Day: February 16, 2023

YFP Co-Founder & CEO, Tim Ulbrich, PharmD, is joined by YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP®, RICP®, to wrap up the two-part series on common social security mistakes to avoid.

Episode Summary

This week, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, is joined by YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP®, RICP®, to wrap up the two-part series on ten common social security mistakes to avoid. Tim and Tim start the discussion with a quick review of the first five common social security mistakes to avoid: not checking your earnings record, only considering your own benefits and not knowing what benefits are available, not understanding how social security benefits are calculated, taking social security too early, and not coordinating benefits with your spouse. They move on to dig into the second half of the list, including mistakes like not considering the cost of living adjustment (COLA) and how it changes your benefits, not planning for taxes on social security benefits, assuming social security benefits will fully cover your living expenses in retirement, how getting divorced too soon or remarrying can change social security benefits, and the mistake of viewing your social security benefits through the wrong lens. They share about potential dangers of polar opposite views on social security and how viewing social security as an insurance framework tackles a variety of financial risks that can impact the financial plan. 

Links Mentioned in Today’s Episode

• YFP Planning: Financial Planning for Pharmacists
• Schedule a free Discovery Call with YFP Planning
• YFP 294: 10 Common Social Security Mistakes to Avoid (Part 1)
• YFP 242: Social Security 101: History, How it Works, and Why it Matters for Your Financial Plan
• Social Security Administration
• YFP Tax
• YFP 275: How to Build a Retirement Paycheck (Retirement Planning) 
• Your Financial Pharmacist Disclaimer and Disclosures

Episode Transcript

[INTRODUCTION]

[00:00:00] TU: Hey, everybody. Tim Ulbrich here, and thank you for listening to the YFP Podcast, where each week we strive to inspire and encourage you on your path towards achieving financial freedom. 

This week, Tim Baker and I wrap up our two-part series on 10 Common Social Security Mistakes to Avoid. Now, whether you’re a new practitioner, where Social Security is far off in the distance, perhaps in the middle of your career listening or approaching that timeline towards retirement, I recognize that many listeners may not be aware of what the team at YFP Planning does in working one-on-one with more than 280 households in 40-plus states. YFP Planning offers fee-only high-touch financial planning that is customized to pharmacy professionals at all stages of their career. 

If you’re interested in learning more about how working one-on-one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com. Whether or not YFP Planning financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom. Okay, let’s jump into my interview with Tim Baker, where we complete our 10 Common Social Security Mistakes to Avoid. 

[INTERVIEW]

[00:01:11] TU: Tim, welcome back.

[00:01:13] TB: Good to be here, Tim. How’s it going?

[00:01:14] TU: It is going well. I’m looking forward to part two of our series on 10 Common Social Security Mistakes to Avoid. If you missed last week’s episode 294, make sure to check it out, link in the show notes below, where recovered the first five Common Social Security Mistakes. 

Tim, we talked through not checking your earnings record and making sure you’ve got a good view on what’s going on in the ssa.gov profile and some of the tools in there. We talked about not knowing some of the specifics of the benefits that are available, spousal benefits and disability benefits. We also talked about how benefits are calculated and then some of the strategies around potentially the timing of claiming Social Security. So a lot of information in that episode. Make sure to check it out. 

Tim, let’s jump right into number 6 on our list of 10 common mistakes, which is the cost of living adjustment. We talked briefly about this last time, but it really needs the attention that it deserves. So tell us more about the Social Security COLA and how that works.

[00:02:11] TB: Yeah. So every year, the government looks at the consumer price index for urban wage earners and clerical workers, and they do this I think – I think this is in fourth quarter. Based on the CPI-W, they announce what like the change in payments would be for security or other government benefits. This year was – Most years, it’s very incremental, right? Because inflation hasn’t been what it was year over year from 2021, ’22, what we’ve seen. But last year, they announced and then put it into practice that the benefit would increase by 8.7%, which is huge, Tim, if you think about it. 

