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Retire Eyes Wide Open: Season 1 Episode 4

REWO S1E4: Social Security & Retirement Optimization

Top tips for optimizing your social security benefit in retirement. Top mistakes people make when electing their social security. Scot Landborg, host of the weekly podcast, Retire Eyes Wide Open, shares insight and strategy around social security and how comprehensive planning can help you maximize your benefits.

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Welcome to Episode 4 of Retire Eyes Wide Open. I’m Scot Landborg – Today we’re talking about social security and how it fits in your retirement picture. When should you take it? We’ll explore the basics and some of the more advanced topics related to when you take your benefits.

We’ll review the week’s news in the Money Rundown

We’ll talk about the best thing I saw this week

In our Scot Strategy Segment – we’ll review the biggest social security mistakes. And we’ll take your questions.

This is Retire Eyes Wide Open!

Money Monologue:

Today were talking about Social Security. You know, I’ve become somewhat of an expert on this topic. I’ve conducted dozens of seminars over the years, specifically on social security. And this fall, it’s our main topic at many of our events. We have over 12 seminars in Southern California this fall focused just on social security.
Because it’s a big part of your financial picture!
Did you know that the average retiree will depend on social security for 37% of their retirement income? 37%! That’s a huge number.
It’s also a confusing topic. File and suspend, restricted application. File at 62, file at 70. There is a lot of conflicting information out there – it’s a complicated subject and unfortunately – often the people in your life giving you advice either don’t have your best interest at heart… or haven’t seriously wrestled with the issue to really understand the stakes.
When you’re thinking about your social security understand how important of an asset it really is.
It’s one of the few assets that will give you income for life, it’s guaranteed by the federal government and it affords a cost of living adjustment. In other words, inflation protection.
Folks… not many assets can say those three things anymore. Income for life guaranteed by the federal government and it affords a cost of living adjustment.
Understand you need to devote some time to understanding your benefits and the nuances.
Understand that your financial advisor may not be giving you impartial advice or may not know what they are talking about.
I’m shocked every week by someone who tells me about bad advice they’ve received.
I met with someone recently that told me with confidence that they had social security figured out…their advisor told them what to do… take it as early as possible and that would allow them to not touch their investments.
I wonder why he gave them that advice?
Maybe because it helped preserve an asset that the advisor was collecting a fee on? he told him to pull money from Social Security early so that they don't have to touch their investments? Not because it was necessarily the client's best interest, because it was an advisors best interest. So anytime you get advice, make sure you take that advice with your eyes wide open.

Whenever you decide to take your Social Security, make sure you go into that decision with your eyes wide open. That you really look at it, and analyze the different ways to optimize your benefits.
What are some of the top things you need to be considering when analyzing your social security benefits?

1. Look at social security as a joint decision with your spouse and understand how the decision could impact both of you.

I see this so often when people are thinking about their decision, they're thinking just about them. What's their health like? How long are they going to live? How long did their parents live? What's going to give them the most benefit? When do they want to turn on their pension? It's not just about you. When you're thinking about social security, you need to think about both of you. Because remember, if something happens to one of you, if one of you passed away, the lower Social Security amount will disappear. we ran some analysis, A break-even analysis someone that decided to wait to take their benefit till 70. That person passed away at age 70. Their spouse lived to 92. And guess what? Waiting to take that person's benefits until 70, even though he never received a nickel of that benefit himself, what it meant is that his spouse, his wife received over $100, 000 more in benefits over her lifetime. So you want to look really closely at different strategies for taking your Social Security.

2. Every year you wait means a higher benefit for both of your lives and a higher base amount for inflation adjustment.

Every year you wait past 62 your benefit is increased for the rest of both of your lives. Every year you wait Past full retirement age you get an eight percent increase for both of your lives. You have to remember, if you have a higher amount, if your benefits are at $2000 at 62, but $2600 at full retirement age, it's a bigger amount of money that you're getting those inflation in adjustments on. if you look at the statistics, and if you look at the projections overtime there is a significant difference every year that you can wait.

