Cynthia de Fazio 0:23
Welcome to Retire Smart Maryland. My name is Cynthia DeFazio. Joined today by Prashant Sabapathi and John DeFeo of Elite Income Advisors. And to our viewers at home, we know that you have a lot of questions surrounding Social Security. You’re probably asking yourself, when do I turn it on? Do I turn it on at a certain age? Should I listen to friends or should I wait? All of this information is so important to you. It’s a critical component in the retirement years. And what about if you’re married? It becomes even more complex. So thank you for being with us on today’s show, Prashant. How are you today?
Speaker 1 0:57
I’m doing great, thank you. How are you?
Cynthia de Fazio 0:59
Fantastic. Thank you so much for asking, and John, how are you?
Speaker 2 1:03
Likewise, I’m doing great. Thanks for asking.
Cynthia de Fazio 1:04
Good, good. It’s so good to be with both of you. And I know this subject is so near and dear to the viewers at home. Social security is like a big giant puzzle. If you, there are so many different pieces that you have to get right so that it makes sense. So, Prashant, in your words, Social Security. How important is it to get it right when you’re going into the retirement years?
Speaker 1 1:25
You have to get it right, in my opinion. You only get one shot to get it right, and so you really have to optimize your Social Security benefits. I think a lot of advisors talk about this idea of maximizing your Social Security, just trying to get as much as you can possibly get out of the system, our opinion it’s not about maximizing Social Security. Okay, it’s really about optimizing Social Security, and the difference is that optimization makes sure that the Social Security fits in to the rest of your income plan. I’ll give you an example. Let’s say that you’re aiming to maximize Social Security and you find that you can get more money by delaying your benefit till 70. But then you run a break-even analysis and find that most of that increase in lifetime income comes when you’re 70-eight or 70-nine or 80 years old. If that was the case, I think a fair question is to ask, well, if that income that’s going to be higher is going to really break even and come to me when I’m 78 or 80 years old, was it actually meaningful to me? Did I actually get to enjoy it in a way that made my retirement as fulfilling as possible? I think a lot of people would find that answer is not always yes, which is why it’s not about maximizing how much you get. It’s really about getting income at the right time so that it empowers you to live your life in the most fulfilling way possible. That’s how we tend to think about
Cynthia de Fazio 2:56
it. I love that. And John, when it comes to married couples specifically, talk a little bit about why that’s even more important because you’re looking at two different Social Security revenues, if you will. How do you choose the right one?
Speaker 2 3:10
It’s a good question. I think it really comes down to your income plan, right? What are the income requirements that you have? What is the age difference between you and the spouse? Do both of you have your own benefit to draw on. There are features for married couples that that draw Social Security that aren’t available to single individuals, right? One of those is what’s called the living spousal benefit, that says that you are able to take up to 50% of your spouse’s Social Security benefit if it’s more than your own or if you don’t have one at all. So there’s strategy behind when you take it to ensure that the other spouse could potentially take advantage of the spousal benefit. And there’s also something called the survivor benefit, and this is suggesting that when a spouse passes away, the hire of the two social securities is going to stick around for the surviving spouse, but there’s actually an income that’s a loss. The lower of two of those two benefits go away. So there are sometimes that we strategize with clients to ensure that the surviving spouse has a higher level of foundational income. So maybe it makes sense for one of the spouses to actually delay the benefit out for a while and and have the higher benefit, maybe waiting until 70, but then the other spouse potentially can take their social security benefit a little bit early just to take advantage of some of that income in the short term and kind of have a staggered approach. So it just introduces a bit more variables into the equation when we’re trying to help with that decision. And
Speaker 1 4:38
isn’t that what makes this whole thing complicated? Is there’s so many different variables, just like you said. It’s like higher income earning spouse delay, lower income earning spouse collect as soon as possible. Is that even the right thing to do? Right. We got to look at health history. We got to look at longevity. We got to look at the gross benefit amounts. I mean, so many moving parts. I totally see why people sitting at home are overwhelmed in making this super important decision. Is with all these options, how do you actually make sense of it? And so this is why in our office we’ve really partnered with some folks who have developed something that we call a social security timing tool. And what the tool will actually allow you to do is evaluate every possible combination for how you can collect Social Security. So maybe you have a strategy in your mind. Maybe you always thought that you’d both collect at full retirement age. Maybe you’re an individual thinking, “Hey, I’ll just collect it early, but you’re not 100% sure. Yeah. When you have this Social Security timing report, it’ll help to create some clarity surrounding that decision. What we’re going to do is, if you come in to visit with us, we do this every show. But if you come in to visit with us, the phone number is 833308 5200 My team is going to run you a personalized Social Security timing report. We’ll actually print it out for you. You’ll leave our office with that in hand the very first time you come in. Just schedule that appointment. Come in to visit with us. Make sure you ask the advisor that you meet with to run you that timing report. All we’re going to ask you to do is bring in your latest Social Security statement.
