Last Word on Social Security

Speaker 0 00:00:00 <silence> Speaker 1 00:00:05 This is annuity Straight talk. Since 2008, your host Brian Anderson has helped clients nationwide navigate the complex market for annuities. With Brian's assistance, hundreds of clients have achieved a profitable and secure retirement. I would know because Brian has answered many of my questions concerning annuities and retirement planning so that you can benefit as well. Let's get started. Here's Brian. Speaker 2 00:00:47 Hello and welcome everyone to the Annuity Straight Talk podcast, episode number 98. I'm your host, Brian Anderson, Northwest Montana. Beautiful summer day, getting ready to go out. Enjoy the outdoors this weekend. Once I'm done with this, I want to thank everyone who reached out with support and comments on uh, episode 97 last week. That was great to uh hear from people. I do have a feeling that in large part what I do is beneficial to people. I figured there'd be some happy people along with the one dissatisfied person that I do know about. But here we are again, I wanted to be productive and so I call this the last word on social security. I've talked about it a bunch. I'm gonna probably do another one, but it's gonna be more the structure of social security and how best to handle it for each people. 'cause I do have a new friend who specializes in that and he does seminars on social security. Speaker 2 00:01:42 But I've received a lot of pushback on my comments, which is great. It's a challenge to get better, be better, make more justifications, more calculations, make sure that I'm giving people the correct information. So I'm gonna share you guys this week and I'm gonna show you the newsletter. It's kind of my visual aid as I go through and I wanna know what you guys think. So please remember to comment, subscribe on any of your favorite podcast platforms or on YouTube. Let me know what you think, good or bad, like to share the comments with everyone so your comments help other people. And here it is the last word on social security. So I've covered the topic a ton. I tell everybody about it. Few weeks ago someone commented, I think I did the full blown retirement plan. So if you go on the newsletter page, on the website or the podcast page, just type social security, I think there's only one podcast, there's two or three newsletters. Speaker 2 00:02:43 But somebody commented about and the full blown retirement plan, I said, take social security as early as you can get it. This guy said, you are definitely in the minority in your opinion. And I take pride in that because that's the point of this entire website. I'm in the minority of my opinion and I'm right. You should always take social security as soon as you can get it. And there are only a few exceptions, although there are some. Okay? Number one, if you're still working, do not take it early. Put you in a bad tax situation. I've met a few people that take social security while they're still working, trying to bolster savings and all that. And a lot of that. I think honestly a lot of the people do it. Not everyone, A lot of people that do that have not managed their money well and they're setting themselves up for a tough time in retirement. Speaker 2 00:03:29 Underfunded, at the very least, if you're doing a Roth conversion, if you're trying to convert Roth, you don't need the extra income. That kind of thing. Sometimes it's appropriate to do that. That's the case I'm gonna talk about today. They're talking about Roth conversions tax for retirement and there's some people that have so dang much money that it doesn't matter anyway. If you got a pension or rental income or investment income that covers your basic necessities, you got a bunch of money and you don't really care, fine, I didn't write this in the newsletter, go search it. Go Google Social Security 2033 projected cuts of 24% to social security, take your money now. And on top of that, I got other justifications for, I've seen a lot of cases in the past where advisors recommend people delay payments just so they could sell an annuity. Speaker 2 00:04:17 Or you're getting 2000 a month delay till 70. So you can get 3000. And by the way, by this annuity that pays you 2000 a month. So you got 2000 a month for uh, eight year income or five to eight year income gap. And then the combination of the annuity income and social security forces you into maybe even even higher tax bracket. It's a bad idea, but there's a lot of sales pitches that go along with social security. I'm trying to alleviate burdens on your retirement portfolio that give you more flexibility, whether you wanna protect it with an annuity or you want to have market investments and chase returns. If you do everything the right way, you have the freedom to do that, okay? In that situation where you're covering an income gap, that's a long-term product meant to solve a short-term problem. Like a short-term income gap. Speaker 2 00:05:06 You're delaying social security for five years and you buy an lifetime income annuity to cover that five years and you're spending way more than you need to just take the social security. So I saw a lot of those examples. I started digging into the numbers. It was easy to figure it out. I told you guys about the social security planning software now along about 5, 6, 7 years ago, there were a lot of strategies you could do. You could delay, you could defer, like spouse could defer, a spouse could collect half of the higher earning spouse's payments, defer theirs. And then when there's got above that they could switch. You can't do that anymore. Not a lot of strategies that go along with it. Anyway, the biggest lesson here is for anybody who wants to learn more about finance, you need to understand the concept of time, value, money. Speaker 2 00:05:53 It's very important. I learned that when I was back in finance classes. I don't think in college with a finance degree. We did a couple of like investment classes. I learned a lot of ca calculations where I did the did did everything longhand. But we learned about time value of money and the simplest terms now is money now is worth more than money later, right? And a lot of people will think about uh, inflation, but you also have to talk about investment returns on money as a way to calculate the time value. So delaying social security often costs money and most of the time that cost is never factored in the into the equation of any calculator I've seen. And that comes into the topic today as well. In terms of cashflow, you get more for delaying payments, but the break even between the two options turns out to be most cases like early eighties, something like that. Speaker 2 00:06:47 So you're waiting till fairly late in life to actually derive a benefit from delaying social security add in the time value of money and you never break. Even if you start actually doing the calculations, the lost opportunity cost, you would never ever catch it even if you do live to a hundred. So it's especially true if you're spending money out of pocket just to get higher payments later. That means the increased payments are not free. It