SAM Webinar- Timing your Social Security Benefits: What Smart Retirees Do Differently

Hello, I am Kimberly Threadgill. I am a senior wealth manager at Stanbury Asset Management. I'm also a CFP in the CDFA. Uh I have been holistically advising clients now for about 10 years. Been in the financial industry for about 15 in total. And um I want to share a little bit about you know what we do here at SAM. Stanbury Asset Management is a an RAIA where uh we are actively managing um strategies. We have our own investment team and uh we manage different strategies each with their own mandate that is designed in order to to reach a certain goal for different clients. Uh we don't hold mutual funds. We are big believers in owning productive assets and we have an amazing investment team that focuses all day every day on that part of of the equation in in finance. Now on on top of that I am uh part of a team of great wealth managers and what we do is spend our time working with clients understanding what their needs are and deciding with the the input of of the clients and their holistic uh financial picture which are the best strategies or what combination of strategies will work best for them to help them reach their financial goals. So in doing that I u have now um since joining SAM I currently manage over 200 million in assets under management um and am very very privileged to work with a great team and as I have I I am based here in New York City. I've come across a question more often than not um from clients that are typically in their late 50s uh some of them you know early 60s or some of them even mid60s that have held off but they're questioning when should I take uh when should I claim my my social security benefits you know what timing is ideal uh and so today our topic is was going to be what smart retirees do differently so I'm hoping that this will be of some help. We're going to get started. Uh just jump right in. So with that, I want to talk about this first slide. This this is u how you're you get to the point where you've got the you're entitled to these benefits in the first place, right? You have 16 6.2% of uh your income up to a certain dollar amount of your taxable income that is um paying into social security. And what that's doing is that money is going to pay for people who are receiving those benefits. Now, uh often times, and this is something to note, is that um the employer is matching that 6.2%. But it's not a small number. Uh and and that number or that maximum taxable income has gone up every year. So, if you look and this is what I'm kind of showing here is is just since 2022. This this webinar I'm I'm doing here today is is we're in 2025. 2022 is not that long ago. Uh in in the amount of max of of taxable income that 6.2% can be taken from in 2022 is 147,000. Fast forward to today and it's up to 176,100. So I don't think that number is going to be going down anytime soon. And I do think this is one component that the government is doing to keep Social Security up and running. Um, and as we go through the rest of this webinar, I think you're going to see there's some other other areas and factors as well. So, what happens after you have been working and you you've you've worked through your career, you've been paying into that system and um, you know, for some people they expect to work longer and maybe they don't um just given a job loss or what have you or maybe needing to retire to take care of a loved one. And so with that uh change or that in circumstance there can be a question about um social security right um and and so the first thing I want to touch on is your social security benefit schedule. This is a sample of what that would look like. So, if you have never seen this um then you're you're probably pretty young and uh because usually uh you know social security will the administrative administration will will send this out um after a certain age you'll start getting something. But if you haven't uh you know it is something that you can always go and proactively look at. Go to ssa.gov and you can register uh online to establish that account and be able to to look at what your schedule of uh of benefits are. Uh and you know it's important to do I'll tell you it's not always right. You don't want to assume that it is and wait until you're ready to actually start taking it to look at this. So um one thing to look at it's very transparent. Uh when you go into ssa.gov register, get your account. You'll you'll see what they're basing your numbers on. And so you want to take a look at what that reported income is. Make sure that looks right. But so here we are. Here's let's say this is right. Um in this case, this is an example where somebody's full retirement age happens to be 67. So one of the questions I get is why are these what is a full retirement age and why is it different for everybody? Because it is. It can be. Um well I I mean short answer is it's just I there is another way of kind of extending and keeping social security alive is pushing back that that FRA the full retirement age and um that's going to be based on your date of birth. So if you were born um between 1943 and 1954, your full retirement age, that time when you are entitled to take your full benefits that you've paid into the system to receive that is going to be um 66. Now if you were born between anywhere from 1955 to 1959, then your full retirement age is pushed