Randy reviews Medicare parts A, B and C to help you make informed decisions during this Annual Enrollment Period (AEP) Plus, an in-depth look at Social Security benefits and understanding how to maximize your monthly income.
Book a free consultation with Randy here.
Call today by dialing 866-990-7664
10.25.22: Audio automatically transcribed by Sonix
10.25.22: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
Producer:
Welcome to Your American Retirement with your host, Randy Sams. Get set for a full hour of financial information and economic news affecting your bottom line. Randy works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here is your host, Randy Sams.
Randy Sams:
Hey, welcome, Central Arkansas to Your American Retirement with Randy Sams, president, CEO, SMMG Financial. Thank you for joining us today. 101.1 FM. The Answer where Little Rock comes to talk. Folks, again, I want to welcome you to the show. Hopefully you're having a fantastic Saturday. The weather is getting a little bit cooler here in Arkansas where we are at at Your American Retirement SMMG Financial folks, we've had a lot of people leave comments. We've had a lot of people kind of give us suggestions. They like the way the show is going. You know, our show is more we're focused on education. We want our clients to understand what they're about to enter into. Call this thing called retirement. Leave us a message. Go to Your American Retirement dot com YourAmericanRetirement.com. Leave us a message. Leave me your contact information. Am I going to inundate you with emails I don't work that way, but I'd love to be able to speak to you. Kind of hear some of your comments. Also, go to the Your American Retirement dot com podcast on YouTube or Spotify wherever you get your podcast. Or you can go to 866 990 7664. Give us a call, Leave us a message, leave us a voicemail, give us your information, contact information, and we'll be glad to reach out and speak to you. Answer any questions that you may have about the shows that we have coming on. Give us a thumbs up on the podcast. We love to know that there are folks that are not only listening to us on the radio, but also going to the website. If you miss one of the segments, one of the shows, one of the recordings that we do, you can go to Your American Retirement dot com YourAmericanRetirement.com Look on previous shows, click on that link and you can listen to any and all of the shows that we've got recorded.
Randy Sams:
So folks again Randy Sams, SMMG Financial president, CEO, thank you for joining us here at your American Retirement. We are focused on addressing the major financial issues facing retirees and pre-retirees in America today by helping people understand and prepare for a secure retirement, not a risk of retirement. Folks, we want to remove that word four-letter word, risk or risk. And that's what we do at Your American Retirement. Smg Financial. So, folks, we've got a great show plan for you today. I'm glad you joined in. First of all, we're going to start covering we're going to go back over Medicare. A lot of folks that don't understand what Medicare is, what the parts A, B, C, and D are. And also right now, we are in the midst of AEP, which started October 15th and will run through December 7th. And a lot of folks are not they do not quite understand what they can and cannot do during AEP. So we're going to cover AEP, Medicare parts ABCD in the first segment here, then the second, third and fourth segment. We're going to talk about something that everybody needs to know, especially if you're getting close to retirement, if you're 60, 61 or about to turn 62, this is something that we ought to be sitting down and discussing. It's going to be called your Social Security options, what you can and what you should do based on what your objectives are. But hey, I'd like to welcome in the show today our producer, Mr. Jim. Jim, thank you for joining us. Jim is going to give us a few tidbits. He's going to give us the quote of the week and then we'll start the show. Thanks for joining, Jim.
Producer:
Hey, Randy. Thank you again. I really enjoyed our talk and our show last week. But you mentioned that word risk. That is a four letter word. And it's a word that a lot of times isn't all that pleasant when it comes to what we discuss on a weekly basis. Risk, stress. Risk risk spelled it right that time.
Producer:
And now for some financial wisdom, it's time for the Quote of the Week.
Producer:
Let's get to our quote of the week, Randy. This is from Arthur Godfrey. His quote, I'm proud to pay taxes in the United States. The only thing is I could be just as proud for half the money. Pretty good quote from Arthur Godfrey.
Randy Sams:
I like that. That's funny. I like Arthur Godfrey.
Producer:
Yeah. That's the first time when I was looking up this quote this week. First time I actually heard of Arthur Godfrey. I looked him up and he had pretty he had some good quotes, some pretty esteemed quotes and some good financial wisdom, I think, in my opinion.
Randy Sams:
Well, he was you know, he was an American radio and television broadcaster and entertainer. I think his nickname was what, the old redhead. Is that what they call him?
Producer:
Yeah.
Randy Sams:
Yeah, they've got that. Well, thank you for the quote of the we are quote of the week. We appreciate that. Hey, folks, just a quick reminder here in Arkansas, remember? Tuesday, November 8th, 2022 is is Election Day. So go out and do your patriotic duty folks. Go out and vote. If you like the current situation that you find yourself in, then you know what? You should vote. If you like to see different changes. If you want to see the changes in the economy, you want to see changes in the gas prices, then you should know exactly who and what you should be voting for. But folks, anyway, early voting is open right now. When you listen to this show, we're recording this show on Tuesday, October 25th. But when you listen to it, folks, you have early voting. Early voting is open in Arkansas right up until the Monday before Election Day, which is November the eighth, 2022. So folks, go out and do your duty and cast that vote. It's your American patriotic duty. So how are you folks? Again, like we said earlier in the show, we're going to finish out segment one, talking about Medicare, talking about part A, part B, C, and D, And we're going to talk about what you can do during ADP if you have a medicare Advantage program or if you have a prescription drug plan. But, folks, this is very important. You got to realize one of the things that we do at SMMG Financial, your American Retirement, is we sit down with folks and like I said earlier, we like to educate our clients.
