Welcome to the fiscal firehouse, a podcast dedicated to promoting financial literacy to firefighters. I'm your cohost, John Beatty, executive board member of local 1309, a lieutenant, and also a certified financial planner with me, I have the other cohost of the fiscal firehouse, Louie Borrella, executive board member of local 1309 ambulance driver, and want to be financial expert together. John and I hope to bring clarity to the world of personal finance, specifically relating to firefighters.
Firefighting is a difficult job. Making sound financial decisions shouldn't be. In today's episode of the Fiscal Firehouse, John and Louie will discuss Social Security. John and Louie will talk about the different components of Social Security. How you become eligible. When you can start claiming social security and some of the additional benefits John and Louie will also talk about the social security fairness act that was recently signed into law by president Biden on January 5th of 2025.
Without further ado, we're going to turn it over to local 1309 studios and the recording of the fiscal firehouse.
Welcome back to the fiscal firehouse. This is your co host. John Beatty with me as always. I've got my partner in crime here Louie Bruella say hi louie Good to see you louie good to be back. We took a kind of an extended break because of the holidays and stuff, but I'm excited to get the podcast going again and start with the new episode for the new year. Yeah, fresh 2025. Hopefully everyone had a wonderful holiday season. Everyone was safe out there.
Hopefully the the bugs and the germs didn't get you too bad, like they wiped out Louie and I's family.
I think everyone, everyone I'm hearing at the fire stations are like, yeah, we, it slaughtered us earlier this year or something like that. So I think it went through and got everyone.
It was in a tense, intense sickness season. So we're all back and we're ready to go. So in this episode, we are going to talk about social security. Everyone's favorite.
get, get nothing. Gets the blood going. Like social security.
Oh my God. This is one that it's. Tough. When Lou and I were talking about topics we're like, do we really want to try to tackle social security? 'cause this is typically a big honker. People get bored out of their minds talking about this. And it's a very complex topic as well. Listen folks, we know you're turning and going, man. Or you saw the title and you were like, social security. I probably shouldn't even know, is this for your granddaddy? Has this a granddaddy's podcast?
But this is for you. Like we, we actually think this is an important part of your
Path to financial independence and your path to financial security. So that's why we're doing it. And especially with the big updates to social security that we'll talk about, we think that it's very relevant right now. And we want it to have a relevant episode for you guys, because there's probably a lot of questions going around it.
So not just for the old guys at the department, but for the young folks too, we think that this is a really important thing to discuss right now because it's going to be, it's going to be important for your future someday. Maybe not, maybe not for 20 years or 30 years, but someday this will be important.
That's right. So whether you're day one on the job or whether you're not, we've got some of our retirees that are listening to the podcast. So shout out to all those guys. whether you're retired or you're getting ready to retire, or like I said, day one, you'll get something out of this and it'll be beneficial.
So really what we're going to talk about today though, is when we did our last recruit presentation about financial literacy, we actually opened up with one of these questions, like a raise of hands of how many of you think that social security is going to be around when you're ready to collect in 30, 40 years for some of them, it was pretty surprising to see the amount of hands that were not optimistic to say the least about what that could potentially mean.
Yeah. I think people have been like, they've been conditioned, right. To be like, oh, that's social security's for old people, but when we're there, it's gonna be broke. It's gonna be bankrupt, and there's gonna be zero. Nothing. We're getting a nothing for social security. I think that's a very common belief among people under. 30 or even 40 years old.
do you think that is?
Because it's always in the news, right? Whenever there's a shortfall, you hear about the social security shortfall. You hear that it's going to run out of money by 2030 whatever. And so you just hear there's a shortfall government, doesn't know how to manage it. They don't know how to say for it. They can't agree on it. And so it's just going to go bankrupt and just going to disappear.
And I think that's it. I think there's a lot of fear mongering out there when it comes to social security specifically. And I think that's one of the big misconceptions when they actually say that, social security is going to run out of money in 2034, 2035, whatever the latest projections are. What people don't understand is it's not going to run out of money. They're still going to pay benefits. But it might not be a hundred percent of your benefit.
It might be 80 percent or whatever that looks like. So big misconception, but Louie and I want to just dispel, or at least our personal opinions about social security is we do feel like it's going to be there in five years and 10 years, 20 years, 30 years down the line, some form of social security is going to be there now they might have to go down some significant reforms and we'll talk about potentially what some of those reforms could be, but, and.
At least in our opinions, we truly believe that it's such a, a cornerstone of American society. And there's a lot of people, unfortunately, that this is their primary retirement vehicle that they use to survive and not be impoverished. So it's
are going to be eating a lot of cat food if social security goes away and I'll just say this, like, it's, a. Omni political thing Neither party is going to be the party that kills social security republicans democrats. It doesn't matter especially because the vast majority of those voters for both parties are from the Social security eligible population. It's those people that are voting for the politicians.
That's why we have so many old ass people in congress right now, which Is a different story that we have to go on but the truth is like That's who is voting. They vote in droves. And so they're not going to be the ones that are forcing the grandma and grandpa to start eating cat food in retirement. So John and I do believe once again, that social security will be there for you when you retire. We don't know if it'll look like you.
