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thank you all for taking some time this morning this afternoon whichever time zone you're in again my name is james bogart i'm ceo and president of bogart wealth before i get jumping into today's webinar i do have the question and answer boxes open as well as the chat box is open feel free to ask questions throughout the presentation i'm going to do my best while i'm presenting to be able to answer those also we are recording this event so if you'd like a copy of the recording afterwards it's going to be on our website but also we can send it to you directly and uh lastly at the end of this of the event there's going to be a brief anonymous survey we'd love to get some feedback uh we're still we've been doing a lot of these these webinars but always open to feedback always open to new topics etc all right so uh just brief introduction to bogart wealth so bogart wealth is what's called a registered investment advisory firm our core competencies are financial planning investment management tax optimization and tax preparation uh we're managing about 980 million dollars of client assets now it's about 700 households we are true fiduciaries for our clients which means we're legally obligated to put your interest above our own there are 15 of us on our wealth management team and financial planning team four on the tax team we've got three different office locations one in mclean virginia one in houston texas and one in the woodlands texas we've now moved into our new office spaces both in mclean and in the woodlands so finally getting settled it's like moving a house our mission is to help our our clients achieve financial peace of mind by preserving and maximizing intergenerational wealth uh you know and very frequently you hear me say your kids and your parents can be some of the largest variables in anyone's financial plan we've made it part of our firm's culture to give your children access to certified financial planners we find it very important to have an impact as early as we possibly can and it's not uncommon kids don't want to listen to mom and dad so today's talk is specifically talking about social security insights and some planning strategies this is part of a bigger series that we do called our retirement readiness series we do one on the retirement planning timeline we do one on retirement income planning we do one on tax and tax strategies we do one on estate planning state planning strategies one on net unrealized appreciation and post retirement income strategies also one on long-term care long-term care insurance and then one on ross versus traditional 401ks and iras i have been supplementing with with adding some more timely presentations such as the cares act or what's going on with discount rates you know if there's any topic that you'd like to hear us present on either it's myself or one of the other team members we're delighted to add it as an existing webinar or or supplement it in however best fits all right so uh let's go go ahead and dive into today's talk specifically about social security and and uh the agenda today is we're gonna talk about will social security be there for you how much you can expect to receive when should you apply for social security benefits how to maximize those benefits and will social security be enough to live on in retirement and i'd obviously say in the last one the answer is no you know so in order to really dive into social security it's important to understand kind of the gravity or magnitude and why it's important and ultimately kind of objectify some of the different components to where social security will fit into someone's portfolio analysis but you know the fact is is when social security was initially established in 1935 it was never designed to replace 100 of anyone's income but to kind of give you the grasp and scope of what these numbers really look at you know if your monthly benefits two thousand dollars today and you live for another ten years you know that's going to be three hundred and two thousand six hundred and eighty nine dollars you live for twenty years six hundred and sixty six thousand four hundred and fifty six dollars thirty years it's uh 1.141 million and these are just looking at the pure dollar figure today inflated up for that time frame we're using a 2.7 percent cost of living adjustment and the other thing about this is to understand the impact that cost of living adjustments have on your social security benefits for example if your benefit is two thousand dollars today and just using a two point seven percent cola in ten years that equivalent balance is two thousand six hundred and eleven dollars uh in twenty years it's three thousand four hundred and eight dollars and in thirty years it's four thousand four hundred and forty eight dollars those are monthly benefits so you're gonna see the impact the cost of living adjustments have and ultimately that is going to have be part of the conversation around some of the timing components now when we talk about social security a lot of people just think of the retiree benefits and really it's important to us as we're building out a plan associated with timing or optimization around social security we need to look at all of the different components and how it impacts your household directly so for example there's something called spousal benefits we'll talk about that there are children benefits there are survivor benefits there are disability benefits and there's also death benefits but in order to get there we kind of have to answer the first fundamental question of will social security be there for you and i do talk to a lot of households and they say look i want to take it as early as possible because i don't think it's going to be there and and to kind of address that we wanted to first talk about the fact that social security trust fund is actually still in an accumulation phase so as of the end of 2018 it was at 2.895 trillion dollars and as at the end of 2019 it was at 2.897 trillion dollars now as we're looking at this we did see a period of time where that trust fund was depleting