Social Security Claiming Tips For Diverse Family Situations Retirement Planning

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Social Security Claiming Tips for Diverse Family Situations

6d ago 20:22

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Social Security claiming strategies can vary greatly depending on family dynamics. This episode explores how different family situations, such as those with a stay-at-home spouse or a blended family, can impact when and how to claim Social Security benefits to maximize your retirement income.

Helpful Information:

PFG Website: https://www.pfgprivatewealth.com/

Contact: 813-286-7776

Email: [email protected]

Speaker 1:

PFG Private Wealth Management LLC is an SEC registered investment advisor. Information presented is for educational purposes only, and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk and unless otherwise stated are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Speaker 2:

The rules of retirement have changed. No longer can most of us rely on Social Security or a single pension to fund our futures. We're living longer and retirement doesn't just last a handful of years anymore. Instead, you might stay retired for 20 or 30 years and maybe even more. We need to look at retirement through a new lens with fresh eyes, with a new approach and plan of attack. Here to answer the call, our financial advisors, John Teixeira and Nick McDevitt of PFG Private Wealth Management serving you throughout the Tampa Bay area. This podcast is Retirement Planning - Redefined, and it starts right now.

Marc Killian:

Time for another edition of Retirement Planning - Redefined with John and Nick, financial advisors at PFG Private Wealth. Make sure you subscribe to the podcast on whatever podcasting app you like using. Just type in Retirement Planning - Redefined, or find it online at pfgprivatewealth.com. That's pfgprivatewealth.com, and while you're there, you can book an appointment with the guys right there at the top of the page. Just click on the little tab and get started today. We're going to get into Social Security conversation this week with the guys, some claiming tips for family situations, different kind of family situations that are out there before we get rocking and rolling. Nick, how are you doing, my friend?

Nick McDevitt:

Doing pretty good.

Marc Killian:

Yeah, hanging in there?

Nick McDevitt:

Oh, yeah. Slightly enjoying the cooler weather, but I always enjoy hoodie weather, so I could use a couple more degrees, but.

Marc Killian:

Okay.

Nick McDevitt:

But not too bad.

Marc Killian:

Not too bad. And John, how are you doing with the herd down there? Everybody doing all right?

John Teixeira:

Yeah, everyone's good. Everyone's trucking along. Yeah, my daughters are in karate, so they're enjoying that.

Marc Killian:

Oh, nice.

John Teixeira:

And debating what the next step is for one of, actually, they run around kicking me all the time now.

Marc Killian:

Yeah, they're going to ninja flip you all over the house.

John Teixeira:

Nice. I'm trying to get my youngest one into flag football so I just bought her a football and throwing it.

Marc Killian:

Very nice.

John Teixeira:

My wife's like, "No, no, she's doing softball."

And I'm like, "Whatever."

Marc Killian:

Nice.

John Teixeira:

So we're trying to get her into some sports here, so it should be fun.

Marc Killian:

Good, good stuff. Good stuff. Well, since we're talking about families, let's talk about the Social Security breakdowns on some things. Claiming strategies vary, obviously from dynamic to dynamic. In this episode, let's just run through some stuff. I guess we'll start with the broad view, fellas. Social Security claiming strategies, there's a lot of it. I mean, it can get a little overwhelming, which again is important to work with somebody who has some experience in this. Whoever wants to tackle that, what's your thoughts on just the sheer number of claiming strategies that are out there?

John Teixeira:

There's a lot. There's a lot of them, but it really boils down to a few that you end up doing. I think the most important thing is to understand your current situation, whether it's the discrepancy of what the income's going to be for each person. If you're filing jointly or you have two people taking Social Security and understanding what the need is at the time. Do you need income right now? Can you hold off? But there is a lot of different options to pick from. The best thing is to review what makes sense based on the plan, and then also at this current time what you have going on.

Marc Killian:

Yeah, I think a lot of people view it as, well, we've got this collection. We've got a 401(k) and this, that, or the other that we've personally saved. Oh, and Social Security versus maybe looking at them all together holistically in one overall strategy. It should be thought about and we're going to talk about that in the way you set up your income structures. Nick, I guess I'll let you take over and get this first one. Let's look at it from a single income household consideration. We don't see this as much anymore, but maybe it's just one person that goes to work and the other person stays at home, which is totally fine, but what's some things to consider in that unique situation?

