Navigating Social Security: Listener Questions Answered

gonna jump into these. But first, before we get into these questions, those of you who follow me on YouTube have likely already seen this video. But the Social Security Administration is sending out emails to everyone who has a my SSA account, that's the online account that you can log into to do a benefits verification, you can check your earnings history

and a lot of other things there as well. And I always recommend to people that they have an account setup, you know, there's a few reasons Number one, you need to be checking your earnings history every year to make sure the right amount of earnings are being recorded. But the second reason that you need to get in there is partially the reason that the Social Security Administration is sending out these emails as well. And that is to make sure that your information stays safe. And

every day that goes by that you haven't gotten your own. My SSA account, frankly, is another day that someone else can get that on your behalf and probably not meant to be beneficial to you. So if you haven't gotten your my SSA account, do that. But most of you probably already have gotten that. And if you signed up a few years ago, you're likely still signing in with your username and password. While coming up at some point in the future. We don't know when they are going to discontinue

allowing you logging in with a username and password. And instead, you're going to have to migrate to the login dot geo V methodology for getting into your account. Now, this only applies to people who are either not already using login dot geo V, or the id.me service. And so if you use either of those, you don't need to make any changes. But if you're still just using the username and password, you received an email, vast majority

of people are seeing that email. They're saying that, hey, I know that the number one scam out there is the Social Security scam. So I'm just going to ignore this email. And that's fine. Ignore the email, I never recommend clicking on links about you know, things like that out of an email anyway, but go over to your my SSA account and make those changes. Because at some point in the future, you're going to log in, or at least attempt to log in, and you're not gonna be able to get into

your account. And it's just going to be a big hairy miss. Because it takes a little while to get things set up with login dot geo V, you've got to show them a picture ID things like that. There's a lot of extra security precautions there as well. Now, many of you may already use login dot geo V. For some of the other government agencies. I know the Small Business Administration uses it, I believe the Office of Personnel Management uses it. There's a handful of others that

already use this. And so you can link these accounts together, where you have one set of login credentials that will get you into all of these different governmental accounts. Alright, so now that that's out of the way, let's jump into some of these questions. The first one comes from Lois. She said for a taxpayer who was born in 1955, the full retirement age for

survivor benefits is 66. But for all other benefits, it is 66 and two months, which of these two retirement ages is used to determine if a taxpayer who is receiving survivor benefits will have the benefits reduced because their income exceeded the earnings limit. All right. Now, she went on to give me some more information, but I'll just stop it right there. So we all know about what the full retirement age is, right? So for anybody born in 1960 or later, the full retirement age is 67.

And if you were born before that it's slightly younger, but most of the people listening to our podcast or is that 1960 or later, we do have some in there that are a little older than that. But if that's you, you likely already know what your full retirement age is. The interesting thing about this is when they made changes to the full retirement age, they put the survivor benefits on a different schedule. And really

all it is is just everything is pushed forward to yours. So for example, in 1960, the full retirement age becomes 67 for retirement benefits, but for survivor benefits That doesn't come into effect until 1962. So just add two years on to the normal full retirement age for Survivor Benefit or for retirement benefits. And then you have the full retirement age for survivor benefits. Now, she's asking a very astute

question here. And that is, which of those ages determines the earnings limit, because at full retirement age, the earnings limit no longer applies. And although she's only noting, it's a two month difference between those, that could certainly make a difference with the amount of earnings that she could have, in those two months if she were to continue working. Now, that does cause quite a bit of confusion for individuals who are collecting survivors benefits,

and I get it. But here's the thing, the Social Security ministration does say very clearly, although it's hidden, some that if you receive survivor benefits, we use your full retirement age for retirement benefits when applying the annual earnings test for retirement or survivor

benefits. Although the full retirement age for survivor benefits may be earlier, for the annual earnings test purposes, we use the full retirement age for retirement benefits, this rule applies even if the beneficiary is not entitled to retirement benefits. So there you have it, they're going to use the normal schedule for for retirement age to determine that earnings test and the application of that. All right, Jane, Jane says thank you for all the information you continue

