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Bogleheads University 501 2023 - Social Security Rules and Strategies with Mary Beth Franklin


Whisper Transcript | Transcript Only Page

00:00:00.000 | (audience applauding)
00:00:03.160 | All right, our first speaker, Mary Beth Franklin,
00:00:09.800 | is a contributing editor at Investment News,
00:00:11.740 | specializes in Social Security,
00:00:13.220 | Medicare, and retirement income.
00:00:15.040 | She's been a financial journalist for more than 40 years,
00:00:18.820 | and has covered everything from federal budget
00:00:20.760 | and tax policies to consumer finances.
00:00:23.960 | She's been an editor at Kiplinger's.
00:00:26.260 | She became a certified financial planner in 2015,
00:00:29.120 | is now an in-demand speaker at conferences
00:00:31.460 | just like this one all over the place.
00:00:35.100 | She's a frequent guest on radio and TV.
00:00:38.040 | She's a host of the Retirement Repair Shop podcast.
00:00:41.340 | In her free time, she likes to read, garden,
00:00:43.680 | ski, and play the piano.
00:00:44.980 | Mary Beth Franklin, come on up.
00:00:46.620 | (audience applauding)
00:00:49.180 | You probably heard yesterday that the cost
00:00:52.220 | of living adjustment for Social Security for 2024
00:00:55.420 | was just announced, 3.2% as we had expected.
00:00:59.400 | Now, yeah, it's less than half than the 8.7%
00:01:03.060 | we got this year, but keep in mind,
00:01:05.500 | it's also larger than the average cost
00:01:08.840 | of living adjustments over the last 20 years,
00:01:11.380 | which was about 2.6%.
00:01:13.780 | So, yay for people collecting Social Security.
00:01:16.520 | They will actually get a bump about 59 bucks a month
00:01:20.280 | for the average Social Security benefit.
00:01:23.480 | Now, of course, that's only one piece of the puzzle.
00:01:26.520 | For those of you who are collecting Social Security,
00:01:28.780 | you know that your Medicare Part B premiums
00:01:32.120 | are deducted from those Social Security benefits.
00:01:35.560 | Now, we normally don't know till about Thanksgiving
00:01:38.660 | what those premiums are going to be.
00:01:40.800 | Always something to talk to your friends and family
00:01:43.100 | about at Thanksgiving.
00:01:44.400 | But surprise, this morning on the way here,
00:01:47.700 | they announced the Medicare Part B premiums for next year.
00:01:51.780 | And they are merely going up by about $10 a month.
00:01:55.440 | So, that's good news.
00:01:56.720 | The average Medicare Part B premium
00:02:00.160 | will be roughly $175 a month next year.
00:02:03.560 | That goes up by 10 bucks.
00:02:06.120 | The Social Security benefits going up by more than 50.
00:02:09.220 | So, most of you will have a net increase
00:02:12.400 | in your Social Security benefits.
00:02:14.060 | However, because you're successful investors
00:02:16.900 | and may be paying high income surcharges,
00:02:19.940 | known as Income-Related Monthly Adjustment Amount, or IRMA,
00:02:23.780 | as in a hurricane for your healthcare cost of retirement,
00:02:28.020 | they also announced that the new IRMA surcharges
00:02:31.620 | will start at a new threshold of $103,000 a month for singles,
00:02:36.620 | $206,000 for married couples.
00:02:40.020 | So, that may mean, depending on your income,
00:02:42.860 | that if you were paying IRMA this year,
00:02:45.160 | you might slip into a lower bracket
00:02:47.500 | or possibly disappear altogether.
00:02:50.540 | I know when I do my income taxes,
00:02:53.300 | I care less about the tax brackets
00:02:55.640 | and a whole lot about those IRMA surcharges
00:02:58.540 | and do whatever I can as a self-employed person
00:03:02.040 | with a solo 401(k)
00:03:03.780 | to get the numbers below those thresholds.
00:03:06.420 | But today, we're really talking about Social Security.
00:03:09.880 | And obviously, I'm clicker happy here.
00:03:13.760 | We're gonna learn how the claiming age,
00:03:15.960 | marital status, and earnings limit
00:03:18.360 | affect the amount of Social Security benefits.
