Announcer:
It is 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 Incorporated, a broker dealer, member of FINRA, SIPC, investment advisor representative. Cambridge Investment Research advisors Incorporated, 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. This is Nate Kreinbrink bringing you today’s program second Wednesday of April, moving right along. And if we had it, Andy or Mike or T.J. or anyone else from our tax season, I don’t know if they’d say it’s moving too fast or not moving fast enough as we are, again, less than a week away from the tax deadline as far as to get your taxes filed unless you have filed an extension.
So April 15th is coming up very quickly. So again, if you have not gotten your taxes around and into your preparer, you need to get moving on that because that will be here very soon. And it transitions into then after tax season and what they get into now with more of the tax planning instead of tax preparation. Again, tax preparation we always view as looking backwards and basically reporting what is already done. Tax planning is taking that information and looking forward.
So, again, you don’t like how your tax return turned out this year, if you have some changes on the horizon, changing jobs, changing marital status, whatever the case may be, got too much back, paid too much in, again after tax deadline, it’s a good time to sit down and review that and make those changes because we do have enough time before we get to the end of the year to make them turn out a little better with that. So get them in as soon as you can. As again, the April 15th it’s right around the corner here.
For today’s program and, again, looking at different topics, I mean, obviously David was on last week with the half-hour live show talking about some of the current events, obviously tariffs and those impacts have been in the headlines lately. Again, knowing how your accounts are allocated to be able to handle some of this volatility, what it actually means for you maybe going forward, and then how it impacts a few other things. Again, but today’s program wanted to hit a topic that again, is prevalent on nearly everyone’s minds in some way, shape or form.
But as individuals thinking about retirement or are nearing their retirement date or we start to do some planning with that, again, social security continues to be a driving force between, again, how we are going to make all these pieces fit together. And when you start looking at your social security benefit, and again, when you multiply that out by an average 30, 35 years of retirement by what you’re going to get each month than each year it’s one of the larger assets that the majority of people will make decisions on throughout their retirement.
And a lot of time those decisions are made without really understanding the impact that it could have by again, knowing all the options that are on the table. And again, when we meet with people and we start bringing up the topic of social security, there’s oftentimes a lot of strong feelings one way or another. And again, my job is not to tell people exactly when it is, but again, to say this is how it fits into the big picture. And we’ve always said that when you retire and when you start social security benefits needs to be two separate decisions.
And there’s a lot of reasons that go into that. And mainly is because, again, it is one of the largest assets that you will have in your retirement, and it is a paycheck that will come to you each month. Markets are up, markets are down, that paycheck from Social Security will be deposited into your account every month on the date that it’s going to come in. So when we decide to claim that is crucial to, again, maximizing possibly some of the other assets that we have from a tax standpoint, from a cash flow standpoint, from a legacy standpoint, whatever is important to you.
Again, that social security decision will definitely have a big driving force behind how much that is successful, or, again, in some places unsuccessful. So when we look at your social security benefit it’s important to understand the basics. For the majority of people that are claiming on their own retirement record, 62 is the earliest that you can claim it. Your full retirement age will be determined on the year that you were born. So from anybody that was born before 1954, your full retirement age is 66, anybody born in 1960 or later, your full retirement age is 67.
If you’re born in between there you’re going to have a little odd full retirement age. So again, 54 and earlier was 66. If you’re born in 55 it’s 66 in two months. If you’re born in 1956, it’s 66 in four months and so on and so on until we up to 1960. So that is the age where your benefit is un-reduced. And when we say un-reduced is because it is not taking earlier. So again, the earlier that you take it prior to your full retirement age it is going to be a reduction. Essentially. You are going to get more payments, but those payments are going to be of a smaller amount.
And you are able to delay past age 67 or 66 or 66 in eight months, whatever your full retirement age, your benefit will increase 8% a year up until age 70. Your benefit essentially caps out at age 70. So again, different timing period. You can take it anytime in between too. Some people wait till 65, they turn their social security and their Medicare on at the same time. Some people try to wait till age 70, but they get to age 68 and they’re like, “Yeah, it’s probably a good idea to take it.”