Nick McDevitt:

The timing of the benefits are super important. Number one, the golden rule in retirement planning or financial planning is it depends. From the perspective of I think one of the biggest drivers in a single income household is going to be age difference between the two, and that has the biggest impact on the claiming strategy. Ultimately, any of these Social Security decisions come down to their function of other assets and the impact of the timing of the Social Security benefits and how that's going to take into account. But if we were to pick one thing from the standpoint of survivor benefits is a good example. A lot of people are under the impression, or I should say the feedback that we've gotten from many people is not having a good understanding of how survivor benefits work. The reality is that survivor benefits are when one passes away, the surviving spouse gets to the higher, the two benefits, the lower one goes away.

Marc Killian:

Right.

Nick McDevitt:

Oftentimes obviously if it's a single income household, the person that hasn't worked, their benefit's going to be lower, it's going to be half or even less depending upon when they take it. We'll go through and use, we have some calculators that we'll work with with clients, put their specific situation in there, then use those numbers and overlay them with the plan to help them try to figure out the most efficient way to do it. We always say to them that there's the top financial strategy and then there's the we have to try to balance that with the I want my money and I want it now strategy.

Marc Killian:

Right.

Nick McDevitt:

When it comes to Social Security, there's something to it from the perspective of people putting in the money over years and really wanting to get access to their money quicker. That's how we go into most of these strategies is overlaying it with the plan and looking at how it's going to work.

Marc Killian:

Well John, let me ask you a couple of follow-up questions on the single income household side. I think there's some confusion too. I typed this in the other day when I was putting these together and I saw this, I think it was, I don't know, Reddit or something feed where people were back and forth and they didn't seem to, there was a lot of misunderstanding about if you didn't work, could you get Social Security?

People were saying, "Well, you have to work the 40 quarters in order to qualify for Social Security," which that's accurate for your own.

However, and then somebody else would follow up and go, "Wait a minute, my grandmother who never, ever had a job gets Social Security. How is that possible?"

I think there's confusion out there that if you're a single income household, if you've never worked, you can claim against your spouse, correct? But they have to have already activated it for it to start, is that correct?

John Teixeira:

You get the spousal benefit. Correct me if I'm wrong here, but I believe you have to be married nine months in order to receive that.

Marc Killian:

Yeah, correct.

John Teixeira:

In reality, most people will get that as a spouse.

Marc Killian:

Sure.

John Teixeira:

I had one situation actually where someone got married, they didn't qualify and the spouse died after eight months.

Marc Killian:

Oh, wow.

John Teixeira:

So they did not qualify anymore. You do have the spousal benefits, which is half of the earning or the qualified spouse's, what they call full retirement amount.

Marc Killian:

And they have to turn it on first, right? That's a bit of a sticking point. If you're the worker, you have to claim Social Security before the spouse who never worked can also get their half, correct?

John Teixeira:

Yeah, Marc. That is accurate. To receive a spousal benefit, the spouse that is qualified has to be drawing on benefits. The person receiving the spousal benefits has to be past 62. The big confusion on this was in the past, you could do some strategies like file and suspend where the person didn't have to be drawing it just yet, so you do some strategies. But they closed those loopholes about six or seven years back, which ultimately was a loophole that needed to be closed to help the longevity of the program but a lot of people weren't happy because it was probably the best strategy out there to use. But good news is it helps longevity of the program. Bad news, you can't do it anymore. But some of the confusion comes into play where people that have already done the file and suspend are grandfathered in.

Marc Killian:

Gotcha.

John Teixeira:

Circling back to the spousal benefit, spouses are entitled to half of their spouse's full retirement benefit. They can drawing at 62, and their spouse has to have started drawing on it themselves.

Marc Killian:

Yeah, gotcha.

Nick McDevitt:

And if they do receive the benefit, if the spouse that hasn't worked and is receiving the spousal benefit, if they take it before their full retirement age, then there is a reduction.

Marc Killian:

There's a reduction as well, right.

Nick McDevitt:

There's a function there. The only other thing I want to mention for the single earner is, single income is if somebody was married for at least 10 years and then are divorced and not remarried, they are eligible to, and maybe they never got their 40 quarters, they are still eligible for a spousal benefit.

John Teixeira:

To jump on that, because this has come up quite a bit with clients, if you're divorced and you're eligible for spousal benefits, you do not have to wait for the person to be drawing. As long as they pass the age of 62, you can draw. Part of that is because you might have some vindictive spouses that are waiting to draw to make sure their ex doesn't get the spousal benefits.