Cynthia de Fazio 6:19
Okay.
Speaker 1 6:19
Okay. And so, if you’ve not yet collected Social Security, bring in your statement. We’ll run that report, and hopefully, it’ll start you on the path to get a little bit more clarity surrounding this extremely important financial decision. It
Cynthia de Fazio 6:32
is such an important financial decision, and we hear so many people say that they’re going to wait until their break-even age. What is a break-even? I’m confused by that, John. What is break even?
Speaker 2 6:43
So it goes. I think it comes back to the longevity conversation. There are break even points, as they would say. We’re taking the benefit early and just taking advantage of that income as early as you can has a break even as to where if you had waited longer, the increased payments that you’re receiving eventually end up being more favorable than taking it. So it’s like,
Speaker 1 7:05
what age do I have to live to to justify the Social Security decision that I made? Meaning, if I collected hypothetically at 67, what age do I have to live to in order to make collecting at 67 a better decision than collecting at 60-two.
Cynthia de Fazio 7:23
Okay, that’s
Speaker 1 7:23
all a break-even is. But here’s the thing: people get so enamored with the break-even.
Cynthia de Fazio 7:30
Okay, they say,
Speaker 1 7:30
“Wow, my break-even might be 70-eight years old. Well, will I outlive some? I mean, like who knows, right?
Speaker 2 7:36
And what’s the challenge with just using the longevity break-even? We don’t know when we’re going. Exactly. So unless
Speaker 1 7:41
you have a crystal ball to know exactly when you’re going to go, a break-even analysis is not good enough.
Cynthia de Fazio 7:47
Okay. What if
Speaker 1 7:48
the break-even analysis says you should wait until 70 years old, but you want to retire at 62? Well, now you have an eight-year period of time where you’re not collecting Social Security. The fundamental problem is you still need income during that eight-year period of time. So that means you have to have a pension, you have to have significant retirement savings to be able to live on for that eight-year period. Not everybody is in that position, which is why break evens are nothing more than a data point. It’s important for you to know it, but it should not, in my opinion, be the end-all, be-all decision maker for how you collect Social Security. What matters more is where’s my income going to come from. How reliable is that income going to be when I get to retirement? Most importantly, after I pay taxes on that income, is it going to give me everything I need to live my most fulfilling lifestyle? If you’re not sure the answer, you’re just going to pick up the phone and give us a call. It’s 833308 5200 That’s 833308 5200 In my book, Fiscal Health Retirement Wealth, we wrote a chapter on optimizing your Social Security plan. If you’re if you have no idea where to start, this book is a great resource. Visit retiremaryland.com, get a free copy of the book. I’m going to cover all the shipping to you. You just got to fill out a short questionnaire. We will mail this book out to you. Read the chapter on Social Security and get a sense of where to start in your planning process. RetireMaryland.com, or you can scan the QR code at the bottom of your screen.
