Taking Social Security Early

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Episode Transcript

(00:00):
This is money in Motion with ClassFinancial, a fun and informative show designed
to help you get answers to allyour retirement questions in one place, and
our phone lines are open for youright now. Love to have you join
our retirement planning professionals from Class Financialwith your question. The telephone number six
oh eight three two one thirteen ten. That's six oh eight three two one

(00:24):
thirteen ten. We'll get you onthe air with Malia Quavis and Eric Schwartz
of Coloss Financial if you've got aquestion, dogge. You can learn more
about Class Financial on their website CossFinancial dot com. That's Kate LaaS Financial
dot com. And the telephon numberfor the office right here in Madison six
oh eight four four two five sixthree seven. No charge for the financial
gets to Know You appointment tech LossFinancial. It will beat complimentary for you.

(00:47):
I'll get to do is give thema call set up that appointment.
Six oh eight four four two fivesix three seven. I mentioned the website,
I didn't mention all the great features, and there's a couple of things
I'll mention. There's so much moreto it as well. You can learn
more about Coss the team there's separatedivisions. You can sign up for the
weekly Market Pulse newsletter. You cansubscribe and listen back to the podcast.
You can check out the cool pictures. You can see where class Financial is

(01:08):
serving people across the country. Again, that and so much more all at
class financial dot com. Check themout online and again the telephone number six
so eight four four two five sixthree seven as mentioned. Joined this week
by Malia Quavis and Eric Schwartz.Malia, how you doing this morning?
Very good? Happy to be here. Are you a fan of the fall?
By the way, your fall fan? Jo? Oh, it's so
beautiful those leaves falling down. Andin one day yesterday I could see the

(01:34):
leaves on the trees one color.Yeah, and I'm not kidding you.
By the afternoon they were a differentcolor. That is amazing, that is
and there. Yeah, there issomething great about this time of year.
And it's as we talk about enjoyinglife and enjoying times a year, nothing
better than retirement as well and enjoinedalso this week familiar voice, our good
friend Eric Schwartz is back. Eric. How you been I've been I've been

(01:56):
good. I'm glad to be heretoday and hopefully enjoy this fall. Weather
is long. Is it'll last forus? Exactly? Yeah, we don't
want to get into that sn althoughsome people are waiting. Love love snowing.
You know that for snowfall is alwaysfun. So we've got an important
question this morning. A great questioninvolves, and I know it's a very
popular conversation involving social Security benefits andquestions people may wonder about, is should

(02:19):
I be taking it at sixty twoor hold back. We'll get some details
and some of the considerations you shouldbe making if you're making those decisions,
and I will say lucky you hada great opportunity you have as we talked
this morning with Eric and Malia.As mentioned, the phone lines are open
six oh eight three two one thirteenten at six oh eight three two one
thirteen ten the website as well Classfinancial dot Com telephon number six oh eight
four four two five six three sevenfor Class Financials office right here in Madison.

(02:43):
And before we start talking social securitythis week, one of the great
things that goes on on this programeach and every week is the Closs Quiz
Question the Week this week no exception, a chance to win a fantastic prize
twenty five dollars gift card two DIX. Again, that's from our friends at
COSS Financial. Listen closer to theprogram. Typically both the question and answer
come up during the show to theClass Quiz Question week. We'll tell you

(03:04):
exactly how you can win that alittle bit later on in the program before
we talk. So security us mentioned, let's take a look back at last
week's program do the Class Quiz Questionweek at the question and answer from that
show as well. Yeah, solast week, I think the topic was
even more exciting than this week's becausewe were discussing early retirements, so lots
of listeners called in for our prize. The question of the week was true

(03:27):
or false in general, if youwithdraw funds from your retirement accounts before the
age of fifty nine and a half, you'll trigger an IRS tax penalty of
ten percent. Grant of Madison wasfirst to call in with the correct answer.
The answer was true, So makesure you know what you're doing before
you just start distributing money out ofthose retirement accounts, because you don't want

(03:49):
a surprise from the IRS. Sothanks for listening. Listen carefully for today's
question, and as you mentioned Melia. It's a great I think a lot
of us daydream about that day andhaving that option to you not you never
never never. So it's a greatopportunity to listen back the podcast class Financial
dot Com. That's Claus Financial dotCom. So today we are going to

