Top 5 Social Security Misunderstandings

Myths, rumors, and misunderstandings are pervasive in the world of Social Security. On this show, we’ll look to clear up the top 5 misunderstandings about Social Security.

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Transcript Of Today's Show:

Speaker 1: Hey everybody, welcome into another edition of Plan With The Tax Man. Thanks for checking out our podcast. As always with Tony and myself. Tony, what's going on buddy? How are you?

Tony: I'm good. How about you?

Speaker 1: Hanging in there? A little bloated. So this is our post Thanksgiving podcast. How are you doing? Did you have a good Turkey day? And.

Tony: We had a good Turkey day. It was relaxing as usual, try to eat, you know, these last couple years, trying to eat a little healthier, you know, and while still being able to enjoy it.

Speaker 1: But isn't this the one day like you really could not be healthy.

Tony: I know, I mean within moderation, you know, and we have been, my wife and I had been working on it hard these last couple of years, but I mean, you know, it's still enjoyable. We still eat and have a little wine and relax with family. Yeah.

Speaker 1: Very cool. The average person eats about the average American, I should say, eats about 4,500 calories on Thanksgiving day and that crazy.

Tony: I did not know that.

Speaker 1: Yeah. That's a little Turkey day trivia for you. Well anyway, we hope that everybody enjoyed their Thanksgiving, and if you're checking on our podcast, we appreciate that. And of course, you know the great thing about podcasts is you can check these out anytime. Maybe you're catching this one, you know, the week after, or maybe you're catching it several weeks after, who knows. But either way, we appreciate it as always. And if you've got any questions, need some help, make sure you go to yourplanningpros.com that's yourplanningpros.com.

Speaker 1: All right, so Tony, let's get into it this week. I got to ask you this. This is my little tidbit of, did you see this? I don't know if you want to call this a fun fact, a weird fact or what, but a man pretending to be an investment advisor in Nevada just got a cease and desist letter, I guess a few weeks back or whatever from the SEC. He basically is a baggage handler at the airport and we've been giving an investment advice to like a thousand people, like airline employees and whatnot and started charging them a fee. And of course that's when it becomes a no no. And so obviously that's fraud and yada yada yada. So I don't know, what do you think about something like that?

Tony: You know, I didn't see that, but that is a question I would have is how are those people, basically taking his advice but you know how it is around the water cooler, so to speak, employees share information or yeah, maybe he came off as a really knowing a lot. But yeah, I mean I guess the moral of that is obviously you certainly wouldn't want to pay and a fellow employee or anybody a fee unless you really thought that they were, either in the business of giving the advice and things like that. It's basically, you know, with the internet and there's so much info out there, some people are out there and they study and they read a lot. And then they all of a sudden they want to dispense a lot of advice. So you've got to be careful who you're listening to.

Speaker 1: Well I mean, I guess, I mean, if he's, you know, what he should have done, I guess if he was, you know, started off as a, you know, a friend, coworker, blah blah, blah, that's all fine and good if you're doing that. But when you start charging a fee is when it becomes, you know, that's when the sec starts paying attention and it's like if he had a good knack for it, go get the education right. Go get the license.

Tony: Exactly, go get the education and then you don't have to worry about, breaking any rules, charging the fees.

Speaker 1: Right, right.

Tony: Yeah.

Speaker 1: Then you're on the up and up. Yeah. It's pretty funny. Well, and of course now, Tony, you've been doing this for 23 years. You do have all the proper things. You're a certified financial planner. So yeah, I just thought that was interesting. I guess you can never underestimate people and they'll do some interesting things. All right, well, so on our addition here, let's go ahead and hit our main topic this week. I want to talk about just some simple misunderstandings with social security. I've got a top five here, call them myths, call them rumors, column misunderstandings call them just whatever, urban legend, I don't know, but whatever you want to call them. And I'm just going to have you give us a quick rundown on what you think as to these particular misunderstandings. OK.

Tony: Okay.

Speaker 1: Social security. It's broke, it's going broke, all that good stuff. What do you think? Is that a misunderstanding? Is that legit? What's your thoughts?

Tony: You know, we hear that all the time from clients and the prospective clients cause it's out there. A lot of people talk about it. It's not going broke. You know, it's had some financial setbacks, there's no doubt about it. And I think the latest statistics are, is that it will be out of money right around 2034 now that doesn't mean that everybody just stops getting benefits. Basically what that means, unless Congress changes some things is that I think the latest assessments, 70 you know, if you're getting social security at that time, instead of getting what you normally get, you'd only get about 79-80% of that. Now Congress more than likely we'll probably act to fix that. There's a number of things they can and trying to do.