Cynthia de Fazio 9:21
Prashant, thank you so much. John, thank you so much to the viewers at home. The number to call: 83330852008333085200 Don’t miss the opportunity to get a copy of Prashant’s book. It has a lot of great information about how you can plan your perfect retirement. We’ve also made it very simple. You can simply click on the QR code at the bottom corner of your screen. That’s the fast track to get a copy of the book. And again, we’re talking today about Social Security, and as you can see, it’s not just about maximization, but more importantly, it’s about optimization, making sure that you’re taking it at the right age for you. And how do you know that? You need to have a guide, but you’re in the right place. 833-308-5200 We’ll be right back momentarily on Retire Smart Maryland.
Speaker 1 10:15
Everybody in my family is in medicine, so my parents were both doctors. My brother’s a doctor. Everyone in my extended family is in medicine, but science was never really my thing. I was always about numbers, and money was always really intriguing to me. I went to University of Maryland. I was economics and finance, and I was fortunate enough to work for one of the big box retailers in the insurance advisory world right out of college, and that’s where I met Ozzie, and that’s how I got started as as kind of a new guy in the business. I kind of learned the ropes there, but it became pretty clear in in 2014 that we wanted to go independent and have a little bit more control over how we deal with our clients and give them good advice. There is no feeling quite like watching your clients get to do everything that they wanted to do. Work doesn’t feel like work to us. We get to help people plan for their next phase of life. Being able to to help people do what they want to do, and being able to make a pretty good living out of it makes it all worthwhile and truly fulfilling for us. It truly doesn’t feel like work.
Cynthia de Fazio 11:33
Welcome back to Retire Smart Maryland. My name is Cynthia DeFazio. Joined today by Prashant Sabapathi and John DeFeo of Elite Income advisors, and if you’re just joining us, we’re talking about the important component of Social Security in your retirement plan. So many of you, that is your main pillar, and maybe an additional pillar, but it’s something that you definitely need to have a well-designed, cohesive retirement plan. It’s not about maximization; it’s about optimization. So thank you for being with us today, so often as we can just understand just from the first segment, it’s very confusing talking about Social Security. I remember my mom and dad just getting that little green slip out of the mailbox. You remember? I mean, I know I’m dating myself a little bit, but it was so easy. It was like, okay, well, there’s there’s this number we have right here. It’s changed a lot since then. There are so many things to be thinking about right now.
Speaker 1 12:24
Yeah, and so how you collect your benefit is only one small part of it, right? What about the taxes on Social Security? I think a lot of people have a misunderstanding that because they paid into Social Security through payroll deduction and FICA taxes and so on and so forth, that when they take their money or not their money, but when they take Social Security out of the system, that maybe they won’t have to pay taxes.
Cynthia de Fazio 12:50
Yeah,
Speaker 1 12:50
fact or fiction, John? Well,
Speaker 2 12:52
for I guess it depends on the person, right? You know, there are instances where if you have a very low income, you’re not going to have to pay tax on Social Security, but we’re talking a very low income. The amount of tax that you pay on Social Security is dependent upon what you claim in income, and right now, through the federal government, it’s up to 80-5% of your benefit that you can be taxed on. There was a bit of miscommunication, I would call it, last year when the big beautiful bill was passed, and that was the promise of no tax on tips, overtime, and Social Security. Okay, and I think a lot of people took that as you know as fact in terms of there being no tax on Social Security. What the bill actually did was it introduced an additional $6,000 standard deduction to seniors 65 and older that are within a certain income threshold. So as a married couple, it’s somewhere around $150,000 or less that you had to have earned in order to take advantage of that additional deduction. Single filers $75,000 or less. But if your income is above that threshold, you’re phased out of the deduction, and you’re likely back in the same situation that you were prior to the bill, where you’re paying tax up to 85%
Cynthia de Fazio 14:04
Wow! So all of these things need to be taken into consideration.
