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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to how to retire on time. A show that answers your questions about retirement, income, taxes, social security, health care, and more. This show is an extension of the book, how to retire on time, which you can grab today on Amazon or go to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, how to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much cover it all.
Mike:Now that said, please remember this is just a show. Everything you hear should be considered informational only as in this is not financial advice. If you want financial advice, then request your wealth analysis by going to www.yourwealthanalysis.com. That's www.yourwealthanalysis dotcom. Doesn't cost you a dime to start exploring your lifestyle and legacy potential with someone from my team here at Kedric.
Mike:Now with me today, a part of my team, one of my colleagues, mister David Frandsen is joining me. David, thanks for being here today.
David:Yeah. Glad to be here.
Mike:Now David's gonna be representing you. He's gonna be reading your questions, and I'm gonna do my best to answer them. So you can send those questions in right now or really anytime, but right now especially. Just text them in 913-363-1234. That's 913-363-1234, or you can email them in hey mike at how to retire on time dot com.
Mike:That's hey mike @ how to retire on time dot com. Let's begin.
David:Hey, Mike. I'm trying to figure out whether I should file for Social Security. I am told over and over that I should file at 70 years old because I have good health and I believe that I'll live longer than most. The problem is I don't want to wait until I'm 70 to retire.
David:That sounds reasonable.
David:How do you figure out when to file?
Mike:So Social Security is tricky because there's an emotional play here that says I want to get the maximum dollars amount of Social Security. Okay. The maximum dollars out of Social Security is the wrong question to ask. That may not sound reasonable at first, but let me walk you through this. What's more important, maximizing your estate, maximizing your income, or getting the most from Social Security?
Mike:Because all three of those questions have a different outcome.
David:Yeah. It's almost like a Goldilocks here. Like, how do you like your porridge? Right? Too hot?
David:Too cold? Just right? I don't know.
Mike:Yeah. Well, if time is your most precious commodity, then when do you want to retire? And then put a stake in that in the ground. That is that is the date. And if you can afford to retire, then great.
Mike:Social security is intended to be, in my opinion, a complement to the lifestyle that you want to live, to when you want to retire.
David:That makes sense. It
Mike:and there's this expression that I created years ago. It says if you file too early, your income could be hurting. But if you file too late, you could be hurting your estate. Here's what I was trying to say with that. If you file income too early, so you're filing for Social Security, let's say, 62 years in a month, then you're taking the income at a significant discount that never really recovers.
Mike:You kind of locked in that discount for life, and that's if you don't live a long time, maybe it's good, maybe it's not good. But when you file early, because you're taking income for social security, you don't have to take as much from your portfolio to bridge the gap because there's, at the end of the day, a certain income number that you want. And it's just a mixture between social security maybe you've got pension, maybe you've got rental income, but social security and your portfolio are really the the 2 that you're calculating here. If you're taking income from Social Security, you take less from your portfolio. If you delay your Social Security, you take more from your portfolio and that's where the ladder comes in.
Mike:If you file too late, you could be hurting your estate. If you file Social Security at 70 years old, which may give you the most dollars from social security, you may actually drain your estate, your portfolio down over the 10 years. Let's say you're retiring at 60 years old, you wait till 70, you file for social security, that's 10 years that you're taking additional income. You've put additional stress on your portfolio, and it may never recover. It may recover.
Mike:No one knows the future. No one knows your, any sort of life style event that may happen. No one knows if the markets are gonna tank. We don't know if we're gonna enter into a flat market cycle. We may be in a flat market cycle right now.
Mike:And so it's a risk of putting extra pressure on your portfolio. But if the portfolio is structured correctly, you, in theory, would have more to work with later on because you've gotten a higher income. When you turn 70 and you file for Social Security, your portfolio then has a huge relief. And so if you were to pass, and I'm getting a little bit nuanced here, but if you were to pass at, let's say, age 95 or a100, you may have more in your estate to give if you were to wait till 70. But if you pass at 65, 70, 75, 80, you may have more in your estate to pass to the kids because you filed early and you gave relief.
Mike:Here's what I'm getting at. Social Security is so nuanced on when you file because it affects everything in your plan. It affects your estate planning. It affects your income. It affects your income strategy from your portfolio.
