Growing Your Wealth with Brian Evans

Welcome to Growing your wealth with Brian Evans and Jeff shade. A show this simplifies the complexities of investments, taxes, retirement and more so you can discover how to better sustain yourself and your wealth for years to come. Brian is a CPA with 30 years experience and a financial advisor which brings a unique perspective to the financial world. This show is brought to you by Madrona financial and CPAs. Home of the routed wealth plan. One a retirement plan designed to last 30 plus years, go to Madrona financial.com. And click get started to see what the routed wealth plan can do for you. And now, here are your hosts Brian Evans and Jeff shade. Thank you so much. Welcome to Growing your wealth with Brian Evans, the show that gives you the straight talk and honest answers you need to help you sustain yourself and your wealth for 30 plus years. On today's show, we're going to be discussing what you need to know about Social Security with our guest, Hamilton mirallas. My name is Jeff shade. And as always, I'm just here to ask the questions. But of course, the words of wisdom and solid advice come from Brian Evans, CEO and President of Madrona financial and CPAs. Brian, how're you doing today? Doing pretty good. But today, I'm gonna do your job. Yeah, absolutely. I was like these shows. And I always say that because you know, we've been doing the show for eight and a half years. But still, Brian, I think your depth of knowledge and just being in your presence sort of makes me nervous once in a while. So I'm going to take a little bit of a break and let you talk about Social Security. It is one of the main cornerstones for a lot of people in terms of their income in retirement. And it depends on how well you've done in retirement as to what percentage that is. But still people have a lot of questions about Social Security. So Brandon, we turn it over to you and let you introduce our guest. And I'll just sit back and listen like our audience. Yeah. Thanks, Jeff. Yeah, so security, it's not something I've been covering a whole lot on the show over the years. You know, I, I know I'm on the radio. And I think that new topics and stuff you haven't heard about is more interesting radio than talking to say income tax law or Social Security. However, I'm told that when I talk about income, taxes, Social Security, that's when we get the most responses. So I guess you gotta listen to my audience and say, Alright, maybe I should talk about that stuff more. And, and both of those topics can be quite interesting, actually, when you start peeling back the onion, which we're going to do today, peel back the onion on Social Security with an expert on that. So I'm excited about today's show, it's something we really haven't done in our eight and a half years on air to this point is do a full on show on Social Security. So Hamilton Morales is our guest today from financial independence group. And they're one of my partners, they helped me with all things annuity, Universal Life with business coaching. I'm one of their coaches for other advisors. So security solutions on and on and on, or they get tons of resources. So we're we partner up on that, and welcome to the show, Hamilton. And maybe you could spend a little time and introduce yourself. Tell us a little bit about you your background and go from there. Absolutely. Thanks for having me on Brian. And yes, for your listeners. My name is Hamilton Morales, and I've been in the financial industry since November of 2001. I've been doing specifically social security things, if you will, for last 10 years. And so my main goal here is to provide help to financial advisors across the country. And I do that in a lot of various different ways. So one is via phone call, if there are questions that an A financial advisor has, I also do security seminars, I do radio shows, like we're doing right now, podcasts, YouTube videos, things of that nature. So try to keep me busy, as much as possible. But what I am finding out is this is very, very important information that quite honestly, people just don't really understand. And there are a lot of misconceptions out there. And some of that is just because of the information they're getting maybe from friends, colleagues, cocktail parties, whatever. But other misconceptions are getting really and I know that sounds bad, but they're getting it from the Social Security ministration when they call the Social Security offices, they're not always getting the right answers. And so that's kind of scary as well. It's funny you say that, because that does not surprise me. They've done studies and when you call the IRS and ask him tax questions, you're better off yeah, I think about old Seinfeld episodes when George would do opposite George and whenever he thought he should? The answer was he decided it was the opposite of that. And his life changed for the better. It's the same thing with the IRS. I think they answered wrong 60% of the time, so whatever they say just do the opposite. And you'll be more likely to get the right answer. So what you're saying is Social Security Administration is kind of somewhat in the same boat perhaps. Well, you know, it's unfortunate. It is a government agency. And just like with a lot of government agencies out there, they're understaffed, you've got people that are retiring, and then they're not replacing those people, and are very few of them. And then those people that are brand new are the ones answering the phones and they just don't have the knowledge and literally I've had people that I have talked to that have called on the same question back to back to back to back four times and gotten three different answers. And so it is kind of scary.
And so where do people go? Where do they go to get those answers? Here we are, we've got people that are getting ready to retire. They're trying to do their planning, they're trying to do what they need to do to make sure they have a good plan for when they retire. Social Security is a big piece of that puzzle in their income planning. And they're trying to get some answers. And every time they call, it's something different. How are these people supposed to put these plants together? It's very difficult. And so that's kind of where I come in as a conduit for you for financial advisors out there across the country, to make sure that they have the correct information. So they can help these folks put these plans together, so they can have confidence when they retire. Yeah. And you know, back to my example, the IRS, I mean, I remember I would call them and I need to find out if something's taxable. And they basically say, yes, it's taxable.