Because if we take a step back and we talk about one of the major pieces of the retirement paycheck, obviously, Social Security, which is what we’re talking about, the other major piece is the investment portfolio. So one of the reasons why we put our money into the markets and we, hopefully, take aggressive but intelligent risk is because, unfortunately, we can’t stuff the mattress full of cash and then hope that in 30 years, when we go to retire, that that’s going to be enough to sustain us. So the reason that we invest and we earn dividends and we earn capital appreciation on investments is to outpace really two things. It’s the tax monster and the inflation monster. That’s why we do this. 

One of the beautiful things about Social Security is that it is inflation-protected. So your payments going from December to January got almost a 9% bump to month over month, which is huge. What we have said is that they don’t even sell annuities on the market right now, as I’m aware, that has a cost of living adjustment rider, which means that when I’m talking about annuity, all an annuity is is your own Social Security benefit that you’re creating yourself. So it’s where you say, “Hey, I have $100,000. I’m going to give this to the insurance company, and then they’re going to pay me for life or for a term certain X amount of dollars per month for that lump sum of cash.” 

I can even go on to the market and say, “Hey, you see what Social Security is doing, where they’re simply giving me that 9%.” Or hopefully, it’s not that big. We don’t have inflation starting to temper down, but it could be 5% next year. It could be 7% the following year. You can’t even get that on the marketplace. So Wade Pfau, who is a professor at the American College, he’s written a lot of books on retirement. He’s basically saying that Social Security is really the cheapest annuity money can buy, even the firm process. So you can’t even get that on the market. 

Now, what you can yet, Tim, is you can get a rider that says, “Hey, it’ll go up 3% every year or 2% every year.” That’s typically the component that drives the price of the annuity because two or three percent could keep pace with inflation. But this year, you’re like, “Hey, you’re down 6% if you have a 3% rider based on the difference.” So really what we’re doing with Social Security and it being protected by inflation is we’re protecting your buying power. We know that the price of gas, the price of eggs, the price of other groceries, housing, utilities, everything has gone up. For a retiree on a fixed income, that can be super stressful. But at least if a good portion of your retirement paycheck is protected by this inflation protection, it’s a little bit of a feather in the cap. 

Social Security payments, just to clarify, they’re adjusted every year based on inflation, based on that CPI index. This is another important thing. By law, an individual’s benefit can’t decline, even in deflationary times. So that’s one thing that your benefit could stay the same. Usually, it goes up every year. When we’ve had a year like this, where there’s been a lot of inflation, you see that matched in the benefit increasing by 8.7% this year. So I think that this is one of the things that is often overlooked. When we’re buying policies or doing things, like cost of living always comes up, and it’s one of the more expensive things because it’s just an unknown. We just don’t know where it’s going, so the fact that the government has our back in this regard. 

Again, a lot of people, we pay for Social Security. Like that comes out of your check every time. So this is just allowing us or the government allowing us to kind of get those payments for life. So they’re doing what they need to do on the back end to make sure that that is sustained. But to me, this is important piece that it is inflation-protected. Again, being on a fixed income, there’s risk there that if you’re not, you’re just being priced out. Your standard of living is affected without it.

[00:07:04] TU: Yeah, Tim. New news to me. That’s really neat. I was unaware of, essentially, the floor, right? That they’re in a deflationary time period, that the benefit can’t go the other way, which makes sense, right? That while some people are using Social Security benefit, obviously, for goods and services that are going up with inflation or in a deflationary period, those costs would go down. There are other things that are fixed that aren’t going to go the other way. So that would make it difficult for planning. 

Tim, I was feeling good about my high-yield savings account with Ally at what? 34 or 35 –

[00:07:34] TB: 3.4. 

[00:07:34] TU: So I saw 87, and I was like, “Oh, man. Still losing, right?” That’s inflation, so. 

[00:07:40] TB: Yeah. You know what? Every little bit helps. Again, most banks, they kind of just collect that money on the float. So I like seeing those payments roll in, even though I know that it’s a jungle out there with inflation.