(04:09):
be diving into a pretty big questionthat a lot of folks ponder, which
is should we grab our Social Securitybenefits at sixty two or is it better
to hold back for a while.What do you need to know to make
this call? Eric, Yeah,you said it, Sean. This is
a really really popular question and somethingwe spend a lot of our days talking
about with clients. We've talked aboutthis before too. Social Security is a

(04:32):
critical part of retirement income, andin some cases, for some people,
it's the only source of income.So it's really important that we're thinking this
through before jumping into drawing benefits.So, first of all, there's a
difference between when you're first allowed todraw benefits and when you can claim your
full retirement benefit. So you canbegin collecting Social Security as early as sixty

(04:55):
two, but you can also waituntil you're seventy or even collect anywhere in
between. There I think we hearfrom people a lot they almost think that
there's like certain finish lines where theycan draw it. Well, I can
only draw it sixty two or sixtyfive, but you can draw any time
in between sixty two and seventy.Now, the earlier you draw benefits,

(05:16):
the smaller your monthly check's going tobe. And that's really because you're just
stretching those benefits over a longer periodof time compared to somebody who waits until
they're say sixty five or seventy.Now, if you're wondering how much you're
going to be getting from Social Security, we've said this before too. SSA
dot Gov is an excellent resource forall things Social Security. So you can

(05:38):
set up an account there and youcan get a current estimate of your future
benefit based on your earning's history.That's, like I said, personalized to
you. But your benefit is afunction of your full retirement age or your
FRA. And if you were bornbetween nineteen forty three and nineteen fifty four,
your full retirement age is sixty six. Now for those born between nineteen

(06:01):
fifty five and nineteen fifty nine,it's sixty six in some number of months,
and then for everyone after nineteen sixtyit is age sixty seven, so
your full retirement age, or yourFRA, this is when you can collect
one hundred percent of your benefit.The right time to actually start Social Security

(06:21):
this really depends on your unique situation. In some cases, we like to
see clients hold off at least untilthey hit their full retirement age, but
there can be reasons to draw earlier, and as we'll talk about, many
people do. But you can alsodelay your benefits beyond your full retirement age.
You can if you wait beyond whateverthat FRA is, whether it's sixty

(06:44):
six, sixty seven, or somewherein between. Waiting beyond that provides you
with what are called delayed retirement credits. So these credits increase your benefit by
up to eight percent per year untilyou begin receiving benefits or until you reach
seventy. So sometimes it can actuallymake sense to hold off collecting your Social

(07:04):
Security benefits, even if it meanstapping into some of your retirement investments,
because that guaranteed eight percent benefit increaseis pretty tough to beat. I think
Millie and I think we're pretty goodat our jobs, but that we certainly
can't guarantee that really interesting stuff thismorning as we're talking with Eric Schwartz and
Malia Quavis, our retirement planning professionalsfrom Class Financial, some great information in

(07:27):
this week's program. Don't forget ifyou ever missed part of the show,
you can listen back right at cossfinancialdot com. That's k l aa S
Financial dot com. Tellphone number sixoh eight four four two five six three
seven. No charge for that initialget to know you appointment tech Loss Financial.
It is complimentary to you again theirnumber six oh eight four four two
five six three seven And to getout on the air this morning six so
eight three two one thirteen ten.That's three two one thirteen ten. And

(07:51):
Eric, you mentioned age seventy?Why is age seventy so important in this
conversation? I'm sorry about that,Eric, Why is age seventy so important
in this conversation? Sorry? John, I lost you there? Thuring,
So what was so we were?You mentioned the age age seventy and that
I know a lot of things wetalk about oftentimes. The answer is it
depends. Age seventy is a prettyclear one in this conversation, isn't it?

(08:16):
Yeah, it definitely is there there'salmost no reason to wait beyond age
seventy to start collecting your your benefits. I'm sure someone can come up with
a really, really out there reason, but in many cases it's pretty straightforward.
Do you want to you want toget started at that? They love
the government and they want to givethe money back. I don't know.
There has to be some reason,I guess yeah, someone will have one.

(08:37):
Yeah, well, but really importantnumbers, important dates, and of
course great website s SA dot gov. Speaking of fantastic websites, colotsfinancial dot
com. That's k l AA sfinancial dot com. Tel forh number six
so eight four four two five sixthree seven and to get on the air
this morning. All I gotta dois give us call six oh eight three
two one thirteen ten. That's sixsoh eight three two one thirteen ten.

