Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives securities offered through Cambridge Investment Research, Inc., a broker/dealer, member of FINRA, SIPC. Investment advisor representative, Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. Well, this is Nate. I got Mike joining me today with NelsonCorp Wealth Management. Another wet one today out there. Whoever’s wanting this rain, we’re good.
Mike Steigerwald:
We’ve certainly gotten it for the past few days.
Nate Kreinbrink:
We are good. The grass is definitely going to be green. I was going to try to mow it last night, but obviously that didn’t work. So hopefully tonight and probably another two or three days from now, do it again.
Mike Steigerwald:
It’s really come hard and fast these last few nights-
Nate Kreinbrink:
I know usually you see July, end of July as we’re getting to, usually the grass is starting to become pretty stressed and start to brown up. Not this year.
Mike Steigerwald:
Yeah.
Nate Kreinbrink:
We’re going to be good for a while. So hopefully all the basements stay dry. I know it’s been an issue when you get heavy rains like this, you’ve seen some of the flooding in town here, but hopefully it comes in moderation now for a while.
Mike Steigerwald:
Down in the Quad Cities, they were just preparing for it to be pretty much over and now I think this influx of rain may have changed that. They were starting to take some of the barricades and barriers down, et cetera, in the downtown area. And I have to imagine that the rain that’s come the last few days has-
Nate Kreinbrink:
Hasn’t helped anything.
Mike Steigerwald:
No, certainly not.
Nate Kreinbrink:
And just, again, getting into today’s program, I know there’s a ton of topics to get into. We were talking a little bit about some of the recent meetings and cases that we’ve heard or articles that we’ve read. And it still deals with that. Where it’s preparing for the unexpected. And I think whether it’s weather, I mean, you can say it’s going to rain, but you don’t know if it is or how much or what it’s going to do. Preparing for retirement is preparing for that unexpected for the majority of people.
A lot of times when they get there, they’re looking at all these decisions that need to be made, how one decision impacts another thing. And when they do it, they become oftentimes overwhelmed because they’ve never really realized all the decisions that go into it and all the, I guess, impact of, again, when you claim Social Security, when you do this, if you’re going to continue working and pension and retirement distribution and tax planning, and all this type of stuff.
Again, they’re trying to project out and looking at how they’re going to do it. But again, when it comes down to it, there’s still a lot of information out there that, one, people are misinterpreting or they’re seeing it and they’re not really, I think, putting it as it’s technically written out or they just don’t know it. And again, what you don’t know, you don’t know. And that’s tough when it’s coming into retirement planning, but unfortunately that seems to be the case a lot of times.
Mike Steigerwald:
Yeah. And I think we’ve talked about this before, but most people, this is a one and done shot. You have one opportunity and one situation where you are going into retirement and facing these decisions, which many times are irrevocable decisions. So if you decide, yes, I’m doing this, and you sign some paperwork that says, “This is my distribution plan,” or what have you, “This is my pension payout.” I mean, there’s no turning back. So seeking that advice if you’re not really sure is crucial. The other thing that I think gets misconstrued a lot of times is the decision on when to retire and can I retire and have my pile of money that I’ve accumulated last in retirement? And also, how does that coincide with me claiming Social Security? Now, those are two separate decisions that I think oftentimes get mixed into just one decision. Well, I retired, I’m flipping the switch, going to turn on my Social Security benefit. It doesn’t always have to be that way.
Nate Kreinbrink:
Right. And I think too, again, with Social Security, we could spend a whole month talking about Social Security and the different claiming strategies and then how they impact it. But again, when you’re looking at Social Security, there really are a bunch of options available to you. And again, the old thing where I’m going to turn it on as early as I can to get my money back because that’s what my parents did or that’s what my coworker did. Again, it doesn’t necessarily fit into your situation.
Because again, yes, we want to take it, yes, we want to make sure we’re getting our money back, but if you sit down and actually look at the amounts that you are going to get at your different claiming ages, again, project that out over a normal life expectancy. You look on your Social Security statement, whether if it’s mailed to you, if you’re still getting the paper copy or if you log into ssa.gov and you look at your most recent statement, on the back of the second page and two-thirds of the way down, there’s a little box in there that shows exactly how much you personally paid into Social Security and how much your employer paid into Social Security on your behalf.
You add those two numbers up and then you, again, project out that whenever age you’re looking to claim it to, look at where your breakeven point is, look at where, again, you’re going to be getting more money back than what you paid into it. And I think a lot of times people will be astonished to see that, again, it’s not as far out as what they thought they were going to be. So again, if you live a normal life expectancy, you are going to get your money back and then some. Usually two, sometimes even three times if you live a longer life. And when you look at the total amount of benefits that are going to be paid out to you over a normal lifetime, for a lot of people, it’s one of the biggest assets that they have that they’re making these decisions on completely uneducated on when they’re doing it.