back. Each of those years is pushed back a further like two much two months more. So in 1955 it would be uh your full retirement age would be 66 years and 2 months and 56 it'd be 66 years and 4 months and etc etc. So for anybody though born in 1960 or later then you're looking at uh 67. So no surprise this person has a a day birth in in March of 68. So full retirement age uh full benefits is at is 3306 a month at the age of 67. And and so you have a choice here. You can take earlier but each as early as you take it. The earliest you can take is at 62. It's going to be discounted from what you've paid into that system, right? um with each earlier year it's going to be you know you're getting a haircut. Um now if you wait beyond that that time of your full benefits then there's a premium that you're you can receive each year. So that of course is is something that once you take a look at this it's saying well when is the best time to take it and of course that's going to depend on your own special circumstances. So, for one, if you're single, um, or let's say you're divorced, then you've got to take a look at, you know, what are my expenses? What are my income sources? How is my health? Um, do you know you're if you're in good health, you've got longevity in your family, maybe you know if you're you've got other sources of income and you can meet your expenses just fine, then maybe you don't need to take at the permanent discount of of 62 uh the least amount that you can receive because yes, you'll get a cost of living adjustment, but it's always going to be on that, you know, drastically haircuted amount. Um, and so, you know, you want to think about the bigger picture. Um, when you're considering this decision, you know, one thing that I I have heard it said from clients that I've met with that didn't really work with an adviser before, they're already taking their social security and they took it really early and they said, "Yeah, I just took it because I just didn't know if it was going to be around for much longer." And you know, I've never heard it said that if something was to happen to Social Security, it's only going to be for the people who haven't started taking it yet. So, it's something to to bear in mind that you really don't want to uh make decisions based on what hasn't happened. Um, Social Security is still still alive. Uh, even through lots of changes in government, um, that's still in place. And as you can see, pushing back that that full retirement age is one way of kind of delaying um folks from getting their full retirement benefits. Now, another area I want to touch on with single folks is if uh if you are divorced, um there's there's several factors you want to keep in mind. You may have your own entitled to your own benefits. That's great. And in which case, you can always look at that. But you if you were married um to a higher earning spouse and um for more you know 10 years or more you were divorced or you've been divorced for at least 2 years uh and not remarried under a certain up to a certain age then you can um look at and consider taking uh the expouse's benefits. um certainly if they're substantially more than what maybe you're entitled to. And so um and it it you don't you're not required to wait until that expouse take, you know, chooses to claim. You can do that at at your best timing. And again, this is where working with the financial adviser is really important. This is part of what we do when we um are working with clients, especially through um those years as you're looking at projections of cash flow, right? Whether it's someone that's just gone through a divorce or um you know, various times in their life just leading up to retirement and saying, "Okay, you know, we have different sources of of money." Sometimes um some people will have you know an IRA or 401k you know all of that tax deferred money anytime we're withdrawing from that it hasn't been taxed yet right so dollar for dollar you're adding it's like adding a salary amount to your taxable income right it's like W2 stuff it's going to go straight on that 1040 um if you've got after tax investments um often times that principles already been taxed, right? And so it's any withdrawals from that source is going to be only taxed um on the gains or on the the the income, right? Uh and so being aware of of those things and then how does social security play into this? Well, it's important to be aware that it's a, you know, it's a pretty low bar, but if you're widowed or single and your income is um more than 34,000 or you're married filing jointly and your income is more than 44,000 for the year, then your social security will um well 85% of what you receive for the year is going to be taxable. Okay. So, when you're considering your different income sources and when to, you know, start to to claim, you want to think about, you know, do I want to add more taxable income right now. Um, if you're, you know, again, comes down to all of these different factors, longevity, can you pay your bills, all of that. But um you know that's these are all the things that we talk about and consider when we're we're kind of running through these kinds of plans. So something to be aware of where it gets even more interesting is is when you have a couple and especially when you have a couple where both are um eligible to receive social their own social security benefits. In that case, then