The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 123 - Social Security Benefits and Planning w/ Mike Skrynecki
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Social Security faces potential trust fund depletion by 2034, but ongoing payroll taxes will still cover about 81% of promised benefits even if Congress doesn't act. Mike Skrynecki shares insights on optimizing claiming strategies, understanding benefit calculations, and navigating potential future changes to maximize your retirement income.
• Most Americans rely heavily on Social Security, with 69% expecting it to be a significant retirement income source
• The Social Security system consists of retirement, survivor, and disability benefits funded primarily through payroll taxes
• Recent tax changes in the "One Big Beautiful Bill" may actually accelerate trust fund depletion from 2034 to 2032-2033
• Claiming benefits early (age 62) results in a permanent 30% reduction compared to full retirement age (67)
• Delaying benefits until age 70 increases your monthly payment by 8% per year beyond full retirement age
• Only about 4% of Americans optimize their Social Security claiming strategy, leaving $3.4 trillion in potential benefits unclaimed
• For married couples, having the higher earner delay benefits can maximize survivor benefits
• Up to 85% of Social Security benefits may be taxable depending on your income level
• Working while collecting Social Security before full retirement age can result in benefit reductions
• Potential solutions to funding gaps include raising the payroll tax cap, increasing retirement age, or modifying cost-of-living adjustments
To learn more about Medicare enrollment or Social Security optimization strategies, register for Mike Skrynecki's upcoming webinar on September 15th at 4:00 PM or visit skryneckifpg.com.
So this is a conversation that is applicable probably to every single person listening right now, so you better pay attention here, and we haven't talked about this concept ever, and after doing about 120 podcast episodes, so this is extremely important.
Speaker 1:I'm very excited to talk about this concept here. So, if you have any business at all or a W-2, and have any intention to ever retire or even take this benefit, this is going to be applicable to you. We are going to be talking about social security today, and what is it and how could you potentially benefit. What decisions are we going to make around it and what is going on in the country, and what is this thing called social security and how does it. And, most importantly, we're going to discuss how does this apply to you and how can we make strategic decisions to optimize your situation, whether it relates to collecting the maximum amount of benefits from your social security or reducing your taxes as well, as we talk about a lot. So all these factors have to be considered in this highly intricate topic. So I'm very grateful to be joined by someone who knows a lot more than me on this topic today, which is Mike Skrynecki. Did I say it right?
Speaker 2:Say it fast, skrynecki, and you're good, skrynecki, did I say it right? Say it fast, skrynecki, and you're good.
Speaker 1:Skrynecki, who I've known for a while in Atlanta. Mike, can you introduce yourself to the audience and then we'll get into the conversation.
Speaker 2:Sure, certainly. Thank you, first off for having me, and this is an area that I'm Mike Skrynecki, the Skrynecki Financial Planning Group, area that, mike Skronecki, the Skronecki Financial Planning Group. This is an area I've been studying probably since before the turn of the century, when I had the good fortune to be a part of the local Atlantic Kiwanis Club with David Walker, who had went on to become the Comptroller General of the US government. So we've been studying and talking about Social Security for the last 30 years. You may have heard that the trust fund is a little wobbly these days, right? So there's a lot of concerns and the number one question I help clients on a day-to-day basis optimize their Social Security and the number one question that I'm getting today is will it be there, right? So, mark, you know, despite what we think, there's 70 million people currently take, you know, on Social Security, benefiting from it and, as you said earlier, we're all going to benefit from it at some point in time, we hope. Fingers crossed, right?
Speaker 2:So most Americans rely on Social Security. It is a big part of their retirement. You've heard of, you may have heard of, the three-legged stool, right? Most people don't have a pension anymore, so we're relying on two different legs of that stool. The average American has only about $51,000 in non-retiree savings $126,000 or so for couples. $126,000 or so for couples so that personal savings leg is pretty rickety too. So there are a vast majority of people who expect to rely on social security. In fact, 69% of people expect to rely on social security, a third of whom social security will be their primary source of retirement income. And that number gets even worse for women, who save less than men on average. You know when, right now, almost 60% of women rely on Social Security as their only source of income in retirement. So this is a critical topic and, as I mentioned, everybody is going to benefit from it at some point in time.