(09:00):
Maybe wondering and asking yourself, howexactly do they figure out what Social Security
benefit will be? It's different foreveryone. Wow's that calculation made. We'll
get the details from Milliam. We'lltake your call next. As well as
Money in Motion with Class Financial continueshere on thirteen ten WIBA. This is
Money in Motion with Class Financial,A fun and informative show designed to help

(09:24):
you get answers to all your retirementquestions in one place, and our telephone
lines are open for you if youhave questions for our retirement planning professionals from
Class Financial, Maleia Quavis and EricSchwartz love to get you on the air
this morning six oh eight three twoone thirteen ten. That's six oh eight
three two one thirteen ten. Youcan learn more about Class Financial on their

(09:45):
website class financial dot com. That'sKlaas Financial dot com. And the telephone
number six oh eight four four twofive six three seven that's for their Madison
office. No charge, that initialgets to know you appointment at COSS Financial,
it will be complimentary to you again. Then number six so eight four
four two five six three seven andyou get on the air. It's the
old fashioned three two one thirteen ten. That's three two one thirteen ten.

(10:07):
So as we're talking this week aboutsocial security, I think one of the
big questions folks have is how exactlydo they figure out what social security benefits,
what they're going to be, andwill they ever go up or are
they set once you claim social security. That's that's where you're at. What
do we need to know there,Malia, Yeah, that's a great question.
So first of all, you youdo have to earn enough credits to

(10:28):
even qualify for your own Social Securitybenefit. Later about if you don't have
the necessary credits, how you mayactually qualify on behalf of someone else's earnings
history. But what you need toknow is that as you clock in your
hours and pay your taxes, youdo start racking up those Social Security credits.

(10:50):
And in twenty twenty three, youearn one credit for every sixteen hundred
and forty dollars in earnings, andthat's capped out at four credits per year.
So essentially, if you earn sixfive hundred and sixty dollars this year,
you maxed out on the four credits. But just to give some reflection,
you know, we look at acredit today is worth ten hundred and

(11:11):
forty dollars. I was reason orstarted working, so I'm dating myself now.
Back in nineteen eighty you only youreceived one credit for two hundred and
ninety dollars of earnings. So it'skind of interesting to see how as time
and inflation and everything else has changed, you obviously have to earn a little

(11:33):
bit more than we did way backthen. So ultimately most most people need
to earn forty credits about ten yearsof work to qualify for the benefits.
So what's good to know is ifyou step away from work for a few
years, say you're home with thekids raising them, your record stays in
place, and then if you goback to work later you can be adding

(11:56):
more credits to it. But ifyou haven't hit that that forty credit mark
and again you jump back into theworkforce, all you need to do is
go to SSA dot gov to thewebsite and look at how to earn credits.
Again. There will be a formulaagain per dollars per credit, and

(12:16):
again it will have increase most likelyso assuming you've gotten your forty current force
and so that zero obviously slowly youknow, brings down the average. However,
jumping back in the workforce, evenif you made five thousand, six
thousand dollars could definitely help beefit up. So you want to be careful on

(12:37):
being able to understand how your benefitis affected when you do leave the workforce.
And then something that everyone looks forwardto is understanding that you will become
eligible for cost of living benefits startingat the age of sixty two. That's
true even if you don't start gettingthose benefits until your full retirement age or
even age seventy. So this isagain you know, people listen to things

(13:01):
that affect them personally as a fact, So most people heard last week that
the cost of living increase set bythe Social Security Administration. They've announced that
they are going to be bumping upeveryone's benefit next year by three point two
percent. We know last year wasbeginning of this year was a pretty huge

(13:22):
event and went up by eight pointseven percent for twenty twenty three, again
based off of last year's pretty highinflation, so it's not as much as
everyone received this year, but itis perhaps good news that inflation has decreased
somewhat. So again, just beaware that your benefit is being calculated every

(13:46):
year based on what they have lookedat for inflationary figures. That's really interesting
stuff and as mentioned a couple oftimes, the website SSA dot gov has
come up definitely an important resource there. As we talked this MOK was the
Malia Quavis and Eric Schwartz, ourretirement planning professionals from Class Financial, speaking
of great resources. If you've gotquestions, we'd love to get you on