it becomes a question of really one of us can take at a different time than the other, right? You both don't have to take at the same time. So, when do each of you claim? Now, I'm going to go into a uh some tables here and some comparisons. Um, and I want to kind of set the stage here, but it's not the same numbers as what you're seeing on this slide. We're working with a totally totally different number. So, as we go ahead, we're going to look at some cash flow projections because this is going to show you where if you have read on this topic before, you've probably heard about with a couple maybe the higher income earner waiting to take it at 70. But, um, I want to show you a sample so you can see how the cash flow projections flow. So you can see some of the merit is an example of possibly doing that if that's the best case uh and and and works for for for you. But again, I I would encourage you to work with a financial advisor. There's six of us here that can work with you. What we would want is to look at the bigger picture. Obviously all these comp components we're talking about as well as your individual social security benefit schedules. All right, so let's get started here. This is a social security benefit comparison. In this case, we have both spouses taking retirement benefits at full retirement age. And for this couple, their full retirement age happens to be 67. Uh so the higher income earnner is spouse A and that person's full retirement age benefit that means at 67 is $3,542 a month. Okay. Now spouse B has um has full retirement age benefits of $3,036 a month. So in the table here to the left, what I'm showing here is not the year they start taking it. I've projected this five years down the road because I want to show you what happens when one spouse passes. So I needed to go further, you know, later in life to show it. But also too, um I think you can see how projections amplify when you use um a fairly, you know, um I'd say a realistic, we're trying to make it realistic, um inflationary assumption rate, which for us we're using 2.5%. Because again, keep in mind social security has a cost of living adjustment. Is it going to be 2.5% every year? Probably not. But we got to go with something. And so this is what we're going to go with. We're going to say 2.5% every year. That's what your social security benefit goes up. Sorry. So, if you look in this in this comparison here, so we're we're we're starting with year 2040. In the case here, now I'm going to use my mouse to kind of point to it here. In this case, they started five years ago, both at the same time, both at full retirement age. Spouse B just has a little bit less than spouse A. spouse I is a higher income earnner together they're making 114 322 a year just in social security we're not counting other income we're just looking at this as it projects throughout the years though interestingly you know we have spouse A now has passed okay and passed at the age of 77 so now the they happen to be the same age if you note here I've got 7272 that's telling me that spouse's spouse A's age is 72, spouse B's age is 72, born in the same year. Okay, so in 2046 now we have a surviving spouse and watch what happens. The the surviving spouse continues to have that inflationary component to that person's benefits, but now receives a survivor benefit. And you may wonder where does that figure come from? Well, what this is, it's what spouse A would have received had spouse A continue to live because it's the higher earner. Now, the surviving spouse is going to receive what was equivalent to that as it projects at the 2.5% going forward. So as you can see through each year the surviving spouse is is living and that is certainly adjusted down. something to be aware of obviously when you're thinking about how is that surviving spouse going to be how is that person going to be comfortable because we're going to have a a significant shift in some of that income um when you the higher income passes on higher income earner passes on and so we want to you know pay attention to that and of course being a holistic wealth advisor you you're addressing that and saying, "Okay, we know we're going to be planning on pulling from here or there. Um certainly maybe the mortgage has been paid off by then, and so perhaps the the expenses are significantly lower. Um but the the medical expenses are one of those things that we typically don't expect to go lower, and we're going to touch on that, too. Um but let's look at this comparison. Um now, taking a different approach. Now the higher earning income spouse is waiting and in and claiming benefits at 70 and not before whereas the lower income spouse takes early at the age of 62. Now in that case you can see a real difference in what their individual um benefits are. But what I thought was pretty interesting, I wouldn't know it unless I ran this uh to see it, is that is that their their total social security while they're both living is it's pretty similar to if they both took at 67. Um it's not really that much more when they both took at 67 versus 70 and 62. But here's where it really does change. This is the notable difference is that the year that the higher income earnner passes because of waiting until 70, the difference in what the survivor is going to receive in those years alone um without that other spouse is is significantly higher um than having taken even at the age