What New Social Security Laws Mean For You – Episode 064

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler, and No BS Money Guy, Todd Strobel. Hey everybody, welcome to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel, and we’ve got a special treat for you today. We actually have one of our prosperity economics advisors that are going to be talking with us today. Her name is Gina Wells, she’s president of Advanced Capital Group. And Gina, I know you’ve been in the business for a long time, but maybe just give us a little bit of information on yourself so our listeners can get to know you.

[00:45] Certainly. My office is in Fenton, Michigan and I’ve been in the prosperity economics advising arena for over 20 years prior to that. I worked in the estate planning arena as a paralegal. And so, I like to help people focus on benefits, maximizing their benefits, minimizing their risks and making sure that they keep as much money as they can in their pockets and out of other individuals’ pockets who don’t deserve to be a part of their overall estate planning. Super. Well, I can tell you folks that I’ve known Gina for a few years and Gina really Social Security, how to maximize Social Security, and more importantly, she understands the new law changes that have gone into effect that I must admit that I did not fully understand

[01:35] myself and probably still don’t. So if you need an expert and you’re planning on maximizing your retirement, certainly would invite you to give Gina’s office a call. She does serve the whole country out of Michigan there. And Gina, what’s a good phone number for them if they want to try to get ahold of you? Super. Well, Gina, let’s just kind of jump into it and get the information. There’s some new laws that have recently changed that aren’t even yet into effect that really have had a much broader impact than I expected. So why don’t you just kind of tell us what’s going on out there? Which included significant changes to the Social Security rules. And one of those rules affected planning strategy used for many individuals as they

[02:32] started to reach their full retirement age. Now, full retirement age is different for different individuals. For example, my full retirement age is 66 and eight months. People who were born in different years have different months. And that full retirement age says here is the maximum amount that we’re going to base your Social Security off of your earnings record. Now, one of the things recently, if any of you have received your most recent earnings record from Social Security, they have just started mailing them out again. But for those of you who haven’t received your Social Security statement in some time, I would suggest you do visit www.socialsecurity.gov forward slash my account and enroll to get

[03:24] your estimated benefits right off the website. What is unique about the six page report that you’re going to receive is there aren’t very many promises there with regard to what you will specifically receive other than an estimate based on your earnings record. So just so our listeners understand, there’s a few different dates that people have to look at. One is the minimum age that you can receive Social Security, correct? Right. And at that point, you get a which would be the lowest possible amount. And it does come with some restrictions, correct? Right. Well, the lowest possible amount, we won’t get into all of that in the report that you can order from my office. It’ll show for each individual specifically.

[04:09] But it’s a percentage of reduction based on how many months you take it prior to your full retirement age. Once you get to your full retirement age, you can continue to postpone taking your Social Security and wait until your full retirement age of age 70, at which time between your full retirement age and age 70, your overall benefit is supposed to grow at 8% per year. Now, whether or not that will continue to happen in the future, again, with these changes that have just been made, no one knows for sure. But the idea behind Social Security wasn’t so much to be the main retirement income. It was to be a supplement of the retirement income. And for those who did save and could use some of these strategies to maximize and

[05:02] keep their other money working and inside of their families, those are now kind of taken away. Social Security is still there. But the file and suspend rules and the restricted application rules will be taken away after May 1st of 2016. And just so our listeners understand, why don’t you explain what a file and suspend rule is? Right. At your full retirement age or older, you can file and suspend your Social Security benefits by electing to say that you are full retirement age, but then suspending your benefits and allowing a spouse or a child to collect benefits based on your earnings record while your own benefit is suspended. Because your benefit is suspended, your benefit grows at that 8% level until

[05:55] age 70 when you choose to take it. So if a spouse is four years younger, let’s say that I’m 66 years old and my spouse is 62 years old, we have a four year difference. And it would make sense for us to file and suspend where I’m continuing to work and my spouse is, my spouse’s, the spousal benefit, half of my benefit for my spouse is more than their own age 62 benefit. They would elect, we would want to elect that file and suspend. Thereby, from 62 to 66, my spouse is collecting off my record. When my spouse reaches age 66, they can start taking at 66 or continue to defer until age 70. When I reach age 70, I will be earning the most that I could off of Social Security benefits and thereby maximizing my overall Social Security

[06:55] monthly income. And that’s very important because as we move out into time, there are all sorts of tax issues. What is the market going to do with money that has been saved? Do I have pre-tax savings, after-tax savings? Am I going to continue to work? What assets do you use to supplement retirement? What are my medical expenses going to be? Do I have long-term care? All of these things come into play when you’re making a decision on when to take Social Security. So by them, by Congress actually eliminating that particular file and suspend strategy, now someone like myself, which I am not age 66 yet, but someone like myself who wanted to try to plan that way, now totally has been taken away from me.

[07:46] So I guess the people that, in my opinion, it looks like that are going to be most harmed by this, are those people who are actively saving separately for retirement that are trying to use Social Security the way it was intended, will probably feel the most impact of this? Right, or they won’t feel the impact, right? What you thought to be true about Social Security is turning out right now not to be true. So actually if we look for a silver lining, now is the time to start saving a little bit more because you may not get that small of benefit. Also Social Security, part of the reason I think that they’ve passed this inside of the budget, they’re trying to find ways to get more benefit, to make the Social Security fund last longer.

