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KRC the talk station, you know, six fifty five kr CD talk station. Happy Monday, It's Monday, It's ato six, which meeks is time for all Worth Financials Brian James and another edition of Money Monday. Brian, welcome back up. You had a nice weekend, my friend. Your microphone's off.
Brian.
Wow, that's two weeks in a row. Brian, that's two weeks in a row. I got to put another dollar in the jar.
My bad. Good morning, Brian, Good morning, mister Thomas. How are you? Can you hear me loud and clear of this time?
Loud and clear? It's working fine now.
So anyhow, it's not the smart thing to do take your Social Security BEN benefits earlier. But I guess, at least based on the article reported in the Wall Street Journal that you provided for the context of this conversation, fear mongering has driven people to claim benefits earlier and bad idea. So what's the story behind this one, Brian James.
Now, the story is whenever people get nervous about Social Security, and we had this during the first Trump administration as well, whenever people get nervous, the answer is always, well, I'll just go turn on my benefits now. That way, I'll be as guaranteed as I possibly can. They're really let's cut to the chase here. There isn't any evidence at all showing that that Trump has it in his sights
in terms of actual action. But I will say I can confirm just from my normal day to day I'm getting a lot of questions about this, and I have had clients that there that have decided, you know, what the heck with it. I just want to you know, burden the hand versus two in the bush. I want to go ahead and turn on this big our position at all worth as we're having clients, you know, doing our planning processes and all that has not changed, which is that Social Security is not in a good spot.
But that is not That's been something I've talked about all three decades of my career. Really been in a good spot. The math has really never worked, never worked.
Congressional Office, but Budget Office comes out with it every year, tell you how much longer it has before it's going to collapse on it. So this has got nothing to do with the Trump imministration, the Biden administration and Bomb administration has everything to do with Congress not taking steps to correct the problem or fix it in some way.
Yeah, and this goes back to the forties.
So I think the real issue here was that we decided in the nineteen forties that we were going to carve an eight percent increase in stone. That eight percent you get every year you don't file for Social Security has been in stone since the early forties when it was first put in place. It does not react inflation, that does not react to interest rates. So when we went through so security had a problem anyway before we went through twenty years of the lowest interest rates the
world had ever seen. But so Security kept going up by eight percent like clockwork every single year. So that accelerated the problem. But nothing has changed just because Trump is in office. The mask still says and as you mentioned, the CBO looks at this every year, and the mask still says that the quote unquote, and we got to qualify this. The quote unquote trust fund is going to run out by twenty thirty one, twenty thirty two, thirty three,
something like that. Now, let's make sure everybody understands that does not mean that a pile of money is going to go poof. That is not what that is. That simply means that for all of us. You know, I'm sitting here at work, You're working. I see Joe working hard. There's a lot of people out there on the highway
trying to get to their jobs. All of us are going to get a paycheck sometime in the next two weeks and it will say FIKA on it, and there will be a deduction that's you paying for your Social Security benefits. That is going to continue well past twenty thirty three, twenty thirty four, whatever the magic year is. So as long as money is flowing from paychecks, it's going to
reach beneficiaries. If they change nothing, then benefits will need to drop by about seventy percent because that's what we will be bringing in from current workers to pay beneficiaries.
Right now, we're bringing in more. That's the trust.
Fund well, and as the article reflects, it really is prudent to put it off as far as you can, because benefits starting at age seventy are seventy six percent higher than if you start a drawing at sixty two.
That's a substantial difference.
Yeah, it's a substantial difference, but I'm not going to call it prudent because that it could be different for anybody. If you are a person who sometimes the math just doesn't work and there are no other resources for income, that kind of thing. So I don't want people thinking it's black and white. I got to wait till seven.
I it's not the case. However, if you do have longevity, you expect to get past your you know, your early to mid eighties and whenever your relatives passed away, isn't necessarily the only the only only factor, because there's a lot of people in their nineties at nursing homes that didn't expect they were still going to be around. But it's that is a very personal specific decision based on your own financial circumstances. So just because it's the highest
number doesn't make that the answer. What other resources that you have that you could tap into? And I'll tell you where the pivot point is, Brian. If you're somebody who has resources, You've got your own savings, that kind of thing. When I do the math for clients, it tends to be what is the tax treatment of your various other resources? If you have all four oh one K, like many of us do. Lots of us work for companies in this area that support that either are or
support Fortune five hundred companies. That means we got a boatload a four oh one K money that probably has not been taxed yet.
That tends to be the pivot point where.
If you're going to get taxed earlier in your early sixties, if you have to draw on your four oh one K, that might say, you know what, go ahead and turn on social security first. However, if you've inherited a pile of money, or perhaps you've built up a significant amount of wroth IRAA is not taxed, that tends to favor pushing social Security out a little bit.