of 67 in the prior example. So in this case the difference being you know difference between 71 388 and 88,000 is I think you know certainly notable because we're we're talking about you know that also projecting from year to year. Um and at the age of 82 a difference between roughly 79,000 and uh 97,700. I think that's that's notable. So going to the the next slide. This is the same couple. Okay. And we're using that same example that you just saw. This is exactly what we were just looking at. Higher income earner is taking at the age of 70. Um that's delayed out, but the the uh spouse B is taking at 62. But in this case, the spouse B is taking at 67. So waiting until full retirement age, but the higher income earner is still holding out until the age of 70. In that case, what's interesting is that you can see um you know where the difference really lies in that scenario is how much more they have in total in social security income by taking it and timing it that way. comparing the two between the um the the lower income earner um the one that's taking um a little bit less or receiving a little bit less in in benefits but waiting until 67 versus 62 is is certainly a difference here and in terms of annually um 15 you know 15,000 up to 18,000 every year different in the years they are living you know both living now what happens is again with a higher income earner taking at 70. The projections show that the it makes no difference with respect to that surviving that that's still going to have that benefit of having the higher amount and that amount being higher than if the higher income earner took at 67. Uh but we're in this case the difference in the comparison I wanted to show is is for all of these years when they're both surv they're both living they're both receiving. Social Security, you've got a difference of quite a bit. I mean, 15,000 to 18,000 per year difference. So, something to pay attention to. I think it kind of brings to life um what we've read about. I know that those articles are out there where people are talking about different timing uh of things um and and so I think actually showing a sample um is super helpful. But again, I would say if you if you're questioning this and you'd like to have a complimentary session on um looking at your actual schedules and working through something like this, um me or any member of my team would be we'd be happy to to work with you. So, uh, going on to the next phase or next conversation or the next facet, if you will, about social security, um, is is that often times when I'm when I'm working with clients, you know, Medicare often kicks in for most people, uh, they start to claim at 65. Uh, there are always exceptions, of course, to that, but let's just go with the the mainstream for the for the purpose of this webinar. Um and and at 65 either people have started taking their social security or they have not. Um but for those that you know are in those years where they are taking social security and they are taking Medicare right and they're receiving the Medicare um benefits of that. There is something to pay attention to. there's an income effect uh that will affect your Medicare premium amount. So again, this is something when we talk about where are we going to take income in retirement and the effects of your taxable income, it's paying attention to that, especially as you know, if you're 65 and older and you're you're taking or you're you're paying for Medicare, um there is a two-year look back at your modified adjusted gross income. And the higher that is, the higher your Medicare part B and part D will be. So when I uh um am working with clients, we we talk about this. where I am aware that any um bump in their income for various factors well whether it's the sale of a home um now I don't necessarily mean primary residents often times there is that um exclusion of 250 250,000 in gain that's not taxable if you're individual for your primary versus 500 for a couple but if it's an investment property rental properties things like that there's there could be a bump right especially if you are um if you're it's a profitable um transaction. Um another thing that will affect this is Roth conversions. And so certainly if you are considering doing a Roth conversion and you are taking Medicare or you're close i.e. taking Medicare next year or you know in two years then you want to be aware that this could can affect your Medicare premium. Now, it would in that case for a Roth conversion, it's only going to be um affected 2 years later from the year that you did the Roth conversion. Um but be want to be aware of it. It's not to say it's not the right thing for you to do, but it's something to be aware of. So, um so this is showing the figures for 2025. Uh it's the it's showing you what the monthly search charges are. Okay. So there's a a base Medicare premium amount for part B. This is in addition to that. So if you are single, uh then if in 2023, this again we're we're taping here in 2025. So, if in 2023 you're single and your income was 106,000 or less, that modified adjusted gross income, then then you are not going to have any kind of an an Irma sir charge added to your Medicare premium amount nor to your part D uh amount. Uh it's 212,000 or less if if you're married filing jointly. Now as that goes up uh then things change right and so these are the different brackets they change every year and this is going