Speaker 1 14:08
I think so. I mean, it’s a handful just to try to wrap your mind around it, and so you know, it’s kind of like you know I’ll use a medical analogy because that’s the world I grew up in. Yes, yes. But when I go visit the doctor, I don’t necessarily need to understand exactly how all the medicine works behind the scenes. I just care about the end result. If I walk into the doctor’s office with a problem, and I have a good fit with a doctor that I’m working with, I expect to leave the office with a solution.
Cynthia de Fazio 14:40
Yes,
Speaker 1 14:41
and I feel like that’s what most of the people that come in to visit with us have a mindset around. Now, obviously, your money and your health are not exactly the same in terms of thought process, but most of the people that we visit with don’t necessarily need to know every single last detail about why they should collect Social Security. Be the way that they should collect it. They don’t need to know every single detail about what area of the tax code they should or should not be taking advantage of at any given point in time. But what they care about most, I’ve found, is they just care about the end result. Do I have enough income after paying my tax liability to live the way that I’ve always dreamt of, especially because I never got to live a piece of my life while I was working because the job got in the way.
Cynthia de Fazio 15:29
Absolutely, right. And
Speaker 1 15:30
so, yeah, it’s important to do the planning. It’s important to have some understanding of why you’re doing what you’re doing. But what’s more important than all that is the end result, and that’s what John and I have, for years, focused on trying to do is get people to the end result that makes their life as fulfilling as possible.
Cynthia de Fazio 15:47
Makes perfect sense. And then also one of the things that we’ve heard people talk about surrounding this, if you will, is filing is a one-time decision. John, your thoughts on that? A one-time decision.
Speaker 2 16:00
Well, ultimately, you do file, you know, the the one time for Social Security, but I think it’s a lot more that goes into it than just picking a specific date, right? You have to think about what it means to your cash flow, what it means to your surviving spouse, what it means to you know your overall financial plan. One of the things that we ask people is just philosophically, would you rather use the money that you have worked really hard to save and draw down on your own money that could eventually be passed on to your beneficiaries, or do you want to start drawing off of the benefit that you’ve paid into the federal government that does not get to port to your beneficiaries in the future? Right. So either take Social Security that you’ve been paying into your whole life, or use the money that you’ve worked hard to save. And you know, there’s no right or wrong answer, but we start with that framework. Try to help start the conversation. So I think it’s more than just one decision in terms of a simple date. It’s how does this integrate with the rest of my plan? I
Speaker 1 16:58
look at that and I say, well, it’s a great question. Would I rather spend my own money, or would I rather spend the tax money in the system? It sounds like to me one of those is finite, and one of those, in theory, could be infinity. Right?
Cynthia de Fazio 17:11
Yeah.
Speaker 1 17:12
So there’s so many people out there who pay into Social Security who will actually receive a lot more income over the course of their lifetime, far in excess of what they actually paid in. Now, conversely, there absolutely will be people who paid a ton into Social Security who might not ever live long enough to reap the benefit of what they put in. But one thing I know for certain: the money that you have saved is a finite amount of money. It doesn’t matter if it’s half a million dollars, a million dollars or $10 million-it a finite resource, and when it runs out, it runs out.
Cynthia de Fazio 17:47
Yes.
Speaker 1 17:47
And so, if we have the chance to preserve that finite resource, hopefully even grow that finite resource, so that we can pass it along to leave a strong legacy, to empower ourselves to live a comfortable lifestyle, wouldn’t it make sense to explore the idea of doing that as opposed to potentially delaying on a Social Security benefit that may or may not be at risk of not being there in the future?
Cynthia de Fazio 18:12
Absolutely.
Speaker 1 18:13
So, I’m not saying there’s a cookie cutter strategy that we should always adhere to.
Cynthia de Fazio 18:19
Yes.
Speaker 1 18:19
All I’m saying is everybody, in my opinion, should sit down and figure out what combination of resources, what combination of strategies is the right combination for your specific retirement plan. But John, how often do you hear from people? Well, my coworker told me I should collect at 67, or my golf buddy told me that he’s going to collect at 60-two, and so that automatically means that’s what I should do. Yes, I think there’s a flaw in that mindset.
