When to Claim Social Security

Video Chapters & Transcript:

[Music] Well, folks, welcome to yet another edition of Smarter Money Matters, your exclusive ticket to advanced wealth wisdom that’s hard to find elsewhere. Uh we’ll be teaching family office wealth secrets and the keys to intergenerational wealth from retirement, asset protection, uh and smart tax strategy to how to pay way less in taxes, expert trust and estate planning, investments to insurance, even real estate and business financial planning. We are your passport to more wealth with less hassle and less friction. Entertaining, clear, and to the point. We make it fun to get richer with less work and stress. I’m Dr. Jeff, your wealth doctor. Of course, joined by our super CFPs, Lou and Anna. Thank you so much for joining us. Today’s session is going to be about when to claim social security and talking about the conventional wisdom and maybe some some other considerations that that uh may make you think twice about the conventional wisdom. So, I think typically what are most people can what we train to what are most people counsel do with social security? what claiming age assuming you’re going to live a normal lifespan. Most people say push it off till you’re 70, right? And why is that? You get the better higher benefit. Yeah. In fact, in fact, the uh the benefit increases pretty dramatically uh as uh as you get older, right? I think it goes from um something like uh 2,200 for a 62 year old to 3700 for a 70 year old, which is almost double almost double, right? Um, and you know, presuming that you live a normal lifespan and long enough, you know, to catch up with those extra payments, the conventional wisdom is you get more money in your pocket by waiting because the payment is so much bigger, right? Yeah. Um, but that’s, you know, kind of just half the story. So, what are some reasons that, you know, may argue against it that people might want to take it sooner? I mean, I think a big one is just um flexibility, right? So if you defer it to 70, which is that conventional wisdom, and you’re pulling from investments instead, if you have a large purchase or that you want to make later in retirement or higher health care costs, you want to give a gift, something like that. If you’ve depleted a lot of your investments, you may not have as much flexibility. Yeah. And you also have to think about sequence of return risk, right? the market goes down during that period, not only you spent the portfolio down, but it’s also worth a lot less because, you know, so it’s kind of like a double whammy, right? Sure. Um and uh so flexibility is is pretty important. And also, you know, there’s a mindset about gee, if I’ve got regular income coming in, you know, um you tend to spend it. If you got to make a decision, am I going to go into my investments or my account, you might be more reluctant to do that. and you you know psychologically may just resign yourself to living and retiring less comfortably than you could. Right. Sure. Sure. What what are some other considerations see that well yeah the other thing is uh obviously you know concern mortality concerns right you know how long is someone going to live for and you know the sooner you know the longer we wait the less money or you know less years we have to draw on social security. So, you know, if we’re if this is a benefit that we’ve been paying into our entire working careers, our entire working lives, you know, some people are going to want to start early and then make sure that they get their money back in a way, right? Yeah. And even if you expect to have a long lifespan, I mean, I I expect to live well into my 90s and you know, Adrian, you know, purports I’ll live to be 200. So, right, but the uh but what if I get hit by a bus or get on the wrong plane next week, right? and all that potential hundreds of thousands of dollars of income stream you know I never me and my family never would have got um and there’s also you know a lot of folks don’t think about I got to tell you this is something I’m sure that all of you have heard and we have been steeped in it in our training as financial planners I mean that’s the rigor you go ahead you wait till 70 and if you’re going to live along a normal lifespan and catch up that’s what you should do gave you know more of the discussion but what but what about sequent whether opportunity ity cost. Sure. Right. So it assumes that you know the break even analysis doesn’t consider what you could earn if I’m getting a smaller payment sooner and I’m not spending it and investing it. What would that grow to? Especially in the you know the kind of market we’ve had over the past 10 years. Absolutely. Um so um I guess you know when we go through and you should think about this Kamarta clients as we do uh your social security you know claiming optimization analysis which we can do for you anytime and remember Q2 is our big retirement planning and uh and financial planning quarter to to run these analysis and catch up on on your retirement plan. So, if you haven’t done that, plan to um when it comes around the calendar again beginning in April of 2026 um or with your other advisors even back in the envelope or some of the online calculators. Think about does it really make sense to wait what could I do with the money in the meanwhile? Would it free up your lifestyle? Would you invested maybe make more money? Would you have more flexibility? There are a lot of reasons really to to kind of question the u the conventional wisdom. Any parting thoughts? I mean, Lou and uh and Anna, you work very frequently with clients retirement plans. I’m sure you get questions about this a lot, right? And what, you know, what’s the general feeling out there? Well, to me, you know, everyone’s situation is different. You know, you know, you you and your neighbor may have totally different, you know, uh situations, totally different times that that you want to start your social security based on your, you know, how much money you have saved up, uh on your health history and your family health history and just just, you know, there’s a number of different things that go into this. So, uh, what I usually talk about with my clients is that, uh, you know, let’s run a financial plan. let’s let’s let’s put the numbers on on on paper and see what makes most most sense because sometimes you know if you have a lot of money saved up in your IAS well you know there’s there’s the whole you know and we’ll talk about this in our next podcast maybe but you know the whole conversion factor and require minimum distributions that that start you know happen at a certain age at 73 now uh where you have to where you’re forced to take the money out of those IAS and if you have you know if you’re taking that money out and you have social security well what does that do that increases your taxes overall so There’s there’s a lot of it also has your profound implications for the cost of Medicare. Correct. Right. Absolutely. Absolutely. So there’s a lot of factors that go into it. My suggestion is is suggestion is let’s you know let’s discuss it. Let’s talk about it. Let’s kind of you know do your individual financial plan and see what the best solution is for for you. Kevin you any client stories or you know biases that you’d like to share? Yeah, I mean some clients that I’ve worked with navigating the the shift from working and accumulating to retirement and and drawing income either from pension, social security investments, it’s a big mental transition, right? When you’re that saver like a lot of our clients who just worked normal jobs, saved, right, business owners, making that transition is difficult. So from a, you know, money psychology perspective, maybe drawing social security a little earlier might help them with that transition. So I think that’s another thing to factor in for some of those clients that may want to take it earlier and it might make sense to. And then I have other clients that have had parents that have lived into their late 80s and 90s and some that are still living and they are more concerned with longevity. So then in their case maybe it makes more sense to go longer. But it’s very individualized like Lou was saying. Yeah, there’s a lot of things to think about. And another one is, you know, facing know in this as we approach the middle of the 21st century, you know, inflation has become a real wild card and you just don’t know where that’s going to go and there’s a lot of reason to believe that, you know, the official government inflation figures when they’re finally published again um are going to maybe understate the actual case. So having a burden of hand getting a payment now even though it’s lower with the opportunity for it to grow and maybe keep up with inflation versus waiting later and actually getting a lot you know less in terms of actual spending power is something to think about true and it’s also the tax considerations that you had mentioned earlier and lots to talk about please feel free you know as Camarda clients and and those that you don’t want to get to know us uh to to have robust you know discussions with us and in your own individual situation we’ll try to help you find the best path But always question, you know, the conventional wisdom. And uh and then look beneath the cover, you know, to to maybe find a a better way to go. And and we’re going to be talking about retirement a lot, by the way, in coming weeks. I think next week, uh we’re talking about how to do backdoor Roth um the um contributions, which is really important. And then we’ll also talk about Roth conversion strategies later on so you’ve got that information while you still have time to make those decisions uh before the end of the tax year. But for now, thanks so much for watching from Jeff and Anna and Lou. Thanks so much for watching Smarter Money Matters. It really does. And we’ll see you next time. Thank you. [Music]