And our phone lines are open for you if you have questions for our retirement planning professionals from Class Financial. All I got to just pick up phone dial in right now. Tellphone I'm gonna get on the air six SOH eight three two one thirteen ten. That's six oh eight three two one thirteen ten. We'll get you on the air with CJ. Coss and Eric Schwartz. Great show ahead. We're gonna be talking this week about social Security benefits.
And I know this is one that always gets a lot of questions, a lot of calls, a lot of conversation. Love to hear from you this morning again, tell phe number to get on air six SOH eight three two one thirteen ten. That's six SOH eight three two one thirteen ten. You can learn more about Class Financial on their website Class financial dot com. That's Coss k l Aasfinancial dot com. Teleph number for the office right here in Madison. Six O eight four four two five six
three seven. No charge for that initial get to know you appointment tech Class Financial. It will be complementary to you again their number six O eight four four two five six three seven cold out of the number as well, coming up a little bit later on the show, we're gonna have the coss Quiz question the week your chance to win a fantastic prize from our friends at Class Financial. This week's prize a twenty five dollars gift card to
pet Smart. So listen closely oftentimes just about every time, to be completely fair, the question and answer just about every show come up, so you get a little leg up on everybody else by paying close attention. It definitely benefits you a number of ways to pay a close attention to the program. Speaking of the closs Quiz question week, before we get rolling on this week's conversation, let's actually take a look back at last week's show and get
the question and answer there as well. Eric, first off, welcome to the program. Let's take a look back actually at last week's show and get the question and answer there as well.
Yeah, thanks Sean, we had a great show last week. In our congratulations first of all to our winner, who was Jillian from Madison and Jillian. The question Jillian got right was if you are fifty five years old in twenty twenty five, how much can you contribute into your retirement plan at work? So the choices were twenty five thousand or thirty one thousand in Jillian shows the correct answer.
With your thirty one thousand dollars in twenty twenty five.
Congratulations Jillian, great work there, and again we'll have a chance for you to win again this week with the Class Quiz Quash Week. Pay close attention to the program smatch the full lines. They're open if you've got a question, love to have you join us. Six oh eight three two one thirteen ten. That's six soh eight three two one thirteen ten. Mentioned earlier the website colss financial dot com that's coss klaas financial dot com did get a
chance chance to mention all the great features. You can learn more about the team at Costs Financial. You can learn about their separate divisions. You can also sign up for the weekly market Paul's newsletter all on the website class financial dot com. So today we're gonna be talking about Social Security benefits in the various ages folks may become eligible to receive certain benefits and CJ. What do we need to know there?
Yeah?
Well, first off, I hope you can hear me.
Okay, so great, we're having some trouble there, sound fantastic.
Okay, great, Yeah.
So to begin our discussion, I want to outline the various types of social security benefits someone could become eligible to receive throughout their lifetime. Now, for those who have listened to our show for a while, I actually want to encourage you listen closely. Today's show is going to go quite a bit deeper into elements of social security I don't know that we've ever talked about on this show.
So for those who are interested in sociecurity benefits, whether you're drawing it now or drawing in the future, this is going to give you some additional insights into the various types of benefits that soci security provides, along with different calculation.
So hang tight.
But the various types of sociecurity benefits include the following number one, retirement benefits. This is what most people think of when they think of soci security. They think of retirement benefits, but believe it or not, Outside of retirement benefits, there are the following other benefits, disability insurance benefits, survivor benefits,
family benefits, and supplemental Social Security income benefits. Now, according to SOCI Security Administration, here are quick definitions of each type of benefit, someone could become eligible to receive throughout their lifetime. Because you actually think about it, you could become eligible to receive any one of those five different types of soci security benefits I just mentioned at different
points throughout your life. So let's define them first. The soci security retirement benefit is a monthly check that replaces part of your income when you reduce your hours or stop working altogether. It may not replace all your income, so it's best to identify other ways to pay for your monthly expenses as you age. Again, everybody, these are actually definitions right off the Soci Security website. So again, that was just a definition for Social Security retirement benefits.