[00:07:53] TU: I’m glad that you mentioned the tax monster and the inflation monster. Obviously, we just talked about the inflation monster and addressing that with COLA. But our number seven common Social Security mistake really gets to the tax piece. I think, as we’ve talked about many times on the show, tax, like inflation, is often an overlooked part of the financial plan. 

Tim, when it comes to this number seven mistake, not planning for taxes on Social Security benefits, another example of the integration of tax planning with the financial plan. So how are Social Security benefits taxed, and how could this impact, potentially, someone’s decision to whether or not they’re going to earn additional income as well?

[00:08:32] TB: Yeah. So to your point, shout out to our tax team at YFP Tax, Sean Richards and Paul and Ariel, I think this is another indication or another example of having a professional look at this and help decide on this as important. 

So one of the things that people don’t know is that up to 85% of your Social Security benefit could be taxed at the federal level, if you earn substantial outside income, such as wage or dividends. Really, the benefit, Tim, the percentage of your benefit that’s subject to income taxes really depends on what’s called your combined income. So your combined income is essentially 50% of your household’s Social Security benefit, plus any other taxable income, which could be wages that you receive from a W-2 or a 1099, plus any tax-exempt interest, which is typically things for like bonds, that type of thing. 

So 50% of Social Security benefit, plus taxable income, plus tax-exempt interest income. That’s essentially your combined income, and that’s how it is determined, like what your tax will actually be. So one of the interesting things is that back in the ‘80s, I believe it was the ‘70s, ‘80s. A smaller percentage of people’s Social Security was being taxed, and a lot of it is because some of these thresholds that they’ve set were not indexed for inflation. But as time has gone on, and people have earned more money, we’ve seen it creep up to where now a recent study projected that going forward, about 56 of beneficiaries will pay taxes on at least some of their Social Security benefits. 

It’s good to kind of sit down and see, okay, if I’m earning additional money or I have a portfolio that spits out of income, how does that affect what I’m going to pay taxes on? Then probably even more, a broader conversation is really, okay, if I do additional work, am I going to lose some of my benefit, which is also a misnomer and probably something that should have made this list as well. Like if you make a lot of money, you don’t necessarily lose the benefit. You just don’t – They just kind of pause it, and they give it back to you later. 

Earning money in retirement, so to speak, is actually a great strategy. But understanding kind of the tax and how it affects the benefit itself is important to know. Again, it can be great because it, obviously, helps maintain the portfolio and all that stuff. But it’s really important to understand that the tax is. Again, if you work with an accountant, a CPA, an enrolled agent, they should be able to walk you through, okay, this is what the tax bill is going to look like on your Social Security benefit. I think that’s an important piece of the puzzle as well.

[00:11:21] TU: Yeah. Tim, it’s reminding me back too on 275. We talked through how to build a retirement paycheck, right? You talked about that a little bit on the last episode as well, but so important. I mean, at the end of the day, like for planning purposes, we want to know what is the takeout, right? What’s the net? So we can plan for our expenses and goals and other things that we’re working towards. 

Another good example is you mentioned of not only thinking about the sources of income, one being Social Security, that are going to make up our retirement income. But what are the tax implications, and the tax optimization strategies to, obviously, pay our fair share, right? But no more, right? We want to be able to allocate those dollars.

[00:11:59] TB: Yeah. If you know that your tax bill is going to be higher for that year, maybe the paycheck, the source is really coming from things like a Roth account, which you’ve already paid the taxes on. Or an after tax account, which you might have to pay capital gains tax on. But that’s different than ordinary income tax, and you leave the traditional accounts alone a bit. That’s why at the end of the day, a lot of people ask me like what proportion should be in pretax versus Roth versus like a taxable account. 