Speaker 2 18:48
I would agree. I mean, do you go to your neighbor or your your buddy for medical advice? Right? Are you going to trust their diagnosis on unless
Speaker 1 18:56
they’re a doctor? Unless they’re a doctor, right? Right. Unless they’re in your family, call your
Speaker 2 18:59
brother there. But but in all seriousness, right? You you want to work with a professional. You know you want a mechanic to address your car issues. You want a doctor to address your medical issues. You want a financial professional to address your financial issues. And it’s so common that you hear this. Oh, I talked to a buddy and they’re doing this. Well, your buddy might have a completely different set of variables in their plan that warrant the decision that they made, so we can’t base that off of that. It has to be based on your plan, subjective to your goals. You
Speaker 1 19:28
know, my mom used to say something to me when I was growing up, and you know, she was a physician. My father is a physician. My mom always used to say, “Don’t take advice from people who don’t have to live with the consequences of the decision that you’re making.
Cynthia de Fazio 19:45
That’s good. So
Speaker 1 19:46
your golf buddy might be giving you advice on Social Security, but if it ends up being the wrong advice, are they going to be the one that pays the bills for you?
Cynthia de Fazio 19:54
That’s very probably not,
Speaker 1 19:56
unless you got a really good friend, in which case that may work for you. But in most. Cases, people giving you this unsolicited advice never have to deal with the consequences of making a bad decision, and so ultimately it comes down to you making that decision for yourself, so that you can live with what happens next. In order to feel totally confident about it, you should visit with a professional and at least see where you stand. It’s 833308 5200 Again, pick up a free copy of the book. It’s Fiscal Health Retirement Wealth. Visit retiremaryland.com or scan the QR code that you see on your screen. We’ll get you your free copy immediately.
Cynthia de Fazio 20:37
Prashant, thank you so much. John, thank you so much to the viewers at home, the number to call is 83330852008333085200 This will be the roadmap to your retirement dreams. Don’t miss the opportunity to grab a copy today. Once again, all you have to do is call in 833-308-5200 or click the QR code at the bottom corner of your screen. We’re going to take a very short commercial break here in Retire Smart Maryland. Don’t go anywhere. We’re talking about Social Security optimization, and we have so much more when we return. The
Speaker 3 21:18
work never seems to end until the day it finally does, after nearly a lifetime on the job, you should be rewarded for all the time you spent working, whether that’s crossing off items on your bucket list, learning a new passion, or rekindling the love of an old one. After all, life isn’t over when you stop working; it’s the start of an all-new chapter, the one where you’re the writer and you get to choose how your story will go, a way to achieve that is by having a clear financial plan to sustain your golden years. The biggest fear most retirees have is if they’ll have enough money to maintain the lifestyle they’ve always enjoyed. Having a plan to help protect you against the curveballs life often throws will help to maintain your lifestyle. Call today to get your free written financial plan so you may live every day to the fullest and enjoy the retirement of your dreams.
Cynthia de Fazio 22:10
Welcome back to Retire Smart Maryland. My name is Cynthia DeFazio. Joined today by Prashant Sabapathi and John DeFeo of Elite Income Advisors, and we’re talking all about the importance of Social Security optimization so that you can have the retirement of your dreams. Thank you for being with us today. So often, gentlemen, we’re hearing people ask the question: Is Social Security going away? Is it going to be there when I am ready to retire? And there seems to be a lot of information about that. What are your thoughts on that, Prashant? Is it going away?