to provide to educate those planning for retirement. And those of us already retired. Well, thank you, Jane. She said, I have two questions. My husband is 70 and just filed for Social Security benefits, I will be 65. In February, my full retirement age is 66 and 10 months, if I file for social security when I am 65. Would that lower my survivors benefit if my husband were to pass, but I waited into a full retirement age to file for survivor benefits. All right. So let me address that

question first. So what she's asking effectively is, hey, if I file for my benefits, is that going to decrease the amount of my future survivor benefits? The answer is no, it will not. Those are two separate independent benefits. So as noted in the last question, the Social Security Administration makes a very clear distinction between survivor benefits and retirement benefits. So if you file for your retirement benefits, that does not automatically deem you to have filed early for a

survivor's benefit. And since she's already told me that her husband filed at 70, than we know that she's going to be able to file for benefits. Now, if that's the way it should work out, you know, when you look at it on paper, if that's the optimal strategy, and I'm not convinced that it is. But again, I'd have to know a lot more factors here. But her husband found at 70. And now she's 65. And she's thinking about falling, would that reduce a survivor's benefit? If he were

to die before her? Jane, it would not, you would collect your reduced retirement benefit. And then if your husband were to die before you, your benefit would step up to the benefit that he was collecting. At the time of his death? Her second question says, Can I file for a reduced spousal benefit at 65,

which would be potentially higher than my own benefit? So no, you cannot, prior to January 1 2016, I believe it was you could do that, you could restrict the scope of your application to a spousal benefit only, and let your benefit grow as long as you're at least full retirement age. But in this case, you know, you wouldn't have been able to do that anyway. But now the law has changed. So it doesn't even

matter. So if you file for, you know, if you go in with the intention of filing for a spousal benefit, only, they're just going to entitle you to all of the benefits that you're entitled to. So that would be your own benefit, plus a little bit for the spousal benefit, which would be added to your own

benefit. So both of those would end up being reduced. But again, that would not change the fact that if your husband were to pre decease, you, your benefit would stop, if it's lower, and it sounds like it is, and your husband's benefit would be your new benefit. All right. Perfect. Thank you for the question, Jane. All right. The next question is from Sheila. Sheila said, so you have a plan, plans change life happen. Now, we could pause right there and have a pretty in depth conversation,

couldn't we? You know, speaking of plans, when we do planning for clients, they will often ask me, you know, before they engage us, Devin, can we just take this plan and run with it? You know, is this something that we can take an execute for the rest of our retirement? And sometimes there will be some shock when they hear us say, No, you won't be able to because the one thing that we know about this plan is

that it's wrong. You know, I know that isn't a warm and fuzzy feeling for someone who's about to pay A two grand for a retirement income plan. But it's true, right? Because things evolve. What I can say is that when we do planning, it's as accurate as it can be at that moment in time. And I don't think we could get any higher level of accuracy based on what

we know. But as Sheila has noted, here, you have a plan, plans change, life happens, things evolve, tax law changes, the way that we view, money changes, man, I can tell you, I'm 48 years old. And I can tell you that the way I view money now is not the same as it was when I was 40, maybe even, maybe even a little older than that, right? Because as you age, your objectives start to change your ideas about what's important starts to change. And so these plans have to evolve right

alongside your life. So if you don't have a plan, if your advisor is not giving you a plan, or if you're not going out, looking at new retirement, and getting a plan and modifying that plan on an annual basis, you need to because things change. All right. Let me get back to her question. She said, rather than taking Social Security before age 70, which is her current plan is drawing down from my IRA a better approach, we have some cushion, but don't want to outlive our savings.

Having a higher social security seems to be more important than using some of the IRA. Ooh, Sheila, there's a lot to unpack in that question. You know, the financial media is hyper focused on the idea of maximizing Social Security. If you go out to your Investopedia, US News, all these articles that have plenty of quotes from financial planners, you're going to see that maximizing Social Security is a big key word. Here's the deal, though, when you are retired, let's say that you retire at 65.