and then it started to accumulate again it's been depleting and then somewhat kind of hovering out and staying flat and some of the key dates to think about in terms of where social security is at in terms of its funding and solvency so the costs exclude exceeded income excluding interest for the os oasi account in 2010 and then including disability in 2021 now cost succeeding total income was in 2012 it will be in 2021 and then in 2023 for disability and the the fund is projected to be depleted at the end of 2034 and with disability at the end of 2065 and here's kind of a graphical representation of that so the point is is without any level of reform we are we're projecting that in 2035 social security trust is only going to be able to pay out 83 of its current outstanding obligations so essentially you know translating it to 83 cents of every current dollar that would go out now it is not fair to assume that there's not going to be any level of reform and all we can do is draw on precedent and see what we've done historically you know social security reform is one of those political hot buttons that uh polarizes a voter and and most politicians really don't want to address it until the 11th hour and for for many of our clients you know the last time we saw reform was at a period of time that really they didn't care they were probably my age or younger and social security was just kind of this mythical thing in future might be there but we have seen uh periods in time in history where social security was going to run out and uh we saw some reform there so um one of the first things that we saw changed was an increase in maximum earnings subject to social security tax it went from a hundred percent of the median wage to 250 percent of the median wage so that's the wage base the amount that that is eligible or subject to social security tax and that's been indexing up they also introduce costs of living adjustments you might hear me call them colas a lot today they increase payroll taxes up from six percent to seven point six five percent both on the worker and the employer and then they also raised a full retirement age so originally the age was 65. it got increased to 66 for those born in 1943 to 1954. uh you were 29 to 40 years old at the time of this reform so again didn't really have a meaningful impact and then it got increased to 67 for those who were born 1960 or later which at that time you were would have been 23 or younger they did also add new workers to the system so federal employees hired after 1983 all members of congress federal judges etc and then they made social security benefits partially taxable you know and so with all of this reform even then it wasn't supposed to or intended to keep social security solvent forever the modeling at the time was that social security was going to be solvent for 75 more years well the fact is it hasn't been 75 years and it's currently not insolvent and there are lots of studies being done regarding proposed changes in the future so one of those proposed changes would be increasing the maximum earnings subject to social security tax so currently up to 137 700 of income in 2020 is uh eligible for social security tax and for example if they just remove the cap which is one of the proposals um it would it would resolve 76 of the funding gap if they raised normal retirement age again so currently it's 66 as i mentioned earlier for those born 1943-1954 and it's 67 for those born 1960 or later but just raising it for example to age 69 for those born 2008 or later would fund uh 39 percent of the gap if they lowered benefits to future retirees so escalating benefits based or increases in some of the consumer price prices rather than on wages that's another way of funding the gap now the one area that i think that is potential to impact existing retirees would be if they reduced cost of living adjustments across the board you know for example they could raised uh unchained excuse me change cpi versus raw cpi and if they did that that would eliminate 21 of the funding gap you know the one that i don't list on here that has gets we get a lot of questions on is if there's going to be some type of means testing associated with social security benefits you know there has been some rumblings of that in congress you know but at the end of the day it would take a significant amount of significant amount of legislative reform to get a means testing passed that said anything's possible especially in this environment we do have a tremendous amount of deficit to recover from but i would think that we're going to see some of these reforms far before we would see a means testing passed the point is is that in order to do any level of planning you have to assume that social security will be there at least in some form and what we're finding is for those that are typically now in that category baby boomers are eminently going to be baby boomers more often than not or more most likely we're not going to see significant level of reform that's going to cause them to not be there so we want to transition and talk a little bit about what you can expect to receive and in order to do so you have to look at how much you've earned over your working career uh what your year of birth is and then the age you are at which time you go ahead and apply for benefits and i'll dwell into each of these in a minute so at age 62 this is actually the first time that a workers social security benefits are ever officially calculated everything prior to that is an estimate and at that point they look at your earnings history and they index it up for median wage inflation they're then going to look at the highest 35 years of earnings and and their average they create what's called the aim averaged index monthly earnings that aim is then divided by three bend points to determine what is called the primary insurance amount sometimes you'll hear us use the acronym pia now this is the amount that you're eligible to receive at full retirement age and i'll talk about full retirement age here in another minute now benefits are increased each year by cost of living adjustments based