00:03:21.000 | You're also going to discover how claiming strategies
00:03:25.160 | for married couples, and in some cases,
00:03:28.000 | eligible divorce spouses,
00:03:30.040 | may be able to maximize Social Security benefits
00:03:33.100 | over two lifetimes.
00:03:35.120 | And I really want you all to understand
00:03:37.780 | that Social Security retirement benefits
00:03:40.480 | and Social Security survivor benefits
00:03:43.080 | are two different pots of money.
00:03:45.320 | And depending on your individual circumstances,
00:03:48.180 | it's quite possible you may be able to claim
00:03:50.960 | one type of benefit first
00:03:52.860 | and switch to the other larger benefit later.
00:03:55.960 | You can do it in either order.
00:03:58.000 | And I'll give you an example in a few minutes.
00:04:00.300 | The key is how do you become eligible for Social Security?
00:04:04.300 | This is you-must-pay-to-play kind of game.
00:04:07.200 | You have to work in covered employment
00:04:09.840 | for essentially at least 10 years
00:04:12.220 | to earn the minimum number of 40 credits of covered work.
00:04:17.060 | You can earn up to four credits per year.
00:04:19.660 | Therefore, you have to work about 10 years
00:04:21.660 | to get these 40 credits.
00:04:23.360 | But that does not tell you
00:04:24.660 | how much you will get in retirement.
00:04:27.060 | Your actual benefits are based
00:04:29.100 | on your average lifetime earnings,
00:04:31.540 | which Social Security defines
00:04:33.180 | as your top 35 years of index earnings.
00:04:36.980 | So you work 40 years,
00:04:38.780 | those low-earning years when you're flipping burgers
00:04:41.120 | and delivering newspapers.
00:04:42.240 | Remember those?
00:04:43.080 | I used to write for those.
00:04:44.420 | So those low-earning years go away
00:04:47.220 | and they base your future benefits
00:04:49.820 | on your highest 35 years.
00:04:52.260 | But again, that still doesn't tell you
00:04:54.100 | how much you're going to get each month
00:04:55.860 | because the key is how old are you
00:04:59.240 | when you claim your benefits.
00:05:01.600 | And you all know,
00:05:03.040 | my clicker just stopped working.
00:05:06.240 | Is that a reason?
00:05:07.140 | Okay, help from the back.
00:05:11.040 | You all know that you can claim benefits as early,
00:05:14.540 | maybe it's a power thing.
00:05:15.920 | Oh, that works.
00:05:19.320 | You can claim benefits as early as age 62,
00:05:23.220 | but I bet a whole lot of people in this room
00:05:25.260 | don't plan to do that.
00:05:26.820 | Because if you claim benefits at the earliest age of 62,
00:05:30.460 | your benefits are permanently reduced
00:05:32.860 | by up to 30% for the rest of your life.
00:05:35.540 | And if you claim benefits early and continue to work,
00:05:38.680 | which I think is a really bad idea,
00:05:40.640 | you are also subject to earnings restrictions.
00:05:43.420 | If you make too much, which is about $22,000 a year now,
00:05:47.720 | you will start losing some or all of your benefits,
00:05:50.580 | at least temporarily, due to the earnings cap.
00:05:53.580 | Now, if you wait to your full retirement age,
00:05:55.620 | which is anywhere between 66 and 67,
00:05:58.300 | depending on when you were born,
00:05:59.960 | then you get 100% of those benefits
00:06:02.660 | that you worked so hard for
00:06:04.260 | and paid so much for in the form of FICA taxes.
00:06:07.860 | And even if you continue to work,
00:06:09.840 | you can keep all those benefits
00:06:11.840 | because earnings restrictions go away
00:06:13.800 | once you reach your full retirement age.
00:06:16.100 | But for those people who are willing and able
00:06:19.840 | to delay collecting up until age 70,
00:06:22.920 | there is a huge bonus.
00:06:25.220 | You earn an extra 8% per year.
00:06:29.220 | For every year, you postpone claiming
00:06:32.800 | beyond your full retirement age up until age 70.
00:06:36.300 | So for somebody like me, whose full retirement age is 66,
00:06:40.000 | waiting till 70 means a 32% increase
00:06:43.700 | in my monthly benefits for the rest of my life.
