Ep. 278 – Navigating Your Social Security Retirement Benefits

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In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss the intricacies of Social Security retirement benefits and answer some of the most commonly asked questions. They break down key topics such as when and how to apply for Social Security benefits, understanding the taxation implications, and how to maximize your benefits.

Listen in to learn about the various factors you should consider when deciding when to apply for Social Security benefits, how Social Security benefits are calculated, and how different types of income, like IRA withdrawals, might impact your benefits. They also delve into common pitfalls to avoid and provide strategies for protecting yourself from Social Security scams. Whether you are just beginning to think about retirement planning or are already navigating the complexities of Social Security, this episode offers valuable insights to help secure your retirement.

In this episode, find out:

·      When and how to apply for Social Security benefits to maximize your payout.

·      The impact of taking Social Security benefits before full retirement age.

·      How different types of income affect your Social Security benefits.

·      Strategies to avoid common Social Security scams.

·      The importance of accurate income reporting for your Social Security record.

Tweetable Quotes:

·      “Social Security is something you only apply for once, so it’s crucial to get it right the first time.” – Radon Stancil

·      “Income from your investments doesn’t count against your Social Security benefits, but earned income does.” – Murs Tariq

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript: 

Radon Stancil:
Welcome everyone, to the next episode of Secure Your Retirement. And today, we are tackling a topic that, well, it’s probably one of those love-hate scenarios. You don’t like paying the taxes for social security whenever you’re building up to it. Then when you finally do get to retirement age and you start taking social security, it’s a big deal and people want to make sure that they get the maximum benefit. And obviously, you only do it once, you only apply once. So there’s a lot of questions around this whole idea of social security.
So really, the theme of this one is just navigating this idea of social security. How do we do it? What are some things that we might need to be made aware of? So some common questions that we’re going to handle today, because this is a big one for us. In the world of helping people think about retirement, which is what we do, this question of social security, what are the rules, how does it work, comes up all the time. So we’re going to just kind of go through some common things on this particular topic. So let’s get into our first one here, Murs.
Murs Tariq:
Yeah. And just to preface, this episode is not so much about the proper time to take social security. That’s a very individualized type of question. And for that we have resources. We’re very well versed on social security. We put it into the financial plan. We help our clients make that decision. We also have a social security consultant that helps and aids us along the way, as far as running the numbers and crunching the numbers and helping people make the right decision. Today is really more about those frequently asked questions that we constantly get.
The first one I’m going to talk about is, it seems simple, but it’s a question, because like Radon said, you only do it once. You’re not really trained on how to do it. So when and how to apply for social security benefits. So the when is your window opens up four months before your desired start date. Your desired start date can be as early as age 62. That’s the absolute earliest that you can take traditional social security. And the latest you can take it, or let’s say when benefits stop growing for you, is age 70. So 62, if you take it early. Obviously, it’s going to be a smaller amount. 70 is your maximum amount. So whenever you’re ready to initiate social security, you’ve got a four-month window before that start time. So keep that in mind, that you can go ahead and get it done well ahead of time.
And the advice we’ve heard from the social security consultant that we work with, is you want to get it at… If you know you’re going to take it at a certain age, go ahead and do that application process three, four months in advance, because they are backlogged and there’s a lot of people receiving those benefits, so it takes time to process.
Which then leads me to how to apply. How do you apply? Again, the most common feedback that we get from the consultant is the best way, the smoothest way, the easiest way to apply is on the government website, ssa.gov. They’ve got a lot of tools on there. How you’re going to start that process, is you create a login and they ask you questions to create that login. But once you have that login, you can run numbers to understand what your 62 benefit is, what your full retirement age benefit is, what your 70 is. And then eventually, you can use that same website, that same portal to apply for your benefits. That’s what I’ve heard is the smoothest. They put a lot of resources into that website to help people navigate.
But you can also, if you don’t like doing things online, you can do it by phone. There is a phone number for Social Security Administration. It’s +1 (800)-772-1213. And there are standard hours of operation there, typically from 8 AM to 7 PM. So you could call in. Now just realize when you call in, a lot of times people are hoping to get advice when they call in. Social security, the person on the other line, they’re not responsible to provide you advice. Now, you can ask questions and they’ll give you answers, but if you ask them a leading question of what’s better for me, they can’t give you that response. So it’s purely informational types of answers they’re going to be able to give you there. And you can apply that way as well.