upon currently what is the consumer priced inflation now when we look at kind of replacement and social security at no point in time was ever designed to replace a hundred percent of anyone's income and so for example if someone lives on eleven thousand five hundred and twenty dollars a year social security is designed to replace ninety percent if they live on sixty nine thousand four hundred and twenty dollars it would be forty two percent replacement if you live right at a hundred and thirty seven thousand seven hundred social security will replace twenty seven percent and obviously if you're living on more than that social security will be replacing less of a percentage so theoretically if you live on an unlimited level of income well obviously it's gonna be difficult to do retirement planning but theoretically social security will replace zero percent of your income as well so to kind of drill into this a little bit more uh so let's just say a baby boomer uh born in 1958 turning 62 years old maximum social security again we're going to assume maximum social security earnings for every year since they were 22 years old so that means that they've made at least 137 72020 or at that max wage base every single year since they were 22. so their average index monthly earnings is 10 296 dollars per month now in order to determine their primary insurance amount you then apply these three bend points uh so the first 960 dollars it's ninety percent which would translate to 864 dollars of replacement then the next four thousand eight hundred and twenty five dollars is multiplied by 32 so that would then translate to five hundred and forty four dollars the remaining four thousand eight hundred and seventy one dollars is multiplied by fifteen percent and that would translate to seven hundred thirty dollars and eighty cents we add those together and that's what creates what is called the primary insurance amount three thousand one hundred thirty eight dollars and eighty cents now it does get truncated so that you know ultimately the max benefit that somebody who's maxed out social security wage base since they were 22 years old would be basically three thousand one hundred thirty eight dollars per month once they attained full retirement age and by the way i mentioned these three bend points the 90 the 32 and the 15 basis points they correspond with this replacement ratio so for example i go back here if you're living on nine thousand six hundred dollars a month ninety percent that's what then would translate over into what would be the design replacement ratio um and you can just see the calculations here and how we get to those those max out points now with regards to full retirement age as i already mentioned those born 1943-1954 full retirement age for you is 66 years old if you're born in 1955 at 66 in two months 1956 is 66 and four months and it keeps indexing up each year by two month increments until 1960 or later and at that point if you're born in 1960 or after your full retirement age is going to be 67 years old now you will receive a percentage of your primary insurance amount if you decide to claim early so the earliest you're eligible to claim is age 62. think of it very similar to anyone who's got a pension program if you were to claim prior to the full retirement age then you're actually going to have a discount associated with it so for example if your full retirement age is 66 then the maximum amount that you're going to receive for social security is 75 so it's approximately a 5 per year discount obviously that's a roundation but um if your full retirement age is 67 you're going to receive 70 if you were claiming as early as 62 and obviously at full retirement age of 66 if you claim at 66 you're going to get 100 at full retirement age of 67 if you claim in 67 you're going to get 100 as well now there's another component to social security that is what are called delayed retirement credits so if you make the choice to delay commencing your benefits you can actually get more than the 100 amount so sometimes you'll hear people say well shouldn't i delay until age 70. so for example somebody who is has a full retirement age of 66 if they delay until 70 they're actually going to receive 132 of the overall so it's 8 per year simple interest for someone who's 67 they can delay until 870 and they can get 124 percent obviously if somebody at age 67 whose full retirement age is 67 and they claim at 66 they're not even going to get 100 of their benefit so in order to estimate these you can go right to the social security website social security.gov my statement or just go to socialsecurity.gov and you can click on the estimate your retirement benefits now social security statements are estimates and again as i mentioned earlier 62 is the first time they officially do the calculation for you but it's helpful from a modeling perspective to start looking at where your current situation would be and then start building it out all right so let's start talking a little bit about some of the nuances and the first and probably the biggest one that gets talked about is spousal benefits so spousal benefits is actually where a spouse is entitled to half of the primary workers primary insurance amount if started at full retirement age so just a quick example we'll talk about john and jane so john's primary insurance amount we're going to say is 2 000 jane's would be 800. if jane applies at full retirement age her benefit's actually going to be a thousand dollars which is 50 percent of john's it's more than her own so with spousal benefits there's this concept called deemed filing and it's important to remember that because it does impact some of the potential claiming strategies that i'll talk about a little bit later but with deemed filing it means that if you file for your social security benefits you are actually filing for the best that's available to you and so for example and i'll talk about some of these nuances here but let's say that jane go ahead goes ahead and claims her benefit early so if she was full retirement age of 66 then if she claimed it at 62 that means that her benefit