Randy Sams:
We want you to make smart decisions. We want you to understand what the ramifications might be from making a decision without being educated. You know, there's a lot of folks out there that don't understand Medicare. I get questions all the time. What Medicare A, what Medicare B does, What is this C, what is Part D? Do I have to have this? Can I not take this? So, folks, we're going to spend a little bit of time on each show between now and December 7th, which is the end of the enrollment period. So the first segments, we're going to talk about Medicare, we're going to talk about what, Medicare, A, B, C, and D is, and then we're going to also go over what the EAP period will allow you to do if you have a medicare Advantage or, like I said earlier, a prescription drug plan. So, folks, first of all, we're going to talk about original Medicare. Original Medicare refers to Medicare Part A and Part B, which is managed by the federal government. People can see any doctor that accepts Medicare assignment and the government program pays a significant portion of the cost. So, folks, I like to refer to Medicare. Now, don't take this as gospel, but it works similar to what your old 8020 plans. There's not a lot of 8020 health plans out there today. A lot of them I see are 6040, some of them are 7030 paying higher premiums.
Randy Sams:
You might be able to have an 8020 plan. But if you look at Medicare Part A and part B, that's basically an 8020 plan. So if you go into hospital and all you have is Medicare Part A and part B, you're going to be looking at about 20% being responsible for 20% of that bill. So there are ways that we can help you take care of that 20%. And we'll discuss those in just a little bit. But late, let's go over Medicare Part A medicare Part A is basically hospital insurance. It covers inpatient care in a hospital skilled nursing facility, although not custodial or long term care. Part A also helps pay for a hospice care and some home health care Part A does have a deductible of $1,556 in 2022. That's going to increase to 1600 in 2023. And they're also coinsurance, which means the patients pays a portion of the bill. So most people that are eligible for Medicare Part A, they do not pay premiums because they or their spouse have paid Medicare taxes for at least ten years. If you have questions on how you qualify for that, you give us a call. 866 990 7664. We'll be glad to explain it. Medicare Part B, Medical Insurance. Medicare Part B covers doctor's visits and other medically necessary services and supplies. That includes preventative services or health care to prevent illness as well as ambulance services, durable medical equipment, mental health coverage, and a few types of outpatient prescription drugs. So Medicare Part B requires a monthly premium.
Randy Sams:
And in 2022, your monthly premium has been $170.10 per month. In 2023, that is going to decrease to $164.90 per month again in 2023. Single people with an adjusted gross income of over 91,000, that jumps up to 97,000 and married couples filing jointly with adjusted gross incomes of over one. 82,020 22 and 194,020 23 are going to pay slightly higher premiums. Medicare Part B also has a deductible of $233 currently in 2022. And that's going to jump now, assuming it's going to fall down to 22 $226 in 2023. So again, after you pay these, you typically pay 20% of Medicare approved amount of services for services and supplies for Medicare Advantage or what's known as Medicare Part C. A lot of you all here ask me, what is Medicare policy? Well, that is Medicare Advantage. Medicare Advantage is a type of health plan offered by private insurance companies that provides the benefits of Part A and Part B and often Part D prescription drug coverage as well. The majority of the Medicare Advantage plans that I market here in Arkansas and some of the surrounding states, they all include a prescription drug plan. So they're known as Medicare Advantage prescription drug plan. But you must continue to pay your part B premium. So your part B premium is not going to go away. Even if you take a medicare Advantage plan, their separate premium to pay for the insurer. And however, a medicare Advantage plans are offered at zero premiums through the insurance. There are several advantage plans out there today that have a zero premium for you as far as if this is the plan that you have.
Randy Sams:
Also, we refer to these Medicare Advantage plans as bundle plans because they have additional coverage providing some costs for benefits for vision care, hearing and dental care. Unlike Medicare, your original Medicare Part A, B standalone, there are no out-of-pocket expenses for Medicare. I mean, shouldn't they said there is no out-of-pocket limits for expenses if you just have Medicare Part A and part B, But with Medicare Advantage, you do have a maximum out of pocket. Right now, it's around $7,550 depending on the plan that you have. But in 2023, that could and will increase to $8,300 again in 2023. And the majority of your Medicare plans are HMOs and POS. So, folks, that'll give you a little bit of information. Let me cover very quickly what you can do during a Yep. You can change from Medicare Advantage, from original Medicare. You can change from original Medicare to a medicare Advantage plan, change from a medicare Advantage plan back to original Medicare switch from one Medicare Advantage plan to another Medicare Advantage plan. Switch from a medicare plan that doesn't offer drug coverage to a medicare Advantage plan that offers drug coverage. Now, folks, I'm going to stop right there because we're about to take a break. I'll finish up with the last few points here. But thanks for joining us. We're going to take a little break and we'll be right back.
