16):
Ininancial gets know you appointment to at COSS Financial, it
will be complimentary to you again their numbers six o
eight four four two five six three seven. Talking this
week about Social Security specifically, what all the details about
full retirement age and that kind of brings us as
we've been kind of covering this ground here try to
figure out what the right age to start taking benefits

(14:37):
in Kyle, what's uh, what is that break even at
age that that I often hear about.

Speaker 4 (14:43):
Yeah, this is the biggest kind of heart of this decision, Sean,
and is the one that a lot of listeners that
are you know, astute would try and figure out themselves.
And you know, there's no one size fits all answer
to this. It depends on your health, your income, sort
of eligible for spouses benefits and things like that. So
some people, you know, want to pull their benefits at

(15:03):
sixty two just because they wanted as soon as they
can get it and get it in their hands, while
others prefer to wait to get it until like we said,
sixty seven or seventy. So it really comes down to
you know, the just the math on it and running
it out. So if you were to start early, let's
run through an example. So let's say your full retirement
age is sixty six. In two months, if you were

(15:25):
to start your benefit at sixty two, you would get
just seventy four point two percent of your full benefit,
so a little bit less than seventy five percent if
you started at sixty two, and if you started at
sixty five, you'd get about ninety two point two percent.
So you can see that's almost a twenty percent difference
just by wait in three years. And remember this is

(15:47):
locking in for the rest of your life. Obviously you
get your colas and things like that, but as that
the cola based off that smaller dollar amount, if you
start smaller dollars down in the future, so that's a big,
big difference. And this is why you know, we ask
a couple of key questions when people are looking to
start their benefit early. It's really depends on health. You know,

(16:08):
for some reason they think that their life expectancy is
much shorter than average, then maybe that's a good reason
to start it. Early. There's a few reasons where we
would recommend people started early, but honestly, we're going to
have people try to push it off longer if possible.
And so then you're calculating, Okay, if I started at
sixty two, I get the seventy four point two percent.

(16:28):
If I started at sixty five, I get ninety two percent.
So where does this break even where my benefits? Where
do I get my most bang for my bunk or
most bang for my buck? Right, So this is where
you know we start again running the math. So if
you were born in sixty two, your full retirement age
is sixty seven, and let's just say that your full
benefit amount at that sixty seven would be one thousand dollars.

(16:51):
If you were to start it at sixty two. Again
we're just using round numbers here. You would get set
a month a thirty percent cut, So you're getting thirty
percent less, but you're collecting it obviously five years sooner,
so you're getting the eighty four hundred dollars a year,
So that seven hundred a month is eighty four hundred
a year instead of the twelve thousand a year, which
is one thousand a month. So after five years, you

(17:13):
would take that eighty four hundred you get up to
that's how much you would have in your pocket by
taking it at sixty two. But if you wait until
sixty seven, you start getting that thousand dollars a month.
So then your break even point of Okay, I started later,
but I'm getting that three hundred dollars more a month.
Where does that Where do those lines cross over? And

(17:34):
it's around age seventy eight and eight months. And it's
no big surprise that you know, those break even points
tend to line up pretty closely with the average life
expectancy for Americans. Obviously, Social Security has a bunch of actuaries.
They've run them numbers on all these kind of things.
They have this figured out too. So if you were

(17:54):
you know, if you think you're going to live past
seven off, wait until sixty seven. If you think you're
going to pass way before then you would started earlier obviously.
And so this is why my joke comes in. Tell
me the day you're going to die, and we can
tell you when you should take this thing. Right. So
it's it's a very, very like I said, personal decision.
And there's so many different factors that go into making
this decision.