Can't take benefits until you're 65 or 68 or something like that if they're going to raise the age In order to collect benefits or if they're going to reduce the amount of benefit that you get But in some shape or form we believe social security will be there
there. Yep, and that's why we wanted to talk about this because if we thought that this was Literally going to go away in the next couple years or it wasn't going to be a benefit for our members We wouldn't waste our breaths talking about it. But we do both believe that's true This is going to be a part of our members retirement plan. So we just want to talk about the, a little bit of the history.
So a little history lesson here on social security, but also how it's going to apply to our members, especially now that the social security fairness act has been signed by former president Biden. So we'll talk about that at the very end. So we'll just start with a little bit of a history lesson about social security. So when doing some research, I've forgotten. A lot about kind of the backstory about where social security got started.
For those history buffs, it was enacted back by president Theodore Roosevelt back in 1935. almost 90 years ago, it's been implemented and it was really started based on, if you guys remember history, Mid 1930s, early 1930s was all about the Great Depression, right? So they had a tremendous amount of unemployment. They saw a tremendous amount of poverty happening to the citizens in the United States and they wanted to have some type of program that would help support them in their time of need.
And there's actually a quote that I thought was interesting to talk about what the intent of Social Security was. And then I'm going to talk a little bit about how the benefits have been enhanced. Enhanced over the last 90 years or
Just to, just to point clarification real quick, so we don't get the hate mail. You said Theodore Roosevelt. Teddy. Brr, brr, brr. Fuck. No, it would've been Franklin. Franklin, FDR would've done it.
So yeah, Teddy was in the 1800s. So yeah, as you can tell fact check me. Thank you. No, Hey, no,
come back in later and be like, these guys dunno what they're talking about. We do.
exactly. So no, that's why Louie, once again, I, I don't know why I'm on the podcast, but Louie is my fact checker. So yes, Thank you, not Teddy, but FDR. Theodore was way before him. Yeah. FDR basically said we can never ensure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, but we have tried to frame a law, which will give some measure of protection to the average citizen.
And to his family against the loss of a job and against poverty ridden old age So he basically made those comments when he signed that into law So once again, if you're thinking about the intent of social security originally, it really was a backstop to help society to help our citizens that they would have the basic necessities of life covered by Social Security and they wouldn't be impoverished and they wouldn't have all these other challenges that our society faced.
So that's really the history behind where and why Social Security got formed. But really when you think about Social Security, Most of us think about the retirement benefit. I would say the vast majority of people when you talk about Social Security That's immediately what they think about but really there is a couple other components of Social Security that I think It's good to know What they are and it's also good to know because how the funding mechanisms of Social Security happen.
So Besides retirement benefits, which is what we think about when we think about social security.
There also are disability benefits So disability benefits are one of those and trust me This is something that you never want to have to qualify for And to my knowledge this is something that is extremely difficult to qualify for in order to get social security disability benefits Like that's no quality of life that I would wish on any one of our members so that's not something that we're advocating for but it is you
It's not like I have some slight hearing loss, so I'm gonna go get some social security benefits from that. It's like,
No, so it would basically be, I know a lot of our members are familiar with disability benefits through FPPA, through our Pension or Death of Disability program, which is an amazing program. And we have a lot of, I shouldn't say a lot, but we've had plenty of members that have qualified for a disability, a medical disability, right? None of those members that have left are disabled.
Got social security disability benefits like this would basically be a full on occupational disability where you can't work anymore And like I said, that is not That is not an illness or a situation that we would wish any one of our members on but just know that it is there As a backstop, to help our citizens Really in their time of need where they can't have gainful employment They can't do anything and it helps, you know support them in their daily endeavors
Yep.
So another another benefit as well is the survivor benefit. So once again, this is something that if you qualify for social security and, and Louie and I will talk about the eligibility here in just a minute, but if you do qualify for social security and you do have a dependent if you pass away, those dependents would get a certain survivor benefit. And there's a whole big formula that we're not going to get into.
But once again, that's going back to the original intent of FDR and just trying to peak I'm not sure if that's a good thing to do, but I think that's a good thing. keep people from being impoverished and being able to have some quality of life where they wouldn't be
And that's much easier to qualify for. For the dependents of workers who have earned their social security benefit when they pass away the federal government is pretty good about. giving those people their social security benefits because they know that families need it, that some of these survivors would really go on the streets if it wasn't for a check from social security. So they're pretty good about that. At least that's my understanding.
And then the last kind of component if you will is what's called the SSI Or the supplemental social security income So this is either lower income or if they have, you know A disability through their age or they're blind or something else like this It just gives them an additional amount of money on top of what their original social security benefit would have been Ben.
So those are the umbrella of social security, if you will, but the, if, if you can imagine the majority of the money that social security spends out on a yearly basis, the majority of that is for retirement benefits and not disability or survivor. Or the SSI, the supplemental social security. So just a little backstory on social security and kind of the different components.
So when you're thinking about social security though, I think it's good idea to figure out exactly how it's funded, So they always talk about the funding mechanism and whether or not. It's going to run out of money. So once again, if you're thinking about how social security is going to be funded, it basically gets funded through what are called your FICA taxes.