(14:07):
the air with Malia and Eric.All I got to do is give us
call here at station six oh eightthree two one thirteen ten. That's three
two one thirteen ten Class Financial greatwebsite cluss financial dot com and they're telephone
number six soh eight four four twofive six three seven. No charge for
that. Initiate to know your appointmentdechlss Financial. It will be complementary to
you again that number six oh eightfour four two five six three seven here

(14:30):
that term break even, break evenpoint. Of course, I think we're
all probably pretty uh interested in whatit is exactly and and how we know
when that breaking point is, Like, what's that perfect age Eric to start
collecting social security? Well, asyou can imagine, the right age to
claim social security is different for everybodybecause we have to think about not only

(14:52):
your Social Security benefits, but youknow, what you have saved for retirement
outside of that, any other sourcesof income you might have part time work,
pension, and what your your speyour spouse might be getting. So
it's that part makes it difficult enough. But I think what makes it even
more difficult is we're trying to predicthow long people are going to live because

(15:13):
Social Security pays us as But letlet's talk about what it actually looks like
if you claim your benefits early.So we're going to we're going to look
at an example here. Let's saythat your full retirement age is sixty six
and two months and you decide,you know what, I'm going to start
taking my Social Security benefits at sixtytwo. So at that point you are

(15:35):
going to receive seventy four point twopercent of your full retirement age benefit.
So remember, the full retirement agebenefit is when you receive one hundred percent
of your Social Security benefit. Sodrawing early at sixty two, you're going
to get seventy four point two percentof the benefit. Now, if you
decide to wait till you're sixty five, maybe you want to start your Social

(15:58):
Security when you start your mind ofcare, at that point, you're going
to receive ninety two point two percentof the full retirement age benefit. Now,
even though we know that waiting canmake your benefit grow a lot,
age, sixty two is still themost popular age to claim Social Security.
That's according to most the most recentgovernment data we have now One reason people

(16:22):
might draw at age sixty two ismaybe they're facing an illness or they have
ongoing health problems and they expect tohave a shorter lifespan. Maybe people just
can't get to sixty two and theycan't stand the thought of not collecting their
benefits. But I want to getto your question about the social Security break

(16:44):
even age. So we get thisquestion a lot when trying to figure out
when is the right time to actuallytake benefits. So just remember when you
choose to take benefits early, thatis a permanent decision. Your benefit is
going to stay reduced throughout your ownentire life. It's not just until you
reach your full retirement age. Now, your social Security break even age.

(17:07):
That's the point in your life whenthe total of those lower benefits equals the
total you would have received if youhad waited until full retirement age or beyond.
Now. I just heard myself saythat, and I know how how
confusing that sounds. But if welook at an example here, I think
it helps illustrate it illustrated better.So let's say that you were born in
nineteen sixty, Okay, so thatmeans your full retirement age is sixty seven.

(17:33):
If you decide to start collecting yourSocial Security at sixty two, your
benefit is thirty percent less than yourfull retirement age benefit. So let's use
easy numbers here. Let's say yourSocial Security is one thousand dollars a month.
If you draw it sixty two,then you're going to be receiving seven
hundred dollars each month for the restof your life. Now, let's say
your coworker who was born on thesame day and they have similar earnings history,

(17:56):
but they're a little bit more patient. They decide to wait and claim
benefits until they're full retirement age,which is sixty seven, so five years
later. So they're going to getthat full thousand dollars a month. But
for the first five years, you'regetting seven hundred dollars a month. While
they're waiting, they're not getting anythingin that time. So during that time,
you collected forty two thousand dollars andyour coworker collected nothing. Right,

(18:22):
But once they start receiving benefits,they're going to be getting three hundred dollars
more per month than you. Okay, so an extra thirty six hundred dollars
a year. So the point atwhich they catch up with you with their
extra monthly payment. That is theSocial Security break even age. So in
this specific case, the break evenpoint would be seventy eight and eight months.

