John, good to see you today, we are going to discuss one of the most important decisions you will make in retirement, when to claim Social Security. There are so many combinations out there. John with what's best, especially if you're married, but I know that this question comes up over and over again with your viewers. So what do we need to keep in mind when we are trying to figure out when to claim Social Security?

Yeah, it's actually my most asked about topic off my YouTube channel. So here's what it comes down to in Social Security, claiming it is making the best mathematical decision for your specific situation, not your family members, not your friends. So here it is, a 2019 study Erin showed that 57% of retirees would actually benefit by delaying their Social Security till age 70. Now here's an even interesting, more interesting stat. Now I'm going to ask you this, Erin, what percentage of people actually claim Social Security to its maximized, optimized benefit.

That's a tough one. I would have to say it's probably around 10% that's that's a pretty small number, Erin, but it's not small enough. The study showed that only 4% of people actually claim Social Security to its most optimized number. And I would like to think that some of my clients are within that 4% but the study goes on to show that by maximizing your benefits, the average retiree stands to gain $100,000 or let's turn that around by not optimizing it, you could be leaving $100,000 on the table. And Erin, I mean, I don't know about you, I sure would like to have an extra $100,000 right? So John, walk through real quick how claiming early can hurt you financially, but more than that, John, what I like to say to you all the time is, and again, I know you specialize in helping clients determine when's the most financially optimal time to claim, because it's so much more than a calculation than you can do online. It really has to be a conversation with a professional. The earlier you claim, the less you get. But what goes into the strategy? John, well, there's a variety of things that go into the strategy. And here's the thing, I get it. People want their money. People have, you know, fears about the system in general. Generally speaking, we already talked about maximizing to age 70 is the the best, most ideal thing you can do, and here's overwhelmingly the number one reason why, because Social Security is a sustainable income stream, and income is hard to buy in Social Security, But for the vast majority of people, and actually 81% of people claim it to their detriment. They're claiming before full retirement age. So full retirement age for most people is 67 that's when Social Security is saying, Listen, this is the benefit that we basically prescribed you to receive. If you claim before full retirement age, then you're taking an 8% annualized reduction in lifetime benefits. And it's not just for your lifetime, especially if you're the breadwinner, that could be a survivorship benefit. So you know, a lot of things need to go into the calculation. The biggest thing is not just taking the advice of someone just ad hoc and saying, listen, oh, so and so says I should claim it early at 62 What is your specific situation, and have you actually ran the numbers? So when looking at social security, there's a couple of reasons why. What we should consider, number one is your overall health. And I know there's a lot of stock being put into genetics, and you know, did our parents live long lives? But there's also a lot more talk recently in in health studies that you know genetics do play a part, but it's also your lifestyle. So if you're leading a healthy lifestyle, and you have healthy parents, you could far beyond exceed the maximum life expectancy age the catch up. So delaying could be a huge benefit for you. And furthermore, when you die, one benefit goes away. So if you're married, you're the breadwinner, and you've delayed, you have just done a monumental service to your spouse, because they're going to get that larger benefit. On the flip side, if you claim early, you're locked into those low benefits for the rest of your life, and the survivor benefit is is low. So, you know, for a lot of people, it comes down to, do you need the money right now? Right? 

Yeah. And I think, though, John, especially with this stat that you mentioned, you know, 30% of people claiming as soon as they're eligible. I think this is because so many people fear that social security isn't going to be around, and they want to get it while the getting's good. Do you think the program will remain solvent?

Yes. So in my expertise, and my expertise is, you know, from the the true experts of Social Security, the conferences I attend to, and the social security experts that I read their their articles, Social Security is going to be solvent for the boomer generation, right? Erin, and you and I, we may see some harsher reductions, but social security is actually a fixable problem. And I've said this in past videos. You know, they can do a lot of things to help Social Security. They can change the full retirement age. They can push it back for, you know, obviously not the people right now, but perhaps 10 or 15 years down the road. They can, while no one likes to hear this, and I absolutely hate to say they could add a third layer of taxation to that provisional income, where 100% of your benefit now becomes taxable, but the biggest thing that I could see them do in the government is is hitting the payroll taxes and increasing that. So while you're working, those workers are going to pay more into Social Security. And you know, for all the fear out there, I have not heard one person say that Social Security will not be around for the boomer generation. We could definitely see a reduction in benefits. That's, you know, they've said that. They've been saying that for well over a decade. But either way, you're going to take a reduction on benefits on a higher benefit, or you're going to take that reduction on benefits on a lower benefit. So I'm glad you brought up taxation, John, because I think a lot of people don't recognize that up to 85% of your benefit could be taxed. Can you walk through again, how this is calculated?