And I know in previous episodes at some point or another, we had talking about FICA taxes, but that stands for federal insurance contribution act. All right. So these, this is a certain amount of money that you pay into social security and it's, it ends up being 12, 000. And typically it's split between the employee and the employer. So as the employee, 6. 2 percent of your wages would go into Social Security, and then your employer would pick up the other 6. 2%.
For those of you that are self employed whether that's, you got a side job from the FD and you run your own business or your spouse or someone else is self employed, they basically have to make up that whole amount. Yep. They pay up both sides. So 12.4% now they end up getting a tax deduction at the end to make it equal. But just know if when they front load that you end up paying the whole 12.4%.
And this is important to know that when we're talking about this, that's for those jobs that pay into social security, which we've mentioned in the last podcast, I believe, but we'll just reiterate if you are an employee with our department or I think probably any other professional firefighter department in Colorado for sure and almost across the country. You are not paying into social security. You do not pay that 6. 2%. The department is not paying that 12.
4%. And so you are not earning eligibility credits, which we'll get to in a little bit here. You are not earning, you're not paying into it.
Yeah, 100 percent so I think that's a great clarification there. So yeah, this is just talking in general and I think it's something the research I found it's something like 96 percent of workers pay into Social Security So we're that weird 4 percent of folks that that don't pay into Social Security. So that's the funding mechanism and that is not to be misconstrued or With Medicare, because sometimes those things overlap and there's a lot of confusion.
So what you pay into social security is not what you pay into Medicare. So what you pay into Medicare is 1. 45 percent of your salary. And that is something that we do as employees at West Metro. Basically everyone pays
I was gonna say every, is there
can't opt out of it. Nope. So basically everyone pays into that. So we pay 1. percent and then the employer also kicks in 1. percent to be called 2. 9. And that's something that social security has a wage base. So I think for this year, it's something like 176, 000 worth of earned income will be subject to social security. And then anything earned after that, they don't take anything out. So it actually is capped based on how much money you make.
That's something when we talk about funding possibly in the future something that congress could go after is obviously make that Wage base increase or unlimited so they could continue to get some funds in there So that that's basically what keeps for the most part social security funded So if you think a lot about that 12. 4 that's going into Very similar to how our pension works, right? So we have people that are actively paying into our pension.
They are producing You Contributions and those contributions are then invested and then those investments pay out the beneficiaries So our pensioners get that money at the end when they retire Social security is set up very similar that the majority of money that is how social security is being funded Is through those payroll taxes now you also do Unfortunately get taxed when you do get social security income And some of that taxes for your social security income actually help support the
funding mechanism behind social security.
sounds like Double taxation, John, but I know we don't have that in the United States, so I don't, I don't get
Yep. Nope you it is one of the rare circumstances in which you truly could look at that as a form of double taxation and we taxed it on the way going in for payroll taxes And then when you take it out on income you get taxed on it again.
Now, there are certain states that Limit the amount of money that they'll that they'll take out Charge you for for social security or what their tax but federally you're pretty much with the majority of people About 85 percent of your social security is going to be taxed to some degree. So that's
getting his.
Getting his getting his and once again most of that money goes to fund the benefits for retirees, the retirement benefit, not so much for those other components like disability and survivor and stuff like that. So that's more or less how social security gets funded, the mechanism behind it. And, when they talk about shortfalls in it, that's really what they're talking about. There's just not enough money that they're accruing on interest to pay out those benefits in the
Yeah, and just and so just talking about that now just the shortfall because that's the that's the fear mongering as John mentioned that we always Hear we'll just address that real quick The one of the reasons we believe that it'll be there in some form when we all retire is because when that shortfall hits, and I think the latest projection is like 2035, it doesn't mean that there's 0 in there.
It doesn't mean that they, that they pay the last checkout and the tank is empty and there's nothing in. So they shut off the lights and say, okay, everyone, like no, no one else gets anything. There's still revenues coming in every month from everyone paying payroll taxes. So there still will be money that comes in to meet obligations. They just can't meet obligations at all. at the projected levels after 2035.
So what would happen is they would probably do a reduction to like somewhere between 75 and 85 percent of what people were normally getting. And that's assuming that Congress doesn't, pull their head out of their ass and make some important decisions to fund Social Security, which, like we just mentioned, we think they will. There's a huge tax base that are collecting Social Security that they're not going to risk alienating or driving to the other party. Something will likely be done.
And even if it's not reduced benefits will be there or benefits at a later date. Maybe you raise The age from 62 years old to 65 years old, something will happen to fix it. We think it'll be there. Some decisions will be made. They'll have to be made in order to fix the shortfall or to reduce benefits. But it will happen.
Yeah, and there's a lot of if you do some research on there There's a lot of commentary about what they feel like congress is going to do to try to help rectify or remedy this situation and it's funny just Even making some small incremental changes would really move the needle on this as far as the sustainability Moving forward so we talked about how much you pay into social security so even changing that So if we put if you pay in 6. 2 percent of your salary You Even if they up that to like 6.