[08:34] And for the small amount of individuals who can actually use these strategies, by taking that away they’re bringing quite a bit of money back to them. Enough money, I guess, that they’ve brought back to the table that they can say that they’ve done something with the Social Security. But it’s not going to be a cure for the overall Social Security problems with regard to funding and not enough people working and more people claiming benefits off of the overall amount that we put into that. I mean think for a minute, each of us contribute 7.6% and then our employers contribute the other portion of that. And if we make it to collect from Social Security, great. If we don’t make it and we’re not married or we don’t have minor

[09:25] children at the time of our death, then no one receives the monies that we contribute into the fund during our lifetime. There are pros and cons to Social Security. We need to understand it, but it is not the end all be all of your overall planning or should not be, but it definitely can be a nice icing on the cake if planned correctly. Well, and just from an economic standpoint, we have watched the baby boomers as they have aged, have pretty much changed the rules at every point in their life. And now that those people are coming of retirement age, I would think that we haven’t seen the end of these changes and that actively planning for ourselves is going to continue to be more and more important.

[10:16] Do you have an opinion on that? That’s a definite. I mean, we should always be planning for ourselves. The more that we can be self-sufficient, the better off we will be when we’re not dependent upon others to maintain the type of lifestyle that we want to lead. With regard to the Social Security programs or any other programs that are out there funded by the government, the only way they can be funded is by taxpayer dollars. And so we have to keep an eye on how much of our tax dollars are actually going out there and what are we getting back in return for them. I don’t think Social Security is going to change that drastically other than to possibly increase the amount of tax that we pay. And if that’s the case, it’s going to make it only harder for

[10:57] people to save on their own. Super. And the point that we really want to bring home to our listeners today is that Gina has been more than generous enough to actually create a customized report for each of you. The phone number is again is 810-579-5808 directly into her office. And just kind of explain what this report would do for one of our listeners. Great. I’m glad that you said that. You do need your overall Social Security report because, as again I said earlier, it is based off your earnings record. So it’s not the same. Your report is not going to be the same as every other person’s report out there. And so the first thing that you’re going to need in your hands is that Social Security most recent report to show your

[11:43] earnings reports. And then we enter those numbers in and we talk about, number one, longevity. How long do you think that you’re going to live? Number two, how many assets do you have? How many assets do you have that you are counting on in retirement? Number three, how old are your children? Could they possibly receive benefits if you happen to retire and your children are under the age of 18 and qualify under Social Security laws to receive some of those benefits? So there will be questions that will be asked back and forth to create this report. But basically it gives you an idea of where you stand today. And, you know, as we say in the prosperity economics movement, we need to measure every year what we’re doing

[12:27] and where we’re at and what are our positive things looking forward and what are negative things looking forward in the future that will affect our overall lifestyle and that we may need to be cognizant of today. And the sooner we’re cognizant of them, the better off we’re going to be tomorrow. And Gina, of course, we do get questions in from our listeners from time to time. And you mentioned that under the Social Security report that you receive that there really aren’t any guarantees. Can you explain what you mean by that? Yeah. You know, these are estimates based on what the current laws are today. So this bipartisan Budget Act of 2015, one of the things is they’re grandfathering people who are

[13:09] already been in there. But people born on or before May 1st of 1950 will actually be the least affected by the bill. People born between May 2nd, 1950 and January 1st, 1954 will see some mixed effects on the new rules and their optimal benefits filing strategy. People born on or after January 2nd, 1954, which includes myself, will be the most affected in terms of the effects of filing and suspending as well as not being able to file a restricted application for either just a spousal benefit or just a retirement benefit even after full retirement age. So those auxiliary benefits aren’t going to be there. They will not receive auxiliary benefits during any kind of a suspension. They can still suspend and not take it, H-66

[13:57] and wait until H-70, if in fact, you know, the overall increase to H-70 is still 8% out into the future. I would really hate to say how many people fully understand the impact of these changes. I think some of these were just kind of slid under in a bunch of, you know, wording and things that we really didn’t pay attention to. And those of us like me in the industry aren’t paying attention. Those affected probably have even a lesser chance. So I think it’s important, first of all, that you fully understand them, which you must find somebody like Gina, a prosperity economics advisor, to help with that. And then second of all, make sure that you do have an active strategy going forward that gives you options.

[14:45] For sure. For sure. That’s what it’s all about. We need to control our own destinies and not be in the whim of other entities that we’ll try to take away from those things that we can plan ourselves to do much better and more efficient. Super. Well, once again, this is No BS Money Guy Todd Strobel for the Prosperity Podcast. Special thanks to Gina Wells, who is the president of Advanced Capital Group. Once again, her phone number is 810-579-5808. We urge you to contact her and get a hold of that six page report that she offers you that will show you what your options are now so that you don’t end up being caught in a mess later. Anything you want to say to our listeners before we wrap up, Gina?

[15:32] No, I’d just love to help them. If they’d like to give us a call, we’d love to hear from them. And thank you for having me on today, Todd. Thanks so much. Take care, everybody. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.