Yeah, so the provision provisional income, it's going to have a bunch of different variables, pensions, rental income, IRAs, capital gains from your taxable accounts and and here's, here's another hidden kicker, it's going to be those tax free muni bonds, right? They're not absolutely tax free. And then lastly, they're going to they're going to add all that up, and then you're going to get half of your Social Security benefit into that. So for the vast majority of people, you know, they're blowing through the 50% benefit threshold and well beyond the 85% and again, to put this in perspective, you're not being taxed at an 85% rate. It's just for every dollar of Social Security money 85% is taxed. But you know, Erin, if you could put up this one slide about why people make the poor claiming decision, and you know, the big thing is, is fear they're looking at what they're reading on the news Social Security is becoming insolvent, and our friends are saying to to get out of Social Security or claim it. While the getting is good, a lot of people claim out of bad advice, right? Well, my neighbor, my sisters, my brothers, they say just to claim early, get their benefit and let their IRA assets grow tax wise, I will tell you right now that is not the best option. So and then the biggest reason, also that I see, is psychological, right? We've already touched on the psychological belief that Social Security is going to be insolvent. But again, we talk a lot about the psychology of retirement, because it's a very powerful driver of our decisions. So when we are talking about the psychology, it is really the point of having a lack of comfort from spending, from your savings, which is your IRA. And I've talked, and this is probably for a lot of the people that I've coached through this, this is the number one thing, right? They don't want to touch their IRA assets. They they just want to claim their social security. They want to get that predictability, that paycheck that we've always talked about, that's what Social Security provides. But here's the thing, folks, especially if you have significant assets, paying down that IRA money and building an income bridge until you get to Social Security claim, the optimized Social Security claiming strategy can not only be beneficial in your lifetime, income stream with that increased social security, but it can also reduce your taxes in the future, especially with required minimum distributions, because you spent down some of that IRA money, and 100% of every Ira dollars taxable, where, at the worst case scenario, 85% of one Social Security dollars taxable. So there's a lot of things that go into it, but ultimately, I tell people this, know the numbers don't just make an emotional decision. Have analytics behind it, because I have actually had clients, and in this is a scenario where the bread winning spouse was much older, close to 10 years older than the other spouse, and when we ran the numbers, I actually had to do a double take, because the social security software told the spouse to actually claim at 63 years old. So there are instances where the numbers work out, but in most cases, I tell people listen, if you both can delay till age 70. Great, if not, at least, at least go to full retirement age for one spouse, and especially if you're working, do not claim Social Security benefits if you're working, because you are going to have to face earned income credits, which is a whole other video.

It sure is. Well, that's why you know it's it's easy to see when John, you and I get the chance to talk why this is so complicated, why people want to make it simple. They love to hear claim it 62 claim at 70. But there is no one. One size fits all. Answer, it really has to be a conversation with a professional.

What did we forget to cover, John when it comes to claiming strategies, or even some of the mistakes that you've seen. Well, I mean, again, the claiming strategy, you have to sit there and you have to incorporate social security into your overall income plan. If you're not doing that, you're making a huge mistake. Second step, you need to incorporate it into your overall tax plan. Now, all that aside, the numbers like I say, 98% of time are going to push for delayed benefits. Again, this is a very specific, individualized decision. This channel is not giving you the absolute advice, because you may need the money now. You may be sick, you may have a variety of issues that go well beyond just taxes and income streams, where it may absolutely make sense for you, either at a necessity or actually at a at an analytical level, to claim early so you need to take into everything that we've shown you on the slides, the income, the taxes and the survivorship do not, do not make life harder on yourself if you're the surviving spouse, or your spouse who you know is a widow with your death, so much to think about again, John, I'm glad we got the chance to talk this through. A good reminder to everyone that we have many wonderful in depth videos about Social Security claiming strategies on your website, I'm sorry, on your YouTube channel, but if somebody does have questions and wants to talk through anything with you, how can they get a hold of you? Yeah, well, you know, especially when it comes to social security, I love the comments we you know, we read all the comments. We may not reply to all of them. If there's things you want to learn about, put them in the comments. But outside of that, go to visit our website www.gosecurus.com we have a ton of information. We've had social security experts on our podcast in the past. We have other videos on social security, on taxation and income planning. And while you're on our website, you can go ahead and schedule a 20 minute phone call under the contact us tab, or you can schedule a vision and clarity consultation, or you can just shoot us an email at info@gosecurus.com Give us your thoughts or a question, and we'll try to get back to you the best we can. Okay, John, thank you for your time today. Thank you, Erin.