5 or 6. 6, so small incremental changes, but you do that for everyone, you're talking about a lot of revenue coming in. So I think there's going to be a mixture somewhere between that, somewhere between maybe increasing the eligibility age in which you can start claiming social security, raising that threshold for how much they're going to, how much Income you're going to have before they stop taking out social security.
There's a lot of different things that they can do to to help make that more sustainable. message loud and clear, at least from Louise and I opinion is that social security in some form or fashion will be there. So we want our, our members to start thinking about that when they're thinking about social security and, and building that into some of their plans as they get ready to retire, when they're going to claim it and stuff like that.
So maybe we should talk about now would be a good time to talk about who qualifies or how Do you actually qualify for social security? Is it just being a citizen that gets you credits? Like how does that how does that whole fiasco
Or depending on who you believe, it's anyone gets social security, even if they're, a migrant or something like that. There's a lot of different myths about that. So we'll talk about it real quick. I know we briefly discussed this in the last podcast, so we'll do a brief overview again, because if you're listening to this, You might be going, Hey, how do I know if I get social security or am I eligible? Or how do I know if I have credits? Everyone talks about these credits.
So we'll just break that down for you real quick. There's basically two ways to qualify to get social security. Number one is on your own. And in order to qualify on your own to get social security, you have to have 40 credits. So that
Just like college credits?
college credits. Yeah. How do I get these credits? How do I earn these credits? Well, it's basically two ways their quarterly credits that you get. So 10 years of paying into social security would get you those 40 credits. You basically earn one credit for each 1, 730 earned. So basically if you, Made more than 7, 000 over the course of a year. And you paid social security tax on that 7, 000. You would earn four credits that year. You can earn more than four credits.
Doesn't matter if you pay in 60, if you make 000, you're only going to earn four credits for that year. So basically if you have 10 years of social, of paying into social security, you would have 40 credits and that would qualify you to receive a social security Benefit,
Well said. And that's one of those things. So it's inflation adjusted every year. So every year that, that threshold for each one of those credits that Louie was talking about, so that once 1, 730, I think that was from last year. I think that was 2024. So every year moving forward, that, that goalpost is going to move a little bit more, like I think this year it's like 1, 800 or something like that. So it'll move up
It's it's still pretty low and the truth is there are a ton of firefighters that have side gigs side hustles And they are earning over seven thousand dollars a year over ten thousand dollars a year and they're paying social security You Probably both sides of social security. And so they are earning credits that way.
So just because you're a firefighter, if you have a side gig, that doesn't mean that you're not going to get social security, you probably have paid into your paid and earned your credits. And you're, you're probably able to qualify on your own.
100 percent and that's one of those things. The best source for information on this in the resource that hopefully every listener has is their social security login. So you can actually log into the social security administration ssa. gov. And if you haven't set an up account, You should definitely set up account because that is basically what they're using to, to notify you, or to basically give you an estimate on what they feel like your benefit is going to be.
So if any of that information is inaccurate, there's actually ways that you can contact them and make, make sure that that gets solved, but you want to make sure that that is as up to date as accurate. So as you get closer to retirement, those projections will be much more accurate because when you're 30 or 40 years out, they are not
bad. Yeah, it's just it's a shot in the dark
you know how they actually make those projections? So if you, let's say you've only got, let's say you're brand new out of college, you started having a corporate job or a job that you're paying into social security, you've had this job for like four years. And then you log into the social security administration and they say like, Oh, cool. In 40 years, Louie, you're going to be expected to get this benefit. Do you know how
No idea.
Yeah, so it's it's one of those things. It's basically just an assumption and they take your previous couple years worth of Salary and they project that that's going to increase at a certain rate up until you basically retire at 60 or 65 So the ways that social security gets calculated is they take The 35 years of your highest salaries. So 35 years worth is what they account.
So one thing that kind of hurts us not paying into social security is if you, let's say you've only got 15 years or 20 years worth of, of paying into social security, those other 15 years counts as zeros. So that's how they calculate all that information. So obviously you're going to have a lower benefit cause you're not going to have 35 years worth of work, so to speak.
That's basically how they end up calculating what your monthly benefit or your primary insurance amount is going to be is off of 35
years. Yeah
paying into social security, but that's how those projections work. So I always tell people, I caution them, if they're, 28 years old and let's say they just got picked up with us. And they had five or six years, I mean, maybe making some pretty decent money in the private sector. And then they come in there like, Oh man, it's projecting that I'm going to have 3, 500 when I retire at social security. That's not going to be the case.
No, because they are just assuming they don't know that you're now in a non covered job that you're not paying into social security. So they, the projections are not accurate. Now if you're 62 and you're getting those projections about what your social security benefit is. They're going to be very accurate, much accurate, much more accurate. So just take that as a grain of salt when you're talking about that in your future.
And if you're working with a planner, advisor, everything else, hopefully they should, they should recognize that as well when they're running projections for you and understanding that right now, working for the fire department that you're not paying into social security. So just how all that stuff is
all that stuff is. Yeah. Okay. So the two ways to qualify. We talked about on your own. And then the second way to qualify. And I really like this way is on your spouse's record. So If you have a spouse who has earned their 40 credits they have, let's say they have a job and they've been paying in social security their whole life, or at least for 10 years, they will qualify for social security.