That's a really important point you make there. And not already has the resources like in a four oh one K to cover themselves adequately. You got to take this so security when you can, when you need it. So I guess the other component of this is, you know, people are living longer, which suggests, and I think the
statistics bear this out, they're choosing to work longer. And if you're continue employment, you've got that steady revenue stream in there, maybe you can continue to contribute to your wroth or maybe continue to contribute to your four oh one K. But that also will help you allow delay that Social Security draw for a while longer.
Yeah, a lot of people are always on the fence Brian when it's time to retire, because it's a big commitment. We all kind of hide behind the money. But once we realize, you know, for people who are in a good, fortunate situation and have worked hard, then they realize, you know what, I've never thought about whether I actually want to work. You know, maybe it's important to me to have a place to go to get out of bed and have some you know, some purpose and that kind
of thing. Not everybody is dying to get away from work in general. They just haven't been able to pull a trigger yet. Those folks are definitely saying I'm gonna just keep working for a little while. Long ago, I was on the fence anyway, But now this, you know, I just don't deny. I might totally turn on Social Security if the math works, but I'm definitely still gonna keep working. Now, let's talk about that situation for a little bit, because there is a bit of a.
Bite you can take.
I would be very very very careful, just running down to Social Security. If you are between age sixty two and your full retirement age, which will be somewhere between sixty six and sixty seven depending when you're born. If you are between those ages and you turn on Social Security while you're working, you're gonna give.
A chunk of that back.
There is there's something called the earnings test that will take away a chunk of that Social Security pain.
And that isn't that something that Trump has talked about, like not taxing Social Security because you know everybody who've used that, it's sort of it seems outrageous.
Wait a second.
You know I paid all the taxes, and you know I had income tax at the time, and they took out my FIKA, and you know, here I am getting taxed on what I basically quote unquote invested in throughout my life. I get it with the four to one K because it's pre tax earnings. But this doesn't seem quite right about taxing social Security benefits.
Yeah, and that's a good point, but that's slightly different. What I was referring to is the fact that you will take a haircut on your Social Security payment if you are going to generate W two income somewhere around twenty some thousand dollars as if you're still working and
you're under that age sixty seven what you're referring to. Yes, Trump has talked about we're not going to tax Social Security at all, but that so far is nothing more than a campaign promise, and we are, in fact we've actually been draining the Social Security tanks a little bit
more quickly. One of the recent changes was the Social Security Fairness Act that would that came forward under Trump, but it was it was basically put into law by Biden, which is removing something called the windfall elimination provision, which took away dollars from somebody who had a In this area, we have a lot of people who were state teachers
in some of the state sponsored pension plans. If you paid into Social Security earlier in career and then you spent the rest of your career on paying into a state plan, then you had to take a haircut on your soci Security payment. There that has now been removed. And if you are in this situation that so Security is reaching out right now to confirm with people and tell them what their payment is going to be. Increasing
to the windfall elimination provision has been removed. That's good news, but that is we've just widened the drain on Social Security just a little bit more. So next time the CBO talks about this, it's going to have to reflect the fact that there are bigger payments going to people you know, that weren't receiving them before, and that's not in the math yet.
Yeah.
I guess the takeaway I have from the article is, you know, if everyone was saying, you know, I'm going to start tapping into it early because I think it's going to disappear through mismanagement by our federal government, the whole programs on ICE make more sense than saying, oh my god, evil Trump is going to get rid of Social Security. That I mean, there's no truth at all to that, So that someone would make a life changing decision to start taking this draw early because of say, oh,
evil Orange Man. I mean that the level of ignorance that suggests is just to me mind boggling.
Yeah, and a lot of it comes from me.
There are voices in the Republican Party that, of course want to reduce Medicaid benefits and that is not germane to this particular conversation. However, I think people come back and they say, well, if he's coming after medicaid, will come after everything else. Therefore, I'm just going to turn on this big and be done with it. That's not there's no more truth of that than anything else.
Well, apparently Americans are financing groceries, not a positive signal. We'll talk about that with Brian James coming up next.
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six three eight one foam online. It's USA Insulation dot net fifty five KRC for more information about s eight nineteen ifify about kerrcdtalk station all or financials. Ran James joints the program every Monday beginning get eight to a five. We do a few segments together, talk about money issues and hopefully get instilling folks some responsible money management. And we'll get to a little bit more of that next. But now, Brian, let's start with an acknowledgment from Brian Thomas.
I'll behalf of the Thomas family. We got grocery shopping every week, right, And I got an Emory Federal Credit Union credit card, charge your grocer's on the credit card, and then I paid the bill off at the end of the month.
Isn't that buy now pay later.
In it roundabout way? Yeah, pretty much is. Yes.