Speaker 1:Yeah, before I jump into the questions here, we've spent a lot of time talking about mitigating your FICA tax, which is 15.3% tax in 2025, your first $176,000. And there's a lot of people when they think about Social Security, when we think about planning, we're always thinking about how can we reduce or avoid it. But at the same time, it's not the worst tax because, unlike federal tax, when you pay Social Security you're paying into a future benefit. So when we're reducing our social security tax payments, there's a trade-off, and that trade-off how much of a trade-off or benefit you're losing varies depending on how much money comes out, because so much of it goes to your social security tax and your Medicare.
Speaker 1:And when you first become a business owner and you're just a sole proprietor, I call it the silent killer of entrepreneurs because your FICA taxes you don't get that standard deduction. So let's say you make just over your standard deduction, you're thinking, oh man, I probably am going to pay absolutely no taxes at all. And then you get hit your FICA tax. That social security tax is, in some circumstances, greater than your federal taxes or your state taxes combined when you're starting off. So it's a significant tax to budget for. But what we're going to talk today is not so much about the mitigation We'll talk a little bit about how that fits into the puzzle but we're going to learn a little more about what this is and what it means to you here. So first question I have is what does it mean for Social Security? You may have heard go broke or become insolvent in the world of Social Security, and how do we get here? What's going on with that?
Speaker 2:Yeah, that's a good question and your point is well taken. There are the FICA tax that you're paying into the Social Security system is actually one I just want to emphasize one that you will actually get something back. So it's unlike your income taxes that go into the general government bucket to do with whatever they do with it. Right, the benefits that you're paying into Social Security, you will actually get more out of that than you're paying in, and we'll get into those in more depth and how that goes. But the thing about social security, the social security system is actually made up of and if you looked at the numbers, it's OASDI, it stands for old broke in 2034.
Speaker 2:Okay, well, there's a little bit of clarity that needs to be there. There are actually two trusts one for the old age and survivor benefits right, those are the retirement benefits that we all get. And then there's the disability. If you are disabled and no longer able to work, you're eligible for government benefits for that. That trust is a little bit in better stance.
Speaker 2:So what would happen when that trust runs dry? That doesn't mean there's no more money left, because the way the system works, those payroll taxes, those FICA taxes that Mark is talking about those are going in to pay not for your benefit, but for the people who are collecting benefits currently, right? So we're paying in a benefit and all those 70 million people who are taking out of it their benefits are coming mostly from those payroll taxes. The trust is the added extra amount. So right now, the benefits that are being paid out exceed the number of dollars that are coming into as that payroll taxes are collected. So that's what we mean when the trust fund runs dry. What that means is the payroll taxes will no longer cover all of the benefits that are due, so to speak. So in 2034, the estimate is that those payroll revenue, that payroll tax revenue that's being collected, will only be sufficient to cover about 81% of the scheduled benefits.
Speaker 1:So what would happen?
Speaker 2:Yeah, what would happen? Benefits, you know, will likely to be paid, but if there's nothing, if Congress doesn't act before 2034, you might get 80 cents of what you were expecting, or you might be delayed. There may be some delays, we don't know. We've never crossed that bridge.
Speaker 1:What do you think is going to happen? What are they talking about? What could be discussed here?
Speaker 2:Well, before we get there, let's talk about the most recent tax law changes and then I'm going to kind of get to that. You know some possible solutions, but the original deadline, or the original kind of go broker that target was 2034. Well, you may have heard the one big beautiful bill. You know a lot of people say well, we've cut taxes on Social Security. Well, that is not true. What the one big beautiful bill did was provide for the next four years.