Now here's a definition for Social Security Disability Insurance benefits also known as SSDI. Soci Security Disability benefits provides more monthly payments to people who have a disability that stops or limits their ability to work. The third type of benefit is the Social Security survivor benefit, and that provides monthly payments to eligible family members of people who worked
and paid Social Security taxes before they died. So again, survivor benefit would be say I have a parent who died and it could be eligible for different family members. The fourth type of soci security benefit is Social Security Family Benefit. This provides monthly payments to certain family members of people who are eligible for retirement or disability benefits. And finally, Social Security Supplemental Security Income Benefit known as
s SI. So remember the other one was ssd I. This is known as s SI provides monthly payments to people with disabilities and adults who have little or no income or resources. So listen, everybody, here's the example of SSI. What happens when somebody is born with a disability? Right, how do they function in the world. Maybe that disability doesn't allow them to work a normal job, but maybe they can still be in society and add add meaningful value and love and connection.
But how do they live if.
There's no you know, no employer that's going to pay them enough for sustenance? And the answer is often SSI. So here's what I want everybody to realize. With those five definitions in place, social security is fantastic for a society like ours to have some sort of a system in place that takes care of either the least of those in our society or provides a minimum sustenance, income and retirement. I believe we should all be proud of
the fact that we have a social security benefit. Now I'm not saying this is not a political statement, right, That's not the point of this.
It is rather just to say that as.
A as a developed society like ours, it is nice to know that they're that there are these kind of like five fallbacks for people as the age or become unhealthy, or become disabled or born with a disability. Is nice to know that we we have developed the system.
Talking this morning with CJ. Closs and Eric Schwartz, they are our retirement planning professionals from Class Financial, the website class financial dot com. That's Claus k l a as financial dot com and their telephone number six o eight four four two five six three seven. No charge for that initial get to know you appointment tech Class Financial, It will be complimentary to you again their number six oh eight four four two five six three seven. And CJ.
You alluded to and as folks kind of heard you discuss those those five different different types of benefits, folks could experience multiple, if not all of these in their lifetime.
Yeah, that's right. So a couple things on this.
So we do understand that social Security can get a bad reputation due to its funding problems or how politicians.
Use it for political leverage.
I mean, listen, just just watch a couple of the more recent debates in political land, and it's like social Security is a big topic. However, as I mentioned, at its core, social security is a modern financial marvel and it positively impacts the lives of tens of millions of Americans and it keeps countless more out of extreme poverty. That's the key, right, it keeps countless more out of extreme poverty. Now, I'm not saying there's not abuse in
the system. I'm not saying that politicians haven't managed it well, that it doesn't have funding problems. Those are all true statements, and I'm not disagreeing with that. But at its core, what a blessing to our American society that we have found a way to try to provide minimum sustenments. Now, with all of this being said, today, we will be primarily focusing on social Security, retirement benefits and family benefits
for the remainder of our show. And the reason is because these two categories, again, retirement benefits and family benefits account for about sixty five percent of all Social Security benefit recipients. So that is where the remainder of our show will be focused, and.
We're going to talk a little bit about I think one of the big questions every time we talk SOS security is the when, and we'll find out from Cjan Eric. We will do that and so much more. As Money Motion with Coss Financial continues, don't forget about the website class Financial dot com. That's coss k l aa S Financial dot com. There telphon number six oh eight four four two five six three seven, and the phone lines
are open here at station. If you have questions for Eric and CJ, I'll can just pick up phone give us a ring six oh eight three two one thirteen ten. That's six oh eight three two one thirteen ten. More of Money in Motion with Coss Financial is next right here on thirteen ten. WIBA talking this week Social Security with our retirement planning professionals from Class Financial, joined by CJ. Closs and Eric Schwartz. Again, they are our retirement planning
professionals from Class Financial. Hope you've had a chance check out the website Coss Financial dot com. That's coss k l a as financial dot com. Maybe when you get into the office this morning, take a peek over there. Another cool thing to online at the website. If you miss part today's program or you want to listen back, or even better subscribe to the podcast. You can do
all of that online at clossfinancial dot com. That's colss k l aa S financial dot com and their telephone number six so eight four four two five six three seven. Talking this week about social security and CJ laid out the different types of Social Security benefits there are, and we're going to kind of break down in a great rundown from CGEN those various types of social Security benefits.