Speaker 1 (18:14):
Talking this morning with Kyle Kite and Eric Schwartz, our
retirement planning professionals from COSS Financial. Of course, their website,
great website to learn more about Class Financial. It is
Cossfinancial dot Com. That's coss klaasfinancial dot Com. Telephone number
for the office right here in Madison six eight four
four two five six three seven. No charge for the
initial get to know you appointment at Coss Financial. It

(18:36):
will be complimentary to you again their number six oh
eight four four two five six three seven. We'll talk
about you may have heard earlier on in the segment
I think I think that was Kyle had mentioned about
retirement credits. Well, what if you don't have enough credits?
We'll get the details from Eric and Kyle next as
Money in Motion with Coss Financial continues right here on

(18:56):
thirteen ten wib I, Eric Schwartz and Kyle Kite. Of course,
Eric and Kyle come to us from Clause Financial, the
website class Financial dot com. That's colss k l aaskfinancial
dot com. They're telephone number six oh eight four four
two five six three seven. No charge for that initial
get to know your appoyment at clause financial it will
be complimentary to you again their number six oh eight

(19:18):
four four two five six three seven. We're talking social
security this week, and of course talking about when you
should be collecting your Social Security what all goes into that,
that thinking and that planning, and of course it's a
very very it's a complicated one, but it's certainly also
very personal one as well. And I apologize, Eric, you
were actually the one that mentioned earlier about the about

(19:39):
the four per year. You know.

Speaker 3 (19:41):
That's okay, Sean, that's all right, I'll get over here.

Speaker 1 (19:45):
I have genuine ized as soon as I said this way,
I think actually that was Eric that commented on it.
How about this then let's I'll let you answer the
question and you can have at this one. Then, So
what if you don't work enough to qualify for Social
Security on your own?

Speaker 3 (20:00):
Yeah, that's a that's another good question, Sean. And even
if even if you haven't worked enough to get those
forty credits we were talking about earlier, that I was
famously talking about earlier, you might still you might still
qualify based on your spouse or even your ex spouse's record.
So this is this is where it gets even more
complicated and frankly, Kyle and I talked to clients about

(20:24):
Social Security all day, every day pretty much, and this
is probably one of the more difficult parts to help
people understand. So, if you're sixty two, right that that
age that you can actually begin your own Social Security benefit.
If you're sixty two or older, or if you're caring
for a child under sixteen or a child who is disabled,

(20:45):
you may be able to receive spousal benefits and if
you claim at your full retirement age, you can receive
up to fifty percent of your spouse's full benefit. Okay,
so keep in mind that you have to wait until
your full retirement age to get up to fifty percent
of your spouse's full benefit. If you draw earlier, you
can still get benefits, but it's not going to be

(21:07):
fifty percent. It'll be less than fifty percent, and so
it really kind of behaves just like your own benefits.
The earlier you claim, the less that you would actually
actually receive of as a percentage of your spouse's full benefit. Now,
if for widows and widowers, you may be able to
start with your own benefit and then switch to survivor

(21:31):
benefits later. Or vice versa. So if your ex spouse
passes away and you were married at least ten years,
you could qualify to begin survivor benefits. Survivor benefits are
a little bit different. You are actually able to start
them at age sixty, so that's just a little bit
of a different wrinkle for this group of folks. And again,

(21:56):
this is one of the few places that you can
still choose one benefit, so maybe your own benefit, and
then switch to a survivor benefit later on. Again, you
can do those in the reverse order as well. The
reason I bring this up is historically clients have asked
us a lot, and there's been a lot of talk

(22:17):
about what we call, or what was called violence Suspend,
which was basically a Social Security strategy for married couples
to kind of maximize the benefits they get out of
the program, and it involved starting with one benefit and
switching to the other, and that I believe in twenty
sixteen that was ended. It was sort of a loophole

(22:40):
in the system that they discovered and promptly got rid of.
So survivor benefits are really the only space where we're
able to kind of be moving from one type to
the other. Now let's talk about divorce. So if you
are divorced and not remarried once you're sixty two, if
the marriage lasted at least ten years, you are entitled

(23:01):
up to you might be entitled to up to half
of your your ex's benefit. Again, it's earlier you draw,
the less you you're going to receive off of that benefit.
And uh, let's see. I think going through here, I
think that's everything I wanted to cover on the spousal
benefits portion.