It’s tough to say, again, depending on like where you live and what you’re doing because state taxes are different. But I think it’s a good bet to have a little bit in column A, a little bit in column B, and a little bit in column C, and be able to kind of like pull from those different accounts, depending on what’s going on in that time in your life. So, yeah, just, again, having that optionality is another key theme in all of this.

[00:12:55] TU: Tim, as we move on to number eight on our list, which is assuming Social Security benefits can fully cover your living expenses, I think we’ve highlighted well the benefits of Social Security. We talked about the COLA. We talked about potentially the size of that benefit. You gave some examples in the last episode, as you were looking at your ssa.gov, online portal. 

I think maybe some folks might be listening and be like, “Man, do I need to be saving as much as I am outside of Social Security? Can I potentially depend more upon that than I was planning?” So what is the potential mistake here in assuming that Social Security benefits can fully cover your living expenses?

[00:13:32] TB: Yeah. I think it’s – When we’re sitting here and like, “Wow, it’s COLA,” and if I can work till 70, well, I’m going to work till 70, anyway. So it’s funny because like a lot of clients that come to us, and maybe they have a couple $100,000 in debt, they’ll be like, “Man, I’m never going to retire. I’ll never be able to retire.” Then we kind of start to deconstruct that repayment, and then we start to get them in a portfolio that does its thing. Over a couple years, you can start to see the script flip, so to speak on, okay, like I think there’s a path forward. 

In a lot of those scenarios, we’re not even really accounting for Social Security in a lot of ways. When we say we’re going to plan first, as if it’s not there. But the reality is it will be there. Again, it might be dependent on how far away you are from retirement. It might be a lesser benefit. But I think it is definitely a mistake to say, and some people do believe this that it’s like, “Hey, I’m going to do what I can do in my 401(k) and my IRA, and I’m not going to kill myself because I know that the Social Security benefit will be there for me.” 

I would say that, that is – Again, if we’re talking about optionality, if we’re talking about we don’t really know how long we’re going to live, we don’t really even know how long we’re going to be able to work, all of those things, I think, tend to say, “Hey, let’s do what we can to kind of make sure we have a good healthy portfolio that we can draw from.” We don’t know where inflation is going to be. We don’t know really know where the US markets are going to be in the next 30 or 40 years. Again, I still feel super bullish about that. But the fact remains that it is unknown. 

But I would say that, and these are really beginning of 2022 numbers, the average for all retired workers, the benefit is about $1,657 per month. That’s 20 grand a year, Tim.

[00:15:23] TU: Yeah. That’s lower than I would have thought.

[00:15:25] TB: Yeah. I think we’re actually going to – But I think that for so many people who are collecting this benefit, the mindset was like 62 and go. It’s like once I get to that, I’m going to get the money because I’m only going till 68 or 69 or 70. So I want to get the money while the getting is good. We’re starting to see that trend really shift, where I think people are starting to understand, okay, I can defer. Or they’re just naturally working longer because of some of the affirmation things like debt, student loan debt, etc. 

The average for older couples in situations where both spouses receive benefits is $2,753 a month or about $33,000 a year. There’s a lot of different ways to kind of skin the cat, so to speak. But a lot of planners will say, okay, if you make $100,000 as a household, they’ll use anywhere from 60 to 80 percent of those dollars and to say, “Hey, you need 60,000 to 80,000 dollars to live because they discount it, and a lot of the discount is based on really the fact that like while you’re in retirement, you might be saving 10, 20, 30 percent or more. 

Then also ideal, that’s not necessarily true in early retirement because you’re typically a kid in the candy store where you’re like, “Wow, I need to go do all the things I defer while I was working, so travel and that type of thing.” So there is a little bit of a smile, so to speak, of spending where it starts higher, and then it starts to come down as you age. Then as you age, medical expenses get larger, so it kind of increases. 

[00:17:00] TU: Yeah, makes sense. 

[00:17:01] TB: But when you compare that, again, 100,000, most of the clients that we’re working with are making a way above that as a household. So 100,000, 33% of that is covered. It’s not a huge portion of that paycheck, and it’s even going to be smaller the further you climb up kind of the pay ladder. 