Speaker 1 22:43
Well, one thing I know is that the government’s Social Security trustees report has said that there isn’t enough money to pay 100% of benefits at some point in the future. Likely to be within the next decade, we’re going to hit that inflection point where the government potentially does not have enough money to pay 100% in benefits. So I think the natural question, because I don’t know whether Social Security will or won’t go away. I certainly hope, after all the money that everyone has been paying into it, that it doesn’t go away. But in order for that to be the case, I think that we have to explore the idea that Social Security as a program, as a social safety net, could change in the future, and so there’s two or three things that come to mind. John, maybe you can go through a couple of these, but what about this one? The increase of the wage base. We’ve seen the wage base increase. Can you explain to the to viewership here what that means and how that could impact Social Security moving forward,
Speaker 2 23:44
certainly. So the way that we pay into Social Security right now is through the first 180-$4,500 of gross income. It’s somewhere around that number. Once we surpass that level of gross income as an individual, we’re no longer paying into the system, so there’s been an idea of what if we significantly increase that cap, maybe double it, maybe we even uncap it entirely, so every dollar earned in this economy is taxed through Social Security. So that’s a potential option, and then there’s also just increasing the percentage tax that we pay on that 180-4000 or so. Yeah, that’s
Speaker 1 24:22
true. It’s six. It’s 6.2% is what you pay for Social Security. By the way, your employer also pays 6.2% So there’s 12.4% going in for Social Security. If you’re self-employed, you actually have to pay both sides of the house. You have to pay as an employee and as an employer, you assume the full 12.4% So I think your point is well taken. What if they take that 6.2% and what if they just raise it 6.3 6.5 Could that create more tax revenues? We’ll see, right? Because higher taxes means maybe. Businesses can’t employ as many people, so there’s always going to be a push and pull, a domino effect. But those are two tangible things: will they increase the wage base? Will they increase taxes? Or number three, worst case scenario, will they just reduce my benefits? What if the government doesn’t figure this out, and now there’s like a 20-220-320-4% reduction in Social Security in the future. Now, personally, just one guy with an opinion. I have no idea if I’m going to be right or wrong on this, but I don’t think that’s going to happen because that’s that’s a hard thing for politicians to sell. Is hey, we’re just going to cut your Social Security. Vote
Cynthia de Fazio 25:39
for me, it’s gone. Exactly. Exactly.
Speaker 1 25:41
Good luck.
Speaker 4 25:42
Yeah. But that
Speaker 1 25:42
being said, I think they could potentially manipulate the full retirement age. We’ve seen this in last couple election cycles. Is what happens if the full retirement age goes from 67 up to 68 or 69 or 70? Yeah. What do you think that’s going to force people to do? For a lot of people, it means they’re actually going to work longer, which means they’re going to end up paying more taxes into the system. And is it possible that if full retirement is 70, that more people, unfortunately, will maybe pass away before ever getting to that age?
Cynthia de Fazio 26:14
Yeah, it’s a good point. And
Speaker 1 26:15
look, if you pass away, does Social Security take all the taxes that you put into the system and send that to your beneficiaries. Sure don’t. Of course not, right? Because that’s not how the government works. That’s why we always say it’s not your social security; it’s our social security, and that’s why it’s a social program. So, folks, so many different moving parts to this.
Cynthia de Fazio 26:38
Yes,
Speaker 1 26:39
you should have a way to evaluate each and every aspect of this to put together a plan that works for you. Okay, if you haven’t done it, 833308 5200 is the number. That’s 833308 5200 You call that number, schedule a complimentary confidential appointment with our team. We’re just going to talk through these different scenarios. We’ll help you understand what you could potentially do to get out ahead of anything that could potentially happen with Social Security. If you’re not sure where to start, 833308 5200 Also, retiremaryland.com. This book, Fiscal Health Retirement Wealth. It’s all about Social Security optimization, income sources. It’s all about tax management. My opinion: it’s your prescription for peace of mind in retirement. Great start. RetireMaryland.com or scan the QR code below.
Cynthia de Fazio 27:35
Prashant, thank you so much. John, thank you so much to the viewers at home. The number to call is 833308520083 30852008333085200 or click the QR code at the bottom corner of your screen. Be safe, be happy, and be blessed. We’ll see you back next week on Retire Smart Maryland. Take care.