So I've been reading all these articles about buy now, pay later, and I always thinking to myself, what the hell is buy now, pay later versus putting on a credit card. You either pay the balance off or you don't.
Well, the folks who this is affecting are the people who can't get credit cards because they have not enough fans, resources or bad credit or so who's off for these plans?
Yeah?
So what these are?
These These are plans being offered directly by by the companies that you're buying these products from, groceries, electronics, whatever, whoever's in the mood to do it now. The electronics companies all that, they tend to do it around Christmas for obvious reasons. But grocery stores, you know, pretty much obviously not a very cyclical industry.
We're buying groceries no matter what.
So buy now, pay later is a little bit different than you know, a lot of people associate with like payday loans and that kind of thing where I just need a couple bucks here in a short run, and you're going to charge me an exorbitant amount of interest. Well, the card they get to play if you're if you are a merchant who's going to offer buy now, pay later, you get to tell people there's no interest involved at all here.
I'm not going to charge you any interest.
I'm simply going to allow to allow you to pay for last month's groceries this month, which you know, so on its face mathematically it doesn't really cost any more. However, if you're in a situation where you're chronically needing to take advantage of these types of arrangements, that is just a blinking, flashing red light to say, hey, something is going wrong and you're going to need to address it.
These are paycheck to paycheck situations, and if you don't have the credit card or you don't have any other resources, then sooner or later you're going to run into a situation where not only have you gone to the grocery store like you always do, but also the transmission fell out the bottom of the car.
What are you going to do at that point?
So it's still a flashing red light to say, hey, this isn't you don't have any oil in the engine, This is not going to last.
We need to address things.
Well fair enough to all that.
But much like your initial point is is for folks who can't get a credit card, that means their credit score is too bad or they don't I don't understand the other criteria going to getting credit cards. But why would some institution who is in the business of profiting and making money gamble on allowing folks to buy now and pay later that can't qualify even for a credit card. They're just guarant they're setting themselves up for people not paying, aren't they.
Yeah, it's a numbers game, though, Brian.
So in other words, if I'm a grocery store and I sell pretty much the same stuff as my rival grocery store, then I might be able to attract more shoppers by allowing my shoppers to push out their bills without incurring any interest versus another store that does. It's simply a way to look more attractive to another shopper.
But I mean, logically and reasonably considering, you're finding a way to rack up fairly significant losses by attracting those customers who might not be able to pay their bills, just in the name of what looking like you're a little bit better. Margins for grocery stores are single digits. They don't really make that much money in terms of overall profit what two, three, four, five percent? Maybe, so it looks to me like they're jeopardizing their own financial situation.
To me, they can be.
But remember everything, everything is about how much did you make and how much volume did you generate this month? Because whatever, if I'm the manager of a grocery store, good, bad, or indifferent, somebody's going to want to know how much did my store sell versus, you know, versus the competition
this month. And if I can drive volume, you know, by simply making it easier for people or making let me let me rephrase that, making it easier to perceive that I'm easier to work with because at the end of the day, we're all paying our bills no matter what. Then I can potentially drive a little more volume that makes my store look better. I'm not saying that's the thing to do. I'm just saying that's where the incentive is.
Well, it just seems to me, the math doesn't work out because if you're not actually getting the money in the door, you're merely showing what you sold. The soul doesn't equate to profit until that bill is paid.
So it's like the.
Stock market reacts to what did you do yesterday?
I'm okay, now, you can't sell me on this one being a prudent business decision for businesses out there to go down. But in regardless of that, and for those folks who may have to pursue this option because of their the situation, I mean, any any sound recommendations. I mean the one thing to say, you know, you need to get a job that pays more. But that's just not a solution for so many people. I don't understand where the genuine solution is.
Brian James, Well, no, and again I wasn't saying this is a prudent business solution.
I'm just saying our incentives are out of whack.
Somebody is leaning on a grocery store to produce more profit, produce more volume. Just show that you're doing something, and you know there are surveys out there that yeah show that. A recent lending Tree survey showed about forty one percent of buy Now, Pay Later users made a late payment in the past year. That's up from thirty four percent
this year, so you're right. There are also late fees and other things there where if you make a late payment on an arrangement like this, you will pay a little extra for it, so there's margin in that too. So in a sense, grocery stores are becoming a lot like banks. This goes back to the emergency fund discussion we always have, which is make sure you have one and you won't be in this situation.
Well, which takes us to our next topic, which is sadly some people have just given up on saving money. One more with all were financials Brian James after ay quick quard or two for my friends at foreign exchange money issues again talking about money here with foreign exchange, it's a way to save money. You mind the pennies of dollars mind themselves. When you're talking about automobile repair, you're talking dollars, that's for certain, So mind some extra dollars.