So this is to say, and we’re kind of talking at both sides of our mounts, how great of a benefit it is. But it’s also to say that it’s not going to be the end-all be-all for you in terms of retirement, unless your lifestyle just says, hey, I can live off of $33,000, which maybe some people can do that and go from there. So to me, that’s a big thing. If we’re looking at somebody, their stats, Social Security will be a major source of income for many retirees, especially like lower income levels. It represents about 30% of the income for older adults. 

Specifically, when you kind of go down from a gender perspective, about 30% of men and 42% of women receive at least half of their income from Social Security. Then probably one of the more concerning things is that roughly 12% of men and 15% of women rely on Social Security for 90% of their income. Again, hopefully, the people that are on our listeners, because of some of the socioeconomic differences and resources available and, hopefully, the education that they’re receiving from a financial literacy, that will not be them in the future. But it is safe to say that it could be 20 to 30 percent of what you’re relying on, which is getting a good chunk of money. If that can grow because we are differing, and it is inflation-protected, that’s the power of the Social Security benefit.

[00:18:47] TU: Yeah. Tim, this reminds me. One of the takeaways I’ve had just from listening, and you teach and talk on this topic, is to really kind of avoid the polar extremes of use on Social Security, right? I think there’s some folks that, especially maybe earlier in the career, like Social Security is not going to be anything, and we can establish why that probably won’t be the case in the first episode. 

Then here we’re talking about the other side of the spectrum, which is assuming it’s going to fully cover all my expenses, and I think for obvious reasons of what you just highlighted, probably not going to do that for the vast majority of folks. But it can be a really good in-between, just like we talked about building a foundation early in your career with the financial plan here. Like you’ve got this foundation or at least some of the makeup of the floor that’s going to give us some insurances. It’s not nothing but it’s also not going to be everything that we need, as it relates to retirement planning.

[00:19:35] TB: Yeah. Like we mentioned before, like if you’re pretty conservative in your approach, if you can get Social Security and maybe annuity that you purchased by peeling off a couple $100,000 of your investment portfolio, and you can say, “Okay, this check from Social Security, plus this check from the insurance company for my annuity is going to provide for all of the necessities that I need,” like there’s a feeling of freedom there.

Now, someone who has more appetite for risk, they’re like, “Well, I would almost rather just kind of spend down my portfolio and be able to enjoy the things that I want to enjoy without paying that huge bill up front.” But there’s also stress in saying, “Okay. Hey, the market is down 30% and I’m drawing on it,” versus if you were just getting that paycheck built in. So there is a different approach. It’s based on your appetite for risk, and what we’re just kind of describing here is the flooring strategy versus the systemic withdrawal strategy, who I think can be – You can have hybrids of that as well. But, yeah, important to kind of see what is the best way to tackle it for you and go from there.

[00:20:44] TU: Tim, number nine on our list of 10 Common Social Security Mistakes refers to those that may get divorced and then potentially remarry as well. Talk us through what are the implications of the Social Security benefit for these situations?

[00:20:58] TB: Yeah. So sometimes, people don’t know that if they’re divorced and the failed marriage kind of meet certain criteria, you’re actually eligible for a benefit based on your spousal Social Security record or your ex-spouse’s Social Security record. So essentially, the rules for this is that you have to be divorced. The marriage has had to last at least 10 years. You are age 62 or older. You’re still unmarried. Then your ex-spouse is eligible to receive a Social Security retirement benefit or disability benefits and your benefit. So if you’re a worker, your benefit from your own work is less than what you would receive under your ex’s earnings record. 

The other interesting thing, which kind of makes sense because as a divorce say, you’re not like – You shouldn’t be all up in like your ex-spouses like business and when they’re going to retire and claim. But they don’t need to be claiming the benefit. Whereas if I’m married and my spouse can’t claim on my benefit, unless I’ve claimed the benefit. So those are really the rules. So like, again, it might be where if you’ve been married for nine years and you’re looking at divorce, it might be best to kind of get to that 10-year mark, so stay married longer, to activate that benefit. 