I haven't even asked you the question yet, you know, because they gotta, you know, they have an incentive to create more tax revenue. And so that's in there too. And, and the thing about Social Security, you can obviously Google has lots of answers out there, we've got Social Security optimization programs, all this data. But spreadsheets and your lifestyle aren't always the same, you know, you don't come up with the same conclusion. Sometimes, the same situation be different for two different people, just like in investing. Sometimes an annuity is a great solution for somebody in situation. And sometimes it's just not even though on paper, they look like the same person, you got same net worth, you're the same age, but you know, this person has longevity, they should have an annuity and they want security. So the person's a cowboy, and they don't like anything safe, and they don't think they're gonna live as long. So they should be in the market or something else, you know, so you can come up with different answers with the same set of circumstances, I'm sure. Well, and you're absolutely right. And you know, whether you're talking about somebody taking the benefit early, taking it at full retirement age taking age 70, you know, it really comes down to the math, right? And when are you going to retire? What other types of income do you have coming in? What type of savings Do you have? What kind of spending Are you going to have? Do you have beneficiaries? Do you have a spouse, all these things come into play and trying to decide when to take Social Security? And to say that everybody fits in one little box is just not right? It just absolutely is not? Right. And that's why I tell everybody, if you don't have an income plan, just see how this is going to affect you. You're really just rolling the dice and hoping that you roll the right numbers. While you're spot on there. That's a great segue, my book The Seven steps to successful retirement. The first step is the lifestyle plan, which is essentially the income plan. That is the most critical thing for most people that I talked to, it's like, well, what am I gonna live on what's coming in every month? What's my mailbox money as we, as I term it, for them mailbox money being money I didn't have last month that I have this month, and that includes social security, your pension, rental income, annuity, income, interest, income, new money is coming in, that I plan on living on because that for most retirees is the most important thing. And so that's why this is a key component, a cornerstone of the lifestyle plan, the cash flow plan for people in retirement well, and the other thing you got to think about too, as well, if you've got somebody that decides they want to retire at 62, or 65, are 67. And they want to wait until 70. To turn on their social security. Well, where's that income going to come from? It doesn't just come out of thin air, it's got to come from somewhere else. And again, that's where the different situations different individuals, how they're set up comes into play, they may have rental income coming in Great, that's where the income is going to come from, maybe they have a pension, or you know, maybe they have some other forms of income that can supplement until that Social Security kicks in. Well, there are people out there that don't have those things. So where's that income going to come from? Yes, it's great to have a higher social security benefit. I think we all would love to have that. But how do you get there? Either you're going to work till 70, then turn it on? Or if you retire early, that incomes gotta come from somewhere. And so again, how does that affect you long term, making that type of a decision in your income plan, and you've got to be able to see the numbers to make a good solid decision as it relates to to sell security. And those numbers basically, as another segue there for us is, I don't know why anybody doesn't want to get a full on financial plan that integrates all aspects of their financial life. And we provide that to our new clients. And one of the key components of that, which is the hardest one to figure out is how much does it cost to be you how much do you spend so again, here's another example. I can talk to two people, they get the same everything, except for one thing one spends 40 grand a year to be them and one spends 140 grand a year and so we get to come up with a different plan. And it's very common, you know, and you know, sometimes you can do an analysis and on paper you go well, you have longevity or married you know, you're you're older than your spouse or the higher earner everything on this paper says you should wait today
So security in a Oh, that sounds good. But I remember eating Top Ramen rice and beans in college. What am I supposed to do for the next eight years, from 62 to 70? Because I think I'm gonna have to do that, again, if I don't have that coming in like, Hmm, good point, maybe you should take it early. And even though my spreadsheet says don't and so there are non financial considerations, as you just mentioned, to that, that we have to analyze. And that's why the good things about when's the best time to start financial planning yesterday, what's the second best today? You know, if we start now, then maybe you'll have things in place to say like often I might use an annuity strategy to say, look, we're going to have this annuity strategy paying you cash flow in your 60s so that you can wait on your Social Security until you're 70. Or another one where we might take Social Security early by deferred annuity that doesn't start until you're 70. And then that will be your rate, essentially, your supplemental retirement pension supplement. Yes. And so using annuities is a great complement sometimes. So that's part of the planning to it. That probably gets overlooked by most people. I look up beyond Google and Google all these topics on Social Security, but knows Google searches are going to integrate an annuity strategy overlapping the social security strategy to solve the cash flow plan in retirement. Yeah. And you know, when you when you're also married, you've got to look at okay, do they both qualify for Social Security? does one qualify for their social security and a spousal benefit? On top of that? What happens if one of them passes away? You know, I heard you have a 99.9% chance of dying. I mean, it's a statistical fact. Right? You might be low on that. But we'll keep going. I'm I might be I might be, you know, But all joking aside, somebody's gonna die. And so how does that work? The surviving spouse how much is a good and you know, something that I'm seeing a lot of these days is that grandma and grandpa are now becoming mom and dad again. Now I'm not talking about like Abraham and Sarah type of a deal. Here, I'm talking about having to take care of their grandkids, maybe because of a tragedy, maybe because their mom and dad, for whatever reason can't take care of them. I am seeing more and more grandmothers and grandfathers taking care of their grandkids now. And when I say taking care of them, I'm talking about just watching him during the day, I'm talking full on they live with them, they're providing for all their needs. And a lot of these people don't know that those children can now get a children's benefit until they graduate from high school. Yeah, let's talk about that