Marc Killian:

Well, and we're going to talk about that in a minute as well. There's a couple little things, little caveats there. To our point, kicking this off, there's a lot of nuance to Social Security. We're going to try to keep it high level a little bit and not get too confusing. Again, it's important to talk to somebody, but those are some basic things to think about from that single standpoint.

Let's go to the dual income households, which is most people, guys. John, you talked a little bit about file and suspend and while it's no longer an actual strategy, what I know a lot of advisors often talk about with their clients who have dual income is if one person is making more, then maybe you're letting that one grow to 70, right? To the max out. And then the person who's maybe making less, especially if they're the same age, maybe then you're looking at turning that on earlier, whether it's full retirement age or even 62 depending on the money needs. That's a workaround I suppose, to the file and suspend a little bit. That's some things to think about. So what's some other things to think about and dive into wherever ever you want on dual incomes there?

John Teixeira:

Again, rule of thumb is just overview versus individuals, but it does make sense to always suspend the higher benefit, whether if you're dealing with a survivor benefit, there's some strategies. You have the dual income spousal benefits, you want that extra compounding on the higher amount is basically why you want to do that.

Marc Killian:

Right.

John Teixeira:

Another strategy for that and why you might want to delay the higher benefit is the survivor benefit is going to be higher. You can in essence defer someone's benefit till age 70, and if they were to pass away, the survivor benefit now has that increased amount so that is one option you could do. As you mentioned here, you could take a lower benefit earlier, let the other one go. If you have two working spouses, but let's say someone's benefit isn't as high as their spousal, you could look into someone taking their own benefit at 62 and then switching to the spousal later. There's definitely a lot of different things you can do. And a reminder of what Nick said, anytime you take early, you are going to get a reduction of benefits.

Marc Killian:

Yeah, 30% currently, right.

John Teixeira:

Yeah.

Marc Killian:

That's a big haircut-

Nick McDevitt:

Depending upon your full retirement age.

Marc Killian:

From your full retirement age, yeah, it's a big haircut, 30%. To your point earlier guys, when you're building a strategy, because I guess Nick, part of this is looking about where are you taking money from, right? You've got your 401(k), you've built up your personal, then you got your Social Security, and it's like, okay, when are we turning on what and where so that we can maximize this? It's like, which horse are you riding? The one you brought or the one the government brought kind of thing.

Nick McDevitt:

This might be a little bit too detailed, but really, what we do from our standpoint as an advisor is we use the withdrawal rate as the test to figure out. When we look at the overall portfolio and we go through the expenses and we figure out how much income a client's going to need on an annual basis, let's say that delaying Social Security is going to force them to take a 10% withdrawal rate. For three years, they're going to have to take out 10% of their money out of their portfolio a year to cover expenses to delay. That number's probably too high. For most people, that number's probably too high.

If it's something around a max of a seven or eight, and it's only going to be for a couple years, depending upon the size of the portfolio, that can make sense. But when there's just too much pressure on the portfolio to perform, then oftentimes just at least getting one of those Social Security benefits and that's why staggering the two oftentimes makes sense. It's like, okay, well if a 10% withdrawal rate is what's needed, then if we can reduce that down to a seven for a couple of years by taking one and then drop it closer to a four and a half, five after a couple more years and stagger it, that's the ideal.

Marc Killian:

Gotcha.

Nick McDevitt:

It really is a function of portfolio like the nest egg number, the expenses and what we need to take out to cover those expenses and what the gap that Social Security benefit's going to provide.

Marc Killian:

Gotcha, okay. Yeah, so I mean, again, there's really a lot of nuance to figuring out. Most of us are going to probably fall into this dual income household planning strategy. You want to make sure that you're working with someone to just maximize things based on what you've built yourself, plus what we're going to get back from Social Security. Can we talk about a lot of money over time?

John, you talked about ex-spouses earlier, so let's talk about special considerations for blended families or people who have gotten a divorce and remarried or whatever. I'll throw this out there as well. So my mom found, and Social Security, people that work there, they're not supposed to, typically they're not going to help you with their claiming strategies, right? They're going to give you the options available for you, but it's not really their job and they're not really supposed to be diving into the weeds. But I will say, that said, there was a lady that helped my mom. She was asking her a question, and she informed her, and a lot of people don't know this, that you could claim on an ex-spouse, right?

To John's point earlier, and so she found out she could actually get a higher benefit, she's in her eighties, by claiming from her first husband who she hadn't been married to in a very long time. But there are some caveats and rules to that. It could be something that you consider doing in your claiming strategy as well, especially if you're a widow or you're single. You have to be single obviously in order to do that, that's one of those caveats. But talk to me a little bit about some of that stuff. It was interesting, she found out she could get more money. And to your point about the vindictiveness, they don't ever know.