Or even just as you move on and have other relationships, whether you want to actually marry or not because once you marry, then that comes off, and then you’re kind of tied to your new spouse’s benefit, that type of thing. So it is one of those things that, obviously, Tim divorce can be a very emotional thing, and we would never advocate for someone to be in a situation that is unsafe or doesn’t make sense for them. But if it’s kind of a more of an amicable thing, it is something that you should definitely use and understand in terms of strategy. 

The interesting thing, Tim, and I listened to a lecture on this, if you’re married and divorced multiple times, I mean, you could have a stable of ex-spouses that can be claiming on your benefit, and that’s kind of where maybe some of the inefficiencies. If I have three or four ex-spouses, and they’re claiming off of like one worker’s benefit that’s been paid into, and then there could be children involved with that, the bill could pile up, so to speak, for Social Security. I wonder, I wonder. This is just be speculating out loud. I wonder if this is one of the things they potentially tighten up in terms of what this looks like in the future. 

So we know that, obviously, divorce is a reality for a lot of Americans and, obviously, this is the benefit that should be there. But I wonder if this is one of the things that they look at in the future. 

[00:23:41] TU: For the record, Shay, nothing to worry about. Tim mentioned three ex-spouses. Just an example, in case she’s listening. 

[00:23:48] TB: Yeah, exactly right. 

[00:23:49] TU: This is the test, right? Is Shay listening to the podcast or not? We’re going to find out.

[00:23:53] TB: She says she does. She says she does. But I probably need to like quiz her or drop some –

[00:23:59] TU: Well, this is deep and a part two of a series, so like –

[00:24:02] TB: I know. For her, she’s probably sleeping or fell asleep listening to me talk about this stuff.

[00:24:09] TU: All right. Number 10 on our list is looking through the wrong lens. Tim, this is a new concept for me, as it relates to Social Security and looking at it as an investment framework or an insurance framework. Describe the difference. Tell us more here

[00:24:24] TB: Yeah. So I think so many people, when they approach the decision on when to claim, they look at it from the vantage point of like, “Okay, if I’ve put money into the system over the last 30 or 40 years as I’ve worked, I want to get as much money back and more.” So a lot of advisors would use what’s called a breakeven analysis. Basically, they would say, “Okay. If you claim at 62, here’s your reduced benefit. But if you were to wait to claim at 70, there’s eight years where you’re not claiming it, and it’s at any increased benefit. So where did those kind of cross?” 

For a lot of people, it’s usually between age 80 and 84. So if you’re like, “Well, my uncle Donald or my aunt Ginny,” or whatever died at 78, then I’m like, “I’m definitely taking it early.” Many retirees, they live a lot longer than they think they will. So the average person at 65, they’re going to live. Once they get to 65, there’s a really good chance you’re going to live to 85 and beyond.

[00:25:25] TU: Yeah. Life expectancy increases once you get to a certain age. Yep. 

[00:25:28] TB: Yep. So I feel like too many people think of it as an investment that only pays off if they live a long time, and they worry too much about what happens if they don’t live as long as they expect. The thought is that this framework gets the focus – This framework focuses on the wrong issue, dying young instead of living a long kind of retirement with a good kind of standard of living. 

The opposite one, where I think the decision really should reside, is in the insurance framework. So why do we buy insurance? We buy insurance because we want to mitigate risk. Again, this is not advice because everyone’s situation is different. But typically, the longer you to defer, the more you kind of scratch the itch of mitigating some of these risks related to retirement, so one being longevity risk. So longevity risk is that you live too long, where you’re going to basically outlast your money. 

Deferring Social Security and looking through for that framework, you get a larger stream of lifetime income, long-term care risks. So one of the things that I talked about with a smile is that you could get to a point where you need to use nursing homes or that type of thing. Because you deferred Social Security, you have more resources, i.e. in your portfolio, later in life to kind of cover that inflation risk. 