more. That is something we brought up on the radio show. I've talked about the sandwich generation, that a lot of people, maybe my age age, are helping out their parents, they're also helping out their kids while they're taking care of themselves. Now you bring up an interesting segue there is a might also be, you know, around double sided piece of bread here, you know, your three piece of bread. Yeah, we got to triple decker, you're taking care of grandkids too. So tell us more about that. Yeah, actually, I can give you an illustration are actually good friend of mine that happened to when he was 60. He and his wife, you know, kids are out of the house, they no longer live there. And he's got a son and his son got married. And circumstances, neither one of them were capable of taking care of a child. But lo and behold, they had a child and they couldn't take care of them. And so you know, there's only a couple of different options that you have at that point in time. And so they decided that they would, in this case, adopt the child. Now you don't have to adopt the child. But in this case, they did. And so at 60 years old, here he is, he's dad again, and he's raising this child. Well, two years later, he decides, I'm going to turn on my social security benefits, because I know that when I do that my now daughter, granddaughter, and our daughter can take a children's benefit. And she's going to be able to get half of my full retirement age benefit amount, until she graduates from high school. Now, let's fast forward this. She is now 1314. She's right around my youngest son's age. And she's been getting these monthly deposits in every month, every year. And she will continue to do that until she graduates from high school. And that money can be used for anything they can use be used for daily living this particular gentleman, they're taking that money, and they're putting it aside and it's going towards college. And so, you know, he found out about it. But I know there are a lot of people out there that don't know about it. So my goal is to educate people and let them know that that's available. That's a great example of things that we may not always think about when we're thinking about security and stuff around that. And just to recap, we're here with Hamilton mirallas security expert talking about security on the show today. And Jeff I imagine some listeners, you know, there's probably some listeners already that we pique their interest and they want follow up with some questions for us. That's exactly right, Brian, if you do have questions about when to take socialist
Here do you want your Social Security benefits optimized? You can get the answers to your questions by calling 833-673-7373 right now. So you can request your Madrona 30 Point analysis that would include answering the question about when it is right for you to take Social Security benefits. Now, you must have at least $500,000 of investable assets to qualify for the Madrona 30 Point analysis. But those who do qualify will be able to enjoy this conversational analysis intended to dynamically cover a wide range of topics based on your unique situation so that you can proactively adjust your financial plan and strategy to help avoid major potential problems. And as a bonus, we'll send you out Brian's book seven steps to a successful retirement. Once again, that number is 833-673-7373. It's not going to cost you a dime. But this 30 Point analysis could be just what you need to help uncover several blind spots while improving your overall quality of life for the next 30 plus years. Once again, 833-673-7373 That number again, 833-673-7373. Brian, let's continue our conversation with Hamilton about Social Security. Yeah, thanks, Jeff. I find it interesting when you're talking about security, how it fits into the financial plan. And again, I was just talking to somebody the other day about how we do financial plans how we integrate the cash flow for the rest of your life, we'll figure out how much it costs to be you. That's that's probably the hardest one to figure out potential taxes, potential future Social Security increases inflation increases in spending, putting in sources and seeing what your investment accounts do future events that maybe even a potential inheritance in the future or residence sale and reinvestments or business sale or whatever it is. So I was talking to this person they're going, why wouldn't everybody need to have one of those so they could see how much they can spend in retirement. I'm like, thank you. I don't know why everybody wouldn't want that. But this is a critical piece of that. And then you know, this one, you know, what is his plan look like? If I take it at 62? What does it look like at 67? What about 70? How do I work around that with my other things, and I'm working on in that plan. And so you know, this is a critical first step I mentioned, it's cashflow, the lifestyle, part of the seven steps. There's also one of the steps is your security plan. And it it also kind of delves into that because if we have a let's say that typical, maybe the the male is older than his wife, his life expectancy, maybe they agree is less than hers, and his income was much higher, you know, as part of that plan, it might be to wait until age 70. So that she can take his higher amount some day as a security precaution. I mean, sure they'd like more money in their 60s who wouldn't. But as a security components, if they have income from other sources, maybe they're able to do that, given her that peace of mind knowing well, if he passes away, yeah, I'm gonna take a cut in my income, but it's not going to be as dramatic as it could have been. Well, not only that, but if she does lose her spouse, early in her 60s, let's say she is 60 years old and spouse passes away, she's eligible for the widows benefit, which is the higher of the two benefits. But unfortunately, if she takes it at that time, she's got to worry about two things. Number one, she's under full retirement age, which means that widows benefit will be reduced. In fact, at age 60, she's only going to get 71 and a half percent of the widows benefit. Number two, if she decides to continue to work while taking the widows benefit. While she's under full retirement age, she's going to be subject to the earnings tests and the earnings test as you can earn up to $21,240. And when I say earn, I'm talking about wages, not talking about pensions, or withdrawals from your IRA or anything like that purely wages. But if you make over 21,002 40, for every $2, you go over that in wages, they're going to withhold $1 of the benefit. And so you've got to keep those things in mind. And you got to have a plan. And so again, would you rather have 71 and a half percent of the widows benefit? Or would you rather have 100? Well, how do I get 100%? Well, you have to wait until your full retirement age before you take it. Well, how you going to bridge that gap? How are you going to get from 60 to 66 or 60 to 67? Or whatever your full retirement age is? How you going to get there, you just lost an income source. How are you going to get there? Well, I think that's where you guys come into play with that and you bridge that gap to allow them to be able to take that widows benefit at their full retirement age and not have to take a cut and that benefit. That is something we do a lot of probably the primary focus. I mean, when as I tell people there's five objectives for your investments, potential objectives during your 40s and so forth, you know, maybe an order of importance, growth, growth of your investments really important your 30s 40s and 50s Not so much cash flow from those investments because you're working you're you're earning wages and so forth and you're putting money away in fact, look
