Social Security retirement benefits can be particularly complex, and clients really struggle with their decision on how to file.
With our guidance, clients will be able to determine how to best approach their Social Security retirement benefits, and whether their benefits may tie in with other financial planning goals. We get a step ahead and are prepared to provide thoughtful answers to our client’s many questions.
This checklist covers the key issues to consider when a client must make a decision surrounding their Social Security retirement benefits, such as:
Determining whether they should file early or delay their benefits.
Understanding the claiming options they have at their disposal.
Coordinating their benefits with the spouse or ex-spouse.
Understanding how their benefits may impact other tax-planning goals
Hi, Todd Pouliot, Gateway Financial. Again visit us at mygatewaymoney.com. I got a brand new checklist here today, just finished it. And we want to bring it to you immediately and this is a conversation we're going to have with all of our clients. And it's particularly complex and our clients really struggled with the decision on social security retirement benefits. So, with our guidance our clients are able to determine their best approach to Social Security retirement benefits and whether their benefits may tie in with other financial planning goals. So we get a step ahead and we're prepared to provide these thoughtful answers to our client's many questions. So, the social security retirement benefits we're going to cover four main areas today. Determining whether they should file early or delayed benefits, understanding claiming options that they have at their disposal, coordinating benefits with spouse or ex-spouse, and understanding how their benefits may impact other planning goals. So, as usual, I’m going to come over here and share our screen with you. And number one, do you need to check your income has been accurately reflected on your Social Security benefits estimate? Now I'm just going to stop right here. Most people do not check and verify their income has been accurately reflected on their Social Security benefits. Most people need to go to ssa.gov and fill out and get online access to that ssa.gov to get their social security benefits statement. So, I want to pause there. I want to make sure you have that. I don't want to send you away from this video, but I do want to make sure it's one of the first things you do after you're done watching this video is to make sure you have a log on for ssa.gov. So, make sure you have your primary insurance amount. That's the key thing we want to look at when we do all these calculations, is to make sure that that's on file and it is accurate. We also want to look at whether or not you have any reductions for government pension offset, or commonly, GPO and windfall elimination provision, WEP. So, that is number one, we want to verify that this is done before we move on. Are you concerned about when you receive your first benefits and filing your social security benefits? So, keep enough money available prior to claiming your benefits. So, that’s typically at 3 months and obviously, we suggest our clients have a 3 months cushion cash flow always on hand, because it may be 3 months before receiving your first check after you file. So, make sure you have plenty of planning ahead and plenty of runway ahead before you do that. Are you currently below the required 40 social security credits for receiving those benefits? So, whether or not it makes sense to continue working in order to meet the minimum eligibility requirements. So, that is very concerning for us if you don't have 40 quarters that are registered for social security. You may want to keep working to get there. And do you need a review the options? They may have changed when you decided to file. We've had many changes in social security claiming strategies because many of the rules have changed on social security claiming strategies. So, consider whether a retroactive filing, file as if you had claimed earlier, or an application for withdraw benefits, pay back benefits, and continue to delay. So make sure that that is taken care of and updated. Claiming issues. Do you need a review of whether it makes sense to claim your social security retirement benefits early? Consider the factors, “I'm on working claiming early”, poor health, longevity, are you single, do you have dependents, lack of savings? This may lead you to file early, so make sure you understand filing early may be an option, may be in your best interest under those circumstances. And whether or not it makes sense to delay. Look at whether or not you have good health. Do you have longevity, are you married, have dependents, do you have plenty of savings? This may lead you to delay filing. Consider the unique advantages of social security benefits. COLA based income, attractive risk-adjusted growth from delayed retirement credits, inflation hedging, obviously inflation's the number one thing we've been talking about all year. That may compliment certainly the investment objectives of traditional investment portfolios, so we want to make sure we want to say, “Hey do we file early or do we file late?” “What are some of the things that are around that?” Are you planning to continue working after claiming your social security retirement benefits? I just want to state this very clearly, when you go to the social security office and ask them, “When should I claim my benefits?” Sometimes they will say go ahead and claim them now even if you are still working. Just know that they are not held accountable for making those decisions, you are. And that's a very big thing to consider, I may want to still consider working. Some people are moving into different types of retirement, they are calling it the "slow retirement". Some people may work in consulting, or want a part-time job, or whatever and that can be impacted by your claiming strategies. So, benefits claimed prior to the month of your full retirement age will be subject to an earnings test. So they reduce one dollar for every two or three dollars earned depending on your situation. If appropriate, consider staying under the 2022 annual earnings limit of $19560. And again, the numbers drastically change after your full retirement age. So make sure you understand, “What am I going to do, and how much am I going to make if I claim?” Being mindful, social security benefits may continue to increase if your income is high enough to replace your lower-income years in your 35 highest earning years of work history, even after you've claimed your benefits. So those are some really good detailed situations we want to look