Producer:
Missed part of today show? Your American Retirement is available wherever you listen to podcasts and online at Your American Retirement dot com. YourAmericanRetirement.com
Randy Sams:
Hey, welcome back, folks. Again, my name is Randy Sams, president CEO, SMMG Financial. You're listening to Your American Retirement on 101.1 FM. The Answer. I want to welcome you back to segment two of the show. So, folks, I'm going to run back very quickly. Got kind of long winded in segment one, but I want to go over very quickly what you can do during AEP. Number one, you can change from original Medicare to a medicare Advantage plan. You can change from Medicare Advantage plan back to original Medicare. You can switch from one Medicare Advantage plan to another Medicare Advantage plan. You can switch from a medicare Advantage plan that doesn't offer drug coverage to a medicare Advantage plan that offers drug coverage. Switch from a medicare Advantage plan that offers drug coverage to a medicare Advantage plan that doesn't offer drug coverage. You can join a medicare drug plan if you don't have one, or you can switch from one Medicare drug plan to another Medicare drug plan. You can drop your Medicare drug coverage completely. So, folks, I know that's a lot to think about. If you have questions, give us a call. 866 990 7664. I'll be glad to cover what you can do during AEP in more detail if you're interested. And if you want to, we can set up a consultation and go over your what you currently have as far as your coverage go.
Randy Sams:
So, folks, that covers Medicare. Well, I want you to be educated on what Medicare is all about. What part eight, what part B does and does not do, what it will cover and what it will not cover. Then also, for those of you who have Medicare Advantage or prescription drug plan, what you can do during the folks, we're going straight into the next part of the show. We're going to talk about Social Security and why is Social Security. And when you take Social Security so important, Social Security benefits should be a vital part of your retirement planning. We believe that at SMMG Financial, you're American retirement folks. It's going to make a difference when you choose to start, whether you choose to delay what amounts you're going to be getting sent to you through Social Security benefits. But you should be looking at this. You should be having consultations. Again, that's why we have Your American Retirement dot com. You leave us the information. We'd be glad to meet with you. For those of you who are getting close to retirement, those of you who are getting close to age 62, or if you've already delayed taking Social Security benefits and you're about to have your full retirement age, we'd love to sit down with you and kind of discuss what your options might be.
Randy Sams:
But folks, the reason why I focus on Social Security and why it's such an important part and it should be a certain a very important part of your retirement planning is just as an example. Massmutual partnered with PSB Research to poll older adults on their understanding of Social Security. So folks, there were 4500 people who took part in the online poll between April 4th and April 7th. Get this only 6% of those 4500 people correctly answered 12 or more of the true or false questions. I'm going to ask those true or false questions and you're going to see how you do. Only 6% correctly answered 12 or more of the true and false question. So, Jim, what's crazy here is 65% of the people received a failing score on the quiz or barely passed, highlighting the lack of knowledge concerning the ins and outs of Social Security. So, Jim, you can see why here at SMMG, Your American Retirement, while we believe it's vitally important to understand your Social Security options, know your options before the time comes for you to take that benefit. You agree with that, Jim?
Producer:
100%. That's 65 and brings back memories of my trigonometry tests in high school.
Randy Sams:
Yeah, I understand. I wish I never.
Producer:
Had trigonometry kind of guy, Randy. You know what I'm saying?
Randy Sams:
I can't even. You know, it'd be hard for me to spell it right now, much less. Actually, I do that. Do the percentages that Jethro Bodine used to say, okay, but Jim, here, here's the question. So, folks, I want you to listen to this. Listen to these 13 questions and give yourself a grade. These are the 13 questions that were posed to 4500 people. And they concern Social Security benefits. They're true or false. So it's not it's not a multiple choice. It's true or false. Number one, in most cases, if I take benefits before my full retirement age, they will be reduced for early filing. That is true. Number two, if I am receiving benefits before my full retirement age and continue to work, my benefits might be reduced based on how much I make. That also is true. If I have a spouse, he or she can receive benefits from my record, even if he or she has no individual earnings history. That is true. If I have a spouse and he or she passes away, I will receive both my full benefit and my deceased spouse's full benefit. That's false. You will receive the higher of the two. Number five. Generally, if I am in a same sex marriage, there are different eligibility requirements when it comes to Social Security retirement benefits. That would be false. Number six, the money that comes out of my paycheck for Social Security goes into a specific account for me and remains there earning interest until I begin to receive Social Security benefits.
Randy Sams:
That's false. Under current law, Social Security benefits could be reduced by 20% or more for everyone by 2035. That is true. Number eight If I file for retirement benefits and have dependent children aged 18 or younger. They also may qualify for Social Security benefits. That is true. Number nine, if I get divorced, I might be able to collect Social Security benefits based on my ex spouse's Social Security earnings history. That is true. Now, they do have a they do have a time limit as far as going to say a time limit. You have to be married for a certain period of time before you can actually collect Social Security benefits from your ex spouses. But that is true. If you get divorced, you can't collect Social Security benefits based on ex spouse's Social Security earnings. History Number ten. Current Social Security law. Full retirement age is 65 no matter when you were born. So under current Social Security law, full retirement age is 65 no matter when you were born. That is false. We'll cover that in just a little bit. 65 used to be everybody's retirement age, but now your FRA, your full retirement age is going to change based on the year you were born. Number 11, Jim, if I delay taking Social Security benefits past the age of 70, I will continue to get delayed retirement credit increases each year.