And as part of that, if you don't have your credits, but you have been married, you can qualify for a portion of their social security. benefits. It's not like you get the same check that they do. In fact, it's 50 percent of their benefit, but you do get to qualify for that. If you don't have your 40 credits. The reason why I like this one is because I don't have 40 credits. A little fun fact about me before I was a firefighter. I worked for another job.
This one was with a state department that did not pay into social security. So I, I've been free loading for decades. the only time I paid into social security was when I was. When I had a small job outside of before I graduated from college. So my work study job I worked at a pizza place when I was in high school. I paid into social security then, but by no means do I have 40 credits. In fact, I think I have about 26, 28 credits, somewhere around there. And so I haven't paid in enough.
And right now, if I were to retire, I would not. have Social Security. Caitlin, on the other hand, has been paying into Social Security since
2007
or 2008 and she has been paying in consistently and that means that she qualifies for Social Security and that I would qualify for a benefit under her credits. Yeah,
The spousal benefit. Yep. So that's the two different ways in which potentially, the listeners out there, the members out there would would qualify for social security. One of the things to think about though is when do you actually, so we understand how you qualify. So you get these 40 credits you've paid into it for 10 years roughly or you get your spousal benefits, but when can you actually start doing it? Taking social security.
When do you become social security eligible so to speak so that basically anyone that qualifies for it Especially on their own work record can start taking social security at 62. So that's the earliest Currently that the law says that you can start taking social security But they also have something that's called your fr A or your full retirement age.
And that's when you look at your social security statement, the thing that's probably highlighted on the top right hand corner is going to be what your benefit would be if you waited until full retirement age. And for most people listening to this, if you're born after 1960, that's going to be the age of 67. So if you're both.
If you're born before 1960, there's some different cutoffs and your full retirement age might be a little bit before 67 But i'm going to say most people listening here the full retirement age you think should think of 67 That's where your benefit that social security says you should get based on being what they consider normal retirement age
And so that, and that's just to go into that a little bit. That's the age where it doesn't, it doesn't, it doesn't pay to put it off. 62 is when you can take Social Security, but if you decide not to take it at 62 You will get, you would get more money based off an actual aerial table if you took it at 63 or 64 or 65. And then of course, 67 is when you get that full retirement benefit from Social Security.
Yep. And that's exactly how you should think of that. So every, and it's basically prorated every month. So every month that you either wait or you take it early, there's going to be a certain percentage. And it's a pretty big hit though. So the difference between taking social security between 62 and 67, it's about a 30 percent haircut over what your normal benefit would be.
So once again, when you read your statement and it says your benefits going to be 2, Well, then you can just envision if you take it at 62, just take that, just take 30 percent off of that, and that's what your benefit would be at 62.
John, I know that you are a CFP and you're, you're a resident CFP. And I'm going to challenge you here for a second. I, I don't want you to say it depends, or I got to know the circumstances. I'm just going to throw something. I want your gut reaction. If you have a retiree coming to you at 62 years old and he says, should I take social security now, or should I try to defer and wait until I am 67? What does your gut tell you to do?
My gut tells me to wait until you're 67. And, and the reason for that is, so once again, because of our defined benefit, the majority of our members listening to this are in, you already have your pension coming in, you're going to have income coming in. So you don't need additional, you might want some additional income, but you're not going to need it.
Like most people after 25 or 30 years of service, they're going to have their base benefit of 60 to 70 percent of what they were making that should cover most of their needs, right? Truly their needs. They're not going to be, they're not going to need that additional money. So I would, I would err on the side of letting that accrue. And one of the things that's really nice about Social Security, and it's a great benefit, is it's one of the few that has cost of living adjustments built in.
pretty good cost
Really good cost of living adjustments, unlike our pension currently that does not really have any form, I mean has minor cost of living
which we'll talk about in an upcoming episode pretty soon,
but it's not it's not as robust as the social security during the inflation of 2022 and 2023 I I want to say the top it peaked out It's like a cost of living adjustment of eight and a half percent Which is one of the highest it's been in like 40 years.
So it's pretty nice to have that guaranteed So to speak cost of living adjustment based on what the consumer price index is So yeah, if you were half if you were half If you were to put a gun to my head and say, Hey, like you got to just make a decision without any other circumstances, I would say to defer and wait until you're 67.
that's my reaction too, is, and once again, I, I know the easy thing for us to say, and you guys probably roll your eyes and we say it as it really depends on it in the individual and their circumstances. And we can't tell you what's necessarily best for each person that's about to retire, but my. gut inclination. Probably what I will do when I'm there is I'll defer and my wife will defer and we'll wait until we're 67.
Just because first of all, hopefully we're comfortable enough at that point that we can wait. And it's just like you said, it's good to get that pumped up as much as possible so that when you get those cost of living adjustments, they're at the highest amount as you qualify for.
Yeah, and it's one of those things that's important to note. It's a irrevocable decision. So if you take social security, as soon as you're eligible at 62, and then six months down the line, you meet with an advisor or a plan or something else, and you put in your financial and you've already started drawing on that. There's no, there's no
going back.