So when you claim, they don't find out, they don't get to come to your house and go, "You're claiming against my Social Security." They don't even know.

John Teixeira:

Yeah. That's something that comes up where I guess some misinformation or I don't know how this comes up, but it's somewhere out there where I've had clients ask, "Hey, is my ex-spouse drawing on my Social Security going to affect mine?"

The answer's no. What you just said there, you would never know when they draw on your Social Security, it's not going to affect yours whatsoever. And vice versa, where it's like, "Hey, will they know when I start drawing my spousal benefit?"

Marc Killian:

Yeah, can I stick it to them? Like, "No."

John Teixeira:

No, you cannot. And then one thing you mentioned earlier, Marc, when you were going through that is you can draw an ex-spouse as long as you are not remarried.

Marc Killian:

Correct. And I think you had to be married 10 years, right? To the prior person. Yeah.

John Teixeira:

Yeah, you have to be married 10 years and you cannot be remarried. I've had situations where people did not remarry to take a spousal benefit. They just let it ride and said.

Marc Killian:

Mom being in her eighties, she was like, she's not getting remarried anyway. But she was like, "Huh, I didn't know that."

To your point about not knowing, one of my siblings was like, because we're half siblings, "Well, that's not cool. She's drawing against my dad's."

I was like, A, he's never going to know. B, actually, he's never going to know because he's passed away anyway, right? It's a weird little loophole, but it is one that could be beneficial, and a lot of times I think it does benefit widows sometimes who maybe have been, maybe their second marriage and then that person passed away. It is something to consider if they had a prior husband who maybe made more money. It could be an option to look into, but there's some rules and there's some things, so you want to make sure you're talking with somebody about that.

John Teixeira:

Yeah, the most important thing is let's say you are in that situation where you have an ex and currently doing this right now, you have to go to Social Security and provide them with the information so you can determine what their benefit actually is. And if you have multiple exes that qualify for you get to pick and choose whichever one's higher if you're going to be doing a-

Marc Killian:

But you do have to have the paperwork to your point, yeah. You have to show-

John Teixeira:

You have to have the paperwork and everything like that.

Marc Killian:

Yeah, to show.

John Teixeira:

Definitely there's a lot of options, information out there, and it's important to do your due diligence. And if you do call Social Security, and we're going to say this every single time we do a Social Security podcast, sometimes they give you bad information, unfortunately. It's important to make sure you're working with the qualified professional that knows it, and you might want to call multiple times to confirm what you're hearing.

Marc Killian:

Well, speaking of, that might be a good time to bring up the fact you guys got something going on. What's going on there? You got an event or a class or something?

Nick McDevitt:

Coming up at the end of the month in January, a fair amount of our clients have come to us through the classes that we do around at different educational institutions. But starting on January 30, it's a two night course, so two and a half hours on the 30th, and then two and a half hours on the following Thursday. And then concurrently, we also run day one of the course on the 4th and the 11th of February.

Marc Killian:

February, okay.

Nick McDevitt:

It'll be at Pasco Hernando Community College, the Porter Campus up in the Wesley Chapel area. We've got clients that originally went to the course and then sometimes like to go back and freshen up. We have other people that have come to us, whether it's a referral or heard the podcast or whatever, and they find out that we do the class and they like to join. So more than welcome, just reach out to us if it's something that you're interested in.

Marc Killian:

What's the best way to go about doing that? Just go through the website or call a number?

Nick McDevitt:

I would either call our office, (813) 286-7776. Or they could email either John or myself, it's nick@pfgprivatewealth or john@pfgprivatewealth.

Marc Killian:

And again, that number if you need to, folks, is (813) 286-7776. Or email John or Nick and then @pfgprivatewealth.com. All right, that's going to do it for this week on the podcast. Thanks so much. So yeah, great. If you'd like to attend that event, I mean at the time this podcast is happening, you want to jump on the February one. But definitely reach out to them ASAP, don't delay and get yourself in there because a lot of stuff that goes into Social Security. Make sure, as John said, that you are talking with the professional who can help you with this and you can reach out to them at pfgprivatewealth.com or the information we just gave. Check the show notes below for links and information that way as well. Don't forget to subscribe to us for future episodes of Retirement Planning - Redefined with John and Nick from PFG Private Wealth. We'll catch you next time. Thanks guys.

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