would only be 600 but that discount that she's taking on her own benefit would also impact her spousal benefits so when john files for his the best spousal benefit that jane could get would be 750 so a couple nuances with spousal benefits uh the primary worker must have filed for benefits in order for spousal benefits to apply the spouse post must be at least 62 years old for a reduced benefit or full retirement age for a full benefit and one other thing with spousal benefits is there are no such thing as those eight percent per year delayed retirement credits after full retirement age so for example let's go back to john and jane john can wait and claim his and get the eight percent per year however if he waits jane's not going to be eligible to get her spousal benefit so then ultimately the strategy for her should be she waits takes her 800 and then when john gets goes ahead and claims at age 70 then she can turn hers on and get a thousand because the spousal benefit doesn't get those eight percent per year there's any questions feel free to ask them webinars don't typically get as many questions as the live events do all right so um another thing to talk about is benefits for children so when you qualify for social security benefits your children may also qualify to receive benefits on your record an eligible child can be a biological child adopt a child or a step child a dependent grandchild might also qualify so here's a couple of the rules though the child must be unmarried they must be under the age of 18 or 18 to 19 years old and a full-time student or 18 and older and disabled from and from a disability that started before the age of 22. benefits paid for your child will not decrease your own benefit and you must consider a family max so this is a situation where ultimately social security will look at how many children you have if you start claiming social security and you have several children they do apply a max out on here i had a question come in um can my spouse collect her social security at full retirement age and then switch to a spousal based on my earnings when i claim at 70. i think that was your that this was your example yes that was my example so um important to remember that whole concept of deemed filing though so if if a spouse claims their own benefit before full retirement age whatever discount they have on theirs would ultimately also apply to the discount to their spousal benefit as well so typically a lot of times what we have a conversation on is for a lower earning spouse to go ahead and wait until full retirement age but one thing i will say is is there are about 77 000 timing options when it comes to social security we do rely on calculators to help us with the most optimal from a timing perspective but we do need to look at the ages of both husband and wife and also income history for both husband and wife to see what would be the most optimal for your situation all right recently also they clarified regarding same-sex couples uh same-sex sex couples marriages in all states are recognized for purposes of determining entitlement to social security some non-marital legal relationships such as civil unions and domestic partnerships are recognized as well also recognize same-sex marriages and some non-marital legal relationships established in foreign jurisdictions and it does apply to retirement survivor and disability benefits this was something that wasn't clarified for some time and it's only relatively recently that we've seen some clarification on on same-sex couples also uh divorce spouse couples this is one that comes up a lot too now divorce spouse benefits are the same as spousal benefits if marriage lasted 10 years or more the person receiving divorce spouse benefits currently still unmarried the ex-spouse is at least 62. and if divorce was more than two years ago the ex-spouse does not need to have filed for benefits so a lot of times we get asked the question if i were to get remarried after uh ultimately when i'm looking at potentially claiming divorce spouse benefits well it's important to make sure that the person that you're remarrying has a higher wage history than your previous person so that it doesn't impact your divorce spouse benefits it's a terrible joke typically i get laughter in person but it is true you want to look at earnings history and you want to ultimately see what's going to have the impact a couple nuances with this more than one ex-spouse can receive benefits on the same workers record this is the donald trump example so as long as the marriage did last for over 10 years there can be several ex-spouses benefit to one ex-spouse does not it does not affect those paid to the worker the current spouse or any of the other ex-spouses and again to my point a moment ago if benefits will stop upon remarriage of the spouse collecting benefits so you got to look at it again what the implications are going to be for divorce spouse benefits all right with regards to survivor benefits so survivor benefits are talking about when husband or wife obviously passes away there are some nuances and some complexities here that make this part really confusing but at the age it does depend upon the age at which the defeat deceased spouse originally claimed for their benefit so the original benefit so if he or she claimed for for claim that their benefit before full retirement age the survivor benefit's going to get limited to the higher of the deceased spouse's benefit or 82 and a half percent of the primary insurance amount if they claimed after full retirement age the survivor benefit will also include the delayed retirement credits so that last one is probably the most important point when we talk about social security timing for a household it's important to talk about social security for the entirety of the household inclusive of survivor benefits so a lot of times one of the discussions we want to have is related to the higher earner and potentially having those delayed retirement credits because of these survivorship benefits and specifically if we delay until 70 that survivor benefit will also translate over to the surviving