And then the last way you can do it is in person. This obviously, if you like the face-to-face type of contact. The only caveat here is from what I’ve heard is appointments are rather difficult to get. You may be waiting a long time. So keep in mind that four-month window to apply and get the benefits rolling. And so you want to stay ahead with the appointment process, if you want to meet with someone in person at your local social security office.
Radon Stancil:
All right. Now our next one that we’re going to talk about is understanding the maximum social security retirement benefits. Now, social security, the amount I get is really based on the amount of earnings that I have. And then there is, if I am maxing out social security benefits or what I have to pay into it, right now, that pretty much is somebody who is making today about 160 to $70,000 a year. You are maxing out. Meaning, if I make any more than that, I don’t have social security tax anymore. So I’m maxing out that benefit. So if a person’s been in that income range for a number of years, then you’re going to get the maximum benefit. If you’ve made less than that, you might get a little bit less.
So just to kind of give you an idea, if you’re ever thinking and you’re sitting there and you’re going, “Wait, what’s the most that I could ever make in social security?” Here are the numbers for this year, which is 2024. Age 62, so if I’m 62 and I’ve been funding social security to the max, at age 62, if I started my benefit this year, my maximum amount that I could get would be $2,710. If I were 67, which is full retirement age. If you look at that, they call it FRA, full retirement age. In 2024, I would get $3,822. Now, if I have delayed social security and I am age 70 this year, 2024, and I have been maxing out my social security, I will get $4,873. So that’s the maximum, no matter how much you made. You could have made a million dollars a year, those are the maximums that you’re going to get for this year, in 2024.
Murs Tariq:
Okay, our next section is talking about full retirement age. This one is, it’s hard to really know what it is, unless you’ve already been to the social security website or you’ve seen that letter that they used to send out annually, letting you know. Full retirement age used to be age 65. But as people have lived longer and medicine has created longevity and everything like that, they’ve been moving the full retirement age up by months. So some of you, your full retirement age may have been 66, and then a handful of you a 66 and two months, three months, six months, 10 months.
Today, where we sit, in 2024, if you’re turning 62 in 2024, your full retirement age is age 67. Well, what is the meaning of that? Well, I think the biggest thing out of that is, obviously, Radon just gave you the max benefit that you can reach at FRA for 67 in 2024, is 3,822. So the Social Security Administration establishes full retirement age. That doesn’t mean that’s the proper time to retire, they’ve just established that age. One caveat to know is that when it comes to income, if you’re earning an income through salary or wages or whatever, and you decide to take social security prior to your full retirement age, you want to be careful about how much you earn, because there is a reduction of benefit if you earn a certain amount or above. This episode is not to really get into the nitty-gritty on how that works. Just realize that if you earn a certain amount, just say around 20,000 or more a year, and you are drawing social security before your full retirement age, you may be susceptible to a reduction of benefit in your social security.
Once you go past age 67 and you are full retirement age, the Social Security Administration basically says, “Hey, you can make as much money as you want. You’ve achieved full retirement age status, so we are no longer going to reduce your benefit.” So just a clarification there, that you may want to think about in your financial planning process.
Another number that becomes important to people is not social security related necessarily, it’s Medicare. Medicare, the age of eligibility is 65. So keep that in mind. A lot of people will put Medicare and social security kind of hand in hand. But full retirement age for social security is we currently 67, whereas Medicare you can enroll at age 65.
Radon Stancil:
All right, our next one is impact of IRA withdrawals on social security benefits. Now, Murs just talked about the fact that if I make more than around, say, $20,000, I would have a reduction in my IRA… I’m sorry, my social security benefits, if I was taking social security prior to full retirement, or today, age 67. Well, what about IRA withdrawals? That’s income, right? Or what about pensions and annuities? And what if I’ve got investment income? Maybe I’ve got a stock portfolio or I’ve got rentals, and I’ve got income coming in that way. That does not count against your social security benefits. So again, anything that I’m getting that’s, in all essence, passive, it’s not what we call earned wages. So if I were to do something, like I was a consultant and I got a 1099, or I was working somewhere part-time, got a W-2. So if I’m self-employed and I’m actually creating wages, that counts towards social security. So think 1099, W-2 kind of thing. But if I’ve got an investment, a rental, annuities, IRAs, pensions, all of that does not count against social security benefits.