Quiddity generally, we have adequate liquidity during those years because we're working again, we're bringing in money security. Well, security is not as important to a 3040 year old as it is to 70 year old or 60 year old. And then finally tax savings well, and when you're working, there's not a lot of creative tax stuff you can do you get your wages come in, you get tax on period is not till you've had investments that have deferred growth, income or potential step up and basis, or RMD calculation and all this other stuff that can happen later in life, timing of capital gains, and so forth different rates or different things from your investments, you generally don't have those aspects in your 30s and 40s. So as we do our financial planning, we're always looking for other areas to supplement cash flow, I love to see a financial plan where I look at it, we did it, maybe we placed our assets five years ago, we pull up the plan and and I see all the different columns of cash flow coming in. And one of them's not wages, but it's fun annuities, lifetime, increasing lifetime cash flow annuities, increasing lifetime cash flow security analysis, rents from real estate investment trusts private non traded REITs equity or debt REITs rents from Delaware statutory trust from 1031 exchanges or active real estate that they have in their portfolio, less than less I'm seeing pensions, but you know, certainly government employees and so forth, state and local, they have pensions, a lot of my older clients have the bowling pension, which is a flat payout, typically, which doesn't account for inflation, which is pretty important. So we factor all this stuff in so that we don't have 100% reliance on Social Security, because frankly, maybe know the numbers Hamilton on Social Security benefits, but it generally isn't enough to live the lifestyle my clients would want to live. Well, if you hit full retirement age this year. If this is the year, you hit full retirement age, and you maxed out your highest 35 years. That's how they do the calculation for your full retirement age benefit amount. If you maxed out your highest 35 years and you're turning full retirement age this year, the maximum Social Security that you would receive for this year is $3,627 a month. So $3,627 a month would be your Social Security benefit. Well, hello,
you know, is that going to be enough to take care of what you want to do in retirement? And chances are no now again, somebody that's in that position that maxed out their highest 35 years, chances are they made some good decisions, hopefully, and have other retirement accounts set aside for retirement and those types of things. But the vast majority of people out there, in fact, I think the statistics are might be a little off in my percentage, but it's right around 40% of people have retired that Social Security is the majority of their retirement income, the majority do audits of low income elderly housing, when I was working as a CPA and and that, you know, across the board that that was their only place that they received any income at all. And in in your example of maxing out your social security with 3600 a month be enough why pretty much guarantee anybody that Max their Social Security for 35 years, was living on a lot more than
you know, and hopefully right that they actually did good investing. And they have alternative sources of income too. But yeah, when I meet with clients, generally they have pretty good net worths and, and they have made a lot of good decisions and have paid a lot in and and yeah, so security's higher than than the average, I think the average is right around 1500 For most people, because they didn't max out, but they have made a lot of good decisions and so forth. And they're able to have a strategy instead of just being forced to take it at the earliest moment that they can, which is probably what most people do out there. And so that is something that I see with my clients, my clients tend to, you know, how much does it cost to be me, it's not unusual, well, I'll have somebody say, well, 20,000 a month or 30,000 a month or whatever, and you think, wow, that's that's an awful lot. But you know, if you've been making really good decisions throughout your life and and had good fortune with your finances, and sometimes that's the case, and then the Social Security boy that just doesn't move the needle a whole lot for them. It's nice that they have that coming in, but they're going to need, you know, another half dozen other similar income sources to make that work. That's not you know, most people, but that does happen from time to time. So we want to continue with Hamilton in a few minutes. But right now, Jeff, I think you have a reminder for our audience. You bet. Brian, if you're just joining us, this is growing your wealth with Brian Evans. I'm Jeff shade, and we're talking about the ins and outs of Social Security with Hamilton Morales of financial independence group. If you want to hear the show again, don't worry, we also are a podcast just go to wherever you get your podcast and search for growing your wealth with Brian Evans. You're gonna get this show and weekday takeaways so that you can stay on top of your wealth and how to grow it. We're gonna take a quick break and when we come back, we'll continue our conversation about Social Security. Stay tuned.
Tired
only getting half of the story. That's why it's so important to get your financial information from a CPA and an advisor like Brian Evans. Now let's get back to some of the most comprehensive financial information around. You're listening to growing your wealth with Brian Evans. Welcome back to the show. I'm Brian Evans, CEO of Madrona, financial and CPAs. And our guest today is Hamilton Morales, we're talking about Social Security. He's an expert on that from financial independence group, one of my primary partners in providing financial services to our clients. And we're talking about a lot of the ins and outs now, we haven't really hit a lot of the, alright, it goes up this percentage, you know, this year and that percentage that year, we're kind of focusing more on bigger picture, maybe things you haven't thought about when it comes to social security. You know, I'm even learning stuff on the show myself. So that's always a win win, Brian gets to learn some new financial topics. And, and so that's great. So I really appreciate Hamilton, you being on the show today, we were talking about when he takes those security and one of that, and you'd mentioned misconceptions. And I want to kind of pick off a couple of those. But I'll give you one or two here. One is the misconception that even if I had to pay it back, I don't care. I'm going to take it early, because I heard from my neighbor that Social Security is going to run out they read it on the internet, and so security's not going to be there. So I better take it early and get what I can. So you have any thoughts about that, Hamilton? Well, the internet's always right.