So again, having those plan, having those flexibility, understanding, again, the impact of when you file and either any increase or reduction that would be applied to that full retirement age amount. So that full retirement age amount or your PIA, your primary insurance amount, is determined by your 35 highest years of earnings. So again, if you’ve had 38 years of earnings, it’s going to kick out the three lowest years and then use those 35 highest years into an equation in order to determine that amount.
If you have less than 35 years that you’ve paid into it’s going to factor in a zero for those years that you don’t quite have 35 years. So continuing to work into your 60s or later on in your career, again, is having that cash flow coming in. But it also could potentially lead to a higher social security benefit if your income for that year is able to kick out a lower amount. So again, you have a higher amount that is being factored into those 35 highest years. And so that’s how they come up with those numbers. A lot of times people are like, “Well, how do I get mine?”
And they used to be where they would send you out those paper statements. Those paper statements have been few and far between as of recent times. The most easiest way to get that and to get that information and to be current with that information, like so many other things, is simply to set up your own account through ssa.gov. You can go on there, it says “my social security account” or “my account,” and then simply just create your username, password and create your own account. You can get all that information that we just went over up to date, anytime you want.
You can log in. We’ve had some issues with some people saying they haven’t received their 1099 from the social security benefits that they’ve received. You can go on there and literally print off one from that year if you need one from a previous year. All that information is located on there. So again, going forward, that’s probably, I wouldn’t say going to be required, but pretty much nearly required, I think, going forward as far as setting up that own account. If you’re a married couple, you’ll need to set one of those accounts up for each individual.
You can’t link accounts together. So again, if you have a husband and a wife, each one of you would have to set up your own account through ssa.gov with your own login information. So again, when we start looking at that, it’s, again, important to know what your numbers are going to be. Check your earnings history on… And if you get a paper statement, it’s listed on there. If you have your own account set up, look at your earnings history on there. Making sure that the earnings that they have reported going back to the first day that you ever paid into it, they have a breakdown of year by year, by year by year of what you’ve made.
Make sure that those information and those amounts are somewhat close because, again, those are the amounts that they are going to use to determine the amount that you’re going to receive when you file your benefit. So again, understanding that, making sure they’re accurate, the earlier that you can look at and see any discrepancies, the easier it’s going to be to change and to get those updated with the correct amount. So taking those and then looking at, okay, when do you file? And again, the magical question is, well, you tell me how long you’re going to live, and we’ll tell you exactly when you should take that.
Obviously that gets a little chuckle and people say, “Well, I have no idea.” Well, again, looking at it instead of using it as a return of the money you paid in, looking at it as on the flip side, kind of longevity insurance to say, okay, 20 years down the road would I rather have a bigger benefit or a smaller benefit? If you have other assets, again, sometimes it’s used to coordinate you retire. You have a decent size amount in your 401k, but it is 100% tax deferred, meaning that you have to pay tax on 100% of that money. So again, it’s not what you have, it’s what you keep.
If we can get that money out in a lower tax bracket that’s more in yours and less that you have to pay a taxes on for that amount. Well, that may entail that for a few years after you retire, we may want to delay your social security, kick that income down the road a little bit so we can get a little more out of those retirement accounts at a lower tax bracket. And then also whenever we do decide to turn the social security benefit on it is a bigger benefit. This is especially important if you are married and you are the spouse with the larger benefit.
Again, if you would pass away that larger benefit is the one that’s going to continue on to that surviving spouse. So you’re not just making a decision for you, you’re trying to coordinate that with the cashflow possibly for a surviving spouse as well. So again, a lot of decisions that need to go into this. A lot of things that, again, rely on basically the decision of that. Again, there’s ripple effects to every decision that you make. We want to make sure that, again, when we are making these decisions, we are completely understanding how and when and to what extent it is going to impact anything else that we were doing.
So if you’ve got questions on that, understanding what your benefit is, how to coordinate it, when to claim it, how it fits in, give us a call, we’d be happy to sit down and go over those with you. Did want to mention real quick that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of April will be donated to the Veterans Affair here in Clinton County. Again, this is Nate Kreinbrink 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 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 Incorporated, a broker dealer, member of FINRA, SIPC, investment advisor representative. Cambridge Investment Research advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.