Speaker 1 (23:19):
And I gotta ask you, Eric, I know there's a
lot of folks wondering. So if if you are divorced
but not remarried, and you are and you are, you know,
you might be entitled to have your spouse. But does
that affect the exes?

Speaker 3 (23:32):
Uh, that's a great question.

Speaker 1 (23:35):
In anyway, because I know there's some folks that'd be like,
I'll take this just for no other.

Speaker 2 (23:41):
I'm gonna guess not.

Speaker 3 (23:43):
There is no, there is not that that would just
be a even messier than it probably already is. But yeah,
this is this is something that generally, as we've seen
people go through this process, it's a little bit difficult
because it's not like you're spending a lot of time
with your form and able to take a look at
their social Security statement to see if you might get

(24:03):
benefits based off of it. But as you go through
the application process, you actually provide that information to Social
Security so they can they can determine if there's anything
that you would.

Speaker 2 (24:14):
Qualify for something I always wonder about there as well.
Thank you, Eric.

Speaker 1 (24:18):
Before we get to the class quiz question the week,
I think another thing too. I think a lot of
folks wonder Eric about this is when should I apply?

Speaker 4 (24:26):
How?

Speaker 2 (24:26):
How soon?

Speaker 1 (24:27):
How far ahead should somebody apply? When would they need
to apply for Social Security?

Speaker 3 (24:33):
Yeah, we get this question all the time. So you're
able to apply up to four months before you want
to receive your benefits. Okay, so that's that's the earliest
you can start. And I would say we we help
people do this all the time. Over the last probably
year or so, we've seen a little bit of a

(24:55):
slowdown in processing time. So I would say, if you
want to make sure benefits start, I would apply as
early as possible. So as soon as you hit that
four month timeframe, I would get the application in. The
application is fairly painless. You can do it online. That's
the quickest way to do it probably takes I don't know,
maybe ten minutes to actually go through and get it submitted,

(25:19):
and then it's just kind of a waiting game. So
I tell people, if you want to if you want
to get benefits starting in December, get working on it
right now.

Speaker 1 (25:26):
Great guidance, great advice as always from our retirement planning professionals,
Eric Schwartz and Kyle Kite. You can learn more about
Eric and Kyle all online Class Financial dot com. That's
COSS k l a a as Financial dot com. You
can also listen back to this in previous shows podcast Again,
all available to you at Classfinancial dot com. They're telephone
number six oh eight four four two five six three seven.

(25:48):
No charge for that initial get to know your appointment
Tech Loss Financial. It will be complimentary to you again
their number six O eight four four two five six
three seven. You're also going to want to hold on
to that telephon number because it's time now for the
COSS Quiz question. The week works like this, In just
a moment, I'll ask you the Class Quiz question of
the week. You will then have thirty minutes from the
and today's program to call the COSS Financial Office right
here in Madison at six oh eight four four two

(26:11):
five six three seven, And if you are the first
call with the correct answer, you win this week's prize,
which is a twenty five dollars gift card to best buy.
This week's COSS Quiz question the week is this, how
many Social Security credits do you need to qualify for
our retirement benefit? Tell phone number six oh eight four
four two five six three seven. Hopefully you were paying

(26:33):
closer attention than I was to that section. Again, the
first call trict answer will win that twenty five dollars
gift card. Two Cost Financial again their number six oh
eight four four two five six three seven. Eric Kyle,
it's always great talking with both of you, guys. You
enjoyed this beautiful day and we'll do it all again
real soon.

Speaker 4 (26:50):
Thanks Sean, Thanks Shawne too.

Speaker 2 (26:52):
Take care guys.

Speaker 1 (26:52):
News comes your way next right here at thirteen ten
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