3. Realize the tax implications of social security income.

This is a big one. And it might require you sitting down with your Tax Advisor for more information, but the tax implications of Social Security income are huge. I met with someone recently, they were in the highest tax bracket possible and he was thinking about turning on his wife's social security benefit. I asked him, “Why? Why would you do that? Why would you pay half of that money to the government in taxes?” According to his financial plan, once he retired, once his home was paid off, he was going to be in a much lower tax bracket. It would have been much more beneficial for him to defer his wife's Social Security, have her have that higher benefit because they are in a much lower tax bracket just 3 or 5 years down the road. Understanding the tax implications are huge.

4. Know your other income sources and how they may impact your social security.

This is another big one. When you are retired or you are planning for retirement, where is your income going to come from? Is it coming from pension? Is it coming from IRA? Is it coming from your cash account? Your trust account? Where is that income going to come from in retirement? You really have to understand the tax consequences of pulling from those different sources. If all your additional money beyond your Social Security is coming from Roth IRA proceeds or non-qualified or cash proceeds, you may be in the situation where you were paying very little Federal and state income taxes. Maybe nothing if you position appropriately, and if you are aware of where those breakpoints and those calculations are.

5. Know how working could impact your benefits.

This is a big one. I see people making huge mistakes when they're 62 and just flip on their benefits and keep working because they don't realize the penalty they'll have to pay. So make sure you understand how working can impact your benefits. If your 62 years old, for every $2 as you earn over $17, 000 a year, you're going to be penalized a dollar if you have your Social Security turned on. If you are full retirement age however, you will not be penalized. Make sure you are keeping that in mind. Penalties are an important consideration but also taxes.

6. Be aware of advanced strategies for widows, divorcees, minor children, and restricted application.

We could do an entire show on some of these advanced strategies, so make sure that you are aware of them and how they impact you. If you were born before 1954, you need to understand what the restricted application is. How it may allow you to “double dip” and take some benefit and defer to your larger benefit. If you have minor children, understand that you may qualify for additional benefit based on them when you turn on your Social Security. If your 62 years old, and you've got an 11 year old at home, you qualify for additional benefits if you turn on your Social Security and make sure that's part of your calculation. If you are a divorcee, understand that you are entitled to half of your ex-spouse's benefits if you have been married to them for over 10 years. understand that if you get remarried some of those benefits could go away. If you are a widow, there's some strategies with that. Maybe taking your widow benefits and deferring your own benefit. Different strategies that need to be explored to make sure you're making the right decision about your Social Security.

7. Understand that file and suspend is no longer available.

If your 66 and you're still working, maybe your wife stayed at home and took care of the kids, she doesn't have her own social security benefit, guess what? She qualifies for a spousal benefit. Under the old rules, she could turn on her spousal benefit at any time. But under the new rules, file and suspend is no longer available. You cannot turn on a spousal benefit unless the primary worker has turned on his or her benefit. An important change you need to plan for.

8. Divorced spouse benefits cease upon remarriage.

Divorced spouse benefits cease upon remarriage. It's not just about love anymore folks. If you're going to get remarried, you need to be very crystal clear on how that might impact your social security benefits. Plenty more to talk about with social security, we’re gonna talk a lot about it more later in the show. We also do social security events throughout the year and one on one consultations. If you want to talk more about your social security, go to our website:, click on “Attend an Event” if you’d like to come to one of our seminars, or click on “Schedule a Consult” if you want to meet one on one about your situation.

And that’s our Money Monologue for the week.

Money Rundown:

Our Money Rundown segment is where we cover the week’s news. There are a lot of media sources out there that are going to help give you updated information about the economy and the markets. My job is to help summarize and synthesize – help pick out a few stories that are most important for you, as a retiree or investor.

Story #1 – Tesla.