costs you something that's another variable that determines whether the higher payment is worth waiting for. It's not you spend their money first, spend your money last, take the freebie now save your money for later. As far as income goes, it's obvious, but it also affects every other part of your retirement plan. Need growth to offset inflation, you need flexibility to capitalize on market returns. And if you have less cash flow and you're bleeding out your assets just to get more social security, you decrease the opportunity to do any of those things. Speaker 2 00:07:49 And the biggest one is a legacy. You cannot leave social security to your beneficiaries unless it's your spouse. So spending money that you could leave to your heirs just to get more of something that you can't leave to your heirs, it makes no sense. Now a legacy is not important to everyone, but that's a silly concept. Anyway, okay, so onto the topic of today, which is really quick and easy. Everyone who's seen this website, obviously you guys are all searching around, you've seen other advertisements, there's some of it's good, some of it's worthless. There's always a few good ideas and there's at least a good one. Good idea in everything or at least good intentions. But I'm not the only person giving advice on YouTube or with a podcast, but a lot of people I talk to, they say, oh, I saw this video. Can you take a look at it and tell me what you think? Speaker 2 00:08:40 So just this week I had a chance to meet with a a woman that is great, we have great conversations in the past. She was prematurely retired, went back to work for a few years, now we're starting discussions again. Maybe we'll figure out something for her retirement. Um, fortunate that I got to meet her in person. We've always had great conversations and I truly enjoyed the opportunity to meet her. If that ever happens for you, it'll be the same. I'd love to take advantage of any of those opportunities. But after we got done with it, she texted me and said, Hey, check out this video and tell me what you think. And it was a advisory group that was promoting tax-free retirement from age 70 and beyond. Now, I'm not gonna link the video or show you where it's at 'cause there's a lot of stuff in there I could pick apart. Speaker 2 00:09:27 It's a reasonable strategy for anybody who wants to front up a bunch of money just to be tax free. But I don't think it's the best. I haven't dug into the numbers, but I have a good, I have a good feel for the numbers. I know how they work and it's not gonna pencil out to be any grand yield, but it's an interesting thought. The first thing they did is they, these guys were recommending delaying social security to age 70. So the example couple was 65 years old and had just retired. They wanted to wait on social security and cover the gap with I R A money. So spending out of pocket to get more in return. So at 65, the couple could collect 5,100 per month and if they waited till 70, it would be 6,600. Now those numbers don't, I think it should be a little higher at age 70 based on what I've seen. Speaker 2 00:10:17 But those are the numbers they use. So that's what I'm going with. They get an additional 1500 bucks for waiting. Now, interesting to hear the solution solution was to use roughly 360,000, maybe 360 2, 300 $60,000 to buy a five year income stream that pays 6,600 per month, pays out for five years, stops, that's it. That's 79,200 I think, yeah, a year. So it's, it pays out just shy of 400 grand after five years the money is gone, payments run out and then they switch to social security, which would pay them 6,600. The income stream is seamless, but the whole idea is ridiculous. So they had one that one guy that was presenting the whiteboard and then the other guy, they switched to him for an expert opinion. So I assume he was the expert. And he, he said that not delaying social security payments is the biggest mistake that too many retirees make. Speaker 2 00:11:18 And he said, oh, you're essentially giving up a guaranteed 8% annual return on your money by taking payments early. Remind everyone, it's not growth on the asset, it's an increase in income. And when you're fronting up $360,000, an 8% return on that money would be what? 28,800 bucks or something. It's not that kind of increase. That's a growth on your money. The way I look at it, the way it should be looked at is that if you give up $360,000 to get 1500 bucks a month extra, that's $18,000 a year. It takes 20 years of payments to get the money back. They would be 90 years old. They would not realize a profit until after they were 90 years old. There's that darn old time value money thing again, right? So yeah, give up 360 now and take 20 years to get it back. Does not make sense again. Speaker 2 00:12:13 So that's where the newsletter cuts off. I gotta finish it before it goes out to the list. Uh, but just a quick closing there. I hope this is clear for everyone. Again, there are a few examples, but general, there are a few examples where it does pay to wait, but those are extenuating circumstances and the times when you delay Social Security payments are few and far between when it's appropriate, most of the time take it when you can get it. If they're gonna cut it anyway, I believe it's gonna be means tested at some point. They're already doing it to Medicaid with Irma, where if you make too much money, then they basically charge you more for Medicare as part B and D. So they've already done it to Medicare. Why wouldn't they do it to Social security? Hey, you make too much money, you don't get it. Speaker 2 00:13:01 Take the money now while you can in 10 years, it's gonna be less probably because we know they can't make uncomfortable decisions that are, that will uh, threaten reelection, right? Anyway, that's my thought on it. Tell me what you think, agree or disagree. I'd love to hear it. Again, thank you for joining me. Subscribe or comment on any of the podcast platforms or on YouTube. This is episode 98, the last word on social Security. I'll probably do one more, maybe I think a lot of you guys can hear it. Again, I have to explain it almost every day so you guys can listen to it twice. And for anybody new that'll give you a chance to go search the website and look for the other spots where you can find it. So anyway, appreciate you guys joining me back next week, episode 99. It's been great and I've had fun. You guys take care and I'll talk to you next week. Okay, bye. Speaker 1 00:13:53 You have been listening to Annuity Stray Talk. The proceeding information is for informational and educational purposes only and does not represent tax, legal or investment advice. Reviews expressed by guests on this program are their own and do not necessarily reflect the views of annuity, straight talk or its partners. No information presented today should be acted upon without meeting with the qualified and licensed professional. It is important that you read all insurance contract disclosures carefully before making a purchase. Decision guarantees are based on the financial strength and claims paying ability of the insurance company. Me.