Randy Sams:
I wait. That's false. Number 12. Social Security retirement benefits are subject to income tax, just like withdrawals from a traditional IRA account. That is true. That is false. All right. I almost said that matches number 11. That's false. Number 13. I must be a US citizen to collect Social Security retirement benefits. That's false. All right. So you can see ten, 11 and 12 and 13. Those are all false. So, folks. The final three questions that were posed on this survey. We're the most challenging to the respondents. Number 13 gave the most difficult. 75% of the people responded incorrectly when asked whether a person needs to be a citizen to collect Social Security retirement benefits. This is the answer. Non citizens can in fact qualify for Social Security retirement benefits provided they are in the country legally. They are authorized to work in the US and they have earned enough work credits over the course of their careers. Number 12. Question number 12 was also difficult. More than half the respondents got this one wrong. They thought the Social Security retirement benefits are subject to income tax, like withdrawals from a traditional individual IRA account or retirement account. In reality, only a portion of a person's benefits are potentially taxable. All money that that is withdrawn from an IRA is subject to income tax. But only a portion of your Social Security benefits might be taxable. Give an example An individual tax filer may pay taxes up to 50% of their Social Security benefits if their total income is between 25,030 4000.
Randy Sams:
If their total income exceeds 34,000, up to 85% of their Social Security benefits may be subject to income taxes. For those of you you're married or joint filers, you may see up to 50% of your benefits taxed if your combined income is between 32,040 4000. For couples whose total income exceeds 44,000, 85% of your benefits may be taxed. So people think that Social Security, if you take your Social Security, that it's not going to be taxed depending on what your income might be. And again, folks, it's based on your income, earned income, and you can see what it would be for your total if you're joint filers that your combined income for both husband and wife number 11. Over half. Just over half the participants in the poll incorrectly responded to the question, asking whether delaying benefits past age 70 increases a person's eventual benefit. So, folks, what happens is this it's true. If you delay your benefits beyond your full retirement age, could be 66, could be 66 and one half could be 67. But if you delay taking your benefits past your full retirement age. This will boost your eventual payments. Benefits will stop increasing, though, once a person reaches age 70. So there's really no benefit on not starting to take your Social Security benefits, monthly benefits past age 70. So folks that that'll tell you again, 65% of the people that heard those same 13 questions, they either had a failing score on the quiz or they barely passed.
Randy Sams:
So that's why we at SMMG Financial, Your American Retirement, that's why we're focused on helping you to understand and to prepare for that secure retirement. We want you to understand and prepare for Social Security benefits. When is going to be the best time? For us to look at taking a benefit. We need to sit down with yourself. If you're married, yourself and your spouse, significant other. And let's let's go through I have a Social Security checklist and I have a Social Security work worksheet that we can put information on and that will help you decide. So that's why we're going to focus on the next couple of segments here, folks. We're going to focus on Social Security making choices. Maximizing your benefits. So, folks. Understanding Social Security options. Social Security was never intended to replace the full amount of a retiree's previous income. It does provide a significant portion for many. It is their only source of guaranteed income. So listen to that again. Social Security benefits provides a significant portion. And for many, many, it is the only source of guaranteed income in retirement. So do you know what you're expected benefit will level will be? Do you know when you should file for benefits or what choices you can make to maximize what you will receive? So folks, listen to this.
Randy Sams:
Again, focus on that significant portion of people out there today that are in retirement 65 and over rely on Social Security. As their only source of income. This is what we're looking at. Social Security makes up 50% or more of total retirement for married couples right now. Social Security makes up 50% or more of total retirement income married couples right now. Today, 50% of married couples rely 50% of their income on a monthly basis. Comes in from Social Security. Individuals, folks, these are single folks out there in the in today that are retired 65 and over. Those individuals. 70% of those individuals rely on Social Security as 50% or more of their benefit. Social Security makes up 90% or more of total retirement income. For married couples, 21% of married couples, 65 and over 90% or more of their total retirement income. They are relying on Social Security only for individuals. 45% of individuals, 65 and over require or 90% of their retirement income comes only from Social Security. So folks, that's why at SM at SMMG Financial, Your American Retirement, we believe in preach. You do not retire wisely based on assets. You retire based on guaranteed life income. You retire wisely based on guaranteed lifetime income. Again, as Jim and I said earlier, call us. We want to reduce we want to eliminate that risk. So, Jim, what comments that you have, man, you may take us out of this segment.
Producer:
You know what, if I may, Randy, you're a stud. You are so good at what you do and disseminating all of this information. And if anybody missed any of today's show or any of this information, very easy to listen back. All you have to do is subscribe to the podcast. We've got a lot more to come on Your American Retirement today, but a catalog of past episodes is available on Apple, Google, Spotify or wherever you get your podcast. So again, if you missed anything, don't worry. You can listen back to today's show on multiple podcast platforms and listen back to previous episodes as well. We will continue with understanding your Social Security options. We'll touch on those next. Your American Retirement 101.1. The answer where Little Rock comes to talk. We're back after this
Producer:
Remember, all of Randy listeners receive a free financial consultation just for listening to the show. Visit Your American Retirement dot com YourAmericanRetirement.com To learn more and schedule an appointment. Thanks for listening to Your American Retirement and subscribing wherever you listen to podcasts.