You can't be like, Oh, actually I'll, I'll give that money back. And I want to wait until I'm 67 or whatever. You can't do that. So once it's a pretty big decision from that aspect, once you, once you sign or make that election, there's no going back. So it's something you should do thoughtfully. With a plan in place and really having an idea about what you're going to do moving forward in your financial future to, to set you up for success. So one thing to think about as well, and it's similar.
I do like the parallels between this and our pension plan, because there's a lot of similarities. So one of the things that you can also do with social security is you can actually do.
Delay social security as far as when you want to take it So as we talked about before for most people listening if you're born after 1960 67 is when your normal retirement age is going to be that's your normal benefit for social security You can elect to delay taking social security all the way up until age 70 And basically at age 70 is you can't you can't defer it anymore and they're just going to start sending you checks
what happens john when you delay we talked about the full
Yep. So you get an automatic 8 percent increase every year after. So 68, you get another 8 percent at 69, you get another 8%. So basically 16 percent more. And then you'd max out at a 24 percent additional benefit. If you waited all the way to 70 from your base age of 67.
basically a guaranteed 8% return on your money guaranteed to delay it.
Yep, which is pretty significant. So a lot of things when you're meeting with a planner advisor, one of the things that, they're going to take hopefully your whole picture in totality, but one of the advantages of delaying until you're 70 is for the survivor benefit. So if you have someone like the high income earner. Ideally would wait the longest because when we talked about spousal benefits, I don't know if we made this clear.
So when you get spousal benefits, the max spouse benefit you can get is up to 50 percent of what that employee or that of what your loved one would have gotten. So I'll take my example. So my wife, Katie, I think right now, like if we were to run her social security. Whatever projection at full retirement age. It'd be something like 3, 800, 3, 900, I think is what she's projected to get.
And the other thing about spousal benefits is you have to wait until that person starts collecting social security before you can collect. So I'm three years older than my wife, so I'm going to have to wait. So I would actually be 70 and my wife would turn 67 before I would be eligible
is great
her spousal benefit.
in some ways is great though Because now at 70 you have that max benefit from a spousal perspective that you can get
So yes and no. So this is where it gets, this is where it gets confusing. And this is why, man, I'm telling you right now, like social security, like you should really, when you're, when you're thinking about claiming this and everything else, there's definitely people that specialize in this, but you really want to make sure you got someone that has an understanding of it. So when you claim a spousal benefit.
The max benefit you can get is based off of their full retirement age and not their delayed retirement age. So
so it's their 67
So once again, so the max that I could possibly get from my wife and the spousal benefit is basically 3, 800 or would be 1, 900 right now. I call it half 50 percent of 3, 800 bucks. So that's the max you can get is half of theirs. So when we talk about survivor benefits though, it can actually be 100 percent of their benefit. So if my, if my wife waited all the way until she was 70 to start claiming, and that now is going to be, call it like 4, 800, 4, 900. And God forbid she passes away.
I would be entitled to claim that 4, 900 a hundred percent. Yeah, so there are certain things and if it sounds too good to be true It is they never let you double dip so you can't be claiming yours and your spouse's it's always a combination a matchup of both so I don't want to I'm not going to get too in the weeds about some of this stuff, but I do think it's important, especially for those members or those retirees that are closer or thinking about claiming Social Security and their spouses.
They definitely want to think about that as far as when, what the claiming strategies are, but definitely buyer beware, make sure you have someone that understands Social Security and they can explain it to you and run the proper projections. Because typically what they'll do is, if you ever meet with someone, they'll So, yeah. And there's calculators that you can use that will basically say, what's the optimum way to maximize social security?
But the problem with that maximum optimization is it's assuming that you know the day you're going to die Like that's how those assumptions are all made off They're like well if I start claiming it at 62 Versus if I would claim it at 67 or if I delayed all 70 like what's going to be the max benefit? It really depends on how long you're going to live because if you end up dying prematurely You You know, obviously claiming at 62 would have been a much better idea.
You actually would have gotten some more money versus waiting all the way to 70. So you can't take everything in a silo like that. You really should be building it into your whole plan. When you're thinking about all sorts of your different retirement assets and how you're going to draw on those. But, generally speaking, that's how those calculators work. They just, Plug in, what's your benefit going to be at 62? What's it at 67? And then what's it at 70?
And then it says like, well, how long are you going to live? And it'll basically make a little graph and it'll tell you the intersection at what point it makes more sense to wait till full retirement age or delay. And for most people, it's somewhere between about 78 and 81, where it really makes sense to wait at least a full retirement age and delay. And or delay until you're 70 just depending on some different circumstances
Well said. Thanks for that explanation.
Yeah, it's it's complicated. There's literally books, novels, Textbooks that are all dedicated to this and there's very unique Nuance circumstances, even when we're talking about spousal benefits, the one thing that we didn't talk about and something that I know plagues our membership a lot is divorces. And you can actually claim on an ex spouse's social security benefit if you're married for at least 10 years. So there's a lot of weird little nuances and stuff like that.