Speaker 2:This year included a senior extra deduction, a below-the-line deduction. If you're 65 or more, you get a $6,000 deduction that does not offset Social Security. I'll give you a couple of examples here. If you are over 65 but not yet collecting which a lot of our clients I try to encourage clients to delay when they can taking Social Security so that you get more income over your lifetime. If you're not collecting you Social Security so that you get more income over your lifetime, if you're not collecting, you are eligible for that deduction. But let's say, on the other hand, and most Americans start collecting and claiming Social Security as early as they are eligible, which is 62, they're not yet 65. So they may be collecting Social Security but not yet eligible for that deduction, so they're not being offset. Security but not yet eligible for that deduction, so they're not being offset, they're not benefiting from that deduction.
Speaker 2:The net result of that bill is that it has pulled forward that original target of 2034. Now the estimate is that the trust funds will run dry in 2033 or 2032. And so that savings. If a couple is now over 65, they may get a short-term kind of relief from this bill a couple thousand dollars but long-term the impact is estimated to cost a couple up to about $18,000 for the rest of their lives. So be careful what you wish for. It's a great golden opportunity now. I encourage you to, if you have any clients or anybody who's over 65, take advantage of those deductions. But you might want to put the put that money aside and invest it. Don't go on, you know, trip around the world on those couple thousand dollars you might save today.
Speaker 1:Yeah, you know, I noticed a lot of these things in the big beautiful bill we. It looks really exciting, but then when you read the fine print it's not as exciting. A lot of it's getting phased out. And then for Social Security, it's not reducing your Social Security tax at all, like if you had the opportunity to not pay taxes on your tips. Well, it's below the line. So you're still paying your FICA on all that tip money.
Speaker 2:So you're still paying your FICA on all that tip money. So what you asked, you know what are some possibilities. Let's look back to the last time we were facing a crisis like this. The last time there were major adjustments to the social security system was 1983. Okay, at that point in time, and again at the very last minute, congress acted. So I expect very similar. We're not going to see any real motion until you've heard.
Speaker 2:It takes an act of Congress to make changes and that's exactly what it is. The president did not have authority to eliminate the tax on Social Security. That was implemented as part of the changes in 1983. What else was changed at that point in time was it also raised the full retirement age. So if you were born in 1960 or later, your full retirement age is now 67. And that was phased in.
Speaker 2:So for most people who are retiring and beginning to retire now, the full retirement age is now 67. That is when you can get your full retirement benefit. If you apply earlier, you're going to get a permanent reduction. If you delay beyond 67, you can go all the way to age 70, you get a bonus of 8%. The government encourages you to delay where they can. So one of the solutions that, I think, is that you might see something very similar to that, very similar to that where maybe you and I or people listening in today, they're a pretty important voting block, but my kid who is not yet 18, doesn't have a say in this. Chances are he'll have to work a little bit longer. I think that's just one of my beliefs, but there are other options and I'm glad to go into a lot of different potential solutions that are being bantied about.
Speaker 1:Again because people are living longer. My grandma lived to 95. When they designed this program, they didn't expect people to live on Social Security for 30 years, so I imagine that is true, and the numbers are a play a role in this game.
Speaker 2:And think about, remember I said, it's dollar in, dollar out. So what you have right now is the largest generation ever retiring at 11,000 people a day. The baby boomer generation. Right, the generation X is a smaller generation, but the millennials actually are as big as the baby boomers. The numbers will start to kind of even out.
Speaker 2:So this is not a demographic problem. It is more of a payroll tax problem. Remember, I told you that in 2034, the payroll taxes are not going to be enough to sustain that fact that people are living longer and more people are taking benefits, right? So there has not been a payroll tax increase since 1990. So when they did this in 1990, they were estimating that the payroll taxes would cover 90% of the costs. Okay, so how did we get here? Currently, the payroll that they're bringing in, remember I told you, is only about 80% of the costs, right? So that is one of the big issues that are in play here. It's not that it has, you know, it's just never. The system itself has never been fully funded. And, yes, the numbers are getting out of whack. But the biggest culprit here is that payroll tax not being sufficient enough to cover the benefits promised.
Speaker 1:So I know you talked about them raising the retirement age and to my understanding that original age of 65 was because that's when most people died. So the expectation was most people wouldn't really live to get their payroll tax and obviously that's not the case at all, like with my granny living on 30 years of that sucker. So we're talking about raising the. So you talked about there's a possibility of them raising it. You think they're going to raise the payroll taxes as well as the retirement age. Do you think that's a possibility?