Randy Sams:
Hey folks, welcome back to Your American Retirement. I am Randy Sams, President CEO, SMMG Financial. I want to welcome you back to 101.1 FM. The answer we're Little Rock comes to talk again Your American Retirement folks we're going to pick up where I left off and segment to hopefully we'll get we're going to go through quite quite a bit of information may not get finished on today's show, but Jim has assured me that we will pick up where we left off and finish some of the other topics because I've got four topics I want to talk to you about. These are the things that you need to consider, folks. This is what we do at SMMG Financial. You understand that what we focus on is getting our people prepared for a secure retirement, not a risk or retirement. And the only way we can do that for you is to educate and to help you understand what your options are. And when it comes to Social Security, making choices and maximizing benefits to me is one of the most important decisions that you or your spouse, both of you, need to sit down and discuss with a financial advisor and get this right, because you may be stuck with this decision for the rest of your life. All right. So what we're going to look at today, deciding when and how to claim Social Security benefits is one of the most important decisions that retirees will ever make.
Randy Sams:
So to make the most of Social Security, consider taking the following steps. Now, folks, we're going to take each one of these separately, but I'm going to go over all four of them with you right now just to if you want to write them down. But we'll cover each one separately probably in segment, this next segment, Segment three and Segment four. And again, we may not be able to get finished with them, but here, number one, consider taking the following steps. Number one, choose the best time to file. Number two, decide how long to work. Number three, know your options. Number four, consider the big picture. Those are the four things that I think you and your spouse and anyone who's listening to this show you need to consider before making that decision on when I'm going to turn on my Social Security benefits. So number one, topic number one, choose the best time to file if you want to maximize your Social Security benefit. Deciding on the right time to claim benefits is critical. Folks, you have three options. Option number one, you can file early. You can claim benefits as early as age 62, but you will receive a permanently reduced benefit up to 30% less than if you waited until your full retirement age, depending on how early you file. Basically between the age of 62 and the age of whatever your full retirement age is. And I'll go over a couple of them very quickly with you here in this segment.
Randy Sams:
But if you take it at age 62 versus, let's say six and a half, then your benefits are going to be reduced by 30%. You will receive smaller benefits over a longer period of time. So that's something to think about. Some people, when I spoke to them, they wanted to take a benefit at age 62 because they felt like that, hey, my full retirement age is 67. That gives me a five year head start. All right. We're going to talk about that if that's going to be the best decision for you. And it might well be, but we'll talk about that. Next option is your full retirement age. You can file at full retirement age known as FRA. Depending on your birth year. Your full retirement age could be anywhere between 66 and 67 If you were born between 1943 and 1954, your full retirement age is 66. If you were born like myself in 1957, your full retirement age is 66 and six months. If you were born 1960 or later, your full retirement age presently is age 67. There's plenty there. Different ages, different starting points in between those ages. But I wanted to hit those two. So if you're 60, if you're were born in 1960 or later, your full retirement age is 67. All right. That is the age you'll be eligible for your full benefit amount. Social Security Administration refers to this amount, your full benefit amount as your primary insurance amount.
Randy Sams:
The third option is file later than FRA. For each year you wait past FRA benefit, you will increase your benefit by 8%. The benefit stops increasing at age 70. If you remember, one of the true false questions we had earlier in segment two, you remember that? That was one of the questions and a lot of people failed that. So if you're age 70, you've got you've reached your maximum, you've reached your peak. P a In other words, your benefit will not get any higher. So there's no incentive to delay filing beyond that point. By waiting, you lock in a permanently higher benefit amount, although you will receive it over a few of years. So folks, here's what you have to look at to be eligible for for your Social Security retirement benefits. You have to be working you. Had to have been working and pay Social Security taxes. So you earn up to four credits per year and you must earn 40 credits over ten years to qualify for benefits in 2022. You earned one credit for each $1,510 worth of earnings. You become eligible for Social Security retirement benefits by working and paying Social Security taxes. All right. So, folks, here's something that we're going to cover this in a little detail here. I can't go very deep into this, but a lot of folks ask me about what's the benefit of filing early, What's the benefit of waiting? All right.
Randy Sams:
So what I always want to do, folks, we want to figure out when is your break even point? What I mean by break even point is this If you delay taking benefits and wait for a higher payout, in other words, you wait from age 62 to age 66. All right. So you're waiting for that, a higher payout. At what point will you catch up or break even and from that point, earn more benefits for the remainder of your life? Or if you took early benefit, you make less from that point on. All right. So what I mean by that is, as an example. But let's give an example of someone who is age 66. That is their full retirement benefit. And let's say they they if they waited until their full retirement age of 66, they would get 1000 a month. All right. Versus someone who started their retirement at age 62. They took their Social Security benefit at age 62. Their benefit is if we would have waited to age 66 would have been 1000, but they started age 62. Their benefit is going to be reduced to $750 by 25% less $750 per month. Basically, if you do your math, is $9,000 a year, $1,000 a month, there's 12,000 a year. So here's where your break even point comes in and you can calculate this very quickly. So if I started at age 62 and my full retirement age was 66, that gives me, what, four years? All right.
