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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Hey. Thanks for joining. Here's a question I was recently asked on my show, How to Retire On Time. Take a look. What's the next question?
David:So let's let's move on to Social Security. There's a question that was submitted that reads, I understand Social Security timing is based on how long you believe you'll live. I don't understand how that decision affects other decisions. Okay. What do they mean there?
Mke:So, most Social Security optimization reports are sold as an annuity income stream pitch for what it's worth. It's not wrong, it's just I want you to know the wizard that's behind the curtain. Here's how it works. Hey. When you know, this is when you shop files for Social Security based on getting the most out of Social Security and how long you're gonna live.
Mke:Great. Check that box. Is that all the income you need? No. You want some more income?
Mke:Great. Buy this annuity. Return on that annuity income stream at the same time you take Social Security, and now you've got guaranteed income for life.
David:Oh, so so they're taking whatever your Social Security benefits gonna be, and then they're and is that enough?
Mke:And they just pair it with an annuity.
David:Add on this little bit more, and then you're good.
Mke:And that's not wrong. That's not wrong. It's wrong for some people. It's right for others. Okay.
Mke:The problem is it excludes tax planning. It excludes legacy planning. All it does is it answers a question you have, which is when should I file for Social Security? And then it's coattailed with a product pitch. It's wrong.
David:Okay.
Mke:Here's why it's wrong. If you do your plan first, now you've assigned a responsibility to every dollar. You need certain amount of money in the beginning, the middle, and the end of your retirement. That's important. Then what you do is you can take your Social Security, and you say, okay, I'm 60 years old.
Mke:Does it make sense to delay it to 70 years old or take it at 62 or 64 or 65 or 67? Why is that important? Well, if you've saved more, you may want to delay your Social Security so you can do more IRA to Roth conversions. Maybe that's your primary risk. Maybe it's not.
Mke:Maybe you want to delay it so you've got more room on the tax form on your ten forty to get those dollars out of your IRA so it's not a problem later on. Maybe you've saved less, and you need to file for Social Security earlier because you can't handle six, seven, 8% withdrawals from your portfolio for seven years. See, everyone's different, and so you need to understand that when you file is going to affect other parts of your plan. And then if you're married, you also need to consider the widow tax. So maybe one of you, the larger benefit, should file for Social Security later.
Mke:Maybe that's not a concern because you're more concerned about taxes or something else.
David:Mhmm.
Mke:So therein lies a bunch of nuance that's pulled out of the exploration of the strategy session, and that's typically when you figure out when the right time to file for Social Security is. Because when you file for Social Security, will either open up IRA to Roth conversions or get in the way of the IRA to Roth conversions. It will put more or less pressure on your portfolio. For some people, they're delaying their retirement because they don't know how to solve the gap years until they file for Social Security. Well, how much is a year of your life worth?
Mke:Right. Yeah. I mean, to put it simply, like what if you just had a one year CD and a two year MYGA, called it good, check that box off. You've got now three years. So, you know, you cash this year, the CD next year, the MYGA in the third year.
Mke:That's your income, and then you file for Social Security. There's no market risk there. Right. So, the point here being is Social Security will have a ripple effect in all other parts of your plan, and you don't want to be talking about products until you first have the plan projected, and then you're seeing how the ripple effect plays out in other parts of your plan. It's pretty drastic.
Mke:Most people I think underappreciate Social Security Optimization in the comprehensive sense, not in the how do I get the most out of the government sense. Because if you're looking to get the most out of the government, and you passed away in the wrong time, if you're looking to get the most out of the government and you filed early and then got in the way of tax issues, the government's winning because the government's making more money in taxes because you lived a longer life. They're paying you less over your life in Social Security because there's a lower burden, because you have a lower amount that's then growing at a lower rate for the rest of your life, and you're getting hit with IRA to Roth conversions or RMDs.
David:Yeah. So, yeah, the it's all it's like this multi it's just a big web. Right? And everything is touching each other.
Mke:That's why most people don't fully appreciate the planning process. Most people have never experienced a proper retirement planning process that goes to this level of of detail.
David:Yeah. Yeah.
Mke:That's all the time we've got for today's show. If you enjoyed the show, thanks for tuning the podcast. Don't forget to subscribe, leave a rating, and as always, tell your friends, the larger the subscribers are, the better the content can be that fuels your preparation for retirement. We'll see you in the next show.