00:06:46.500 | Now, I suspect some of you in here
00:06:48.640 | were born in 1960 or later,
00:06:50.840 | in which case your full retirement age is 67.
00:06:55.040 | It also means that, yes,
00:06:56.780 | you can earn delayed retirement credits,
00:06:59.220 | but unlike me, you're not going to get a 32% increase
00:07:03.060 | because if your full retirement age is 67,
00:07:05.660 | you only have three years between 67 and 70
00:07:09.520 | for a maximum of a 24% increase.
00:07:13.100 | And people will often say to me,
00:07:15.060 | "Hey, my full retirement age is 67.
00:07:17.540 | "Should I wait until 70 to claim?"
00:07:19.900 | And my answer is always the same.
00:07:21.800 | I have no idea.
00:07:23.040 | It will all depend on what interest rates are at the time.
00:07:26.840 | Now, for the past decade,
00:07:28.280 | we have been living in a zero interest rate environment.
00:07:31.780 | So for people whose full retirement age was 66
00:07:35.160 | and who had other sources of income
00:07:37.960 | and were relatively healthy,
00:07:39.720 | hey, waiting till 70 to collect 8% a year
00:07:42.820 | was a slam dunk decision.
00:07:44.760 | We are now getting to 5% plus in interest rates
00:07:48.800 | on fixed investments, like a CD.
00:07:51.100 | So this decision may be a little less tantalizing
00:07:54.780 | going forward.
00:07:56.580 | This is the most powerful graphic I can show you.
00:08:00.320 | The difference between claiming your benefits
00:08:02.680 | as soon as possible at age 62
00:08:05.440 | versus waiting until the maximum age of 70
00:08:09.280 | increases your social security benefits
00:08:11.740 | by 76% per month for the rest of your life.
00:08:16.380 | Now, as a certified financial planner,
00:08:18.460 | there is no investment I can suggest to you
00:08:21.560 | that is going to increase your income by 76%,
00:08:25.120 | essentially over an eight-year investment period.
00:08:28.100 | But instead of investing your money,
00:08:29.660 | you're investing your life.
00:08:31.900 | Now, who gets those delayed retirement credits?
00:08:34.160 | It's very important to understand
00:08:36.040 | they are delayed retirement credits.
00:08:38.900 | They only apply to a worker's own retirement benefit.
00:08:43.180 | If I am not eligible for social security
00:08:45.420 | on my own earnings record,
00:08:46.880 | or I am, but it's a small benefit,
00:08:49.320 | and I'm married,
00:08:50.780 | well, I'm also entitled to a benefit as a spouse.
00:08:54.220 | My spousal benefit is worth up to 50% of my working spouse,
00:08:59.760 | my husband, my wife's full retirement age benefit.
00:09:03.020 | But that maximum amount
00:09:04.760 | is if I claim at my full retirement age.
00:09:08.100 | It does not continue to grow by 8% a year up until age 70.
00:09:12.480 | That only applies to a worker's own benefit.
00:09:15.380 | Same thing with survivor benefits.
00:09:18.040 | If I am a surviving spouse,
00:09:20.040 | or in some cases, an eligible surviving ex-spouse,
00:09:23.720 | my survivor benefit is worth up to 100%
00:09:27.420 | of what my late husband, late wife, late ex
00:09:31.260 | was entitled to if I claim it at my full retirement age.
00:09:34.700 | It does not continue to grow.
00:09:36.700 | I cannot tell you how many financial advisors
00:09:39.300 | I have talked to who said,
00:09:40.660 | well, my client was recently widowed,
00:09:43.040 | and I told her to wait till 70
00:09:44.700 | to get the biggest survivor benefit possible.
00:09:47.140 | No, you don't.
00:09:49.140 | The biggest survivor benefit
00:09:50.700 | is if he or she claims at her full retirement age.
00:09:53.980 | It does not continue to grow.
00:09:56.040 | So the big question for everybody here is should you delay?
00:10:00.020 | Certainly the pros are the longer you wait up until age 70,
00:10:03.720 | the bigger the benefit you get.
00:10:05.620 | And by having a bigger benefit each year
00:10:08.820 | when there's a cost of living adjustment,
00:10:10.800 | that percentage is applied to a bigger base.
00:10:14.260 | So in dollar terms,
00:10:15.700 | you end up with a bigger increase each year.