Randy Sams:
So that gives me four years of 9000. So you do your math. What does that work out to? Is that 36,000? So over that four year period, you've gotten $36,000 sent to you from Social Security. Versus someone who waited to their full retirement age of 66 and they start out at $1,000. But at what point in time does that person who waited to age 66 to get that 1000? Do they actually break even with you and they start making more money? Well, here's the simple math. How much more is 12000 to 9000? That's 3000, right? 3000 a year more. So how many years at 3000 a year does it take to make up 36,000? 12 years, right? Simple math. Jethro Bodine doing this goes into song. All right. 3000 a year times 12 is 36,000. So someone started at age 66 making 1000 a year versus someone who started at 62, making $712,000 a year, $1,000 a month. Someone making 750 a month at age 62 or 9000. After 12 years, they've caught up. That's their break even point at age six, at age 78. That person is now made just as much money as they would have if they just started at age 62. But here's the point. From that point on, guess what? That person who waited to age 66. They're going to be making $3,000 more every year than the person who took that benefit at age 62.
Randy Sams:
So does that make sense? Again, that's your decision. And again, you have to you have to live that full 12 year period at that $1,000 a month or 12,000 a year to hit that break even point. So that's one of the decisions that you that you have to be involved in, that we have to be to discuss, we have to have a discussion on folks is. You're expecting to live. How long? For myself. My father passed away at age 94, and in 2020, he was age 94 when he passed away. My lovely mother, she is 88. Don't tell her I told you that, but she's 88. So for me, I feel like that I have longevity in my family, in my genes. So hopefully I'll be around for quite a while. So for me, 78, it would make more sense for me to wait, because if I live to be 88 or 94 or 95, like my dad, I would be losing money at age 78 every every month from that point in time. And then just think, folks, that person at age 66, if they would have waited to age 70, their benefit would have jumped up to $1,320 a month or 15,840 per year. So that's that that is the impact of of waiting. If you're going to afford to wait, you can you can secure the highest benefit by filing after your full retirement age with the maximum benefit amount at age 70.
Randy Sams:
So that's going to be what we want to talk to you about. We want to talk to you about when is going to be your break-even point. Or is it going to be smarter for you to take it at age 62, or would it be smarter to wait to age 66? Or would it even be better to wait to age 70? So impact of waiting, folks. We at SMMG Financial, we can help you analyze your personal situation, see what makes the most sense for you. Here are a few reasons you might consider filing for benefits early rather than waiting number one to live comfortably without your Social Security benefit, you would either have to keep working longer or take more money out of a tax advantaged retirement savings. Your 401. K or your IRA. Number two, your spouse earns more and is still working. So we'll cover that in just a little bit. Number three, you have health issues that create greater medical expenses and or possibly a shorter life expectancy. So, folks, longevity is one of the factors that we want to consider when we're talking to you about whether or not you should turn on your Social Security benefits at age 60 to 66 or age 70. All right. So this is something that your decision is going to have an impact on, but this is an almost irreversible decision. Choosing when to file for benefits is one of the most important decisions you'll ever make.
Randy Sams:
And for most people, this decision is is one that lasts for the rest of your lives. However, there are two limited options available that allow you to change your filing choices. The folks I'm not going to go into detail on these. I'm just going to give you their choices. You can request a do over. So if you file early within that, you have a 12 month period to cancel and withdraw that filing, that request. But you have to pay everything back that you've been paid at that point in time. All right. You can suspend your benefits if you've not reached your full retirement age but are not yet 70. You can choose to suspend benefits and to increase your benefit amount. So in other words, if you're started taking it now, then you decided you didn't want to take it. You can suspend the benefits until later age and then they will provide an updated amount during that period of time that you suspend it. But you've got to be aware exercising those options will affect anyone else who received benefits based on your earnings history and may also affect how you pay Medicare premiums. All right. So that, folks, is going to be what you need to do. Impact of waiting. All right. So choose the best time to file. Number two, decide how long to work. You may not be planning to retire when you reach retirement age.
Randy Sams:
A growing number of people are continuing to work, whether by. Staying in the same job or what? Retiring and starting. Maybe their own business working part time. Whatever you decide to do, you need to be aware of how earned income will affect your Social Security benefits. If you file before you stop working. All right, folks, not going to cover earned income. And then we're going to complete this in a segment form. Earned income only Earned income affects a potential reduction of benefits before full retirement age. Earned income includes wages, bonuses, commissions and vacation pay. Earned income does not include pensions, annuities, investment income, interest or any government veterans or military retirement benefits. All right. So, Jim, when we're talking to clients. We are all fully understand that that is important. One of the things that you have to consider is how long do I want to work? Do I want to take Social Security benefits at age 62 and stop working? Do I want to take Social Security benefits at age 62 and maybe take a part time job of folks? We're going to finish up deciding on how long to work. We're going to cover some of the amounts that you can and cannot make without getting taxed. But again, this is a segment three. Thank you for listening. Randy Sams, Your American Retirement. Go to Your American Retirement dot com. Love to hear from you. Thank you so much. We'll be right back.