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Good Shi, I have eight thirty here fifty five KRCD talk station Bryan Thomas with all Worth Financials. Brian James get yourself a financial plan to help you navigate the challenges of investing so you don't have to worry about it. Plus us, you got to get one that has a fiduciary obligation to you. Fee based financial planner is a way to do so. They're not trying to say is something you don't need that they're profiting off of. I'm not speaking out a term, am I, Brian James?
No, not at all. That's it.
You want somebody who sits on the same side of the table as you. My success is my client success. If I can help people understand, you know, what their options are in the pros and cons of each one, and make them get them into a point where they can confidently choose option A over B or C because they understand it, then I've done my job.
Amen to that.
And one of the things you're probably going to recommend and correct me if I'm wrong, is that they have a nest egg of money in case something happens, that they are have a pile of cash. They're sitting on maybe three months six months worth of living expenses and normal expenditures, and apparently, at least according to the article you provided me, half of Americans have given up on even saving money. Now, Is that saving money beyond just
that having that cash cushion around? Is this like saving money out all is and not even bothering to invest in a retirement fund like a four to one or a roth for a one k.
Yeah, not only is that one of the things we recommend, it's the first thing we recommend. It's just like you know, buying a brand new car at the dealership and not putting any oil in the engine and driving it.
Off a lot. You've got to have some liquid cash.
When I'm building a plan for somebody, I want to make sure that the short term, short term chaos. Right while we're sitting in the office, something could happen to that individual or that family or whatever that will that is completely unexpected. They're going to have to write a
check for If that happens. In a situation where we don't have enough money in the bank, there's not an emergency fund, then we're either going to have to swipe a credit card and pay ridiculous interest rates, or we're going to have to tap into longer term savings, which usually involves penalties and taxes and so forth.
So, yeah, the.
Issue here today and go figure people are a little spooked right now. I don't think that's a big shock to anybody. This is the new study out showing about sixty seven percent of people, so two out of three, feel like they're behind on their savings goals. To answer your question from before, what are we actually talking about with savings? This is really an indicator of how many people are in a situation where they can systematically an
ongoing amount out of their paycheck. In other words, there's a steady surplus every week, every two weeks, or every month, or however often they get paid. There's more coming in that period than there is going out. So about two thirds of people say that they are not in that situation.
Well, so what do we do about it?
We need to make sure we need to make sure that people understand the situation. So some other factors here, about sixty three percent of people who have a savings account, so maybe they were already in the situation, had put themselves in a strong spot, but they have tapped into it since just since the beginning of twenty twenty five. Now we're only about a quarter of the way through twenty twenty five and two out of three people have tapped into their their emergency funds here for reasons some
unexpected expenses, everyday necessities or emergencies. Some of them have to tap into it for housing payments, rent, mortgage, that kind of thing. Only about eighteen percent say they use their savings for intended purposes. Put differently, eighty two percent of people tapped into those savings for something they didn't exack coming up. So there's a lot of people out there,
of course, suffering from this situation. Again, what we're trying to avoid is longer term solutions that cost money in the form of interest rates and penalties and taxes and so forth.
Well, and also, as I read this, it's a sort of a generational thing too, with certain generations, you know, dealing with it or managing it better and others not so. Gen Z apparently displayed the strongest growth potential thirty eight percent actually building their savings during this period. That's that's a good indicator anyway.
That is a good indicator, and that's a sizable generation.
Now, what I will say, having talked to you, know these are these are my clients kids, and my right clients kids are my clients as well. So I frequently wind up talking to them even though they're really kind of just getting started and so forth. I will say that is a much more conservative generation. They've grown up pretty much with chaos as opposed to you know, their parents and grandparents who started to save their dollars in the eighties and nineties where really nothing bad happened for
twenty years and everybody became addicted to the stock market. Well, this generation has seen nothing but chaos, and so they're addicted to security. So both groups go too far in whatever direction that they're already predilected to. It's my job to kind of keep everybody in the middle.
And that's what the value of a financial planner is, to walk through it and evaluate where you are now and how you prepare for the future and where you will be at that point. Brian James always enjoyed the conversations we have, even if they're a little disturbing. Sometimes if we get some good news on the horizon, we'll have something really positive to talk about next Monday or maybe the Monday after that. But have a great week, and thanks to the time you spend my listeners and me.
Brian James appreciate.
The opportunity and the Mike will be on the whole time next week.
I oh, okay, I hear the words. We'll see what happens next week.
I hear it for you.
I take care man. It's about eight thirty five. If you five. Curiousity Talk Station should be a really fascinating conversation. The next guest dustin Dunbar and apparently not your typical tale of addiction and recovery. That's described as a hilarious and deeply insightful book. It's You're doing Great and other lies Alcohol told me. That'll be on next to Hope you can stick around.
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