Tesla had a roller coaster week – ending on Friday the 17th of August down almost 9% in a day after CEO Elon Musk detailed his personal pressures in running the company.
This after the SEC announced earlier in the week a probe into Tesla as Musk had made claims of taking the company private at a 20% premium to the current stock price.
Was this a legitimate claim? Or just a way to punish short sellers?
Lots to unpack here...
What does it mean for you?
Of course, you need to be very careful making short-term decisions about a stock and relying on tweets or spurts of information when buying or selling.
If you own a stock for the long run, keep your eye on the fundamentals.
From a personal standpoint… have you ever felt like Elon Musk?
Felt the intense pressure of meeting deadlines. The world falling in around you?
One challenge I see a lot of retirees having to face is moving from saving money to spending it.
I had an engineer in my office tell me just how difficult this is for him.
The question I have for Musk and for you is the same – is it worth it??
Musk described spending days overnight in the factory – missing his 47th birthday. Was it worth it?
For you? You’ve accumulated millions in retirement dollars. It took discipline. You’re not an over-spender.
Is the stress of not taping these funds today worth it?
We all have stress in our life. Whether it’s having enough money... spending enough. Maybe it’s family… maybe it’s adjusting to retirement life.
The question is … will you have the nerve… the courage to make a change? Musk is considering every option available… maybe being a public company at this stage is just too much and not the optimal structure.
What courage do you have to have, to face head-on in your own retirement life?

Story #2

An update from the recent social security trustee report:
According to the report - There were 62 million Americans who received Social Security benefits in 2017. Social Security’s total income amounted to $997 billion last year, $45 billion more than the $952 billion of program expenses. Social Security actuaries project the program’s expenditures and outlays will exceed total income for the next 10 years (2018-2027), the first annual deficits since 1982 (source: 2018 Social Security Trustees Report, BTN 07/23/18).
The government is going to need to do something to fix the social security shortfalls.
How does that impact you?
I think you need to be careful about strategies that say – take what you can as fast as you can because you don’t know how long it’s going to be there. It sometimes can be the wrong move.
Now, I don’t have a crystal ball … but the government has this magical invention that can help solve this. It’s called the printing press. And they can print more money.
If you’re 55 – you should be in the clear for any changes to your social security.
If you’re younger… they likely will push the age higher.
They might make changes to the inflation adjustments. They could do means testing and not give a benefit to high-income earners… if you make over $500k a year in retirement… this could be a legitimate concern, and a legitimate reason to start your benefits earlier.
For today’s retiree… I don’t think you have to worry about SS not being there. Over the long run… with a 20 trillion debt… this government is going to need inflation to help get out of their mess. The question is… but will your SS dollars of the future be able to buy… not if they will be there. The question is what are they actually be able to buy in the future. Are your other assets growing at a sufficient clip to make up for some of those inflation potential shortfalls? What will they be worth?
One of your best defenses against inflation is growing your assets.

Story #3 Turkey

The Turkish Lira is down over 40% YTD as Trump last week announced the doubling of steel and aluminum tariffs. The president announcing that relations with the country are not good.
What does it mean for you?
If you have emerging marketing in your portfolio – you need to take a hard look at that exposure. Emerging markets now down nearly 10% on the year.
Trump and his tweets and his trade policy have been having a dramatic impact in China and Russia and now Turkey.
Our models currently have limited or no exposure to emerging markets … but for the long-term, value investor. Are those becoming opportunities?
Is the Chinese market, really going to stay down 25%?
Be careful with emerging markets and maybe pick some longer-term positions in specific markets instead of picking the sector in general.
Have your eyes wide open. Ask questions of your current advisor. If you own international… how much, and why and what do we do moving forward? Make sure you’re holding your advisor accountable… and if you’re your own advisor, make sure you’re holding yourself accountable and asking those tough questions about what you own and why you own it.

And that’s the Money Rundown for this week.