But I've got to think for most folks, Eric, they just want to know at what age should I be taking and starting my own retirement benefit.
Yeah, Sean, That's that's pretty much what everybody wants to know. That's the most common question we get from from our clients, from the general public. And I mean, unfortunately my answer is going to be a little bit unsatisfying for listeners. It is accurate, though it depends on a lot of factors that are unique.
To individuals and their families.
So before we jump into kind of you know how timing and when you take your.
Benefits effects the amount you get.
Let's just talk a little bit first here about where our Social Security retirement benefits come from.
Right.
CJ was talking about this you know robust program that we have we have in our society here, but what actually funds Social Security? So the benefits that are received are actually funded through payroll taxes. So we look at our paycheck and we see the fight attack on the deductions area, A portion of that is going to Social Security.
So six point two percent.
Of your wages to go to the Social Security Administration. Your employer also kicks in six point two percent of your wages, so that the total of twelve point four and that is applied to your wages up to what's called the Social Security wage base or the cap on earning. So the wage based cap for twenty twenty five is one hundred and seventy six thousand, one hundred dollars per individual.
So this means that what if an individual is a higher earner and they earn more than one hundred and seventy six thousand, one hundred dollars, there will no longer be Social Security payroll tax taken out over and above there. So we often hear folks that we talk to who maybe higher earners, say, oh, towards the end of the year, I actually get a I get a little bump in
my paycheck, I get a little raise. And what they're saying there is, you know, their take home is more because that that's six point two percent is actually no longer being being taken out. Now that changes when they flip into the new year, obviously, and they start, you know, we start the clock over. But the funding mechanism for the Social Security system.
Is is payroll taxes.
But more to your question here, let's let's talk a little bit about how soon people can take their benefits and what is the right age. Unfortunately it's a little bit more of an art than a science, but let's talk about a couple of the things here that we think about. So the first thing is we want to remember there's a difference between when you can first take your Social Security benefits, so when you are first eligible to get some level of benefit.
And when you receive your full.
Social Security benefit, which is at your full retirement age. Okay, so let's begin with a little bit of a background here on what is meant by full retirement age so accordinate to social security. If you were born between nineteen forty three and nineteen fifty four, your full retirement age.
Is sixty six, okay.
But for those born between nineteen fifty five and nineteen fifty nine.
Your full retirement's a little more complicated.
It's sixty six plus some number of months based on when you were born. And then for everybody after nineteen sixty that's all age sixty seven. So your full retirement age, which is also known as your FRA, and you'll hear us refer to that here throughout the show, that's the agent which you become eligible to receive your full unreduced Social Security benefit. Okay, So notice I said you're full
and unreduced social Security benefit. You are actually able to collect as early as age sixty two, and a lot of people do.
You're able to collect as early as sety two. You can also wait until you're seventy. We'll talk about that more in.
A moment, but you know, really between sixty two and seventy you can collect anywhere in there, you know, kind of down to the I think whole a lot of times, think okay, I can take it at sixty two, maybe sixty five and my full retirement age. Not true.
You can take it any month in between there, and.
Social Security is actually going to you know, pro rate your benefit so to speak.
If let's say you take it at sixty two.
And six months, okay, so you'll get a larger benefit than at sixty two, not quite as much as if you wait until you wear your sixty Let's talk to here a little bit about how much you actually received as a benefit. This is a really really difficult calculation and that try to recreate it on our own.
And it can be done, but it takes a long time.
We actually have a great resource available to us at SSA dot gov, So anybody can go to SSA dot gov and.
Create a profile for yourself.
You can see your earnings history, you can get an idea of what your actual benefits.
May be based on the age at which you start.
It's a really really great tool, So encourage all listeners to go out there and create a profile on SSA dot gov so that you can you can get an idea of what your benefit might be. But talking about the best time to collect okay, so again depends on your situation. In most cases, it is generally advisable. You said, generally advisable to wait at least until you've reached your full retirement age to start collecting Social Security because the
monthly benefit is so much higher. Okay, So, if you were born in nineteen fifty five and your full retirement age is sixty six and two months, that is the age at which you are able to collect your full unreduced benefit. Now, what if you wait beyond your full retirement age, because we do have.