Producer:
101.1 The Answer where Little Rock comes to talk. Welcome back to Your American Retirement. Great job today, Randy. We covered really an abundance of information throughout today's show. And if you missed any part of today's program, subscribe to the podcast. Apple, Google, Spotify, wherever you get your podcasts. And be sure to join us every Saturday at 1:00 pm right here on 101.1. The Answer. Hey, don't forget to utilize your opportunity for a free consultation with Randy by calling 866 990 7664 or by logging on to Your American Retirement dot com. Key points today that we discussed Medicare, Medicare parts, ABC and DD Election Day. Don't forget to vote. And of course we talked about what to do during the annual enrollment period, but also Social Security benefits a vital part of your retirement understanding, Randy, what your options are and really how long you need to work.
Randy Sams:
That's true, Jim. That's what we're going to cover on topic to folks. We probably aren't going to have enough cover. Topic three, Topic four. But again, Jim and I have discussed and we're going to pick that up on our next show, plenty of information. I just want to cover it in a little more detail than just skimming over. So again, in the last segment of today's show, we're talking about deciding how long to work. So something that you need to plan for in retirement is growing. Number of people are continuing to work. They're working past retirement age. They may stay at their current job. They may start something new. They may shift to a part time job. I know several folks again, my mom, who is 88 years old, she still works three days a week, keeps her active or there's a lot of folks out there. They've been wanting to start their own business. They start their own business. But remember, whatever you decide to do in your retirement, whether you want to work or whether you want to fully retire and play golf, tennis, you need to be aware of how the earned income will affect your Social Security benefits if you file before you stop working. And again, I've just explained what our income is. That includes your wages, your bonuses, your commissions and vacation pay. So folks, if you start taking Social Security under your for retirement age, so anywhere between 62 and say 66 and a half, depending on what your full retirement age might be, if you claim benefits early and continue to work, there is an annual earnings limit of $19,560 in 2022.
Randy Sams:
For every $2 you earn over that limit, your Social Security benefits will be reduced by $1 at your full retirement age. In the year you reach your full retirement age. The earnings limit is higher. In 2022, it's $51,960 during that year. For every $3 you earn over the limit, your benefits will be reduced by $1. This reduction applies to income earned up to the month before your birthday and not the entire year. So. So see, a lot of folks that I talk to, they get confused about that. So let's use me for example, my full retirement age is 66 and one half. My birthday is in March. So what this is basically stating. So if you're in the same situation I am, you were born in 1957 and your full retirement age is 66 and a half. And depending on when your birthday is, they don't look at the full year. They look at the months before your birthday. All right. So what it says, the reduction applies to income earned up to the month before your birthday. So up to the month before your birthday, if you earn more than $51,960 in 2022, your benefit will be reduced again. If you are $3 over that amount, your benefit will reduce be reduced by $1.
Randy Sams:
Once you hit your full retirement age folks, you reach your full retirement age. Your earnings will no longer reduce your benefits. That doesn't mean it won't be taxed. It just means your benefits won't be reduced. So in addition, any benefits withheld due to the earnings before your full retirement age is not lost, The SSA Social Security Administration will recalculate your benefit to give credit for amounts previously withheld. So if you started your Social Security benefits at an age younger than your full retirement age, anything that they withheld during that period of time will be recalculated and your benefit to give credit for that. So that basically gives you an idea. So how do you decide? A lot of folks ask, how do I decide whether you keep working or not is a personal decision that will depend on your lifestyle, your financial situation and your retirement goals. Here are some factors that you might consider. Folks. This is something that we do. Again, like I mentioned earlier in the show, I've got a Social Security worksheet and I've got a Social Security checklist. Be glad to get it to you if you'll go to Your American Retirement dot com. Leave me a message. Leave me how I get in contact with you either by email or telephone. Glad to get that information to you. Get those worksheets to you or you can call me or leave me your contact information and again, I'll get that worksheet and that checklist to you ASAP.
Randy Sams:
How do you decide it might be beneficial to continue working? Remember, the benefit formula uses the highest 35 years of your earnings. If you don't have 35 years of earnings or if you're earning more at normal retirement age than ever before, those earnings will serve to increase your benefit. Amount. So if you're already receiving benefits, the SSA will automatically recalculate your benefit amount and pay you the increase that is due. So if you're still working and you're receiving your Social Security benefits, remember they're going to take the highest 35 years of earnings. So if you're still working and you're still making a great salary, what you make this year, next year or many years in the future, they're going to use that as your calculation. So your benefit could increase depending on that. If you claim benefits early and continue working, your benefits will be reduced by certain amounts of earned income, but only temporarily. You will reclaim any benefits withheld once you reach full retirement age. If continuing to work allows you to delay filing for benefits that will boost your permanent benefit amount. So if you continue to work, it allows you to delay again, remember the break even point that we discussed taking your benefit at age 62 versus 66 or versus age 70.