at. And do you need to review your spousal coordination strategies to maximize not only your's but also your spouse's social security retirement benefits? It may be worth delaying your own benefits until age 70 even if you are in poor health. Listen to that. It may be worth delaying. It unlocks a larger survivor benefit for your spouse. I know recently I lost my father this year but delaying is going to impact my mother's social security because of that situation. Especially if they are younger. Now there's not an age gap there, but that's one of the things that we wanted to consider when we were claiming their social security strategy. Be mindful, spousal benefits are limited to 50% of your PIA. Do you remember PIA? That primary insurance amount. It can't be claimed by your spouse until you claim your own. There's no benefit to delaying spousal benefits beyond once FRA and spousal benefits are still reduced if claimed before the FRA or full retirement age. So again, as we change social security it is constantly in flux if you were born before January 1st, 1954 and you haven't started collecting yet consider filing a restricted application claim for a spousal benefit. We are going to be seeing fewer and fewer and fewer of those as time goes on. If your spouse is deceased, you may be eligible to claim a survivor benefit based on their own benefit. Generally, it's 100% of what they were taking. Again, we do have another flowchart, “Am I eligible for social security benefits as a surviving spouse?” So look at that and remember to contact social security to claim your death benefit. Have you ever been divorced? This is something that I would hope to never see, but obviously, we see quite a bit. And were you previously married for at least 10 years? To determine whether it makes sense to file for spousal benefits on your ex-spouse. You can get 50% of their primary insurance amount instead of taking your own benefit. But be very careful, remarrying may forfeit your ability to claim spousal benefits on your ex-spouse. So if your ex-spouse is deceased, you may be able to claim those survivor benefits based on their record. Additionally, remarrying after age 60 does not disqualify you from that deceased ex-spouse's social security claiming strategy. So, that is also something to consider. It's difficult when people look at, you know, morality versus what legality is, so be careful of that situation and what that impact does have for you financially. Do you currently receive, or will you be eligible to receive a pension based on earnings from a non-covered employment position? This is a very strange way to say state and federal government pensions that do not pay into social security. We see a lot of this here in the state of Ohio, people working for the federal government or the state government. Consider your social security retirement benefits and how they are impacted by GPO, government pension offset, or WEP so GPO or WEP, windfall elimination period. So, those are very important to plan around those situations. Do you need to review how social security retirement can benefit coordinated and optimized with other tax planning goals? This is why tax preparation is on one side and tax planning is completely different things. So be aware of provisional income calculation on your benefits and affecting your AGI also your modified adjusted gross income (MAGI) is a big thing that we need to look at is that modified adjusted gross income. The tax issues on social security are extremely complicated you want to make sure that those are done correctly and with a professional. Certain income sources, Roth accounts, withdrawals of basis, reverse mortgages, life insurance policy loans, etcetera. Do not increase adjusted gross income or modified adjusted gross income we want to be very careful because of how that affects IRMAA and your Medicare premium, so that's why that is important. And consider accelerating IRA withdrawals, Roth conversion, and harvesting capital gains that may ultimately reduce taxation on your future benefits in the low-income tax years. Boy, this is one of the things that we really target here that we really want to make sure people have taken care of and again that's Pre TCJA – tax cuts and jobs act, and again, before the sunset in 2025, retired but still delaying benefits. I will tell you, if there is one takeaway, this is the takeaway from the video and this is the one thing that we take advantage of the most. In any state-specific tax issues, understanding how Social Security is taxed in your state. And any other issues that are out there. Business owners, do you operate a business as an S-corp? Does it make sense to shift more income toward wages in order to increase the amount you are paying into social security? Again, for 2022 that number is $147,000, again we should see some major adjustments in 2023. Hopefully, those numbers will be coming to us shortly and we will update this checklist as we go. Do you want a copy of that newer checklist when that comes out? Make sure you reach out to us via our website, mygatewaymoney.com and we will get in touch with you regarding the new checklist. And are you a business owner and do you have the option to hire your spouse? So this is a really interesting tax play that is also a social security consideration? Does it make sense to shift more income towards your spouse's wages in order to increase the amount they’re paying into social security? I know that sounds counterintuitive but any spousal benefits your spouse may already be entitled to and whether there are additional FICA taxes that you otherwise would not be paying. So is it worth it to increase the potential for your spouse's benefits? Again that is not an easy calculation, not something somebody should be doing manually but get with a really good tax preparer as we have here, and somebody who's also a tax planner to talk about future spousal benefits associated with your own benefits as a business owner. So again, a brand new one this is probably a longer video that's very very complicated. It’s really hard to bring social security down to a simplified video, in a simplified checklist. But the checklist, if you noticed, is just a yes or no. And if it's a yes or no then we can have deeper conversations about those things. So again, thumbs up, appreciate it really helped us with the algorithm. And subscribe to our channel so we can bring you wonderful information like this. I hope you enjoy them and that we keep bringing them to you. We’ll always have a new checklist and flow charts available to you. Again feel free to visit us at mygatewaymoney.com. I just want to thank you again so much for viewing, and have a wonderful day.