Speaker 2:Well, I think the solutions kind of fall in one of two buckets. One is revenue raising, that is an obvious area. The other are benefit reductions. So let's broach the first one first. So right now, as you know, there is a cap on that payroll right At $176,100, if you make a dollar more than that, anything over $176,100, you stop paying into this system. Okay, so a lot of the proposals and I'll go into one most recent one here are well, what if we raise that cap Now? Back in 1983, that number was set and it does increase every year. So it is an increasing number every year, but it stops. Particularly the higher-end earners are no longer paying into the system. So let's think about this for a second. What is 6.2%? That's what you and I would pay at that cap. How much would we pay? How much is the max any one person can pay into the system in a given year? 6.2% of $176,000 is just under $11,000.
Speaker 1:Yeah, it's not a lot. And you have folks, you have physicians, you have high W-2s and the W-2,. If we have business owners, a lot of them have S-Corps where they're not paying nearly as much payroll. But the W-2 income earners are the ones who are really going to feel this payroll tax.
Speaker 2:Well, yes, if it gets increased. But think about this. This is the misnomer. Well, I've paid in, it's my money, I earned it, right. Maybe Some right. The max that the any one person can pay in in a given year is $11,000. You know what the max benefit is right now for those high earners? I don't know. It's about $4,000 a month. So they're getting four times what they put into it, Right?
Speaker 2:So, you can see. You can see that, like I said earlier, there are some good taxes. Right, this is the lesser of two evil taxes. Right, because this is money you will eventually get back.
Speaker 1:Okay, so it's not the worst tax to have out there right, we actually we have a lot of clients in Tennessee and there's this Tennessee franchise and excise tax and you pay this Tennessee tax if you want to have a Nesco. So a lot of people, they want to follow the masses and go by what they hear online saying if you have income over a certain amount, s-corp. And I'm telling them listen, this is going to increase your Tennessee tax. I would rather pay Social Security taxes. At least you're paying into something you'll get back, as opposed to paying the state of Tennessee and you don't know what they're going to do with your money but it's not going to come back to you in any form of a benefit. So when we do our entity elections, especially in Tennessee, this becomes a really prevalent conversation on the different types of taxes and which one would you rather pay.
Speaker 2:Yeah, and Mark, we talk a lot to particularly sole proprietors and people who can, who can defer more of that income right, especially you know people who don't have any employees that you know which tax pay yourself more right. Pay, pay more you know into the system here and you know defer more of your. You know other income right, so you're you're paying yourself now and later in that situation.
Speaker 1:And now this is a little going to be over the heads of most of our audience. But there are instances where you pay yourself more of a salary and it gives you more of a wage deduction and that also gives you in some circumstances as an entity owner, more qualified business income tax deduction Right and that kind of offsets a lot of the increase in the payroll taxes. And now you're paying, you're reducing your federal taxes but you're increasing your social security tax, which is a payment into a future benefit, and then you can defer more with all these other strategies as well.
Speaker 2:Yeah, you got to be real careful too. The OBBA also sets up some phase outs in some other areas. So that QBI, you want to, you know, bump that up, but to certain levels, because then you start losing salt, and that's another topic for another day.
Speaker 1:There are many layers to this, yeah.
Speaker 2:Let's talk a little bit more about raising the cap, because that is, you know, you may have heard in the last administration they proposed. They said all right, you know, right now it stops at 176, but that's a number that goes up every year. So their proposal was let's start it again at 400,000, and eventually that donut hole will close on itself. That donut hole will close on itself. There is a current proposal that was just put in by, I think, senator Gallego from Arizona. It's called the you Earn it, you Keep it proposal. This is a way to potentially eliminate that tax on federal Social Security. So I think that was one of the issues that people are again one of the misnomers.