And again, if you live a normal life expectancy and you’ve had an average work thing, I mean, it’s not uncommon for you to get back close to seven figures, over a million dollars, in Social Security benefits over your lifetime. A million dollar decision that you’re making and not understanding exactly what it is you do. That’s not a good plan.
Mike Steigerwald:
That’s a big deal.
Nate Kreinbrink:
That’s a big deal. And so again, we want to make sure that we’re looking at all these options. Again, if you’re married, there’s different options that come into play with that one as well. Again, not just claiming your benefit based off of you, but coordinating that decision with the spouse to say, “Hey, we want to maybe maximize this.” Again, we look at different theories. We hybrid it a little bit sometimes, where, again, the higher benefit we want to try to delay as much as we can, the lower benefit we want to maybe look at taking earlier. But again, tax planning, other income, all that plays into doing it. So again, it’s not a one-size-fits-all.
Mike Steigerwald:
Yeah. And I think you hit on a key thing there, Nate, is that married couples, this is not a individual decision. I mean, if you have a partner that also is entitled to benefits, you should be looking at this as a joint decision in order to maximize the amount that you’ll get total.
Nate Kreinbrink:
Right. Because again, if you have a married couple, both of them are taking benefits, one of them passes away, one of those benefits is stopping. Both benefits don’t continue to that, the higher benefit will continue to the surviving spouse. But that’s not both benefits. So which is again, why we try to look at it and say, “Hey, the higher benefit, let’s maybe look at delaying, the earlier one, taking on.” One of the biggest misconceptions I think that’s out there is, again, filing for your benefit when you’re younger than your full retirement age. So again, for anybody born before 1954, your retirement age is 66. For anybody born in 1960 or later, your full retirement age is 67. And if you’re born anywhere between there, it’s 66 and two months, 66 and four months, eight months, 10, 12, whatever it is through there. But again, if you file for your benefit before your full retirement age, the earnings test comes into play. Meaning that you cannot make above a certain amount of income without having your benefit-
Mike Steigerwald:
Reduced.
Nate Kreinbrink:
… reduced. So what they’re going to do is if you make above, I think it’s 20 some thousand, $1,860 a month. If you are below your full retirement age, you can’t make above that amount if you’ve claimed your benefits. If you do, they are going to basically withhold some of your benefits that is going to be paid to you. So again, for every $2 that you make above that, they’re going to withhold a dollar from your Social Security benefit. So again, as a general rule of thumb, and again, this doesn’t apply to everybody, but in most cases, if you are working and you are going to be making above that amount, don’t take your Social Security. Because what you’re going to do is you’re going to end up locking in a smaller amount and you’re not going to get it. So again, double negative as far as what we’re looking at, not good for your situation.
Mike Steigerwald:
Right. And that plays a factor in your long-term, essentially, financial outlook. So these decisions are pretty important and there’s a lot of things that come into play. And like you said, different situations for each individual, whether it be a spousal benefit, a widow benefit, there’s a lot of things that may be important to you and your situation and if you don’t know how to navigate it and you just make decisions on the fly, it could have a pretty big impact on your retirement.
Nate Kreinbrink:
Exactly. And I think too, when it comes down to it, again, whether you do get the paper statement still sent to you or if you created your own account on ssa.gov, look at your projections. They’re streamlined now where it’ll tell you at 62, this is what you’re going to get, 63, this is it, 64 or 65. It’ll tell you at every ages, assuming that you are going to continue to work to those ages. So again, that’s another thing. Those assumptions that are in those amounts that are listed on those statements that are sent out to you are assuming you are going to make roughly that same most recent wage up until that time period. If you stop working before that age, it is going to be lower. Because again, they are assuming that you are going to continue to do this. Your benefit is determined off of your highest 35 years of earnings. So if you continue to work and you’re over that 35, you are going to then kick out a lower year of earnings and continue to have your higher earning year now factored into your 35 years.
So continuing to work, again, helps with income coming in, but it also could raise your Social Security benefit as well. So again, a lot of great stuff that’s gone into all this, but again, very complicated, very convoluted, a lot of different options out there. You want to make sure that, again, you know all your options on the table. Again, everything is different for everybody. So what we went over here is not, again, one-size-fits-all for everybody. It’s how it fits into your thing. But if you have questions, you owe it to yourself to talk to somebody.
Mike Steigerwald:
Absolutely.
Nate Kreinbrink:
So again, I did want to mention here, we are getting close to out of time, that every Friday NelsonCorp Wealth Management and NelsonCorp Tax Solutions are wearing jeans for charity. Money raised in the month of July will be donated to the Sawmill Museum here in Clinton. Again, this is Mike and Nate with NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Thanks for tuning in and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research, Inc., a broker/dealer, member of FINRA, SIPC. Investment advisor representative Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website www.nelsoncorp.com.