00:10:18.900 | It's also very important for married couples to consider,
00:10:23.640 | because if you have at least one spouse,
00:10:26.520 | preferably the one with the bigger Social Security benefit,
00:10:29.880 | who tends to be the man, who is often the higher earner,
00:10:33.680 | and who, sorry guys, actually is going to die first.
00:10:37.360 | That's the person you want to wait till age 70,
00:10:40.620 | because you're creating the biggest retirement benefit
00:10:43.560 | during that person's lifetime.
00:10:45.640 | And if that person dies first,
00:10:47.540 | it is now creating the largest possible survivor benefit
00:10:51.580 | for the spouse left behind.
00:10:53.700 | Now, it's not a slam dunk decision.
00:10:56.140 | Hey, if you need the money, that's what it's there for.
00:10:59.120 | Go ahead and take it.
00:11:00.540 | And I'll tell you a few secrets at the end of this
00:11:02.780 | of how to reverse that decision if you change your mind.
00:11:06.520 | If you're in poor health,
00:11:07.960 | the whole idea is waiting until age 70
00:11:11.600 | to collect the biggest benefit possible
00:11:13.660 | is a bit like the lottery.
00:11:15.340 | You must be present to win.
00:11:17.240 | If you don't think you're going to be around a long time,
00:11:19.940 | maybe you don't want to wait.
00:11:21.740 | And a lot of people really freak out
00:11:23.900 | at the idea of dying before they claim.
00:11:28.140 | I usually say to them, what do you care?
00:11:30.340 | You're dead.
00:11:31.180 | Your spouse will be real happy if you wait until 70.
00:11:35.620 | And then they say, well, what's the breakeven age?
00:11:37.900 | You're a bunch of engineers and nerds out there.
00:11:40.220 | I know you asked that question.
00:11:41.820 | So yeah, frankly, how long do I have to live
00:11:44.380 | to make the decision worthwhile to delay those benefits?
00:11:48.580 | The difference between claiming at 62
00:11:50.700 | and full retirement age is roughly you have to live till 78.
00:11:54.540 | Anything past that is gravely you would have gotten more
00:11:57.300 | in social security benefits over your lifetime.
00:11:59.660 | 78 is less than the average life expectancy,
00:12:03.120 | which is about 86 for a 65-year-old woman,
00:12:06.780 | 84 for a 65-year-old man.
00:12:09.540 | What about the difference between claiming at 62 versus 70?
00:12:13.140 | Yes, you have to live till about 83
00:12:15.740 | to make that a worthwhile decision.
00:12:17.500 | Again, less than average life expectancy.
00:12:21.020 | Think about this from a married couple standpoint.
00:12:24.060 | That breakeven age is essentially spread over two lives
00:12:28.500 | because someone is likely to get the survivor benefit.
00:12:31.680 | I just briefly mentioned the earnings cap.
00:12:35.380 | If you claim benefits before your full retirement age
00:12:39.060 | and continue to work and have earnings
00:12:41.500 | from a job or self-employment,
00:12:44.180 | not other types of earnings like pension,
00:12:46.720 | other government benefits, investing, none of those count.
00:12:50.780 | But if you claim benefits before your full retirement age
00:12:53.980 | and continue to work and make too much money,
00:12:56.900 | this year it's about $21,000 a year,
00:12:59.380 | next year it's about $22,000 a year,
00:13:02.020 | now you're gonna lose some or all of your benefits,
00:13:05.420 | but not forever.
00:13:06.880 | Once you reach your full retirement age,
00:13:09.140 | social security will recalculate your benefit
00:13:12.020 | and they'll say, "Hey, Mr. Johnson,
00:13:13.580 | "I see you claimed your benefits at 62
00:13:16.020 | "and you took a 30% haircut.
00:13:19.020 | "But I also see that over the last several years,
00:13:22.640 | "you have forfeited two years worth of benefits
00:13:26.260 | "due to excess earnings."
00:13:28.200 | So now going forward, you reach your full retirement age,
00:13:30.920 | we're gonna pretend that instead of claiming at 62
00:13:34.120 | and taking a 30% haircut,
00:13:36.160 | you claimed at 64 and take a smaller haircut going forward.