People who do this.
Maybe they're still working, they don't need income, or they're just you know, it's part of their retirement income strategy to push Social Security off until seventy. Okay, So the Social Security benefits are increased if you wait after your full retirement age any number of years up until seventy, and depending on your data birth, you are getting what are called delayed retirement credits, and that can allow your benefit to increase up to eight percent per year until
you actually start taking benefits. Now, once you hit seventy, there's no more increases. So most people should not wait beyond seventy to take their Social Security benefits. But even if it means using some of you the income that you've saved in your retirement account. For example, it can still be worth it to put off that Social Security until seventy. It's because you're getting a risk free eight percent annual benefit increase. Now at Class Financial, we have
an excellent investment management team here. Great, they did great work, but they will tell you that to have a guaranteed eight percent rate of recurry that is really, really really hard to beat. Okay, So pushing it off till seventy can be really really valuable if you have the assets to create income in between there and last thing Sean here before we go to the next question. Is I mentioned this earlier, but you don't when you start taking your Social Security benefits, you don't have to do it
like on your birthday each year. Depending on how old you are, social Security either gives you a five ninths of one percent or a five to twelfths of one percent increase for each month that you wait.
Okay, so you are getting credit for that. And I just want to underline here there's almost no reason to.
Not pull your retirement benefits once you've reached age seventy because you're not getting any more of those to layed retirement credits.
Really important information there. Eric Schwartz and CJ. Closs out retirement planning professionals from Class Financial online Class Financial dot com. That's Coss k l aas Financial dot com. So CJ, how is this your specific soci Security benefit? How is that determined? And does that increase what's kind of the understanding there?
Yeah, good question.
First, you need to have enough credits to even qualify to receive Social Security benefits. So for our listeners who listen quite often, up till now, we've talked about a couple of things you maybe haven't heard on social security. But here's where we're going to get into some fun these last two sections. We're going to talk about these calculations and it's it's quite interesting, so stick with us. So, as you work and pay taxes, you earn Social Security that are credits.
They're known as credits.
In twenty twenty five, you earn one credit for each one eight and ten dollars in earnings, up to a maximum of four credits per year. The amount of money needed to earn one credit usually goes up every year, by the way, but most people need forty credits or ten years of work to qualify for their own retirement benefit. Now, notice I emphasize the word their own retirement benefit.
Harken back at the beginning of.
The show, we talked about there's actually five different benefits that soci Security can pay. We're honing in on a retirement benefits, and now I'm honing it even further on your own retirement benefit. You need at least forty credits are about ten years worth of earnings to even qualify for your own retirement benefit. Now, if you do not have at least forty credits, you are not currently entitled to a retirement benefit. Stop working before you have enough credits to qualify for benefits.
Your credits will stay on your record.
If you then return to work later, more credits will be added. So again, you can go to the SSA dot gov website and read their publication how you Earn Credits for more information. Now, assuming you have enough credits, your Social Security uses a calculation based on your highest thirty five year inflation adjusted average of covered wages.
Let's dig a little deeper on this. Now, this is where it gets fun.
Every American begins with one hundred and forty credits or thirty five years worth of zeros in their Social Security retirement benefit calculator. Okay, so again, if they're going to use thirty five years worth of inflation adjusted earnings or one hundred and forty credits, that's just thirty five times four, Then what do I begin with the answer is one
hundred and forty zeros. And as individuals earn money and paid wages into Social Security, those zeros start getting replaced by wage is that are inflation adjusted to create a present value purchasing.
Power for dollar for those dollars.