I encourage people to try to educate themselves as much as possible or seek, expert consultation, so to speak, when it comes to to all those things because there are a lot of weird kind of one offs and nuances and all sorts of different
And John and I are not experts on it. John is more of an expert on it than I am, but
I, I, I know enough just to know enough that I'm like, man, this is complicated. Like there's a lot of different things in there and you really got to think it out. So I
thought, one of the reasons why I chose not to do more reading on social security before the, recent history is because I thought it's, I might not get anything. Like I'm going to give a reduction because of two little provisions called the WEP and the GPO, which have been repealed with the social security fairness act. John, do you want to give us a little bit of a. I have a education on, on that repeal of those two provisions that mean a lot for us as firefighters.
this is super important. So Louie and I just got back and a couple of the other executive board members, we got back from New Orleans at the beginning of January and we had a little meeting.
Leadership conference and one of the huge things that they talked about one of the really big wins On the national level and now it's obviously tricking trickling down to the membership level Is the the social security fairness act which president biden signed into law on january 5th of this year So it's super new It just got enacted But really it repealed two different provisions. One was the wep the windfall elimination provision which basically gave you a penalty for claim social security.
It will reduce your social security. If you had what they call a non covered pension, which is pretty much everyone that's listening to this podcast, you're not paying into social security. So you got penalized, unfairly. And Louie and I talked about a little bit on the last episode about what that was and why that was unfair. We're not asking for more. We're just asking for what was, what was rightfully ours.
And then the other one was the GPO, which is the government pension Offset which really for the most part affects your spousal benefit your ability to claim your spouse's so yeah up until three weeks ago most people weren't really too jazzed about social security from the fire department standpoint because They knew they were going to have a reduced benefit if they're going to have a benefit at all And that's really one that man, I want to give a huge shout out. I think it's important.
And one of the things that Louie and I are really trying to do, not only with this podcast, but just when we talk to our members is really try to educate them more about what the union is, is doing for them. behind the scenes and then also front facing as well And this is one that like if you think about like, oh my god I've paid union dues for 30 years and i'm paying whatever one and one and a quarter percent of my salary and I I totaled all that stuff up like what am I getting for that?
Well, i'll tell you right now like if you were in my circumstance Where I would now be eligible for the spousal benefit of 1800 a month and i'm going to do that for 30 years You That more than covered my
union dues. Oh yeah.
I mean, this is like, I can't, I can't explain enough what a massive, significant financial win this is for our members and how hard they've been fighting for it, 40 years, they've been trying to repeal this and I'll tell you right now, it was basically the IAFF that got this passed across the finish line.
Absolutely.
bless all the other
I don't think, I don't think it would've passed
would not have passed it would not have passed if it wasn't for our general president at Kelly and then all the other DVPs and then all the other members at the local level really pushing their congressional members to vote in favor for this They had other support right from the teachers and from the police officers and all these other folks that are you know, all these other different unions But really it was The, it was the It was the IAFF that got this across the finish line.
And this is not to toot our own horns, but this is definitely a, an acknowledgement of the amount of work that happened behind the scenes and just how fortunate we are and really what a game changer this is gonna be for our members moving
I mean, I, I've heard a lot of people say that it might've been the most significant, at least over the last 30 years, the most significant piece of legislation that the IFF helped pass through. And it is real dollars to real people. I'll give you an example. Actually, I'll give you a couple of examples. One example is there's a firefighter that we work with who's about to retire, getting close to retiring.
And he is going to see between he and his spouse, 800 extra per month because of these, the repeal of the weapon, the GPO. He's had side gigs. He's worked, before the fire department in other career fields, and he has been built up his credits and he was going to be penalized because he's a firefighter now. And now, boom, he doesn't have to worry about that. He's going to get 800 a month extra in social security benefits than he would if this legislation didn't pass. That is huge.
That is absolutely huge.
that's not, he's not the only one. There's a lot of people like that that are now eligible. There's a lot of recent retirees and just retirees in general that are eligible too. And here's something crazy about that, about this whole situation. That's just, Awesome. Even my own mother is going to benefit from this. She worked early in her life as a Safeway clerk and then a manager, department manager. So she worked for Safeway UFCW local seven.
She was a union member as well, but she paid social security for years. And then when she took a job with the state, she was going to get her social security. Docked because of that, even though she paid in faithfully for 25 years and now she's gonna get an extra benefit that she normally would not get, and that will be hundreds of dollars a month for her as well. I mean, that's awesome. That's, and for someone who's, has never earned a ton, that is gonna be a huge difference maker for her.
So it, it's just a, it was a great thing that, that the IFF helped push through.
Yeah, I would say conservatively, if you were to ask, generally speaking, the range for our members, like what this is going to mean for them. And I'm going to say it's probably going to be somewhere between an additional 500 to 1, 500, depending on where you fall on this, on this whole thing of additional money you're going to get every month. Because of this thing getting repealed, which is just, I mean, it's a game changer for some people.