The income sources in front of you at that point will be social security, and your retirement savings. All right. Now, I know that's not the case for everyone. Some people are still fortunate enough to have large pensions, maybe rental income, other things like that. But for the vast majority of people, when you retire, there are two income sources, the income coming from your investments and the income from Social Security. So you have to make a decision, do you want to maximize Social

Security. And the way to maximize Social Security is to fall at 70? Or do you want to maximize your retirement savings. So there is a trade off. And there is an inverse relationship here, by making the decision when you're retiring, say at 65, to maximize Social Security and push that decision out, then you are also making a decision to minimize your

retirement savings, there's just no way around it. It's a counterweight, because if you're not filing for Social Security, you're going to be pulling additional distributions out of your retirement savings. And then if you file for Social Security, earlier, let's say that you go ahead and file for Social Security. Well, now you're not maximizing Social Security. In fact, we could say that you may be minimizing it at that point, because you're getting less than you could five

years down the road. But you're also not likely to be taking as much out of your retirement savings. And thus now you're maximizing your retirement savings. So the big question is always should you maximize Social Security and thus minimize your retirement savings? Or should you maximize your retirement savings and thus, minimize your Social Security? Here's the way to know, lots of testing, you need to be able to get into either a financial planning software, or

hire someone that can do this for you. Or you can look at multiple scenarios, you need to be able to see this in a very easy, logical, clear line graph that makes it very transparent. what the end result is of all of these different scenarios. And actually, I'll back up from that not just the end result. But what is the cumulative result, right. And we want to measure this in two different ways. We want to measure this in cumulative tax liability and portfolio balances. So how does

filing early impact your cumulative tax liability? We don't want to just go to the end and measure it right? So if you put in age 90, as the end of retirement plan, which is also you know, when you think you're going to die? Well, we're not, we're not trying to run the race to get to 90 and see who can have the most money. We want to have the best experience along the way. And so seeing all of these different strategies, what if you fall at 65? What about 67? What about 68? What about

70? And you're able to see how that impacts your cumulative tax liability. And your portfolio balances over that time really gives you that clarity that you need to be able to make a very confident decision in retirement. Now, I'll tell you, I've talked to a lot of people who had the plan to file at 74

Social Security benefits. They were retiring at 60 to 63, you know, sometime in their earlier 60s, and they had already done the math, you know, maybe they used a financial planning software that in most cases will somewhat default to saying Do you want to maximize Social Security. And if you hit yes,

it's just going to get you to fall at 70. But what they couldn't see in all of those pages that financial planning software spits out is that in the interim, between when they retire, and file for social security in that space, seeing what happens to their portfolio balances, because they're taking out larger distributions than they normally would, when you combine that with the possibility of a negative

sequence of return, when you can see that data clearly. And you see that portfolio balance declining in that period, there will be some people that look at that and say, you know, what, I'm not comfortable with seeing my portfolio balance go down like that, that early in retirement, I want to find a way to smooth the ride. So again, it's all very subjective. You know, we often tell people that financial planning is really 50% data. And that surprises some people, you know, there are

those out there, their job is 100% data, right. And decisions are made based on that data alone. But retirement planning really isn't like that, because we have the emotional factor that comes into it. And so I often recommend that people look at multiple scenarios, as that 50% of the equation, the other 50% is then determining how you feel about that data. You know, an example of that, that I've told fairly often on the podcast, I think, is paying my house off early. It does not

make sense on paper to pay my house off early. You know, it was John, who years ago, called me one day, and he said, Hey, Devin, so I'm refinancing this house, and I got 1.9% on it. If you want some of that, here's how you need to call. And I thought, Man, that's the that is the lowest rate I've ever heard of. That's ridiculous. And so I called the same lady at the bank that he had talked to, this was probably a couple of days later, and rates had dropped even a little bit more. And now I could

get locked in at 1.85%. That's an insane, low interest rate. Interest rates shouldn't be that low, right. And when I track this out on paper, the data tells me that I am by far better off to just put that amount of cash that I could use to pay my house off in a money market account, and earn a little over 3% difference between what I'm paying in interest for my house,

and what I'm earning an interest on that same amount of cash. But that's the 50% the other 50% of how do I feel about that data is a little different. Now personally, I don't want to pay my house off early. I don't think it makes sense. You know, I'm somewhat more driven by the data. My wife, on the other hand, says Devin, I have always wanted a paid off house and we're so close. I don't care what that interest rate is, I

want to pay this thing off. And that's the part of the data then that you really have to wrestle with and figure out how does this resonate with me. But before you can get there, you've got to get data that's very clear, that you can understand, and then you can move forward with confidence and make a good decision. All right. Thank you, Sheila for that question. Next