spouse all right so i've got some examples coming up and i think i'll clarify some of these but the other thing that we need to talk about is it so the survivor benefits also going to depend upon the age at which the widow claims the survivor benefit so it's the actual benefit so if he or she claims before full retirement age their survivor benefits going to be a fraction of the original benefit for example if they claim as early as age 60 they can actually only get 71 and a half percent of the full benefit now if he or she claims at full retirement age or later their benefit's actually going to be equal to 100 of the amount inclusive of those delayed retirement credits so here's some examples and i think this will clarify the points so if the spouse dies while receiving benefits the widower may switch to the higher benefits here's just a basic example so now we're going to talk about joe and julie they're married both over full retirement age joe's benefits 2000 julie's benefits 1200. so julie notifies social security and her 1200 benefits is replaced with joe's original 2000. so one thing that i always point out and i typically pull it while i'm doing a live event but it's important to note that while both were alive they were bringing 3 200 in but when joe passed away 1200 of that went away now obviously you have less you know you have less cost for two people however it is a reduction in the income coming into the household and sometimes can create some scenarios where from an early passing we want to make sure that we're modeling that or at least looking at it if longevity is is not necessarily on either husband or wife and making sure that we're not overestimating an income percentage all right so here's an example of if they claimed early so joe and julie again joe's primary insurance amounts 2000 now joe filed for social security at 62. so he took the reduction so he got 75 percent of the benefits so it's 1500 now joe passed away julie's survivor benefit is now going to depend upon what age she is when she claims for social security so um if she decides to wait until 66 or later then her benefit's going to be 82 and a half percent of joe's original uh 2 000 primary insurance amount so she can get a little bit of that accumulation back um and that would take the two thousand to one thousand six hundred and fifty dollars now julie can actually claim as early as age sixty and her benefits actually going to be seventy one and a half percent of the original 2000 so she's going to receive 1 430 all right so that's the early claiming one here's an example of a delayed claiming one so joe and julia are married uh joe's primary insurance amount's 2 000 but joe wants to wait until 70. so he gets 132 of the original 2000 so that's actually going to be 2 640 now joe passes away uh julie again has some options if julie claims her survivor benefit at 60 so we're assuming a big age gap between the two of them her benefit's going to be 71.5 of the 2640. so again it includes those delayed retirement credits so it's now one thousand eight hundred and eighty seven dollars now if julie claims her benefit at full retirement age or later she's gonna get 100 of the whole thing so 2640 and obviously it's going to be indexed up with cost of living adjustments so it's another component that goes into some of this analysis here so rules for survivor benefits first the couple must have been married at least nine months at the date of death except for in the case of an accident a survivor must be at least 60 for a reduced benefit there is an exclusion that if you're disabled in 50 you can claim or full retirement age for the full benefit now the survivor benefit is not available if the widow or widower remarries before the age of 60 or 50 if disabled unless that marriage ends and divorced spouse survivor benefits are available if the marriage lasted at least 10 years so if your ex-husband passed away and you were divorced you're still entitled to as long as the marriage was 10 years or older a lot of nuances here and and this is where we we do believe in integrating it in with the plan and then modeling different scenarios but it's important to look at social security and some of the timing components here all right so let's talk about when to apply and ultimately when to apply is impacted by health status life expectancy need for income whether or not you plan to work and then ultimately looking at survivor needs as well so when we talk about when to apply um and we've already talked about the discount associated with a full retirement case but here we are and then the numbers have changed a little bit in these examples so primary insurance amount is 2 742 and again we're assuming a 2.7 cost of living adjustment so again at age 66 in this example it's full retirement age they'd receive the maximum amount now they are entitled to take it as early as age 62 so that would be 2057. if we assume no cost to living adjustments and if you waited all the way out your benefit would be 3619 so this is 132 percent of the original two 2742 now it's important to think about cost of living adjustments because these are real numbers and by the way i do think inflation will be a real thing in the future but if you look at that discounted benefits you notice again they're the same number but if you factor in inflation just by the cost of living adjustments by delaying it's actually almost a thousand dollars more a month because of those cost of living adjustments now obviously you're giving up uh five years if well excuse me this is 66 or four years of income otherwise however thousand dollars more a month we then need to talk about really the math on the break-evens and then there's another piece to this math also which is the impact on your monthly benefit if you delayed and how long that impact is going to have long-term so for example if you claim at age 62 your your benefit at age 70 is only going to be 2 545 dollars whereas if you wait until 70 and claim it 70 your monthly benefits 4 479 and it really does have a magnifying impact later on in life so for example if you claimed at 62 and you're now 80 