Speaker 2:Back in 1983, they created the tax on Social Security as a way to help kind of fill that gap, to bring monies into the coffer to pay those benefits. The problem with that was that when they set the numbers, the dollar amounts at the time, they did not index those for inflation. So it was designed initially to hit the top wage earners, only the top wage earners or top retirees, the people making the most money in retiree, would pay tax on their social security. But because that wasn't indexed for inflation, it's now hitting pretty much everybody. So one of the solutions that I think and you mentioned Tennessee Senator Blackburn from Tennessee proposed raising that cap and indexing that for inflation, which I think would be a smarter move. Now, again, that doesn't solve the solution. So Senator Gallego from Arizona has proposed well, let's get rid of all that tax but raise the cap to $250,000. So that is one proposal that's in the House right now.
Speaker 2:So that is one proposal that's in the House right now, or in the Senate, I should say right now. That would help pay for the no tax on Social Security, but it wouldn't solve the problem permanently. The estimate there would be it would run it from 2034 to 2058. So, again, that's a bandaid on the system system. And then you know you're going to run into. You know, anytime you rate, you talk about raising taxes, you're going to run into problems from not only Republicans but business owners who are putting half of that bill Right. So while it sounds good, you know, I think it's, it's a step. Those are all steps in the ultimate direction in which we probably want to head.
Speaker 1:Yeah. So if you're a single member S-corp owner and we see a lot of those you probably have some control over what your payroll taxes are going to be. You have to be in compliance with what you pay yourself. It has to be reasonable. If you are a W-2 income earner, you have zero planning opportunities to really impact your payroll taxes, unless you have some way to control what your salary is going to be. It's unlikely you're going to get to do much here, so you would feel that increase right. But if you have a staff, if you have lots of employees on payroll, you're paying for half of those payroll benefits. So if you have folks making above that threshold, then now you've got to shell out more payroll taxes. You might be feeling it, but I think the employees here are going to be really, and the people who have lots of employees that are making high income these are the ones I'm thinking that'll really feel this if it were to go up to that amount.
Speaker 2:So those are the kind of the I told you there were two buckets right. One is to raise revenues that's always part of the solution. The other is to reduce the benefits. I think those are the ones that are going to probably hit the biggest walls. To be honest with you, except for the reality, there are the people who don't have a vote. I think the likelihood of the full retirement age being raised, it will be phased in more than likely and it will hit those who aren't a part of a big voting block. I think they're the most susceptible.
Speaker 2:There's another thought process here, too, because right now, Social Security is one of the few inflation-protected benefits that you can have going into retirement, because there is a cost of living adjustment every year.
Speaker 2:The cost of living adjustment, however, is based on the average wage index, which, as a retiree, really isn't very relevant. They could change how they peg that cost of living to something lower. That would help balance the numbers and, quite honestly, I think that right now, it shouldn't be the CPI but the CPIE which, for retirees, spend more money on health care, for instance, which, as we all know, is going up at a much higher rate than this cost of housing and things that we all have to deal with on a day-in and day-out basis. But I will caution this I said, no matter what solution, the people who are out there now, the people who are on Social Security or approaching Social Security, I think that's a pretty powerful voting bloc. I don't think that any changes they do will probably be like when they did in 28, 20, 83. I'm sorry, 1983. I'm going the wrong way here 1983, when they grandfathered in and they phased in a lot of these solutions.
Speaker 1:Gotcha. So you know there's so much. There's so many different outcomes or combinations of things that could potentially take place here and, for anyone listening, even if you're a W-2, you can't really control much on how much of your income goes to payroll and your Social Security benefits. One area that will require and opens the opportunity for planning is when do we claim? And, as you mentioned earlier, if you claim it earlier you lose benefits, but then you have it longer. We don't know when we're going to die. So help me understand here the risk of claiming early versus delaying it, and how do we determine when we actually start claiming this benefit?
Speaker 2:Yeah, I think what plays into that that's a great question, that's a question that we all have is how do we optimize when we take it? And, as I mentioned earlier, you can start taking Social Security at 62. Your full retirement age now, for anybody born after 1960, is 67. And then you have to start claiming at age 70. So there are permanent reductions if you claim too soon. There are benefits and bonuses if you delay. Right, they incentivize us to delay.
