Tom Mosley:

Hey, welcome to the Ease Into Retirement Show. I’m Tom Mosley, your host. Every single week I build into these things. I try my best at, if you’ll give me five or 10 minutes, I’m going to just take one little bit of financial knowledge and try to impart that to you so that you know a little bit more, and even if you know something about the area, you know even more and you’re able to make better decisions financially. Now, today I’m going to talk about the subject, when should I start taking my social security? The key word on that board right there right now is my, because just as individual as your social security, your address, even as individual as your DNA is, you’ll see, there are a lot of other factors that determine when you should start taking your social security.

I recently bought new tires for my truck. Man, I feel so good. I feel like it’s just gripping the highway as we’re going down the road. It’s a great feeling, but the sum total of how good my truck is, is not how good a tires do you have? You have to also consider the engine and the cab and the inside and the bed in the back and the doors, do they all work, the window, everything goes in and the tires are just a part of it. Social security, even though it’s a big part, about 40 to 43% of the average American’s retirement income, social security is a big part, but there are other factors that you have to consider. So let’s look at some of those today, making the right decision again for you for social security.

Number one, you have to answer a question if you’re going to determine whether to turn your social security on or not. How long are you going to work? And we’ve done some previous episodes where we really got into this. If you’re before full retirement age, you really need to consider before you at 62, 63 or 64 go turn on your social security, especially if you’re still working. And if you’re going to continue to work and that work provides you enough income for you and your family, then you probably want to let it go and let it continue to grow. Probably. Again, I’m not making any absolutes. This is not tax legal investment or gardening advice for you. You need to make sure and get the input of your financial advisor or call us if we can help, but how long you’re going to work makes a difference, especially with how old you are.

Then your other income assets. Some people have rental income, some people have a pension that’s paying them. Some people have other sources of income that’s paying them, and so they don’t really need their social security. And your social security basically grows 8% a year as long as you delay turning on your social security. So in most cases, if you’ve got sufficient other assets coming in and paying you income and you’ve got sufficient income, in most cases it’s not wise to then go on top of that, turn on your social security that you don’t need and that you’ll have to pay tax on, turn on your social security and just have extra money that you’re being taxed on and coming in. Let it continue to grow.

The other thing is longevity. How long will you likely live? I’ve had people in my office recently who were in their seventies and they had to cut our appointments short because they had to go deal with their two parents who were in their nineties. So if you’ve got it in your Levi’s or your genes that you might live a long time, only God knows how long we’re going to live, but if there’s a likelihood of longevity in your lifespan, you need to consider waiting because the more you wait, the higher it starts and it grows faster by going up 8% a year than it will by a cost of living rate. So you really need to consider.

And the other side is true too. I had a guy came in one time, “Ahem, ahem.” I thought he was clearing his throat. I said, “Are you okay?” And he said, “No.” That’s exactly what he told me. He said, “I just came from my doctor and he said, I have terminal lung cancer and I have six months to live.” Man, I felt such compassion for him. And I said, “What’s your major question?” And he says, “I need to know, should I turn on my social security?” The answer’s obvious, go turn it on as quickly as you can if you think there’s something that’s going to cut short and you need that income, go turn it on as quickly as you can if you think you’re going to live a short time, but maybe if you think you’ve got a lot of longevity in your lifetime, let it run, let it flow, let it grow.

The other thing is the income that’s needed for your spouse. In a previous episode, we talked about a breadwinner provision, and the breadwinner provision simply says this, that there’s two different social securities in a marriage. And when one person passes away, doesn’t matter whose social security is higher or lower, the lower social security goes away and the breadwinner grows. So it might be a good idea for you to consider allowing the lower social security to turn on early and the higher social security to grow and turn on later, and that would provide more income potentially for your spouse once there’s only one of you that’s left. So that’s something to consider.

Another thing to consider is how fast am I drawing down my other accounts, my other assets? In other words, some people say, “Well, I want to wait until I’m 70 to draw down on my social security and I’m just going to draw down on my IRA until then.” And I’ll say, “Well, how much is in your IRA?” And they’ll say, “Well, I’ve got a $100,000 in the IRA. When it gets down to zero, I’ll turn on my social security.” Maybe not a good idea, maybe not a good idea. Because if you do that and you have no other assets, you’re withdrawing too much from them to allow your social security to grow, then you may really then be on a fixed income for the rest of your life.

I find that people like to have a little go-to money, leave some money in the IRA, turn the social security on and work that plan. So you have sufficient income, but you also have a little bit of money set aside for trips for special things and for the special things we don’t ask, which are the roof needing repaired, the refrigerator going out, and those kind of things in retirement. If you’re on a fixed income, that can really be tough.

Another thing to consider is inflation. Ha. Hey, we didn’t know what that word was for 30 years and now in the last year we’re learning how to spell it because we’ve jumped from about a 3% average for 30 years. Now we’ve jumped into the eights at the time that I’m making this show. Inflation can really impact what you’re making in retirement. So it might impact when you turn on your social security.

The amount of your other investments. Again, I said, if you’re drawing down on a hundred thousand dollars in an IRA and you get it down to zero, that’s not good. But if you’ve got $750,000 in an IRA and you’re going to draw that down to 600,000 and then turn on your social security, then maybe that is a good idea.

And then the last thing is the type and stability of your other investments. Now at the time I’m making this show, the stock market is up and down and up and down and way up and way down. And I’m talking about in one day. Let alone day to day to day. We’re down about 30% in the NASDAQ, 20% in the S&P, and about 14% in the Dow at the time I’m making this show. If you’re drawing money for income out of a retirement plan that’s not guaranteed or not stable and it’s invested in the market and it’s down 30%, you’re withdrawing a lot more units to get the same amount of dollars right now. So you may want to consider turning on social security in order to offset that huge drawdown that you’re experiencing in an investment that’s not stable. That’s one reason why there’s a lot of people don’t like annuities, but that’s one great thing about annuities is they’re guaranteed, a fixed indexed annuity is guaranteed never to lose value and never to go down in the income that you can draw from that fixed indexed annuity.

Hey, a lot of factors that go into making the right decision for you. And all of these, look at these things that are up here, eight things that are up here, and every single one of you have a different answer to every one of those or a different response when you consider those eight things.

So when should I start taking my social security? That depends. You need to get some input from a financial advisor who can give you some clear direction as to if I do this, it’s going to impact this. Whoops, don’t want to do that. But if I do this, it’s going to impact this. Well, I could live with that. That’s where the input comes. We give you the options and then you make the decision.

Hey, thanks for listening to our show today. We love our followers, we love people who subscribe to us and get our notification every week and people who comment and give us really good comments and maybe they ask about things that we can talk about in future episodes. And then we like it when people pass this along to people. And recently we’ve had people call our office and they’ve said, “Hey, I was listening to your show,” and we look for them in our client database and we can’t even find them because somehow they got passed our show. Somebody passed it along to them, they listened to it, they liked it, and they’re coming in and we’re able to help them. That’s the key thing.

So until next time, this is the Ease Into Retirement Show. If you’ll give me five to 10 minutes, I’ll do my best to increase your financial knowledge.