It's
gotta be right, unless it's on social media, but we won't go there. Right. So anyway, did he answer that question is, I mean, there are people who think that and the truth of the matter is, is that the chances of that happening are very slim to none. I mean, can you imagine if that were to actually happen, I mean, the the absolute nightmare, that would be so every year, the OASDI, which is the governing body that looks at Social Security, Social Security, disability, Medicare, Medicaid, and looks at the health of those programs, they do a report every single year, and this one just came out for 2022. So it just came out in May, June. And it's pretty much kind of the same every year, it might change from one year to the next and a few cents here and there. But usually, it's going to tell you that by the time we get to 2033, maybe 34, maybe 35 usually ranges in there, that they will have enough tax dollars coming in if no changes are made to pay roughly 7576 77 cents on the dollar. And so obviously, people look at that, and they're going, oh my gosh, you're gonna take a major reduction in Social Security, it may go away. No, I, again, this is my two cents worth, I don't believe it's going to happen. I do believe they're going to make some wholesale changes. This is not something new. This has been going on for decades, actually, I mean, for a really, really long time. But we're talking politicians, that's who makes all these changes, makes the laws. And you know, when you're a politician, the first thing you want to do when you get into office is get reelected, right?
If you if you don't want to get reelected, the last thing you want to deal with is Social Security, because you will make nobody happy, it will be political suicide, it just is he eventually though, they're going to have to make some changes, it's gonna happen. We just don't know when Yeah, you're spot on. And I may write a paper on what's going to happen in 10 years, I'll put it in an envelope. And in 10 years, you can open that envelope and note guys that Brian was spot on, because Brian said that you're right. If some a politician went out there and said, We got to fix this. The basic way to fix this is to raise the full retirement age right now it's age 67. And they're gonna have to say, well, we're gonna raise it to say age 70. And anybody that does that just told every voter under the age of say, 60, you know, their 60s, anybody in their 20s 30s 40s and 50s, that I am going to propose something that makes you work an extra three years before you get Social Security. How does that sound to you? Well, it sounds like I need to vote you out of office, so you will lose your election. Now fast forward, the same politician, we've got 10s and 10s and 10s of millions of people on social security, and the report comes down. Yep. Everybody who's receiving social security is going to lose 25% of their benefit tomorrow. Next year. Those politicians go, Hey, I'm the politician is going to save Social Security. I'm the one that's going to increase the retirement age, and they'll get reelected by do it, saving it at the last moment as the hero right now, we're already seeing this in other countries. We're seeing, you know, riots in the streets. You know, why? Why are they writing? Oh, because they just raised their version of Social Security. They just raised the minimum retirement age and young people are mad, and they should be they're rightfully mad because my generation has been sucking money out of this economy for years through the budget debt deficits and taking more out of social security that's going into it. And you know, the politicians answer that is well, we'll just put this on your kids.
to payback, I don't care. I won't be in office by the time they're voting. And so we're putting that on to our children and grandchildren. and on we go, but it will have to come up with that solution. It's a political thing as to why they're not dealing with it now. But I'm pretty much quite sure that we're going to see a full retirement age of 69, or, or 70. Depends on what the polling says when they go out and pull people on how to 69 Sound next to 70. And, you know, there'll be another function of getting reelected, I'm afraid it is. And you know, if people listen closely, they will pick up on these things, especially during the presidential debate. And I'm not talking about where you got the Republican and Democrat nominees debating, I'm talking about the primaries beforehand. And you know, when you go back to 2016, and the primaries during that period of time, you heard a lot about how are we gonna fix Social Security? Well, you're already starting to hear some of that now with some of the candidates are talking about that. And you're right, one of them is that I've heard is increasing full retirement age for those who were born after 1960. So understand what your listeners to understand that your full retirement age is determined based off of the year that you were born. So if you were born between 1943 and 1954, your full retirement age is 66, every year after 1954, it goes up by two months. So if you're born in 55, your full retirement age is 66. And two months, you're born and 5666, and four months, so on and so forth, until you get to 1960, you are more 1960. And after your full retirement age is 67. Those are the ones who they're talking about increasing the full retirement age to age 70. Now, that doesn't mean you can't take it early. But I think they're also going to change how early you can take it right now you can take it at age 62. I believe, again, I have no factual data on this. But I personally believe they're going to increase that from 60, to maybe as high as 6465, for those of us that were born after 1960. So that's one of the ways that they've talked about and dealing with this, it'll help a little bit, but I don't think it'll fix the problem. One thing I think they should do, and again, this is my two cents worth on this is currently, if you are working, you pay into Social Security, unless you are a state or federal employee, that is part of what's called the Windfall Elimination Provision where they don't pay into Social Security, that's something completely different. But by and large, the vast majority of Americans who work they pay into Social Security through their FICA taxes. So they pay a certain percentage in and their employer pays a certain percentage in if you own your own business, you get to pay both portions in Well, right now, if you earn up to $167,000, you're paying into Social Security. But for those people who earn over 160,000, for all that income over and above the 167 threshold, they're not paying into Social Security based off of those earnings over and above 167,000. Well, why is that? That to me, that doesn't make any sense. And so in my opinion, I think that they just should eliminate that. I mean, they increase that number every year. So eventually, it's going to go away. So why don't just eliminate that if you're working, you're paying into Social Security, whether you're making 50,000 a year, or 100,000 a year, 200,000 a year, 500,000 a year or a million a year, it shouldn't make any difference. You're paying into Social Security all along the way. Again, I don't know if it'll completely fix the problem. But I do think it will have a significant effect on the health of Social Security moving forward, and definitely will give us another probably 10 to 20 years, I think at a minimum if they started that now, unfortunately. Right? Somebody's got to make that decision. And we're talking politicians. So I doubt that's gonna happen. Yeah, I would imagine most of their donor money comes from the group that you're talking about would be supporting their increase in tax. Now, I agree with you that that's going to happen. And the reason I think that's because they've already done that with the Medicare tax, they've taken off the limits on that one. So they already have a model for that there. You don't take Social Security, Medicare out of your tax your employer out of your wages, your employer matches that. And then they took off the cap on one of those two, well, it's not going to be brain surgery, you say they're going to take it on the other and then if they need more money, as I've seen with with other kinds of things, well, they've already got the 3.8% Obamacare tax, whatever you want to call it, surcharge on high capital gains, and so other investment income and so forth, what's going to happen? I, in my opinion, depending on who's when we get to certain Congress, President and Senate, same parties aligning and get together on this, they're just going to look at your taxable income and say you got to pay in percentage on that everything. Yeah, that would probably be the easiest for them to do. Yeah, absolutely.