question is BD BD said I retired in 2022. Using Devon's information regarding being the primary earner, a spouse who stays home in quotes and a disabled adult child, this situation alone seem to challenge our local Social Security office and their calculation of applicable Social Security benefits, then they unexpectedly withheld payments against a 20 plus year old overpayment that the local rep had said they probably wouldn't apply to benefit. It was all

rather bumpy. How can I determine what's actually correct of BD, I'm gonna tell you, I have seen so many mistakes made in cases where individuals are receiving benefits from disabled adult children. And really, it's so complicated that it doesn't make sense for me to get involved in

one of these cases. Because, you know, with the hourly rate, I would have to charge to take myself away from my business, the return on those dollar spent may be somewhat low, but I'm going to tell you, I have a fantastic resource for anyone that's dealing with benefits from a disabled adult child and

figuring out you know, are we getting the right benefits? And I don't know that I've ever mentioned this guy on the podcast before, but he is really good spent, I believe 12 years at the Social Security ministration as a claims adjudicator, so looking at these cases, and his specialty is in children's benefits and the disabled adult child benefits

area. His name is Joshua Maga. The name of the company is social benefit advisors.com You can find them online and you can make an appointment with him and he will go through all of it. and help you determine, are you getting the right benefit amount? And in the past, I have seen individuals use him and he's helped them to figure out that they had 1000s of dollars in underpayments because the benefit had not been calculated

correctly. So instead of me trying to go into a long in depth discussion about disabled adult children benefits, I would just say, get in touch with Josh, he's going to be able to get you squared away. All right, next question comes from Carolyn. Carolyn said, my husband retired, he was a policeman, and he drove a city government pension, his social security falls under the Windfall Elimination Provision,

and is reduced. I'm now retired, and I am drawing Social Security, can he draw a spousal benefit off of my social security, which is significantly more than his social security, but is less than one half of his pension? All right. So Carolyn, it sounds like your husband has what we call a noncovered pension. And that's simply a pension that he earned while he was working at a job that he did not pay into Social Security.

And as such, you've already noted, he is subject to the Windfall Elimination Provision, which is effectively just a recalculation of Social Security. It's an alternate formula that they use for people with a non covered pension. But he is also covered by another provision, called the Government Pension Offset, and the Government Pension Offset applies not to your own benefits, if you have that non covered pension. But it applies to any spousal or survivor

benefits that you could be entitled to receive. And the amount of that Government Pension Offset is equal to two thirds of your noncovered pension. So for example, if your noncovered pension is $3,000 a month, then before they will pay any spousal or survivor benefits to you, they're going to subtract 2002 thirds of that non covered pension. So with a spousal benefit, I don't think it's even possible, depending on

what that pension is. But if he retired as a police officer, I would imagine that that pension is going to be too high, where two thirds of that amount would wipe out any spousal or survivor benefits. Maybe that'll change one day, there's always legislation being proposed, most of it is somewhat self serving for these politicians. But we'll have to see. All right, next question comes from Don. Don said, I'm currently collecting Social Security and working, will my benefits ever be

adjusted to account for the new Social Security taxes? I'm paying? Well, yes, done. They will, you know, on an annual basis, the Social Security Administration performs this behind the curtain calculation, they call it a ri computation. So effectively, what they do is, they look at your highest 35

years of index earnings. So that's the years that have already been indexed for inflation using their indexing factors, which you can find on their website, if you want to run those out in a spreadsheet, they take those highest 35 years, and they run those through a formula. And it has to be the formula that's in place the year you turn 62. All right. So that's done that establishes your pie. And from that point, you start getting the cost of living adjustments, so on and so

forth. Now, if you continue working after that point, what they do then is they will look at your new earnings, and compare those against the list of how 35 And if your new earnings are greater than any of the earnings and how 35, they will boot that number out and put your new earnings in, which will result in a slightly higher benefit. But if those new earnings are not greater than one of those in that high 35,

then your benefit will not be recalculated. And so you know, sometimes I hear grumbling from people that say, Look, I've retired as an engineer, or whatever it is, you know, making fairly high income. And now I'm doing this consulting gig on the job on the side. And those earnings are never going to replace one of my hot 35. But I've still got to pay Social Security taxes. So effectively, I'm just paying these taxes in

for nothing. Well, that's absolutely right. There's not going to be any return on investment for those taxes that you're paying in and less. They outpace one of those years and how 35 Alright, let's move on to Tom. Tom said, my wife took her Social Security at 65 and eight months. I was born in 1958. My wife was two, and I'm trying to decide when to take my Social Security to maximize both benefits. Currently, my full retirement age benefit is 3400. And I'm thinking about taking it

either in 2024 or 2025. Do you have any recommendations? You know, Tom, there's a lot more that has to be considered here.