00:13:40.760 | So benefits you have lost due to excess earnings
00:13:44.360 | are restored to you in the form
00:13:46.740 | of larger monthly benefits going forward.
00:13:50.000 | So my number one rule, as I mentioned before,
00:13:52.240 | is if you're gonna keep working,
00:13:54.360 | don't collect social security.
00:13:56.020 | It's simply an accounting nightmare and not worth it.
00:13:59.800 | I also mentioned,
00:14:00.860 | and I'm trying to be really good on time here,
00:14:02.940 | strategies for married couples
00:14:04.900 | that it makes most sense for one spouse,
00:14:08.380 | preferably the one with the biggest benefit,
00:14:11.020 | to wait up until age 70,
00:14:13.140 | to lock in not only the maximum retirement benefit
00:14:16.580 | during your life,
00:14:17.740 | but potentially the largest survivor benefit
00:14:20.940 | for the spouse left behind.
00:14:23.060 | But having said that,
00:14:24.820 | it might make sense for the other spouse,
00:14:27.420 | the lower earning spouse,
00:14:28.920 | to go ahead and collect benefits early at 62,
00:14:32.620 | if he or she is no longer working,
00:14:35.460 | or at full retirement age, if they are still working,
00:14:39.340 | it brings some cashflow into the household,
00:14:42.940 | takes away a bit of the sting
00:14:44.600 | of having the other spouse wait till 70,
00:14:47.580 | and there's no downside.
00:14:49.300 | Because even though that wife, let's say,
00:14:52.260 | claims her own retirement benefits early at 62,
00:14:55.700 | and those retirement benefits are permanently reduced
00:14:58.700 | for the rest of her life,
00:14:59.940 | it will have no impact on her survivor benefit
00:15:03.580 | if she is at least full retirement age at the time.
00:15:07.000 | So she could collect reduced retirement benefits first,
00:15:10.640 | and when she becomes widowed,
00:15:12.380 | she could collect full survivor benefits
00:15:15.060 | worth up to 100% of what her late spouse was collecting.
00:15:19.320 | Now, if you're like a typical dual income couple,
00:15:23.340 | many wives have worked all their lives,
00:15:25.200 | and often not making as much as their husband.
00:15:27.980 | They may have their own retirement benefit,
00:15:30.580 | and they are also entitled to a spousal benefit
00:15:34.100 | because they are married.
00:15:36.100 | So if my own retirement benefit
00:15:38.860 | is bigger than half of my husband's,
00:15:41.200 | that spousal benefit goes to waste.
00:15:43.020 | I just get my own retirement benefit.
00:15:45.540 | If, however, my own retirement benefit is smaller,
00:15:48.900 | and once my husband claims his,
00:15:51.540 | it's gonna trigger a spousal benefit for me.
00:15:54.220 | So I am gonna get the larger of the two amounts.
00:15:57.620 | But let's say I was a stay-at-home spouse,
00:16:00.000 | take care of the kids,
00:16:01.000 | never earned my own retirement benefit.
00:16:03.940 | Sure, I am entitled to a spousal benefit
00:16:07.160 | once my husband claims his to trigger a benefit for me.
00:16:11.620 | So in couples like that,
00:16:13.100 | it might not make sense for the husband
00:16:16.060 | to wait till 70 to claim
00:16:17.960 | because the other spouse also has to wait
00:16:21.500 | for him to claim before she gets her benefit.
00:16:24.620 | You might wanna look at
00:16:25.540 | your other sources of retirement income.
00:16:27.940 | How do we make this plan work?
00:16:30.260 | The goal of most married couples should be
00:16:32.900 | how do I maximize the survivor benefit?
00:16:36.100 | I do this by having one spouse wait until 70
00:16:39.900 | to claim the biggest amount.
00:16:42.220 | Now, here's my favorite part, rules for divorce spouses.
00:16:45.740 | I will say that I personally have been married for 45 years,
00:16:49.180 | so it does not apply to me.
00:16:50.580 | Yes, that is Purple Heart territory in some cases.
00:16:53.420 | I have two best girlfriends
00:16:56.220 | who are each married nine and a half years,
00:16:59.500 | and apparently their divorce attorney never told them
00:17:02.580 | that they had to be married at least 10 years
00:17:05.720 | in order to be able to claim benefits
00:17:08.060 | on an ex-spouse's record.