It can be the difference of, retiring a year or two earlier, or it can be the difference of a lot of different things that they can use that money for. So I'm just really proud to represent the union. I know Louie and I are both very proud of what we, not only what we do here locally, I,
We're very proud
But on the state level and then also on the national level just it's it's really cool to see. And I'll be honest, man, I'm very optimistic. I'm a more than a half glass is full kind of guy for those of you that know me. But But man, when they were talking about getting this three, I was like, dude, this is a lot of money. They're talking about this costing 200 billion over 10 years.
And we can see right now what the government's trying to do as far as, tightening the belt and on all sorts of other things. So the fact that this passed with such bipartisan support, really big shout out to all the legislators, all the lobbyists, everyone working behind the scenes to get this approved for our membership. It's it's a big deal. So really wanted to, really wanted to highlight that. So I did get stopped the other day. And one of the retirees was asking me they're like, okay, cool.
This is great. This all got passed When are we going to actually start seeing our additional money come through? And that's one of those things.
Yeah, so just like anything else that happens in congress They can write great legislation or poor legislation However, you want to look at it, but how it gets enacted and then implemented are two different things So if you go onto the social security website right now There's a there's a quick link that talks about some of the frequently asked questions regarding this And basically they just said We don't know when this is going to start, when are basically when people that are collecting
social security and start to see this additional benefit, it does ask for some grace. And I think there is some verbiage that says like up to a year to get this thing implemented. I do know the way the legislation was passed is that they are going to retroactively go back to January 1st of 2024 for your payments. So at some point in the future, if you are already collecting social security. And you fell under one of these provisions, the WEP or the GPO, you don't have to do anything.
They already have it in their system. There's a formula that they know that it's reducing your benefit that will all of a sudden basically turn off and you'll get your full benefit, but you also will get a lump sum payment, basically backdating a year. So once again, for some of our folks. The max you could possibly get under the WEP would be a lump sum of a little over 7, 000.
So it could be a big chunk of change in the future, but it's still a TBD to be determined as far as when they're actually going to be implemented. And then if you haven't claimed your benefits yet there will be an opportunity when you do get ready to claim your benefits that this will no longer be an issue and you should just get your full payment.
So it's really those that are already claiming their benefits that there's going to be a little Lag time and getting caught up and social security is already underfunded for, their, their what they need to do. And it's 67 million people collect some type of retirement benefit every year. So it's a big, it's a big program. So this is going to take a little bit to get it sorted out, but I'm confident that it will get sorted out that the members will get their money that was owed to them.
And it's going to be a huge win. Just really excited about it. Yeah, pretty darn cool. So that's that's a lot. like I said, a dry episode but hopefully, there's some optimism with this. Hopefully this is, it's going to just help people be a little bit more financially secure than they would have been before. This is something that a lot of us have been paying into and, and now you get your fair share of what was earned to you.
We just wanted to give you guys a little bit of insight or just a little bit more About social security and really try to dispel some of the thoughts of, not counting on this at all. I don't think that's fair. I think there's going to be some, some level of this that we're all going to be beneficiaries of.
And yeah, we thank you guys for listening. We. We have some good plans coming up for, for this year or this season of the podcast, if you will. We know that there's some big things that, there's a lot of questions about that. People want us to answer. The pension is a big one. Obviously that's like the cornerstone. And we've been saving that I think just to get our feet under us and make sure that we're good with talking about it. And it's a, It's a big deal.
So we're, we're actually excited to tackle that. That'll be coming up soon. We're still, taking your guys questions at
askfiscalfirehouseatgmail.
askfiscalfirehouseatgmail. com. So we're making sure that we address those when they come up. We've got a couple of questions already in the queue. We'll address those in one of the episodes, but as always, if you guys have any feedback or anything that you want us to address, we're happy to look into it and try to do that for you guys.
Yeah. And one of the things Louie and I are pretty passionate about is we try to make a lot of this stuff timely. So whenever things are hitting in the headlines or whenever things are happening here around the organization that we think it's like, Oh, this would be a great time to talk about this. we're trying to keep that in front of mind. tax season's coming up here in the next couple of months. So we might do a little bit, with taxes or tax planning and some other stuff coming.
I just did want to say one really thing out of a good order and welfare. I did want to congratulate our own Kevin Reichenbach who is now the president of the Colorado professional firefighters. So huge shout out to Kevin. Man, that guy's been working hard for a long time and it's really well deserved and well earned. And we're really proud of you, Kev. Keep fighting the good fight and keep doing good work at the state level for
That's awesome.
really awesome. But without further ado, once again, thanks everyone for listening. Be safe out there, Louie, as always. Thanks for keeping me honest and making sure that I know my presidents and their orders. No, Teddy, Theodore, what FDR, all the other ones. Yeah, no, it's a, it's a good partnership we have, and I definitely appreciate your camaraderie and sharing on this journey with us.
love doing it with you, buddy. Yeah,
absolutely. All right. Until next time everyone stay safe out there and
Keep saving.
Yep. Keep saving. Just keep saving. Take care. The Fiscal Firehouse Podcast is a podcast curated specifically for local 1309 members. This podcast is for informational and educational purposes only, and should not be construed as professional financial advice. Should you need professional advice, consult a licensed financial advisor or tax advisor. The opinions of John Beatty, Louie Barela, and their castmates are solely their own, and don't reflect that of West Metro Fire Rescue.