And you know, we answered this question just a moment ago with Sheila, where we were talking about, you know, choosing the right age to file there's a lot to consider here, you know, beyond just what are your other assets to an income, then we have to look at, you know, age differences, which here it doesn't seem like there's much of an age difference, would want to look at some health differences, there's quite a bit, that would go into the decision about falling. Now, you

did say, though, that you want to maximize your benefit. Now, the obvious way to maximize your benefit is to push it forward as long as you can, right? Because it's growing by two thirds of 1%. For every month you delay it, which works out to about 8% per year. And so if you were born in 1958, that means that your full retirement age is 66, and eight months, so you're gonna get, you know, what is that 26 720 8% added to your full retirement age, if you delay, so that would be the path

to maximization. But some of that is also going to depend on how much your spouse's benefit is. So for example, let's say that she didn't work a job that paid into Social Security, instead, she ran the household, raise the kids and did all of that work. In that case, if the only benefit that she's entitled to is a spousal benefit, what you've got to remember is that until you file for your benefit being the higher earner, your

spouse cannot receive that spousal payment. So for you delaying your benefit, you're not only pushing your benefit forward, but you're also missing a few months where your spouse could collect a benefit. So you've got to weigh all of that out. And again, much like ATO, Sheila, the way to do that is through testing, you need to look at multiple scenarios to see, you know, what kind of ride does this give me in terms of,

you know, cumulative taxes in terms of portfolio balances. And you know, which of these gives me the most confidence that I'm ready to retire. And to use this, this withdrawal strategy to use this Social Security following strategy, Roth conversion strategy, it all comes back to the testing. All right, we are going to go to Bob and Bob says, I'm planning to wait until 70 to draw Social Security, because I want to

maximize my benefits. And my research led me to believe my wife was entitled to a benefit of at least 50% of my total benefit, but I thought I read somewhere that she is only entitled to 50% of my full retirement age benefit amount. Is that correct? also wondering if I die before her? Is she only entitled to my full retirement age benefit? Or will she be able to claim the benefit? I would be getting at 70? Assuming that's

when I file? Alright, Bob, good question. And it is one that causes confusion, we hear that 50% number thrown around quite often, where people are under the assumption that a spousal benefit is 50% of the higher earners benefit, but it is but it's also not, it is always key to the primary insurance amount of the higher earner, which is effectively the full retirement age benefit. So for example, if your full retirement age benefit

is $3,000. And you delay that to say age 70. And now you're getting almost 4000, well, your spouse is not going to get half of that 4000, she's going to get half of the 3000. So it's always key to the primary insurance amount. Now, with respect to survivors benefits, that's different. That isn't necessarily key to that if you have already filed or especially

if you've already passed full retirement age. So the key there is that the benefit that she would take over if you were to Dhaba for her would be the benefit that you're receiving as of your date of death, and that subject to a couple of limitations as well. But at your age, those won't have any impact or the benefit that you were entitled to receive on your date of death. So in that case, if you push that out till 70, that would be the benefit that she would start receiving when you

died. All right. Thank you, Bob. Let's move on to Kevin. Kevin said you'll see a lot of discussion around when to take your Social Security. Many take it as soon as they can. And they have sound reasoning behind that. But most of the advice is to wait until 70 to maximize your benefit. Those of us in the middle are wondering well what about hedging and taking between full retirement age and 70. But the model seems to indicate this is the worst possible time to

take the benefit. Can you shed some light on why this may be so? Well? I don't know. I haven't seen any research that suggested that between full retirement age and 70 is the worst time to fall. You know, if you look at reductions the first three years before full retirement age, they're steeper reductions than there are in the space after that, right. So if you're 62 or 63, the reductions are a little lower than they are

at 6465 and 66. But in terms of falling between full retirement age and 70 I don't know that that's the worst possible time. In fact, that's when we see a lot of people falling. But like I'm beating the dead horse here. But Kevin, it really is going to come back to making sure that you've looked at all of the different following strategies, and you understand how each of those is going to affect the big picture. All right, let's go to how how said, my wife is currently taking Social