It's unfortunate. It's interesting you brought up Obama, during his administration, they did make a pretty significant change in Social Security. And if the your listeners were young enough where they weren't thinking that much about Social Security at that time, they probably missed it. And it was part of the Bipartisan Budget Act of 2015, that he signed into law in November of 2015. And there's a certain section in there that eliminated two provisions that benefited the Social Security holder, obviously, getting rid of that benefits, the government doesn't benefit the Social Security recipient. And those two things were this first thing they eliminated was the ability to file for your Social Security benefits, and then suspend your benefits. Okay, now, why would somebody want to do that? Well, you can still do that today. But the purposes we use it for back before 2015, you can no longer do that, which comes to the second part of what they eliminated, which is what's called the restricted application or restricted claim. And what that was, was the ability for a spouse to file for spousal only benefits and allow their own benefits to continue to defer and grow. So the way this would work is you would have one spouse would turn on their social security benefits, and then immediately suspend them. So they've activated them, but they suspended the payments, because that was one of the rules, they had to at least have it turned on. So one would turn it on suspend their payments, the other spouse would then file the restricted application, which allow them to take spousal only benefits. So half of the other spouses full retirement age benefit amount, and then it allowed them to let their benefit continue to grow. So think about this for a second, you've got one spouse, that is getting half of the other spouses full retirement age benefit amount, while both spouses full social securities are being deferred, and growing at 8% per year till age 70. Sounds like a pretty good deal. Well, it was a great deal. Unfortunately, it was too good of a deal for us. And so through the Bipartisan Budget Act, they eliminated those two things. And so you can no longer do either one of those. Now, if you were born after 1953, you cannot follow the restricted application. And those people that were born in 1953, they're hitting age 70 this year. So obviously, that's that's going to be gone. And then the file and suspend, you can still file and suspend. But if you suspend your benefits, it suspends all benefits off of your work record. So not only is your benefit suspended, spousal benefits can be suspended. If you've got children that are on your work record, those can be suspended as well. So it just really doesn't work anymore. Yeah, I remember those days I was a hero, when I would bring up a strategy and they were looking me, are you sure about this?
Sweet all this free money? And essentially, and it's interesting, you brought that one up, too, because a lot of tax increases aren't necessarily Oh, your rate used to be 20%. Now, it's 30? No, a lot of them are what you just said, Well, we just took away found suspend. We just increase your age, when you can start, we just did this, we did that. I added the Obamacare tax to your capital gains or something else. Those are all tax increases in a unique way and so forth. So we got to go to a break here. So I'll pass this over to you, Jeff, and continue our discussion in just a bit. Thanks, Brian. I'm sure that our listeners do have questions about Social Security based on our conversation today. And if you do want to find out about your personal social security situation, sit down with an advisor at Madrona financial and ask your questions, call 833-673-7373. You can do it right now. So you can request your Madrona 30 Point analysis and ask that question. When is the right time for me to file for Social Security, you might be leaving money on the table you never know you must have at least $500,000 or more in investable assets to qualify for the Madrona 30 Point analysis but those who do qualify will be able to enjoy this conversational analysis intended to dynamically cover a wide range of topics based on your unique situation so that you can proactively adjust your financial plan and strategy to help avoid major potential problems. And as a bonus, we're also going to send you a copy of Brian's book seven steps to a successful retirement once again, that number to call 833-673-7373. Now this is not going to cost you a dime. But this 30 Point analysis could be just what you need to help uncover several blind spots while improving your overall quality of life for the next 30 plus years. Once again, that number 833-673-7373. You can do it right now call 833-673-7373. Now back to more of our conversation with Brian and Hamilton about Social Security. Thanks, Jeff. Thanks for bringing up the 30 points. As I mentioned in the last segment, I was talking to somebody who was reviewing one of our plans and made the comment why would everybody want this and I didn't have an answer.