Speaker 2:So what are the risks? I think the risk of delaying is that you miss out of several years worth of collecting some benefits. So I think that's psychologically kind of it's money in hand, right. But the risk of filing early is that you lock in those permanently reduced benefits which lower your lifetime benefits and if you live longer that really becomes a problematic one, especially as I kind of alluded to at the beginning here is that a vast majority of people have this is going to be their primary source of income. So if they claim too early and they live a good, healthy, long life, they are cutting themselves off. So that is a huge risk over that lifetime benefit. But there's no right or wrong answer.
Speaker 2:So let me run just a quick scenario. So let me run just a quick scenario, because I think the other issue is that fear of missing out, right? So I kind of did an example here where if you're 62 today and you're afraid that the benefits are going to get cut in nine years, right in 2034, maybe sooner, as we've already explained. So let's just assume you're 62, your starting benefit is and we'll just for simplicity's sake just say $4,000 a month, but if you claim early, that benefit will be cut. Well, you'll only get 70% of that. So your $4,000 benefit is now 2,800. Okay, now you have a head start because you're collecting that money for eight years potentially. So you're going to get a little over $300,000 of benefit, even though it's permanently reduced 30%. So let's say in 2034, again going back to my earlier assumption that if Congress doesn't act, they are now cutting benefits by 20%. So you're already 30% reduced. Benefit of $2,800 is now cutting an additional 20%. Your benefit is now $2,240 a month. So let's accumulate those eight years and let's run that out to 20 years from now. So over the next 20 years you're going to collect about $625,000 more or less.
Speaker 2:So let's take the opposite end of that spectrum. Let's say you waited until you were 70. Instead of getting 70% of that $4,000 benefit, you now get 124%, 8% a year. So that $4,000 benefit goes from $2,800 a month to $4,960 a month. Yes, you missed out on that cumulative income that you would have gained in the interim years cumulative income that you would have gained in the interim years.
Speaker 2:But now let's say again, under the same circumstances in 2034, you get a 20% reduction. Your 20% reduction is on a much higher number right. So you go from 4960 to 3968 a month. The cumulative benefit, if you live to age 82, is about $630,000. So you're basically the same.
Speaker 2:So again, the risk is that deferred amount, taking that money early. And there are some other reasons why you probably don't want to, especially if you're working past 62, start claiming. But the benefit there is. If you live past 82, you're basically giving up a lot more money. So it's that deferred. When you have kids, you get one marshmallow an hour. If you wait, you get two. Most kids, most people, will take the first right. They want that instant gratification. As I said earlier, most Americans take the money too soon or suboptimally claiming and only about 4% of Americans are optimally claiming their benefit and that's leaving about $3.4 trillion that they could be claiming each year. So they're leaving a lot of money on the table. And the numbers if you look at it earlier, you know you can claim at 62, about a third of people start claiming then and then it kind of tapers off and then at their full retirement, about a third more. Only about 20 percent of people are delaying their credits when you know in many cases you probably could and should delay those credits, could and should delay those credits.
Speaker 2:One rule of thumb Mark I always look at it from this perspective. If you've seen a social security statement, social security is really three things. Remember, I told you OASDI, right? So the DI is a disability insurance. What was the S? What did the S stand for Social Security? No, it's old age. That's your retirement benefit. Survivor benefit, right? There's a life insurance component to Social Security that people underestimate, right? So if you are a couple and you both claim too soon, right? You're going to sure the higher age earner delays as long as possible Because the survivor doesn't matter. Who survives will jump into that higher benefit. So remember that it's three things old age, survivor and disability insurance. So what happens if you can't work? What happens when one of you, one of us, dies. We have a life insurance benefit that we underestimate when we take, when we take those claiming, make those claiming decisions every, every year.
Speaker 1:So it sounds like there's is a circumstantial answer here, but absolutely.
Speaker 2:there's no right or wrong. Right, I mean you have to go case by case, but in in most cases, you know if, if the couple is healthy, you know, I, I tell the um spouse, because she's probably the one who's got the least savings and probably has the more likelihood of outliving the wife, as I should say, than the male, don't let him get anywhere near the Social Security office until he's age 70, if they can. Now again, health, individual circumstances, you know, it's all case by case is you know it's all case by case Interesting.