Murs Tariq:
And one thing I’ll add to that before I move on, is that your income does matter from a taxation perspective. So Radon was talking about reduction of benefits. We have done a separate podcast on how social security is taxed. A lot of times people are under the impression that social security is not taxed, and it seems almost unfair that it is taxed. That’s a whole political debate. But social security can be taxable, depending on how much income you earn. So there’s taxation on social security and then there’s what Radon is talking about, reduction of benefits because of certain types of income. So those are things that if you’re in that boat and you want to understand it more, we’re happy to address it or speak to your financial professional about it to get a clear understanding, before you make that social security decision.
Okay, so the next one we’ve got, this is a rather uncommon one, but in my experience I’ve actually to deal with this once or twice, and that is withdrawing your social security claim. What that really means is I want to turn off my social security because maybe I decided too quickly to take it. Or maybe I got laid off, didn’t think I had any prospects for a job, decided to take social security, and then found another great job and had no need for social security any longer. I’ll give you a quick story. A client of ours decided to take social security. And then as we’re going through some tax strategy and tax planning for this particular client, she didn’t necessarily need the social security income at this point in her life, and tax planning and Roth conversion planning was way more important to her. So we ultimately decided to return the social security, turn it off so that she’s got less income, so we can maximize a tax strategy for her.
It’s a little bit of not the smoothest process of turning it off. So you want to be sure when you turn it on, that it’s the best. But if you do want to turn off social security, just realize that there is an application process around it. And if you’ve received dollars from the social security, they’re going to expect you to pay that back. And there’s some tax documents involved with it, too. And then there’s a pretty decent processing time. So all that to say, is that when you make the decision to take social security, let’s make sure it’s the right decision for you.
Radon Stancil:
All right, this is our last one, is protecting yourself against social security scams. Now this is become more and more of an issue with all of the different scams that we get. We get them sometimes on a text message, sometimes we get them in an email, and then sometimes we actually get a phone call and the person could be claiming that they are calling you about your social security benefits.
So let’s talk about first, when would you legitimately get a call from social security? Well, let’s say that I’ve applied, I’ve put an application in, or I’m making a claim of some sort, so I’m interacting. I’ve led the deal here with Social Security. I could get a call back from Social Security, helping me with that particular claim or question or social security benefit. So that would be legitimate. Somebody calling you from the Social Security Administration, maybe from the local office, just working with you on something that you have initiated. That’s key. You’ve initiated this. The key is that social security will not just reach out to you if you’ve not initiated contact.
So if you ever get a call and they are talking about taking legal action against you or they say that your social security number has been suspended, or they tell you that you have to make a payment, or they needed cash or a gift card or wire transfers, or they request your personal details over the phone, all of that would be a scam. Don’t fall for it. If they tell you that your benefit’s about to be taken away, they tell you it’s going to be delayed, that is not the facts. If you are really concerned that there may be something legitimate, you do not tell that person. You hang up and then you go to the ssa.gov website, and you officially call Social Security. Or go to the social security office in your local area. And then say, “I got this call. Is there anything going on with my social security?”
Now I would tell you, I would feel safe to say that there’s nothing going on with your social security because they don’t do that, and so it’s just a scam. But if you’re really nervous and you just got to go check it out, because you can’t sleep, go do it that way. Do not ever share your information with somebody calling and saying that that’s what they are there to do.
We wanted just to go through a couple of these topics. We hope it’s been beneficial. We do have something we’d like to give you though, that we have created, which is a checklist. It’s, 2024: What Issues Should I Consider With My Social Security Retirement Benefits? It’s going to talk about some general things. It’s going to talk about claiming issues. It’s going to talk about tax issues. So it’s a real nice tool to kind of help you think through, well, like the first one here, I like it a lot, is, “How do I know if my income is reflected accurately for social security?” Because that’s going to affect how much I get. Well, there’s a way you can do that, and it walks you through that. So if you would like to get the checklist, reach out to the office, (919)-787-8866, and let them know that you would like this. And they’ll get it out to you as soon as possible.
All right, we hope you have a great week. We’ll talk to you again next Monday.