Best Thing I Saw This Week:

When I say the best thing, I saw this week… I mean the most thought-provoking… not necessarily the most positive.
This week on Facebook …A friend of mine shared a video about capitalism. About growth and life…
The video argues that as a society we’ve only been given this one option…. Capitalism… and it paints it in a pretty negative light arguing the capitalism requires the exploitation of resources … of the planet for growth. They say capitalism requires infinite resources from our finite planet and say that the system will break down.
I bring up this video and this story for a couple reasons… first to make a brief defense of capitalism… and to talk about how it relates to your retirement.
Capitalism is the reason many of us have such strong 401k retirement savings as some of the biggest and best companies in the world have created value.
Capitalist companies like Google or Facebook haven’t exploited our natural resources to create products. They harness human ingenuity and creativity to create virtual products and services. Human capability is not finite. And our economy is becoming more and more dependent on the service sectors for growth not on mineral exploitation.
Think about the NFL or other major leagues sports. How much money changes hands for tickets and shirts and gambling? As athletes make more… they spend more… as they spend more... it means more jobs and more services needed.

Capitalism is not a zero-sum game… for you to make more someone has to make less. That’s not the case. Capitalism is about trade… it’s about getting you motivated to do something to produce something. Not necessarily something physical… but produce a video, a game, a blog, art, an idea. That is the new currency in this digital world.
By the way, regarding resources being finite… people have been warning about there being too many people on this planet for hundreds and hundreds of years. And they have been wrong repeatedly, as human ingenuity has found a way to house and feed and clothe more people than anyone ever thought possible.
Have you ever flown across the USA and looked out the window at the vastness? Across the Pacific Ocean and realized how big of a planet we live on?
Should we be responsible for managing resources? Yes. Be better to the earth? Absolutely.
But make no mistake – there is plenty of room. If you live in LA or Orange County, it doesn’t feel like there is a lot of space. But I think there is… there’s lots of it... but we’re limited by our imagination. There is plenty of room in the sky… in the air… buildup... There is plenty of room in the sea and the desert. Any transportation innovations will shorten the distances.
Capitalism is not subject to finite resources. And neither is your retirement.

Sure… your social security is a fixed number…. Your pension. Even your investments… limits to growth and income that can be provided.
But retirement is not about the numbers.
It’s about living the life you want. Vacationing when you want and where you want. It’s about getting value out of each day. It’s about having the time to see more sunsets. About having the time for a movie night with your granddaughter every week.
Do not be limited by the finite resources of your retirement.
Focus on the infinite qualities of your creativity and ingenuity.
Maybe you can’t afford a family vacation in Europe, but you can rent a beach house for the whole family in the off-peak times, like November.
Maybe you can’t afford a first-class trip to New Zealand, but you can make it to your grandson’s baseball game once a week.
Maybe you can’t buy a second home in Mammoth but see your daughter every Sunday night for dinner.
When you think about retirement… having a plan to deal with YOUR resources is important.
But often the people living the happiest retirement lives… it’s not about that. It’s about so much more. Try something new. Try a new hobby. Take a spin class or a college class. Learn a language. Make a new friend. Host a dinner party.
Don’t focus on the finite… love, happiness, adventure, creativity… those are human capabilities that are not limited – embrace them.

That’s the best thing I saw this week.

Scot Strategy Segment:

And now for the Scot Strategy Segment.
In today’s segment – we’ll address the top 7 mistakes we see people make with their social security. we've talked about some tips on what you should do right now let's talk about what you see people do wrong:

1. Turn on Social Security at 62 when you’re working.

It's a common mistake, and a big mistake. It happens when people don't think about their long-term Social Security strategies and just say “hey I'm going to pull whatever I can from the government as quickly as I can.” The issue is, that there are penalties. If you are working and you turn on your benefit and you are 62 years old, for every $2 you make over $17,000 per year, you are going to be penalized $1 for every $2 you make that's a huge penalty. So basically, if you've got a full-time job in California, and you turn on your benefits at 62, you're probably not going to get any of that social security benefit anyways. And by the way, you are going to miss out on a lot of those increases… most of the increases you would have received by waiting... You're going to miss out on that. Your office maid or your cube maid or your buddy down the street that told you “hey, just turn it on as soon as you can.” That's a big mistake we see often.