Randy Sams:
It's that break even point. How far out in the distance is it for you? Is it wise for you to continue to work and maybe be able to make more money on a monthly basis, an annual basis from your Social Security benefits? Now, let's talk about something that's very important very quickly, taxation of those benefits. Again, we spoke about if you're going to be working, you take early below your full retirement age. You can understand that your benefits would be reduced. But now we want to talk about taxation of your benefits. So if Social Security is your only source of income, the majority of you guys will not owe any taxes because you fall under the limits that you can make that you receive. However, most people have other sources of income. They continue to work. They took a part time job. They started a business. They have retirement accounts, they have wages, they have a pension, they have withdrawals from IRAs, annuities, investment income, municipal bonds. And then you have to add one half of your benefit. So this is going to give you an example, folks. What we're looking at, if you're making 32,000, again, you have to take all your retirement income, your wages, your pension withdrawals from IRAs, investment income, anything that you have coming in, folks, and then add half of your Social Security benefit. What is your Social Security benefit? If you're making 12,000 a year, half of that is, what, 6000? So here's what happens if the total that you add those up and it's greater than 32,000 for joint or 25,000 for single, the amount of your benefit that is taxable is up to 50% of those benefits.
Randy Sams:
Once again, you take all your wages, your pension withdrawals, everything that you've got coming in, and you take half of your Social Security benefit, 44,000 joint, 34,000 single your benefits, Social Security benefits would be taxable up to 85% depending on what you have coming in every year on your Social Security benefits, depending on if you're working, what other sources of income or revenue you may have, those Social Security benefits could be taxed up to 85%. Well, here's what we do. I've worked with a lot of folks that they realize that they want to delay taking Social Security. They may not want to work. Let's use that example that I gave earlier. You've got someone who is at age 62. They want to take those benefits or they're thinking about taking those benefits. And those benefits add up to 9000 a year. What they loved away to age 66, where they could get that extra 3000 a year or 12,000 a year. So what we do is we can work with you depending on what funds that you may have available. We can take a portion of your funds and we would put them into what I call a gap annuity.
Randy Sams:
It's an annuity because we're going to use an annuity to fill that gap between age 62 and age 66. So here's what we're looking at between age of 62 and 66, 9000 versus 12,000. That's 3000. 9000. So that's 36,000. So what kind of a vehicle can I use for you as a client to be able to cover that same 36,000 during that four year period? Folks, we can do it with an annuity. We can do it what I refer to as a spear SP a single premium immediate annuity, and we'll set it for a five year payout. We'll start it at age 61. It'll end at age 66. But what that will do is that will bridge or that will take that gap between age 62 and age 66. You'll get the same amount of money from that annuity payout over that five year period at the end of the age 66. Guess what you do that annuity payment goes away, but your Social Security payment is now 1000 a month versus 750. That's 12,000 a year versus 9000 a year. But folks, we've got two more topics to cover. We're not going to cover them in in today's show. But number three, topic number three is know your options. Number four is consider the big picture. So, Jim, my producer, I think we've covered quite a bit of information.
Producer:
It's this week in history.
Producer:
On This Week in History in 1965, the historical Saint Louis Gateway Arch is completed. The structure costs less than 15 million to build and is designed to withstand both earthquakes and high winds. Have you ever first of all, two points. Have you ever been to the Saint Louis Gateway Arch? And with inflation where it is today, do you think it would cost more than $15 Million?
Randy Sams:
Well, let me answer that. If I was going to tell you, I guess it was several years back in my previous life, I was doing a. Kind of a training session that we were in Saint Louis. And one of the, I guess, excursions that we had for the folks that attended is we actually took a trip to the Saint Louis Arch. Now, you kind of look at it, Jim, and you look at it, man, how does an elevator go up? Because it's an arch. Right. There's usually go straight up. They don't go at an angle. All right. So what happens is when you stand in line, they open up this door on the side of the arch, and it's like you're getting into I don't know if you've seen those. Have you seen those? Like when U.P.S. or FedEx, when they're loading their planes into like what they put packages in like one of those cargo packages. That's what you get inside. And then they shut you up and then they raise you up and then the next person gets in and then it's like a it's like a roller coaster. You kind of hear that Check, check, check, check, check, check. And you're making your way up to the top. And then they let you out and you see they have the windows, the observation towers that you can look out over Saint Louis.
Randy Sams:
But it was kind of scary at first. And then you have to get back in the same container and go down the other side. But yeah, 15 million back in, what, 18 back? And in 1965, I'd hate to think what it would, what it would cost just materials, labor, inflation that we've been talking about Jim It's just it's crazy. Yeah. The Saint Louis Arch is always something that when I flew into Saint Louis, you always knew you were good because you got to see that arch. You came over, you flew over the Mississippi coming into the Saint Louis Airport. And that was one of the first things that I saw the Mississippi and then the Saint Louis Arch. And we knew we were about to about to land in Saint Louis. Folks, thank you for listening In today's show. Again, my name is Randy Sams, President, SMMG Financial You're American retirement folks. Go to Your American Retirement dot com YourAmericanRetirement.com. Leave us a message. Give us some comments. Give us a thumbs up on the podcast that you can you can watch, you can listen to Leave us a message again. 866 990 7664 Again, Randy Sam's Your American Retirement 101 FM. The Answer where Little Rock comes to talk. Thank you.
Producer:
Thanks for listening to Your American Retirement. You deserve to work with licensed financial insurance experts who can offer sound strategies for protecting and growing your hard-earned money to schedule your free no obligation consultation. Visit Your American Retirement dot com YourAmericanRetirement.com Today. That's Your American Retirement dot com.
Producer:
Not affiliated with the United States government. Randy Sams does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. AmeriLife assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as-is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or of the results obtained from the use of this information.
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