(18:48):
Okay, so it takes you aboutalmost twelve years after your full retirement
age. And then at that pointyour coworker who waited, they are now
now they have now gotten more outof Social Security, and they will get
more out of Social Security assuming youlive the same amount of time. So
if we think about this for mostpeople, if you can calculate that that

(19:11):
break even point, and you knowit's somewhere in that eleven or twelve years,
which is fairly common, and you'reconfident you'll you'll live beyond that,
I mean, I guess we canonly be so confident. But if you
have longevity in your family and youyou're generally healthy, then it might it
might make sense to wait to collectyour Social Security until you reach that full
retirement age, or even wait longer. On the other hand, if you're

(19:36):
if you have health issues, oryou're you know, you don't have a
family, start taking those benefits earlierand get as much out of Social Security
as you can. Really fascinating stuff, and just a lot of great information
this morning. Don't forget. Ifyou ever missed part of today's program or
any of the previous shows, youcan always listen back at Class Financial dot
com. That's class k l aas Financial dot Com. The're telfull number

(19:57):
six so eight four four two fivesix three seven. No charge for the
initial gets to know you appointment atClass Financial. It will be complimentary to
you again their number six oh eightfour four two five six three seven.
Let's say you're in a position whereyou haven't earned enough credits to qualify for
Social Security. All hope may notbe lost. We'll get the details next.
Also do the Money in Motion listenerquestion corner, as well as the

(20:19):
Class Quiz question a week. Somuch coming up in this next segment as
Money in Motion with Coss Financial continuesright here on thirteen ten. Wuib I.
This is Money in Motion with ClassFinancial, a fun and informative show
designed to help you get answers toall your retirement questions in one place,

(20:40):
talking with our retirement planning professionals MaleiaQuavis and Eric Schwartz. Of course,
they come to us from Class Financialonline. Classfinancial dot Com that's Klaasfinancial dot
Com and their telephone number six oheight four four two five six three seven.
A couple months ago, a lotlot of verbiage about spouse's x spouse,
et cetera. You can go backand listen to that for more details,

(21:03):
but quite simply, to be eligiblefor your spouse's benefits, you typically
need to be at least sixty twoyears old, or any age if you're
caring for a child who is underthe age of sixteen, or perhaps one
with disabilities. In that case,though, you can get benefits based on
your spouse's record. But this iswhat you need to know. If you

(21:26):
begin receiving spousal benefits at your fullretirement age, which is going to be
older than sixty two, typically you'regoing to receive fifty percent of what your
spouse would get if they started benefitsat their full retirement age. So again
some takeaways today, remember this thatif you do start benefits early, they're

(21:47):
going to be smaller, just likeEric's spoke of a few minutes ago.
So you know, it's kind oflike locking them in, and they are
smaller if you're starting them before fullretirement age. Now there's a whole different
direction for widows or widowers, Soyou can actually kick things off by collecting
Social Security benefits first based on yourown earnings records and then switch to a

(22:11):
survivor's benefit later. Or and thisis quite interesting, or you can start
with survivor's benefits and switch to benefitstied to your own earning's record, even
if you're filing before hitting full retirementage, so you know, if you're
dealing with an ex spouse's passing,you might be able to get benefits like

(22:33):
a widow or widower. We wouldsuggest to dive deeper check out the survivor's
benefits or spouse benefits pages on theSocial Security website. Certainly call make an
appointment, either by phone or inperson with Social Security, because ultimately you
want to get the best benefit atthe right time. We would hate to
see you lock in a benefit that'snot the best benefit you could have.

(22:59):
And if you're divorce worst and you'relooking at survivor benefits, here's a scoop.
And there's always these little caveats.If you're at least sixty and your
marriage lasted a minimum of ten years, and I know Sean's right, and
all this stuff, Okay, andyou didn't remarry remarry before the age of
sixty, you may be eligible toclaim on your late spouse's benefit. And

(23:25):
then we talked about divorced individuals.So you can sometimes get half of the
ex Social Security benefits your exss socialSecurity benefits. But there's a catch hero
as well. You have to havebeen married for more than a decade,
be single, age sixty two orolder, and your own work records should

(23:47):
probably bring in less than what youwould get from your ex spouse's benefits.
You know, at the end ofthe day, we just start looking for
the best benefit that you could youcould actually receive. We don't want to
go through headaches of trying to getsome thing that's worth less than you have,
certainly, but these are these getWe had a question last time we
discussed this, you know, becausesome people are married more than once,