Speaker 1:You know I heard of one. One advisor would tell his real estate investor clients cause you don't pay social security on your real estate investments, he actually recommended hiring his spouse through a management company or creating a management company to hire himself, to create some ordinary income and actually pay the social security tax, to pay into a future social security tax benefit. Which is interesting because you see so much in the tax planning world, so many people talking about how can we reduce our payroll and social security through S-Corps and other strategies. Here's an example where someone is actually trying to increase a tax because we're increasing our payment into the social security benefits.
Speaker 2:Yeah, like we said earlier, there are good taxes and that's probably one of the ones we should not feel bad about paying into right, because we're getting something back for that right. So I applaud them for doing that right. So, again, like I said, sometimes increasing your income can can benefit you in a lot of other ways. Right, you get more QBI. You get, you can, you can do more Roth conversions and things of that nature. Right, you got to be real careful, though, again, you don't want to get into some phase out levels. So this is where hiring someone like you to help them monitor the intricacies matters.
Speaker 1:Yes, let's talk about. I'm going to ask you the top asked questions on this topic. You kind of touched on it earlier, but we're going to get into just a foundational answer here. When can I start collecting Social Security?
Speaker 2:62 is the earliest you can Now. Just because you can we've already addressed, doesn't mean you should right.
Speaker 1:Now, this is going to be a loaded question, but I'm going to ask it anyways. How much will I receive in benefits from social security?
Speaker 2:That depends, right. We do pay in a different amount, right? If you're a high wage earner, right, and your benefit is based on your highest 35 years of contributing, right? So as long as you have 10 years of contributing and you are eligible on your own record, okay, remember, we've talked about some other benefits. We talked about a survivor benefit. There's also a spouse benefit, right. So that's something you also have to take into account, particularly for people who may not have, may not qualify based on their own record.
Speaker 2:There are spousal benefits, right. So there are a lot of intricacies on when to claim spousal benefits to and when to claim the survivor benefits as well. So those are probably. You know, we do a webinar every year and we get more into detail about those claiming strategies, but you got to be aware that those are out there. There's also benefits for divorced. Divorced spouses are eligible for a spousal benefit and widows, right. Divorced widows are still eligible. Again, there are certain rules and regulations around that. So that's a loaded question, mark. I think we have to come back and have another talk about all of the ins and outs and intricacies on that and those.
Speaker 1:What is?
Speaker 2:full retirement age Full retirement age for if you were born after 67 or 60, 1960 is 67. If you were born before 1960, it was phased in. So most people who were born in the 50s have already kind of reached, or are reaching that full retirement age. So 67 is that full retirement age?
Speaker 1:Will I pay taxes on my Social Security benefits?
Speaker 2:We've already kind of addressed that and the answer is yes If you make more than a certain amount. For if you're single, um, if you make over $32,000, I'm sorry if you're, that's a if you're single over $25,000, but up to 34,000, you're going to pay taxes on 50% If you pay. If you make over 34, you're going to pay taxes on 50%. If you make over $34,000, you're going to pay taxes on 85% of that. Remember that was the changes they made in 1983. For a married couple it's $32,000 to $44,000. If you make over $44,000 a year, you're going to pay taxes on 85% of that.
Speaker 2:It's a complex formula but you are going to pay taxes into and that's going into the pay. That's not going into the general coffers, that's money that's going in to keep the system afloat. So we've already kind of addressed that earlier and those were the numbers that were never indexed in 1983 that I alluded to earlier. So those numbers again, I think there was a compromise, there's a solution out there of indexing those. So, yes, the answer is you will pay taxes on your Social Security and what? The senior benefit in the OBBA? That does not impact Social Security, despite what anybody will tell you about it.
Speaker 1:Can I continue working and still collect Social Security?