For purposes of determining the highest inflation adjusted figures over the thirty five year working career. So some people will say to us, Hey, I've worked for thirty years, but I decided to kind of like semi retire, and now my last final five years are going to be lower, and I've heard that's going to hurt my benefit. And Eric and I go, no, You've still got five years worth of zeros to fill in, right, one dollar is
more than zero. Now, people then will say, but I've worked thirty five years and now at the end of my retirement benefit, now I'm going to potentially have lower income. Well, you've already filled in the thirty five. Now interestingly enough, I will just tell you, guys, social Security has to project your benefit. So sometimes at the very end, if you have less years that are filling in zeros that are less than what Social Security is anticipated you to have,
then yes, their projection would be wrong. So listen, we're really getting down into the weeds now on how they
project your benefit. What I would encourage you to do is that if you're going to have what i'll call inconsistent future income as you get closer to retirement, or lower than expected income for your final five years of work, I would just sit down with a good qualified advisor or somebody soci security specialist to say, hey, can you run a custom calculation instead of me just relying on the default provisions of the Social Security projection, can we
run a custom now. Consequently, if someone works less than thirty five years or one hundred and forty credits of Social Security covered wages over their lifetime, then as I mentioned, they will still have those zeros. They work more than thirty five or one hundred and forty one hundred and forty credits of Social Security, then they will simply remove the lowest inflation adjusted dollars within that formula. So everybody, when I say inflation adjusted dollars, here's the problem.
You don't think.
Our brains are not taught to think in inflation adjusted dollars. So often we'll say, well, when I, you know, first started working, I only made fifteen thousand dollars and I had to walk uphill barefoot. You know the whole story, right, Here's the problem. That fifteen thousand dollars forty years ago is the equivalent of seventy thousand dollars now, right, and so Social Security knows that, and the inflation adjusts those prior earnings to bring it forward. So when someone wants
to draw retirement benefits, here's where it gets fun. A calculation is performed to create what's called an average indexed monthly earnings known as AIM for short, that's a new point. Your inflation adjusted earnings from your highest thirty five years are added together, and then the total is divided by four hundred and twenty that's the number of months in
the thirty five years to get your AIM. A formula LA is then applied to your AIM to calculate your primary insurance amount, also known as your PIA, or the amount you would receive at your full retirement age. The formula applied to your aim to your average indexed monthly earnings to create your PIA primary insurance amount is as follows.
You get ninety percent of the first one two hundred and twenty six dollars of your aim, You get thirty two percent of the amount over one two hundred and twenty six up to seven thy three hundred and ninety one dollars of your aim, and you only get fifteen percent of any amounts over seven three hundred and ninety one dollars of your aim. Listen, your head should be spinning right.
Now, should go what what what?
What? What?
What? What's happening here?
These are known as social security bend points. Boy, we're getting into the weeds. These bend points. You need to know social care already is what a social program. It is designed to provide a backstop, a backstop socially. Therefore, the calculation provides the largest benefits to the lowest aim
calculations aka the lowest income earners. It provides a lower benefit to the highest income earners because when you run that aim calculation, they then apply the ninety thirty two fifteen, And as you can already see, your top dollars are only getting a fifteen percent return on them when it comes to that aim calculation, your first dollars were getting
a ninety percent, right. So what you need to know is that while this is complicated, you just need to understand Social Security was designed to be a social program that provides a backstop to people. Therefore, do not think that you are getting a linear benefit replacement up to that up to that income cap we were talking about
that Eric was talking about earlier, You're not. If you were hitting those income caps and paying in all that Social Security, the amount of money you get back in retirement is much lower than if you had earned just fifty thousand dollars per year. So I know this is getting really complicated. I don't want to freak people out on this, but I would just really encourage you to understand this aim calculation, and just for a reference point
so people understand one other element. There's also known as a cost of living adjustments. So people often confuse this. They say, guys, I heard that you said my Social Security benefit if I wait, can grow by seven or eight percent a year that's good. That's good. But then one of my friends just said that Social Security grew by two point five.
Percent, So like you, what's going on here?
Well, listen, if you're not drawing your benefit, your benefit can grow for delayed withdrawal, but if you are already drawing, then they want to try to keep your purchasing power up with inflation. And so even after you've drawn, there will be annual inflation adjusts months if there is inflation.
So boil boy, my goodness.
I'm sure everybody's heads are spinning in the you know, spinning around, but.
Hopefully this is helpful. You can reach out to us with any questions ye.