Speaker 1: Yeah probably in 2033 probably like three months before.

Tony: Yeah right? It's always the last minute. You know, and so, you know, you're 15-16 years out. It's hard to say is I think it's important to a lot of people. I mean it's important to me. I mean I look out that far and by that time, I mean I won't be quite full retirement age, but you know, start to become more and more important and people start paying attention as they get a little closer to it. But the short answer is it's not broke yet.

Speaker 1: Yeah.

Tony: I don't think it will go broken. That's just my opinion. I think they will act and fix it somehow.

Speaker 1: Yeah. Man that just kind of hit me all of a sudden Tony, that's a little kind of heartbreaking. You're, you know, you're like, yeah, if you're 14-15 years out and I real quick I did the math and I'm like Oh I'm I'm 14 years away.

Tony: Right, right. So you, you start wondering, well gosh I really want to even hopefully you're not just dependent upon that. Of course, but it is there and there and if nothing else you can use it as a longevity kind of insurance.

Speaker 1: Right?

Tony: Yeah, it's important.

Speaker 1: Well I think a lot of folks definitely 55 and over probably even 50 and over are probably going to be fine the way it is, but certainly 15 under which I'm just barely under that threshold is going to probably see some changes. Who knows? We'll see. But I think the idea being is that if you are worried about it going broken, you are worried about 75% and if that's going to be enough based on the other things that you have, well then hopefully you have a plan in place and kind of address some of those things. If not, make sure you're talking with your advisor about that. Run those numbers and if you need a little help with that, of course you can always reach out to Tony here on the podcast and let him know @taxdrinc, he'll be happy to do that for you.

Speaker 1: Okay, so a couple of more misunderstandings on social security. This one's kind of a twofer. This is kind of like to a number two, part A and part B if you will. And it's the saying or the myth that social security starting as soon as you possibly can. Tony. Well, darn it, that's just the best option.

Tony: And then the next one probably waiting as long as I want to wait, you know? And basically, it's a personal decision at the end of the day and people ask us this all the time too. And most of the time we get asked, well I as soon as I turned 62 that's the first age you can take it. I want to go ahead and take it. We try to talk to him a little bit about, well you know, maybe that might not be best. Now in my opinion, that's generally best. Especially if you have maybe no other savings, you know, your life expectancy, you know, you don't have a lot of longevity in your family or maybe you've been hopefully not but diagnosed with something that you know, you really think you're not going to live that long. That might be a good idea.

Speaker 1: Sure. Yeah.

Tony: But most of the time, if you've got other means, delaying it at least until full retirement age, which is somewhere between, for most of us now, 65 and 67 is generally best because if you live, and we could do the math for you and actually do the calculation, but generally if you live till 75 76 by delaying it until your full retirement, you're going to be well ahead of the game.

Tony: And then anything after that is gravy because they do increase the benefit a little bit. So, you know, I say talk to somebody, talk to your advisor and pick out what's best for you because it's not just one or the other.

Speaker 1: Yeah. Well now you mentioned that, you know, changes a little bit. There's, I guess there's a Cola increase supposedly for 2020 right? Like 1.6%, which is not very much. And then of course also what you're talking about maybe is the break even point. Right? So running the numbers and seeing, you know, again, no one can tell exactly how long they're going to live, but it kind of gives you a rough idea as to say, well you have to make it to this age if you started at this point to make X number of dollars and so on and so forth. And that kind of helps factor that into, correct.

Tony: It does. Yeah. And at least people know that, okay, I know that and based on what I have and maybe I could use some of my savings to supplement until you know, later age to get that higher benefit and make that decision.

Speaker 1: So for example, if folks, if you're not tracking, so what we're saying is kind of if you turn it on at 62 and by age, I don't know, whatever it is, Tony, you tell me where it's at, but let's just say 80 you make X number of dollars. Or if you waited until 70 full retirement age, that would be X number of dollars at 80 you can kind of weigh out, or I guess what the break even point would be. So starting on 60 to probably take you longer to get to where it would be. But again, you have to live that long.

Tony: You have to live that long. And that's the big gamble. So speak. But you know, the way I look at it is, again, a little bit on a personal level is yes, we want the income and hopefully, I won't be dependent on it, I don't think I will be. Yeah. By any means. But it's nice to have, you know as that, I call it the longevity insurance, just in case you have to be one of those people that live into their late eighties, nineties and people are living longer and at least you can't outlive it and you that you want that higher income.