2. Not doing restricted because you were not paying attention.

There's this advanced strategy called Restricted application. You may be one of those people out there listening that are planning on waiting to take your Social Security. I ran into a mentor of mine from Minnesota and he was so proud of himself when I asked him what he was doing with the Social Security he said: “oh, I waited until 70”. I said, “Did you do the restricted application?” “No, what's that?” He missed a huge opportunity or you could have received your spousal Social Security benefit from 66 to 70 and still received your maximum benefit on your own benefit at age 70. You missed a huge opportunity and left a lot of money on the table. He wasn't so happy when I told him that one. Mistake number 2 is about people that just didn't pay attention to strategies that could have helped improve their overall income.

3. Remarry without understanding the consequences.

It's not just about love anymore folks. If you have a Social Security spousal benefit, you have to understand how remarrying it could impact your benefits. You remarry a person that's 10 or 20 years younger than you, you might not qualify for that social security benefit at all. So make sure it's at least part of the equation. I don't want to tell you not to get married, but make sure it's part of your plan... Make sure you go into it with your eyes wide open so you know what you're getting yourself into and how remarrying could impact your Social Security benefits.

4. Waiting on the spousal benefit until 70.

Again, you might not need the income, so your spouse is going to wait till 70 to take your spousal benefit maybe she stayed at home taking care of the kids... But guess what? After you reach full retirement age, spousal benefits do not get those same level of increases as the primary workers benefit does. The primary worker that waits past age 66 is going to get an 8 percent increase… but you don't get that same increase on spousal benefit, so make sure you're aware of that when you run your calculations.

5. Thinking if you die at 70 you were better off taking early.

It's not always the case. If you die at 70, and your spouse lives 292, your spouse is over $100,000 better off with your decision. Even though you never received a nickel, your spouse had that much more money during the rest of his or her lifetime.

6. Neglecting to plan if one of you pass.

Some clients think they're going to die tomorrow, some think they're going to live forever. Regardless of how it ends up, you need to plan for if something happens to one of you. what's going to happen to your pension benefit? Is it joint life? Is it single life? What's going to happen to your Investments? All of these things are connected and you need to plan what if something happened to one of us how would we put the pieces together to make it work? Because that social security benefit, that lower amount, is going away.

7. Not understanding how social security is taxed. Man, this is a big one. If you're single, if you're married dot-dot-dot the thresholds are different, but if there is a level where your Social Security benefits will not be taxed at all there's a level where it's taxed 50% and a level where it's taxed 85%. You need to be aware of when those numbers are because when the calculations are done, they are only taking half of your Social Security benefits in getting to those income numbers getting to those thresholds, so there is some maneuvering that can be done with you taking money from Roth IRAs, from non-qualified accounts, from cash accounts, to help tax optimize your retired portfolio. We'd be happy to talk to you more about that one on one.

That's some of our top mistakes that people make with their social security. if this is a subject you want to learn more about, go to our website, click on “Attend an Event” to come to one of our upcoming Social Security events in Southern California. We've got some at community centers, some at restaurants... We'd love to have you as our guest! If you'd like to talk more one-on-one about your situation, go to our website and click on “Schedule a Consult”.

And that's our Scot Strategy segment for the week.

Listener Questions:

And now for this week's listener questions segment.

If you want your questions answered during the show, shoot us an email. Go to or you can visit our website: and click on “Ask a Question”. We'd be happy to get your question answered during the show.

Joining us is our producer, Angela. Angela, thanks so much for joining us and what kinds of questions do we have from some of our listeners this week.