to tell you what the premium or what the search charge will be what we call Irma u which is essentially the income related monthly adjustment amount of your of your Medicare and so in each bracket you'll see it can get substantially higher and it can make your premium per person quite expensive. So, you want to be aware of this because again, um what I hear from from clients is they'll say, "Well, my, you know, we had a big year income year and the this happened a couple years ago and so my my social security went down." And really, what they're saying is it's likely that their social security didn't go down. It tends to adjust up. Um but so much so often uh Medicare is is taken out of social security and if there was an Irma charge that certainly that effect can create a net down or lowering of of what you're receiving from social security. So something to very very much be aware of. It's something that we pay attention to here. Um especially, you know, for those that have just a great deal of of money saved in 401ks and in IRA and things like that, knowing that the when they come of age to have those required minimum distributions, it's going to if it's six figures or more, it's something to be aware of that's coming. And um you know, brings up some some conversations about possibly a Roth conversion if it makes sense. Um but it's it's uh certainly that conversation is for a whole another you know a whole another webinar I should think but there this is something that is always discussed or should always be discussed when covering that topic um with a client. So, uh, one thing I want to note is, um, there are reasons that you can actually appeal the income related monthly adjustment amount. That Irma searchcharge can be appealed for a variety of reasons. One is marriage. Uh, another one is divorce. um if you are not filing jointly in that year, especially for the um the spouse that was the lower income earnner. Uh so post divorce, you may not have that search charge because your income is now going down. So that's always something to be paying attention to. Um the death of a spouse also um a possible factor. And then there's some some certain specialties around um loss of income producing property but not you know voluntary sale. Um some other factors that come into mind. So I'll leave this slide here up for a minute because uh it's important to pay attention to be aware of what these factors are and there is a form that you can go to um go through ssa.gov and and and medicare.org or to also get some really good information on some of the stuff. But the form that you would need to fill out is going to give you the options of does this apply to you and you can appeal that increase in your Medicare premium. Uh something to to note again as we are talking about expenses in in these later years and when to take social security and what are your expenses. I mean being aware that um you know Medicare um is a premium um that is you know as you can see can go up and be you know it's it can be quite expensive um and not to mention what Medicare doesn't cover and these are things that a lot of people will need uh in their later years this additional um care and so being aware of that and taking out the necessary coverage to take care of those things is important. Um, but it's something I wanted to to bring up because we look at these factors and take those into consideration when we are are considering what are your expenses and where where are those going to be. Obviously, this is one expense medical that tends to not often does it go down. Um and uh and another factor too just real quickly that I thought was interesting little fact is what the changes with the Medicare Part B premium has been um over the course of the years. And this goes back to 2011 where it was you know 115 and um has gone up by $10 since since last year from 175 to 185. So, with that, I'm going to conclude uh just to to say that, you know, there's there are a lot of things to consider when you're uh considering when to claim social security and it there's more added when you're a couple. Um, I think that here at SAM, um, I I really work hard with clients to try to grow their wealth even and especially even through those years when you are required to withdraw uh, and use some of these assets that you've built up and save for um, throughout your life so that you can have this as supplemental income through the retirement years. And so and the investing component is a very important part of that and our team at Sam does a very good job of that um as well. And if um you'd like to see for yourself, you can go to our website. It's www.stanberryam.com. All of our strategies are actively managed and they're listed there individually with detailed information on each. Uh so you can take a look and see all of that for yourself. Um as well as you know reaching out directly. You can uh reach out through our main line um at 6468544370 or scan the QR code uh to schedule an introductory meeting and of course you can always email us as well at info@stansburyam.com. So again, hope to um hear from you, but if not, if you still want to learn more about us, here are some options of some ways to do that. And hope that today was um was helpful. Uh you can also follow us on LinkedIn, on Facebook, and X. Uh thank you so much for your time. I appreciate it and uh look forward to speaking with you again next time. Bye-bye.