Security, I'm going to start my Social Security at age 70. Next year, she will be entitled to one half of what my full retirement age benefit would have been. Does she have to apply to get that benefit? Or will the Social Security ministration know when I file that she is entitled to it? Keep up the great work, follow your podcast, print that cheat sheets every year? Thanks, how thank you for that those cheat sheets are a great resource. And listeners, if you haven't

downloaded yours yet, you need to. And there's generally a link in the description of this podcast where you can get your cheat sheet as well. So the question is the spousal benefit filing? Is it an automated process? Does the administration know about that? And the answer is maybe they you know, it depends on the Claims Representative when you're filing that benefit. You know, if they ask you the question of, you know, do you have a spouse who is entitled, then they could

further develop that. But what I have found in most cases is that, no, they won't do that. And you do have to tell them, and that needs to be another filing to get that spousal benefit. You know, and I'm thinking of a case right now for some clients we have in California, who they filed for benefits, and just kind of assumed that the wife was getting the right benefit. While she wasn't she was still getting her benefit from her work record. And the spousal top off

had not been added to that. And it was a it was a few 100 bucks a month too. So we went back and we were able to get that fixed. And they did pay her back a lump sum on that. But, you know, like a lot of things, the process that's supposed to be automated with not only government agencies, but in anywhere else, sometimes that automation will break down. All right, next

question is Angela. Angela says if your Social Security will be subject to the Windfall Elimination Provision, What documents do you submit to show your non Social Security income?

Well, you know, here's the thing, the Social Security ministration has some pretty wide reaching authority to go out and get information on you, they may not need you to provide anything, if they do, it's likely going to be some prior w two forms, prior tax returns, it could come down to letters from employers, but the Social Security ministration, you know, is already receiving a lot of that information through that form W two, you know, when it's sent to the IRS, and the IRS

shares that information with the Social Security ministration, there's also pension records that they can access to see what years you worked in noncovered employment, they can also send out verification requests directly to these employers or to these pension paying agencies. And then to once they start that payment, they're going to do some periodic

audits. And, you know, make sure that everything matches up. So I would say that, you know, file, find out what it is they are needing, and if you can provide it great, but otherwise, they may do it all. And then come back to you say we have all the information we need. Who knows, it's it's hard to tell from case to case, how they're going to approach this, but just know, they do have some, some pretty wide authority to go out and get

this information on their own. And they may ask for it as well. Here's the other thing, though, after they go out and get this information on their own. If you're subject to the Windfall Elimination Provision, and you have another job, or you paid into Social Security, don't expect them to necessarily get that right. This is where you need to understand how the benefit is calculated, and how those noncovered earnings and those covered earnings are going to all integrate together.

Angela, thank you for the question. And that's going to wrap it up for all of our social security questions. You know, guys, I do want to thank you so much for the reviews that you leave on the podcast, those are so meaningful for us, John, and I read each and every one of those, and we love seeing that number get higher and higher and higher. And thank you also for

sharing this podcast with your friends. You know, we talk to people occasionally and they say we you know, I'd never heard of you guys, but my friend told me about the podcast, I started listening. And then I went back and I listened to every episode. Now. You don't have to listen to every episode or encourage your friends to listen to every episode, but sharing this podcast with him and just saying hey, here's some guys that

they're not overly scripted. They're not overly salesy. They get on here and talk about good solid retirement information. That is so helpful because the more people that follow our show On iTunes especially, or Apple podcast, as they call it now, the more they are going to suggest that to other people. So again, thank you all so much for your loyalty for listening in every week, or at least the weeks we have episodes and, and putting up with our crazy schedules in those weeks where

we don't have episodes. All right, well, that'll wrap it up for this episode. And until next week, I'll be right here bringing you to and through your very own big picture retirement. Thanks for listening