Have, Bendpoint and Aim. I don't think we've touched on either. It's very fascinating stuff. This week, as always, talk with CJ. Closs and Eric Schwartz, our retirement planning professionals from class financial website COSS Financial dot com. That's Coss k l a A S Financial dot com. We'll take it down the home stretch next as Money in Motion continues right here on thirteen ten WIBA talking with CJ. Closs and
Eric Schwartz. They are our retirement planning professionals. From class Financial Online Cossfinancial dot com and they're telephone number six. So eight four four two five six three seven just moments away from the class quiz question week Before we get to that, though, real quick, we've got a good question involving figuring out the best age and this is one of those areas too. I know that a lot of people wonder, and there's a little bit more that goes into it. So how can you kind of figure
out the best age to start your benefits? And if you start collecting earlier, what kind of reduction are we then looking at there?
Great question, John, But first I have to blame you for the fact that we're talking about ben points and aims today because you made the mistake of telling CJ how much you've learned from the show.
So we have the.
Exactly Thank you. It's not my fault.
But let's let's get to the answer to your question here. So if figuring out when when to start collecting your benefits, you know what I'm going to say, it depends it's ingrained in me.
I can't I can't help it.
But what are some of the things we want to consider when we're thinking about when to start benefits, so you know things like your income sources. When you retire, you have a pension, are you going to be working part time? Would you receive spousal Social Security benefits? And then at the same time, we want to think about things like do you still have debt? Do you have a mortgage and auto loan that you're paying off? So these are some really important topics when we're we're thinking
about when to start benefits. But we also have to think about life expectancy, right because security is a benefit that play that pays while you are alive, but it obviously ends at depth, you know, different from like a pension for example, that may have some sort of joint life benefit.
So none of us knows how long we're going to live.
Obviously, if we did, we could we could make this social security calculation pretty exact. That's where it becomes a
little bit more of an art than a science. Like I said earlier, a lot of people, you know, say they have a If somebody has a health issue, they may say, I'm going to start earlier because I don't think I'm going to be living long enough to make up what I what I left behind by by waiting and other people may have longevity, longevity in their family and say, hey, I'm going to wait till seventy get the largest benefit, and you know, that's how I'm going
to get the largest benefit out of Social Security. But regardless of when you decide to take it, let's just look really quickly here at you know what kind of reduction you get for taking it early. So let's say that your full retirement age is sixty six.
In two months.
So you're in that kind of odd ten year stretch where where it's sixty six in some months. In this case, it's sixty six and two months. That's your full retirement age. If you draw at sixty two, you're going to get about seventy four point two percent of your monthly benefit. So you're losing, you know, a little over twenty five percent. If you waited until you were sixty five, you receive around ninety a little more than ninety two percent of
your full benefit. Okay, so these are the really tough calculation. It's not we're not going to get exact. But that's where again your access on SSA dot gov is going to be really really.
Helpful, great great stuff this week, and you mentioned that website, and I know there's a little bit of information to there, Eric that you wanted to add.
Yeah, yeah, the last last piece here. I even though we know that benefits go up the longer we wait. Social Secure any data from a couple of years ago tells us that the average age that people start benefits is sixty five, which is not all that surprising. This generally when people are getting on Medicare and dealing with the Social Security administration anyway, so they tend to get started them.
Talking this morning with Eric Schwartz and CJ. Closs, our retirement funding professionals from Class Financial website class Financial dot Com. There telephone number six oh eight four four two five, six three seven. Want to hold on to that telephone umber, because it's time not for the class quiz question in the week. It works like this just a moment, I'll
ask you the class quiz question the week. You will then have thirty minutes from the today's program to call the Class Financial office right here in Madison at six oh eight four four two five six three seven. If you are the first call correct answer when this week's prize, which is a twenty five dollars gift card to pet Smart. This week's Class Quiz question week is this true or false? Your full retirement age, known as your FRA, is the age at which you become eligible to receive your full
unreduced Social Security retirement benefit. True or false? Telphone number six O eight four four two five six three seven. Also, let's cross financial office right here in Madison in their website class financial dot com. CJ. Eric, It's always great chatting you guys.
Have a great day, Thanks Sean.
Thanks take care guys. Doctor Greer joins us in sixty seconds here on thirteen ten w I b I