your monthly benefits 3 322 if you waited until 70 your monthly benefit is 5 847 so again it comes back to timing components it also comes back to break even ages so one of the things we have to talk about is the breakeven first between 62 and 66 then we have to talk about the breakeven age between 62 and 70 and then 66 and 70. but what we do know is the decision to delay from 62 to 66 i need husband or wife right again this is single benefits but it's still inclusive because of spousal to live to 77 or 78 years old and the decision to wait from 62 until 70 i need one of the two of them to live to 80 to 81 and then the decision to wait from 66 until 70 is 82 to 83 so the point here is is that the earlier you apply your benefits start lower and stays lower for life those cost of living adjustments really really really do magnify the impact of delaying and claiming later and the decision does impact survivor benefits as well so again bringing back those delayed retirement credits delaying benefits could mean more for the surviving spouse and so again we have to look at social security in the entirety of the household not just the benefit for one employer versus the other now single life expectancies versus joint life expectancies so for a couple who are both the age of 65 there's a 50 chance that both will be alive at age 85. now there's a chance that one will live that one of the two of you will live 50 chance they want will live to 92 25 chance that one will live to 96 and a 10 percent chance that one's going to live to age 99 fascinating but again it's important to look at the household in the household history in order to be able to optimize from a timing perspective all right so how to maximize these benefits first off is let's improve your earnings record now this is easier said than done sometimes but the first step is go in and look at your statement make sure that all of the data is accurate so is there any missing years could you potentially improve it by working longer yeah you know sometimes in a 35 35-year earnings history not everybody works 35 years and even having something in there does improve based on a zero or what otherwise would be a zero now let's also consider timing of this so to apply for social security the most optimal timing we need to look at your income needs now both now but also in the future we need to look at projected life expectancy as well as a spouse's life expectancy and there's one other component to this that was related to timing so if you apply for social security before you reach full retirement age and you're still working this is an important one there's actually a reduction of benefits if you make over a certain level so a dollar in benefits are going to be withheld for every two dollars you earn over eighteen thousand two hundred and forty dollars and and obviously that's going to get adjusted back when you hit full retirement age but it's important if you're if you're over the age of 62 and obviously you're going to take a discount for claiming early but then also past that if you're going to get a withholding that's happening as well because you're earning over a certain threshold well that just doesn't make a whole lot of sense and i would say if you've already claimed and decided to go back to work don't let the annual earnings test discourage you from working but it's one of those things we want to be mindful of when we start claiming social security in the first place but to completely avoid the annual earnings test let's wait until full retirement age that's when we should look at claiming in the first case all right um i want to make sure that we're coordinating with spousal benefits now there used to be some really cool strategies for timing and nuances associated with optimization now some of these have changed um the first one is what's called file and suspended a lot of people are familiar with this because it's been in the media a lot or was in the media a lot now filing and suspending means that at full retirement age the higher earning spouse would go ahead and apply for benefit and then immediately suspend it it would allow the lower earning spouse to go ahead and claim for their spousal benefit but allow the higher earning spouse to continue to delay to get those delayed retirement credits and just a quick example of this bob and barbara both 66 bob's primary insurance amounts 2000 barbers is 800. bob wants to delay his benefit until age 70 but barbara wants to file for her spousal benefit well bob files and suspends at 66. barbara then goes ahead and signs up for her she gets her thousand dollars a month and since bob suspended he's able to delay out and get this get his delayed retirement credits now file and suspend cannot be done before full retirement age and based on legislation that happened in 2015 file and suspend is no longer valid for anybody who wasn't full retirement age in 2016 so i'm imagining majority of the folks that are watching this are not in that category but i wanted to make sure that it was addressed so that in case you had that question unfortunately no longer available there's another strategy called claim now claim more later this is one that actually uh was was discontinued in 2019 but it's utilizing what are called restricted applications so at full retirement age a higher earning spouse restricts their application in order to take their spousal benefit and the lower earning spouse would have already gone ahead and claimed theirs and then at 70 the higher earning spouse goes ahead and turns and switches on their own benefits so in this example mike and mary both 66 mike's primary insurance amount is 2 000 mary's is 800. mary files for her benefit at age 66 mike then goes ahead and files for his spousal benefit at the same time and begins collecting 400 a month half of mary's and then at 70 mike switches to his own now higher earning spouses may not do this before they turn full retirement age because if they do it before their full retirement age they are going to have them again that deem filing concept the discount will apply to their own benefit as well and only one spouse may do