[Angela] Thanks so much, Scot. And for our questions this week, the first one comes from Janice in Los Angeles, CA –

My husband and I are both 66 and really debating when to take our social security. We’ve been really exploring the restricted application idea. What are your thoughts? Or are we better just both turning it on right away? We’re both retired. The extra income could give us a little extra cushion every month – but the higher payoff down the road is enticing. UGHHHH! How do we decide?!?
[Scot] Well Janice, thank you so much for your question. It is a very difficult decision and I think it starts with you looking at your overall income plan. Where is your extra income going to come from? Now, you don't sound desperate for this income... You mentioned it will give you a little extra cushion, so I would encourage you if you can do the restricted application, you are going to be so happy that you did down the road. You're both full retirement age, you only have four years left. What that allows you to do, is it allows one of you to turn on the benefit, and the spouse to get 50% of that benefit until full retirement age. Once you get to age 70, the person taking the spousal switches to their own benefit, but now it's at the maximum amount, just like if they had waited until 70. It's really free money that you're going to get for those for years. One of you is turning your benefit on so you're getting that spousal into the only amount you're going to have to live without for 4 years is that difference between the spousal and the full benefit, which likely is not a lot you should be able to pull from your other Investments to make up that difference. Having that higher Social Security amount at age 70 makes a huge difference because if one of you pass, you get that higher amount for the rest of both of your lives. You're going to thank me for it, you're going to thank yourself for doing that strategy, and for people in the future that are under 54, they don't get to take advantage of that strategy, so I think you are able to make it happen, make it happen and you're going to be happy that you did.

[Angela] Debbie from San Diego –

Hi Scot, I want to retire yesterday! I’m 60 – my husband is also 60 with health issues. We both are anxious to be done with work and get on with it! Our biggest concern is health care. How do we pay for it? Also, when should we take our social security? Feels like we will have to at age 62. Our home is thankfully paid off. It’s worth about $800k. Our income needs aren’t huge – about $4k a month. Social security is about $1800 a month each at 62 – how are we supposed to pay $1500 per month in medical premiums? I guess keep working forever? We also have about $800k across our investment accounts. Should we be tapping that?

[Scot] Debbie, thank you so much for your question. A lot of moving Parts here, a lot of things to unpack. The first thing, I would say is because you are 60 and looking to retire soon, you need to be very conscious of what Healthcare is going to cost until you get to be 65 and you get to go on a government program. From 60 to 65 you need to be very aware of that the most important consideration is, what is your taxable income going to be? From 60 to 65 you can keep your taxable income lower (around $25,000 to $30,000 per year), you're going to receive a subsidy for your health insurance and you're going to pay very little probably under $500 per month. Be very aware of that when you're planning your income in retirement. If you have income sources you can tap. If you have cash, if you have a trust account, if you have a joint account, maybe you can tap some of that income and keep your taxable income low so you still qualify for that subsidy. Social Security can also be a tax-advantaged income source as well because if you keep your income under a certain threshold it's not going to be taxable. Be aware of that too. If you need to turn on your income at 62, you need to turn it on. There might not be a way around it. But, I would encourage you if one of you turns on at 62 if the other can wait until 64 or 65 or 67... Every year that that second person waits is good because the higher amount is going to be for both of your lives. Your situation is pretty tight. 800000 in Investments, the good news is your house is paid off. The good news is your income needs are not huge, only 4000 per month. So I think there is a combination of Social Security and tapping your Investments it should be able to allow you told me to have one of you turn on at 62 and maybe have the other wait until full retirement. I’d love to talk to you more about it one on one if that's something that you want to do go to our website click on “Schedule a Consult” or attend one of our social security seminars for more information. Debbie, for you, it's probably going to require looking at a more one-on-one because the numbers are so close. It is so tight, and if you could tap your investments to help make up some of the shortfalls of having one person defer on Social Security that may make sense, but we really need to look more at the details.

That’s our show for this week. If you want your questions answered during the show. Go to our website and click on “Ask a Question”.
Go like us on Facebook to get our most up to date content. Subscribe to our podcast on iTunes.
We’ll see you next week where I’ll show you more how to retire with your eyes with open.
Don’t go into retirement with your eyes closed, go in with your eyes wide open. I’m Scot Landborg – see you next week!

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