I don't know why Ray wouldn't want that. And you guys do a tax analysis to me. Yeah. Why wouldn't everybody want you a CPA? Who's an advisor, look at their tax return. Also, I don't know why. And who wouldn't want to go through the seven steps to successful retirement? Who wouldn't want to have the 30 points within those seven steps, Social Security being one of the 30? Who wouldn't want to go through that to have a more successful retirement? And I'm thinking, I don't know, why wouldn't everybody sign up for that? So if you're listening right now, I encourage you to think about, you know, these steps in your successful retirement. That's why we're talking about Social Security today. It's it's one topic that kind of affects all of us kind of like income taxes. Sometimes on the show, I talk about Delaware statutory trusts and 1031 exchanges. Well, not everybody owns investment, real estate, but pretty much everybody listening to my show is going to be affected by Social Security someday, and income taxes. So those two topics, I'm pretty much sure everybody listening maybe can get something out of now, Hamilton, we were talking about misconceptions. I want to throw in one misconception I've heard. And it's not necessarily about the rules. It's a security. It's more a misconception about their own life, the part of their life that says I'm 62 I know exactly what's going to happen for the next five years in my life, because I'll ask them. So you're retiring? Yep, I'm done. I'm like, so there no chance. Are you going back to work? Because you just told me you want to take Social Security early? Nope. There's not a chance. Well, it's my Boeing engineer or consultant. And a year later, they call him back and say, Hmm, well, all of our people that know how to do all this stuff left, and all we have are young people, will you come back on a consulting gig, we'll pay twice as much per hour for 10 hours a week, and they're gone. Ha, she I've been take Social Security for over a year. Now. If I take that consulting gig, which I really like to do, I can use the money, give me something to do and and it's not too taxing on me. But my person told me that I have to give back all my social security now. That's something you've run into a few times, Hamilton? Yeah, definitely. And sometimes they even think, oh, I'll just turn it off. Right? Yeah. And the answer is, No, you can't just turn it off. So yeah, there's a lot of things that people need to really consider. And if they decide to turn on their their Social Security early number one is you've been working the vast majority of your life. And now you're getting ready to not work. And as appealing as that sounds, if you don't have a plan for retirement, I'm not talking about financial plan, don't talk about an income plan. I'm talking about what are you going to do in retirement plan, because if you're just sitting around the house, trying to figure out what you're going to do on a regular basis, or oh, I've got enough projects at home, that'll keep me busy, until there's not enough projects at the house to keep you busy, and you're ready to pull your hair out, your wife is ready to pull your hair out or vice versa, and ready to kick you out of the house, you just don't think about these things moving forward, because kind of ignorance is bliss, when you're retiring. So you've got to think that through. So number one, if you turn your Social Security on early, and you decide to go back to work, and you are within the first 12 months of turning it on, you can do what's called a withdrawal of application, you can withdraw your application. So you'll fill out this form as a one page form, you send it in, and they will basically take your application away as if you never did anything at all. However, you are required to pay back everything that they had sent you up to that point. So you can do that you can only do it one time. But you can do that, if you do it within the first 12 months of turning on the benefit. But what if you're over the 12 month period? What are your options? Well, you really don't have any options. If you are under full retirement age, you can't suspend your benefit, you have to be at or over your full retirement age to do that. You can't withdraw your application, you have to be within the first 12 months of doing that. So what are your options? Well, option number one is you don't go back to work, you don't earn wages, that's option one. Option two is you bite the bullet and you go back and you start earning wages, and they're gonna withhold your benefits up to a certain point. Okay, so it could be all of your benefit, depending on how much you're making. Again, for every $2 above the 21,002 40 they're gonna withhold $1 yourself security benefits. If you're making 50 6070 80,000 plus a year, chances are the majority if not all of your social security, you're going to be withheld. Okay. I'm good with that. They'll just pay me back all that money that they were withholding once I retire. And no, that's not how it works. So basically, once you retire again, or you hit full retirement age, whichever happens first. What they're going to do is they're going to take that money that they withheld from your Social Security, and they're going to recalculate that back into your benefit based off of your life expectancy. So if you live long enough, you will get
it all back. The question is, will you live long enough to get it all back, you'll see a little bit of an increase in your benefit once they do that. But again, it's based off of your life expectancy. So two people really need to understand what's involved when they decide to retire early, which, hey, go for it. Absolutely. That's something you want to do, definitely, but just make sure you have all of the information you need to make a good solid decision. And that includes, what am I going to do when I retire? What is my retirement plan as far as what I'm gonna stay active and doing, because if you're not active, you're gonna be bored out of your mind, you're gonna be ready to go back to work. Thanks for bringing it up. We talked about that on the show all the time about successful retirement is not just having money, you gotta have stuff to do. And yeah, I'm gonna golf, well, you're probably not going to golf, enjoy that every single day, maybe, maybe? Well, there, there are a few people that do that. But I think especially with a lot of my male clients, it's part of their identity, their work, there's really, they have their social interactions, they know their job well. So it's not that taxing on them, they kind of like that having something important to do and all of that. And so it's often a successful retirement to me looks like not a full retirement, a gradual retirement. I know Jeff on the show has this great analogy of retirement for