this you can't do it simultaneously on each other obviously the lower earning spouse would have had to file for their own benefits now spousal benefits can determine which of the various spousal strategies is best for your situation but again anyone who was born 1954 or later this is no longer available for all right i had another question come in i'm turning 62 this year currently my social security statement indicates that i will receive the max possible benefit for retirement age if i stop working today should i expect to still receive the max possible benefit at full retirement age based on prior earnings history now i am going to assume that you already have 35 years of earnings history and you've maxed out all 35 years then the answer is yes but if you don't and we're going to have some zeros that are coming into that 35 then no you would not now the one thing that those statements don't include is a cost of living adjustment between the benefit now and what it would be at your full retirement age which would uh most likely be somewhere around 67. great question all right minimization of taxation of social security benefits now with most people think or are under the misconception that social security is tax-free that's actually not the case if you're over certain income levels now in order to determine this we have to look at what's called your provisional income and this is actually looking at your adjusted gross income plus half of your social security benefit plus any tax exempt interest now if you're married filing jointly and you make under thirty two thousand dollars then you're right social security benefits are not taxable to you but if you make between thirty two and forty four thousand they're they're taxable at fifty percent and if you're over 44 000 your taxable benefits are 85 and what that means is that 85 percent of it is treated as taxable income most households are at that 85 percent category so that's mostly what we assume but again it's something to be mindful of if you're single those thresholds are a little bit lower if you're under twenty five thousand it's zero percent from twenty five to thirty four thousand it's fifty percent over thirty four thousand eighty five percent and if you're married uh filing separately and living with spouse it does not matter 100 percent of it is treated at 85 percent doesn't matter what your income is all right some ways to minimize taxes on social security benefits and so one of the options is look at other income with tax advantaged investments but not municipal bonds anticipate future required minimum distributions which will require minimum distributions for anybody who doesn't know is when you turn 72 you're required to start taking a perce percentage of your retirement accounts out and for a lot of folks it does put them in a higher tax bracket so potentially consider drawing down iras before 72 and along those lines one of the strategies that we're advocating for is converting traditional iras to roths especially once you've retired and if you have a period of time of being in lower tax brackets that makes a lot of sense if you have questions on those points feel free to watch my roth conversion webinars we've got a couple of them and then the other is consider delaying social security benefits reduces the number of years benefits are subject to tax obviously you also have less of the income coming in this one's my favorite but uh reduce your expenses have a simpler lifestyle pay down debt and then uh obviously you want to be sure that we're managing taxes throughout retirement so we do think it's important to coordinate social security with in conjunction with your overall plan and as i mentioned a little bit earlier you know social security personnel they can help you with generating those estimates then tell you the amount that you're entitled to right now but what they can't do is help with projecting future benefits through any type of scenario planning or help with any of the strategies for for claiming and different filing components and then to come back to the that question of will social security be enough to live on a retirement probably not for most people i'd say definitely not but mostly it was never designed to be that way and depending upon the level of lifestyle you want i would say it's it's safe to assume social security is is only going to be a piece of the overall strategy so we want to make sure that we're considering it in context of any pension income you have iras and 401ks any of those required minimum distributions at 72 your overall investment portfolio and any work situation and and one of the things that that i think bogar wealth is very unique on is the integration from the tax perspective and ultimately the reason is is the goal and objectives to keep more money in your pocket not only now but also in the future and we want to look at incorporating all of these different asset components because they can have a material implication especially in later years so if you have any questions we're here to help whether it's when to file for social security we're delighted part of our planning strategies are to go through and build in social security components you know what if i want to keep working what if i've already applied and what that impact would have on the benefits how much your benefits are going to be how to coordinate spousal benefits what's the best long-term strategy for your situation and ultimately what to do next you know the one of the calls to action from any of the events that we do is to actually sit down and run your numbers it's absolutely no cost absolutely no obligation great way to establish a baseline where you're at many of my group is going to be following up off the event and if you have any questions you'd like to take advantage of that please feel free to reach out and and let us know if you have any questions oh i did have a question come in an earlier slide uh to show total accumulation of social security benefits over 10 20 and 30 years uses coal of 2.7 percent 2020 is only at 1.6 estimates under the trustees report out to 2029 show not higher than 