00:17:10.340 | So if you remember nothing else from my presentation,
00:17:14.020 | tell your friends, families, girlfriends,
00:17:15.780 | everyone around here that the rule for social security
00:17:19.620 | is there must be at least a decade
00:17:21.940 | between I do and I don't.
00:17:24.860 | If your marriage is falling apart in years eight and nine,
00:17:27.520 | string out the paperwork.
00:17:30.540 | The only dates that married
00:17:32.340 | are the day you walk down that aisle
00:17:34.480 | and the date of your final divorce decree.
00:17:37.180 | I have had financial planners
00:17:38.900 | send me information about their clients,
00:17:41.220 | and I will see there might be nine years,
00:17:44.260 | 11 months, in 29 days, they will get squat.
00:17:47.300 | Don't let that happen to your friends and family.
00:17:49.540 | So here's the basic rule.
00:17:50.820 | If you had been married at least 10 years,
00:17:53.680 | divorced, and currently single,
00:17:57.180 | you may be eligible to collect on your ex's earnings record
00:18:02.020 | if it is larger than your own.
00:18:04.380 | Now, if you remember and mentioned that for married couples,
00:18:07.900 | currently married couples,
00:18:09.580 | if one spouse is not eligible
00:18:12.160 | for her own retirement benefit,
00:18:14.260 | she can still get it as a spouse.
00:18:16.580 | Well, imagine a really nasty divorce,
00:18:19.580 | and one ex-spouse says to the other,
00:18:21.500 | "I am never gonna retire,
00:18:23.140 | "and you are never gonna get a dime on my social security."
00:18:26.460 | Well, Congress thought that was a problem.
00:18:28.980 | So among the 2,700 rules that govern social security benefits
00:18:33.820 | there are a lot of exceptions,
00:18:35.460 | and a lot of the exceptions apply to divorced spouses.
00:18:38.660 | So here's the first one.
00:18:40.080 | In addition to being married at least 10 years,
00:18:42.500 | divorced, and currently single,
00:18:44.820 | if you had been divorced at least two years,
00:18:47.260 | and you're each at least 62 years old,
00:18:49.860 | and therefore eligible for social security,
00:18:52.340 | you can collect on your ex
00:18:54.100 | even if your ex has not yet claimed.
00:18:56.580 | You are known as an independently entitled spouse.
00:19:00.500 | Well, what about if your ex dies?
00:19:04.740 | This is the silver lining for divorced spouses.
00:19:07.400 | Here's a little refresher course.
00:19:11.460 | Your spousal benefit while your ex is alive
00:19:14.140 | is worth 50% of his or her full retirement benefit.
00:19:17.820 | Your survivor benefit after your ex dies
00:19:20.540 | is worth 100% of your survivor benefits.
00:19:24.180 | You're all math geniuses out there.
00:19:26.580 | Yes, your ex is worth twice as much dead than alive.
00:19:30.260 | But you probably knew that anyway.
00:19:32.780 | One other weird little exception for divorced spouses,
00:19:36.360 | I told you, you must be married at least 10 years,
00:19:39.140 | divorced, and currently single to collect on a living ex.
00:19:42.340 | But guess what?
00:19:43.700 | If you wait till age 60 or later to remarry,
00:19:48.020 | you still can't collect on a living ex,
00:19:50.140 | but you can collect on a dead ex
00:19:52.460 | even if you're married to someone else.
00:19:54.860 | I don't make up the rules,
00:19:56.220 | I just try to explain the madness.
00:19:58.780 | And as I mentioned, if you're entitled
00:20:01.700 | to a survivor benefit and a retirement benefit,
00:20:04.820 | you may be able to claim one first
00:20:07.100 | and switch to the other later.
00:20:09.260 | Two minutes left?
00:20:10.200 | Four minutes, oh, I can do a lot in that.
00:20:14.700 | For example, let's say my husband has died.
00:20:17.820 | I'm a 62-year-old widow.
00:20:19.460 | I have my own retirement benefit,
00:20:21.220 | but I'm not working at the moment.
00:20:22.900 | My benefit as a survivor is much bigger.
00:20:25.380 | What should I do?