Again, we’ve talked about this. A larger percent of your income is protected against inflation. That’s a beautiful thing. Things like frailty risks, which is as you get older and cognitively you might not be as sharp as you were, this really simplifies the decision making because, again, a bigger portion of your income is covered, and it’s inflation-protected. Even things like elder financial risks streams of income is – They’re less at risk to kind of be stolen and take advantage of versus like a couple million dollars in an account. 

Excess withdrawal risk, so this is where you’re locking in larger income stream in Social Security, so eliminating risk of generating income from the portfolio assets. Again, market risks, it eliminates volatility and returns. Then early loss of spouse risk, where you’re deferring, again, a larger benefit. Even if I’m in poor health and I defer my benefit, when I were to pass away, even if it’s sooner, it might be larger than what Shay would do. 

At the end of the day, you kind of look at it from the standpoint of, okay, if I have a short – So if I look at this from the strategy of claiming early versus claiming later, and I look at my retirement time horizon, whether it’s a short time horizon or a long time horizon, the only way that it works out to claim early is that if I claim early, it’s worked out, I get a lesser benefit. But I die early, so it worked out. If I claim early and my time horizon is actually longer, I permanently reduced my lifestyle because the benefit just isn’t as good. If I claim late and I have a short retirement, it’s minimal harm done because at the end of the day, again, a spouse could still use that. At the end of the day, it’s not necessarily there. It’s there to kind of provide a baseline for your needs. 

Then if you claim late and you have a longer time horizon, you’ve permanently increased the lifestyle. Again, that’s where I think that most people will fall is that they’re going to live longer than they think. At the end of the day, they’ve permanently increased their lifestyle because of the deferral credits that they’re going to get 8% a year. Think about it as that 8% a year raise that you get for every year that you defer. 

To me, that’s the crux of the issue. It really should be less about kind of a breakeven analysis and more about what is the impact that a decision like this can have permanently on my lifestyle, and what is it that we’re really trying to tackle. I would argue that the Social Security should be more, again, looking through from an insurance mitigating risk, and then the portfolio is where you’re really trying to maximize, okay, vacation and grandkids and things like that. So everyone’s going to be different. But to me 

I think people are starting to come around on this, as they really look at this and they see, hey, we’re just living longer, inflation-protected, all those things that we talked about in the segments. But it is a really important decision, if we haven’t got that point across, that you want to make sure that you’re looking at this from an analytical approach and then overlaying that, again, with what your goals are in retirement.

[00:30:02] TU: Yeah. I think what you’re highlighting here, which is really interesting, something I hadn’t considered before is this is a framework, a mindset in terms of are you thinking about this more from the investment strategy, more from the insurance, and kind of bringing us full circle. Like what I’m interpreting is if you’re able to plan earlier and throughout your career by building other investment streams that you can pull from, it allows you to have maybe some more freedom and peace of mind and viewing that Social Security as an insurance piece and less as a need on the investment side. I think that’s a really, really great example and something that seems obvious that we need to be thinking about in great detail. 

Tim, this has been great, 10 Common Social Security Mistakes to Avoid. We’re going to continue to build out more information on this topic, I think, I hope, as we’ve highlighted so much to consider around Social Security as a part of the financial plan. We’ve just scratched the surface really here in these two episodes. We also did an introductory episode on Social Security back on 242. We’ll link to that in the show notes. But much more to come, and we’re going to tap into Tim’s expertise and the expertise of the planning team at YFP Planning to really bring us some more content in this area. 

So, Tim, as always, appreciate your time and looking forward to more coming on this topic.

[00:31:15] TB: Yeah. It was fun, Tim. Thanks. 

[END OF INTERVIEW]

[00:31:17] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

Furthermore, the information contained in our archived newsletters, blog posts, and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward-looking statements that are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. 

Thank you, again, for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week. 

[END]

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