Speaker 2:Yes, you can, but with a big but caveat there. Remember Social Security is meant to be a retirement benefit. So remember, I told you the earliest you can apply is 62. But if I continue to work prior to my full retirement age and I apply for that social security, you will have what's called an earned income benefit reduction. Right, for every dollar you make over a certain amount, they're going to withhold. For every $2, they'll withhold a dollar, and that number is pretty low for 2025. If you make over 23,400, every dollar you make, they're going to withhold 50 cents on that dollar. Basically, so you may apply early and all you're doing is permanently reducing that benefit and you're not going to see one cent from it. So that's why I said be careful about applying too soon prior to retirement. Now, once you hit full retirement, there's no withholdings. You can collect those dollars. You can do whatever you want. So the main thing is to remember that full retirement age. That that's the key. After that, all restrictions are off.
Speaker 1:So, as you can see the audience listening here, there are lots of variables going on here and this is not something you want to do DIY. Nor would you be able to properly plan for your social security by just plugging in some prompts into chat GPT. You really want to work with someone who knows your situation, context and really knows how to best look at your whole financial picture, not only when it comes to tax planning, but planning for social security. So, Mike, for the audience, I think one of the key takeaways here is before you even think about claiming any social security benefits at all, if I want to talk to you, what's the best way for someone to get in contact with you, and whether it's to use your services or just learn for you what's a good call to action here?
Speaker 2:They can certainly go to my webpage. It's www. My last name's Skrynecki, s-k-r-y-n-e-c-k-i-f-p-g for financialplanninggroupcom. Just reach out to me. I'm happy to schedule a call. They can also email me at mikeskrynecki at raymondjamescom. I've got a schedule link. I'll respond. I can schedule a quick call we can go over.
Speaker 2:I do this all the time trying to help people avoid making the mistakes Again the common mistakes or critical mistakes. Sometimes is claiming too soon and kind of regretting that factor. Say, you know I have to. You know claim at 62, and then I go back to work, right, and all of a sudden you know there are some very limited kind of ways to make up for that. But yeah, it is definitely one of those areas where you know it doesn't pay to go it alone and it certainly doesn't pay to listen to all the things that you hear on the web page and listen. Well, you need to do this right. There is no 100%. This is the way to do it. I always say if you hear somebody giving investment advice at a cocktail party, give them my card. If you see somebody go act on that the next day, give them my cell phone number.
Speaker 1:So I've given you ways to contact me. I didn't give you my cell phone number, but hopefully we don't get to that point. Help finance your retirement and achieve your goals. You can go to prosperalcpacom slash apply Prosper with an L? Cpacom slash apply. Mike. Thank you so much for this conversation. I think it's going to be really helpful and it's going to really shed a light on a topic we haven't had a chance to really dive into. So this is very helpful and really appreciate your time.
Speaker 2:Well, let me give just one real quick plug, if I may. So I mentioned earlier, every spring we typically will do a webinar on social security. So next week, on Monday the 15th, we're doing a webinar on Medicare Medicare open enrollment Medicare starts at 65, not 67. So for anybody who is entering that arena, we can help with that Medicare planning as well. And even if you're on Medicare, medicare is one of those things I always encourage people not to set and forget the annual election period. Just like when we work for somebody usually is in the fall, the annual election period for Medicare is October 15th through December 17th. We're happy to do a Medicare review for you and help you navigate that system.
Speaker 2:Medicare and Social Security most people don't know that are both run in the same place. So you've got all of these people collecting Social Security, all these people doing Medicare. It's one agency that runs both of those programs, so they are not paid to give you advice. In fact, they're in Social Security. They're prohibited from giving advice. So most people are there just to help process that and, as we know, there are far fewer people. They cut a lot of the staff there, so the wait times are pretty long. So again. If you're interested in joining our webinar on Monday, the 15th September 15th we do one every September at four o'clock. Reach out to Mark or through those the numbers, the address and the web address and email I gave you. We're happy for you to kind of join in on that as well.
Speaker 1:Can we send a recording to the audience as well, if they can't make it?
Speaker 2:Absolutely, but they need to register. They do need to register for that beforehand so that we can send it to them.
Speaker 1:Fantastic. All right, mike. Again, thank you so much for your time today.
Speaker 2:All right, thank you, mark. Thanks, always a pleasure. Look forward to. Look forward to continuing the conversation.