00:20:26.540 | I would say claim your reduced retirement benefit right now,
00:20:31.100 | and even though it's permanently reduced,
00:20:33.740 | don't worry about it
00:20:34.820 | because when you get to your full retirement age,
00:20:37.180 | you are now going to switch to your full survivor benefit
00:20:40.980 | worth 100% of what your late husband was entitled to
00:20:44.980 | or was claiming at the time he died.
00:20:47.280 | But what happens if you're a business executive?
00:20:49.780 | You've lost your wife to breast cancer when she's young.
00:20:53.260 | You're also entitled to a survivor benefit,
00:20:55.980 | but hey, you're still working,
00:20:57.180 | you're making a lot of money, what should you do?
00:20:59.680 | When you reach your full retirement age,
00:21:01.700 | when the earnings restrictions go away,
00:21:04.060 | you should claim your full survivor benefit.
00:21:06.860 | But in the meantime, your own retirement benefit
00:21:09.980 | continues to grow by 8% a year up until age 70,
00:21:14.260 | and then at age 70, you would switch.
00:21:17.100 | And for the singles out there, got nothing for you.
00:21:20.220 | It all comes down to what is your average lifetime earnings
00:21:25.260 | and the age when you claim.
00:21:27.060 | I would say absolutely try to wait
00:21:29.140 | till at least your full retirement age to claim.
00:21:32.340 | Remember, that's when the earnings restrictions go away,
00:21:34.660 | so even if you continue to work,
00:21:36.460 | you could claim at full retirement age.
00:21:38.460 | Do you wanna wait till 70?
00:21:40.220 | That's a tougher decision for singles.
00:21:42.500 | Yes, certainly you will get a bigger benefit,
00:21:45.500 | but if you happen to die before you claim,
00:21:48.900 | you do not have any survivors
00:21:50.760 | and that money just goes back into the social security pool.
00:21:53.980 | So for a lot of singles, they feel more comfortable
00:21:57.220 | claiming at full retirement age,
00:21:58.780 | even if they don't need the money,
00:22:00.700 | and then they can bank it,
00:22:01.980 | and now at least you're gonna get about 5.5% in a CD.
00:22:05.940 | For any of you people who were public employees
00:22:09.340 | in states that don't pay into the social security system,
00:22:12.620 | California, Texas, Louisiana,
00:22:14.540 | a bunch of the New England states, Illinois, Ohio,
00:22:17.800 | if you receive a public pension based on work
00:22:22.460 | where you didn't pay FICA taxes
00:22:24.460 | and you also entitled the social security benefit,
00:22:27.340 | you'll get it, but it will be reduced.
00:22:29.860 | If on the other hand, you have a public pension
00:22:32.620 | based on work where you didn't pay FICA taxes
00:22:35.380 | and now you try to claim as a spouse or a survivor,
00:22:39.100 | probably not gonna get anything
00:22:40.700 | 'cause the very onerous government pension offset,
00:22:43.820 | GPO, also known as grumpy partner rule,
00:22:46.900 | says that if I have a public pension
00:22:49.060 | based on work where I didn't pay FICA,
00:22:51.300 | social security is first gonna reduce any potential benefit
00:22:54.340 | by 2/3 of the amount of my pension.
00:22:56.480 | My pension is $6,000 a month,
00:22:58.360 | 2/3 of that is $4,000 a month,
00:23:00.700 | subtracted from a potential social security spousal,
00:23:03.420 | survivor benefit, probably gonna wipe it out.
00:23:06.140 | So the planning key there is if you're in a married couple
00:23:09.380 | where you have one public employee
00:23:11.700 | who is not likely to be eligible for a survivor benefit,
00:23:15.340 | then you and the private sector
00:23:17.220 | may not wanna delay till 70
00:23:19.460 | because one of the goals
00:23:20.780 | is to maximize the survivor benefit.
00:23:23.180 | But if your surviving spouse can't get it,
00:23:25.520 | I'd say take it at full retirement age
00:23:27.840 | and enjoy your retirement.
00:23:29.660 | I will stop there because I'm right at my time.
00:23:32.220 | There are more slides here.
00:23:34.980 | Feel free to review them and ask me questions later.
00:23:38.460 | Thank you.
00:23:39.300 | (audience applauding)
00:23:42.460 | (audience cheering)
00:23:45.460 | [BLANK_AUDIO]