2.4 what have you heard about a no cola for 2021 under the current environment and future and future year projections yeah so um i would actually make an argument that we are going to see a no-cola environment based upon the fact that we are seeing wage as well as price inflation right now uh excuse me deflation right now based upon the current economic environment that we're in you know when we use 2.7 it's looking at a 40-year history which does include some years that were a little bit higher um from a modeling perspective in the plans we're using two and a half uh but you know again for the illustrations here it was just using the historical 40-year an off-topic question what are you hearing about taxing unrealized gains for investments if we end up with all branches being democratic particularly to offset some of the added debt um you know i i would say that it i i could paint the picture of no matter who wins uh the election in november that we're we're most likely going to be embracing some level of higher tax structure now uh one of the proposals uh for from from biden has been that he would eliminate uh long-term capital gains rates you know the the thing is is we have to make decisions in the environment that we're in right now it's very difficult to make decisions under speculation or rumor and one of the things that i would say is you know you cannot print the level of debt that we have printed in the last several months in addition to the deficits that we've been running for years past and not pay it back and and so when it comes back to comes down to paying debt back it's either you grow you inflate or you tax and i think that realistically growth is is going to be impeded for some time might be six 12 18 months and i do think that the higher probability of of taxation and inflation are going to be the avenues that we go in terms of seeing some of the the debt that we've accumulated having to be paid back um let's see another question come in when you mention how long it takes to break even should you decide to delay taking social security does it take into account interest you would lose on funds you have to take out a savings to to place the social security for the time you are delaying taking social security yes it does absolutely does um we're we're using a real rate of return of three percent on that analysis now one thing that i i typically have from a discussion point with the whole concept of delaying and timing of social security really does come down to treating social security as an investment and and let's just say for example you're so your full retirement age is 67 you could take it as early as 62 but you're only going to get 70 of the benefits it's approximately a 5 per year accumulation and so if you look at that from an accumulation perspective and then you also throw cost of living adjustments on top of that i do think that historically it's fair to assume you're still going to see colas yes we might have a year in here that's not going to have them but ultimately if you look at the average or and even obviously that 40-year average a little bit higher if we use a 20-year average we're closer to 2.1 but at 2.1 with that 5 reduction of the discount that's almost a 7.1 percent guaranteed rate of return you know there's not a whole lot of investment vehicles that can guarantee 7.1 percent and same logic applies from from full retirement age and out until 70 you're gonna get an eight percent per year delayed retirement credit plus the the cost of living adjustment on top that's almost 10 percent now that said that's only one part of the com of the overall discussion because the concept of delaying yes it might make sense but there are also lots of scenarios where i look at spousal benefits coming in in conjunction with the timing off of of the higher income earner that could mean more money to the household net present than the decision for the higher earner to delay and then you know ultimately if that delays the lower earner from being able to claim any level of spousal benefits so again every household's going to be a little bit different and we have to run some calculations to to see what makes the most sense but uh in terms of the break-even analysis and back to that that original question you know we also have to look at what are the assets that a household has and what would be the diminishment of those assets relative to time the decision to delay taking social security because it's not uncommon when we build out a plan that will see someone's rate of return or growth not necessarily be more of an upward trajectory it might be flatter or even a downtrend because we're making the decision to delay taking social security and then ultimately once we start taking social security is where we start to see material accumulation again so again everyone's situation is going gonna be a little bit different there is also a component of how much they're spending that we know what their effect of withdrawal rate is relative to their portfolio base and all of that needs to be considered when we're having the discussion around timing for social security and i would even actually also even throw taxes in there especially if you're in the situation where we're really trying to mitigate future rmds and we really want to go after roth conversion strategies well i mean if we bring in social security that's just increasing the baseline level of income that's going to preclude some of the amount that we're able to do from a conversion perspective again it's just one other consideration to bring into the fold so i did go a little longer than i wanted to i apologize if i missed any questions feel free my email's up on the screen again there's going to be a short survey at the end love to get feedback what can we do better with these i do envision that the these virtual webinars are here to stay for a while not sure what i'm going to get back to doing live events but it could be a little bit of time still but most importantly stay healthy stay well we are here if you have any questions or you need anything please feel free to reach out thank you very much take care