(24:07):
twice or three times, so thoseget really complicated. We would definitely direct
you to speak to Social Security tofind out what's right for you. Just
fascinating stuff this morning with Malia Quavisand Eric Schwartz, our retirement planning professionals
from Klass Financial teleph number six soeight four four two five six three seven
and the website class financial dot com. That's k l aas Financial dot com

(24:29):
talked about all the great features onthe website. I did mention earlier that
there's an opportunity to submit a questionto be answered right here on the program,
the Money in Motion Listener question corner. Again, you can submit those
right online at cossfinancial dot com.As a matter of fact, Susan writes
in she says, I'm considering retiringnext year, as as is my husband.
Is it smart for both of usto retire the same year? That

(24:52):
is a that's a great question.That's that's also a big question. So
certainly encourage Susan to reach out toher financial advisor and discuss this in more
detail. But when I hear thatquestion, it does prompt for me a
few things to be thinking about.So if Susan is younger than sixty five,
it's going to be really important forher and her husband to determine how

(25:15):
they want to handle healthcare. Becauseremember, you're not eligible for Medicare until
you reach sixty five, so you'remaybe that's taking Cobra through your future former
employer, purchasing insurance on the healthinsurance exchange, or even looking for a
part time job that maybe offers healthinsurance. The other thing that one of

(25:37):
the other things I would think aboutis does the projected income that you can
take from your investments and social Securitydoes that actually match up to what would
be a comfortable lifestyle for you inretirement. So I think people choose a
date in mind for retirement and theyview it kind of as well, I
just have to get to that agerather than viewing it through the lens of

(25:59):
well, by that age, haveI accumulated the resources and investments that I
need to be able to retire theway I want to? And this,
you know, a big piece ofthis is you know how much debt do
you have left on the table,because that's going to steal some of that
income to cover obviously liabilities that youhave and limit the lifestyle that you have

(26:21):
at least initially in retirement. Butthe last piece of this that I would
really want Susan to think about iswhat do you or your spouse actually want
to do in retirement. Do youwant to spend more time with family,
you want to travel, you wantto volunteer, maybe all of those things.
But we see people retire all thetime, obviously, and one of
the big things that we've come torealize is it's important to have something to

(26:45):
retire too. So when people areworking, they have a routine, they
have responsibilities, they have something toget them out of bed in the morning.
And it's not always, you know, the most exciting things, right,
but it is something that kind ofstructures our lives. So as we

(27:06):
watch people do this, we've foundthat people that retire the most successfully,
perhaps the most happily, actually havea plan for how they want to spend
that free time in retirement. Sothose are just some of the things I
would think about. But again thisis a bigger discussion that I would really
encourage Susan to reach out to atrusted financial advisor with great question, Susan,
don't forget you. Two can belike Susan, submit a question right

(27:30):
online for a money in Motion listenerquestion corner at Cossfinancial dot com. That's
k l Aasfinancial dot com. Thetelephone number six oh eight four four two
five six three seven no charge forthe initial get to know you appointment dech
co loss Financially it will be complimentaryto you. Again. The number six
oh eight four four two five sixthree seven. Also going want to hold
on to that telephon number because it'stime now for the COSS Quiz Question the

(27:52):
Week. It works like this.In just a moment, I'll ask you
the Class Quiz question the week.You will then have thirty minutes from the
ter Today's program to call the COSSFinancial office right here in Madison at six
oh eight four four two five sixthree seven. And if you are the
first call with correct answer, winthis week's prize, which is a twenty
five dollars gift card to Dix.This week's Closs Quiz question the week is
this true or false? According toSocial Security the age that you can collect

(28:17):
one hundred percent of your earned SocialSecurity benefit is your fr also known as
your full retirement age. True orfalse? Six oh eight first call win
that twenty five dollars gift card toDix. Don't forget as well. That's
Class Financial's office right here in Madisonagain their number six oh eight four four
to two five six three SKay chattingwith both of you, you guys,

(28:37):
enjoy this most fantastic of days.Thanks. Sean Names's next news is next
year on thirteen ten Wiba. Thisis Money in Motion with Colass Financial Asset
Advisors LLC, a registered investment advisorregistered with the SEC. The content of

(28:59):
this show for informational purposes only,and should not be considered individual investment advice.
Class Financial does not offer tax orlegal advice. Any opinion offered during
the course of this show is theopinion of that particular investment advisor representative,
and not necessarily the opinion of ColossFinancial