Mike:For those of you that are not buying an annuity, turning on that lifetime income, you've got to figure out how to pull income out of your portfolio without accentuating losses. We implement the reservoir strategy for that, which you can read about in my book, How to Retire on Time. Basically, it's taking some principal guaranteed accounts. So when the markets go down, you draw income from your reservoir, a principal guaranteed source. And when markets are up, you can draw income from anywhere.
Mike:But many people don't understand the trade they're making by when they file. There are too many social security optimization reports that only focus on how long you believe you will live and when you should file, and that's it. And then another wrinkle in this too is the tax planning. So let's say you have the majority of your assets in in an IRA or in a 401 k, a pretax account. You may actually want to delay your Social Security so you have more room within the tax brackets you're working within to take income and convert assets from IRA accounts to Roth accounts, pretax to after tax, so that when you turn social security on, you don't you don't need to do that, right?
Mike:Social security turns on. You've got less room from a tax standpoint, but now you're more tax efficient.
David:Makes sense.
Mike:Yeah. The the the question, when should I file? It's not isolated. Social Security effect and you have to run this through a comprehensive and holistic analysis or you're gonna miss it. You're gonna miss so many possible strategies.
Mike:You may create significantly more inefficiencies within your portfolio from a tax and legacy standpoint because you're trying to get the the maximum dollars from Social Security. It's just what's more important, the money you have or the money you're gonna take from an organization? Two different things to solve for. Most people, once they realize this, focus on their estate and then let it let it go from there. But yeah, don't make the emotional decision.
Mike:Don't say I paid them to us. I'm gonna get the most money out of it. No. It's how does this complement your overall plan? If you have more money if you have more than $1,000,000, it's a totally different situation than if you have 250, 500 or 700,000 of assets for retirement.
Mike:If you have 500,000 or less, for example, you may file in a way that converts enough of your assets to then get tax free Social Security. If you have more than $1,000,000 that's probably not feasible, but you can still find efficiencies in utilizing Social Security for your RMD efficiencies, for your income efficiencies, for your legacy planning efficiencies. It's all connected. That's why we say plan efficient portfolios. You plan the lifestyle and legacy you want, you search for the efficiencies.
Mike:So when do you file for Social Security? How you do tax plan and all of that? And then you talk about products. That's the order, and it's amazing how much can be uncovered through efficiencies and that that part of the planning process. I'd like that's how we do here at Kedrick.
Mike:Did I explain that okay?
David:Yeah. I think so. Yeah. That I think that made a lot of sense. I was just wondering though, what if you have less than 250,000?
Mike:If you have less than 250,000 saved up for retirement, then chances are Social Security will be the lion's share of your income. I would recommend working as long as you can or until 70 years old, and then filing for social security at 70 years old. Something that's important to note is if you file for social security while you're still working and you earn more than the the minimum, it's like 21, 22,000 of, taxable income, then every $2 you earn, $1 will be deducted from your benefit. So if you're still working, you can file for Social Security even if you're still working as long as you have past full retirement age. But I would say if you have less than 250,000 saved for retirement, I would recommend that you consider working longer, delaying the benefit until 70, and then filing at 70.
Mike:There's no benefit of waiting past 70, but you want that benefit to be as as big as possible. It'll be a huge huge factor. So if you've got questions about Social Security, you can always reach out to us. Send us questions. 913 363-1234 or hey mike at how to retire on time.com.
Mike:If you want a Social Security analysis, you can always go to social security dot report. That's www.socialsecurity.report or you can also text us benefits at 913-363-1234. That's a no cost Social Security analysis that will show you the holistic picture of when you file and how it affects all of the other parts of your plan. Now that's all the time we have for today. If you want more tips about retirement, income, taxes, social security, health care, and more, make sure you subscribe to this show wherever you get your podcasts, just search for how to retire on time.
Mike:Also, you can catch this show via our 247 digital broadcast by going to www.retireontimeradio.com. You can stream various episodes on your phone while you're on the go, in the car, or wherever you are on a run. Just go to www.retireontimeradio.com. From everyone here at Kedrick Studios, thank you for spending your time, your most precious asset with us today.