Speaker 1: Okay. So again, I know another misunderstanding is turning it on as soon as you can or waiting as long as you can is the best option. And it may be either one could be, but there also could be something to be said for a happy medium and also having those conversations to run those projections. And then of course, you know at the end of the day you are still kind of making a bit of a guess cause you're gambling on your life expectancy. So okay, so a couple more quick ones here and then we'll hop up out of here for our podcast. As I know people, if they are checking us out here shortly after Thanksgiving, they're probably bloated like I am. The Social Security Administration, those folks can help you choose the best strategies, claiming strategies for yourself. That's definitely a myth, isn't it?

Tony: I think that's a myth and nothing against the people that work at social security. I think that they've done a lot over the years. They've gotten their website a lot better. They've got a lot more tools out there. However, depending on who you're talking to, they're obviously they don't know your financial situation. And they're not going to get into that with you.

Speaker 1: That's the first and foremost.

Tony: I think that's the biggest drawback. So it's nothing against them and they don't know what they're talking about. They know their system and they can give you some facts, but you still got to take that and get some advice or calculate some of the things on your own as to what's best for you and your family and your situation. I would use them for fact gathering and then, talk to your advisor.

Speaker 1: Yeah. Now, I haven't actually been myself, but my understanding is it's a lot like the DMV.

Tony: A lot of times it is. My dad goes down and he comes back complaining all the time. You know, he's down there for four hours. And then he doesn't get an answer and then it's, you know, he's got to go down again and yeah. Ideas and, but you know, in their defense they're serving a lot of people. It's not easy. And they're doing it with limited funds. They at times, I've got a few friends that work higher up, they're not on the front lines, but you know, they just kind of tell me some of the stories. But overall, they do a pretty good job of getting benefits pay obviously. But yeah, for info and things.

Speaker 1: And just like you said, just from a time standpoint, I mean you think about how it is when you're at the DMV, they're typically not interested in answering a lot of extra questions. They kind of want to get to the, the situation at hand and get on through. And of course at the main point that you had, the areas obviously, hopefully the one that rings true with most people is that they don't know you and they don't know your situation. So it's not best to really ask them that. And of course they can't legally, tell you what to do anyway. All right, so final one here on our social security misunderstandings is this one's pretty common Tony, and that's that you don't have to pay taxes on those social security benefits.

Tony: Yeah, and that's the biggie. You know, from the tax angle for us, everybody's surprised. You do have to pay taxes if your income is over a certain level. So it, it's one of those, you know, it depends. But for most of us, I mean if, if social security is just your only income, then no, you don't have to pay any taxes on that. However, most of us have some sort of other income, whether it be from wages, other retirement plans, pensions, things like that. And there's a calculation that the tax code makes us do. And then if you make over a certain amount, it's not very much either. You do have to pay taxes on those benefits and everybody is always during tax season, kind of crying.

Tony: Yeah. You know, they've got a point, you know, I paid taxes on this money already. Now I've got to pay it again. I don't understand. You don't understand. It doesn't seem right, but unfortunately that's the law. So yes, you have to factor that in. Otherwise, you could end up short at tax time. So we do try to talk to people about maybe withholding taxes on their social security, like they would their wages so they just don't end up owing and have a surprise on April 15th.

Speaker 1: That would be good. That would not be good. But that would be good done to avoid that surprise. All right, well I think you know what, that's going to do it for our podcast this week. So pretty short and simple. And to the point if you've got some misunderstandings about social security and maybe one of those ones we discussed or maybe some other ones and you need a little help, you want to have a conversation, make sure that you always check with a qualified professional like Tony before you take any action, you can reach out to him. If you're not currently a client, you can reach out and let them know that you have some concerns or misunderstandings and they'll give you a hand as best they can at 844-707-7381, that's (844) 707-7381 if you have not yet done so, please go to yourplanningpros.com that is yourplanningpros.com and click on the podcast section of the page there.

Speaker 1: Make sure you subscribe to us on Google or Apple or Spotify or various other ones that are on there. Whatever platform of choice you like to use for podcasting, share it with friends or family whose somebody who might benefit from it. We give you a couple of little link options and ways to do that. So I mean you can tweet it or Facebook or whatever the case might be and we certainly appreciate it and hopefully you've got something useful out of this and you continue to enjoy our podcast. And if so, we'll reach out to Tony and let him know. We would certainly appreciate it.

Speaker 1: And Tony, my friend, thank you so much for your time this week. We going to try to hit one more here before the holiday. The big holiday is upon us. Yeah, but I hope you have a good weekend. I'll talk to you soon.

Tony: All right, we'll talk to you later.

Speaker 1: Thank you so much for your time here on playing with the tax man with Tony Mauro, Des Moines professional alternative @taxdoctorinc, we'll see you next time.