a lot of guys is like driving down the road at 60 miles an hour, and then running hitting a brick wall, because you're stopping all at once and you were used to 60. And now you're going zero, well, if you do that too fast, you go through the windshield. That's a tough one for a lot of people, maybe you want to gradually slow down to to 30 miles an hour, then 15 And then to zero someday, but doing it in pieces can be a good plan. So that that is something that we talked about in our lifestyle plans. Hamilton, do you have any other misconceptions that come to mind when you're talking to people about Social Security? Oh, my gosh, yes, I've got a big one. Have you ever heard this phrase? I can get 50% of my spouse's benefit. Talking about spousal benefits? Yeah, absolutely. Well, the misconception is, that's not entirely true. So the way it should be said is like this, you could be eligible for up to 50% of your spouse's full retirement age benefit amount. So I just got real specific. First of all, you're not guaranteed that you have to qualify for it. Number two, it's not always going to be 50%, it could be less than 50%, depending on when you take it. And then number three, it's not based off of your spouse's benefit, it's based off of your spouse's full retirement age benefit amount. So if you thought is going to be half of your spouse's age 70 benefit, you're gonna be sorely disappointed, because it's based off of the full retirement age benefit amount. So that's a big one. That's huge. I hear that all the time. In fact, when I do a seminar, and I asked that question to the audience, just about everybody's hands go up. Yeah, that's, that's, that's what I thought. And then like, No, this is how it works. So how does someone qualify for the spousal benefit? It's very simple when they turn on their benefit. Now, there's two rules that that go coincide with this. A, your spouse has to turn on their benefit, and B, you have to turn on your benefit, does it make a difference? Who turns theirs on? First, they both just have to be turned on. And let me back up real quick for any of your listeners that may be divorced. And they heard Hey, I heard I could probably get a divorce spousal benefit. Well, yeah, you could qualify for that too, as well, as long as you had a qualifying marriage, which means you were married for 10 consecutive years before you got divorced. So now let's go back to the illustration, the two rules. Number one, your spouse has to turn on their benefit. Number two, you have to turn on your own benefit. In a divorce situation, when you've got an ex spouse, you don't have to wait for the ex spouse to turn on their benefit, they only have to reach age 62. They don't have to turn it on. So that's the only difference in what I'm about to say between a married couple and a divorced couple. So once those two rules have been accomplished, what's going to happen is Social Security is going to look at your full retirement age benefit amount, and they're going to compare it to half of your spouse or ex spouses full retirement age benefit amount, if your full amount is greater than their half, you do not qualify for spousal benefits. Have I thought I was gonna get spousal benefits? No, you don't qualify for it because your full retirement age benefit amount is greater than your spouse or ex spouse is half. Okay, now flip that around. If your full retirement age benefit amount is less than your spouse or ex spouses half then you do qualify. So we've taken care of the first one. That's how you qualify for spousal benefits. Now I'm not talking about the spouse that never worked that never got to their 40 credits that didn't qualify for their own benefit. That's something come
pletely different, this is talking to the vast majority of the spouses out there that do qualify for their own benefit. That's how it works, then up to 50%. Well, if you take your benefit early, not only is your benefit reduced, the spousal portion of that benefit is also reduced. Well, when you add those two together, they will not equal 50% of your spouse or ex spouses full retirement age benefit amount. So that's why I said up to 50%. If you want the full 50%, you have to turn on your benefits no earlier than your full retirement age. That's how you there's a lot to this. Yes, sir. Absolutely. Yeah, realize that peeling back the onion here. And I think I'll kind of wrap things up here. Thank you, Hamilton for being on the show. Guys. We could do this for hours, I think on just conceptions on Social Security. But what this reminds me is just there's a lot to financial planning. And that's why it's so hard to do it yourself, or just rely on phone call advisor, whatever it is somebody that's not an expert in all these matters. And we talk about these topics in depth, it just reminds us all as to there's a lot more to it that will want to know so thank you again, Hamilton for being on the show today. And with that, I'll throw it back to Jeff. Thank you so much, Ryan. And thank you, Hamilton. I'm sure that our listeners do have some questions about Social Security. If you'd like to get those answered as part of your Madrona 30 Point analysis call 833-673-7373 Once again 833-673-7373 Well, we're out of time for this week, Brian and Hamilton want to thank you for your time. But most of all, I want to thank our listeners here in the greater Puget Sound for joining us for Hamilton and Brian. I'm Jeff shade. Have a great weekend. We'll talk to you again next week with another edition of growing your wealth. No statements made during the growing your wealth show should constitute tax, legal or accounting advice you should consult your own legal or tax professional on your individual information. Brian Evans and Madrona Financial Services is licensed to offer investment advisory services through Madrona Financial Services LLC an SEC registered investment advisor insurance products are offered through Madrona Insurance Services LLC, a licensed insurance agency and an affiliate of Madrona financial services. Past performance is not a guarantee of future results. Investors cannot invest directly into indexes. No investment strategy, including asset allocation and diversification guarantees a profit or guarantees the avoidance of loss financial planning is an important tool but does not guarantee specific outcomes. ESG investments are only available to accredited investors at opportunity through the issuers offering documents a DSP sponsor determines whether to accept any individual subscription documents. Madrona financial and CPAs is a registered trade name used singly and collectively for the affiliated entities Madrona Financial Services LLC Madrona and Bauer Evans Inc. PC tower Evans investment advisory services are provided through Madrona CPA services are provided through Bauer Evans