Everything You Need To Know About Social Security: Audio automatically transcribed by Sonix
Everything You Need To Know About Social Security: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Producer:
Take Point on Retirement, a well-rounded show from a well-rounded team leading you into retirement. Listen Saturday mornings for an hour of simple retirement advice from your friends at Take Point Wealth Management. Saturday mornings 7:30 We'll look at how your friends and mine are in the studio. They're here to take point. That's right. Take the lead on a stress free retirement fiduciary services up and down the nature coast here to serve you and lead you into that stress free retirement from Take Point Wealth Management. It's a show called Take Point on Retirement. We've got a full show, a full hour loaded of the information you need. You deserve. You desire in the information you need to take note of because they always lay it all on the table each and every week. Lead Advisor Retirement Planner Eric Arnett, Certified Public Accountant Randy Woodruff to take point wealth management team is here in the house ready to lead you once again and take point on that stress free retirement. I'm J.W. Without further ado, let's let the professionals in the studio take over as we take point on your retirement. Everything you need to know about Social Security today.
Erick Arnett:
Hey, hey. Sounds like a great topic. Yes, it does. Good morning. Good morning. Welcome, everybody. And so, so today's show, we're going to jump out here in the first couple of segments and really talk about everything you need to know about Social Security. This is a common question, a common problem, a common challenge. I had some folks in my office just last night and had no idea that they could do certain things with Social Security. They could like, for instance, the spousal benefits. So little things like that. Just as a reminder, though, for all our listeners, podcast listeners and our radio listeners, you can get a free financial plan to your ninety fifth birthday in a free portfolio analysis. All you got to do is visit us on Take Point on Retirement and click that and set an appointment on the upper right hand corner. You guys are getting really good at that. I've been having appointments come in on that little button there, and so it's working. So just go to the it's simple. You can be right on your phone, click on it and you can pick a time to chat with me for 15 20 minutes. Area concerns and questions. And if we decide that there's something that you know we want to move forward, maybe help you with, you can come in the office and we can get to work. But one of the big things is Social Security. There's a lot of questions around it. When do I take it? Do I don't take it? So does my husband take it first? Do I take it? You know, so it's pretty common. It's a challenge for folks to understand that. So set up an appointment today and visit and visit us on Take Point on Retirement.
Producer:
By the way, you've got two websites, right? Take point on retirement and then take point wealth management.
Erick Arnett:
Yeah, the TakePointonRetirement.com is our radio show website. That's the easiest one to remember. And we also, of course, have our corporate site Take Point Wealth Management. So either one of those works, so if you Google, take point, you know one of those and click on there and go ahead and click up and the right hand corner and get you an appointment to chit chat for a little bit if you have some questions. And you will receive a a free Social Security maximization report at no cost to you when you book an appointment with us today. So just visit, Take Point on Retirement and go ahead and set up your appointment and then we'll do a completely free Social Security maximization maximum. Easy for me to say. Yeah, let's try that again, Randy. Can you say that for me?
Randy Woodruff:
Maximization
Producer:
Thank you. Wow. Now this is important for those that are getting ready to retire, right?
Erick Arnett:
Oh, big time. Because, you know, it could mean hundreds of thousands of dollars on the back end when you're doing, when you're doing planning. So when I say the back end, I mean in your latter years. So despite declaring the right strategy, so and a lot of people don't even know that that spousal benefit is out there. So, randy, some common misconceptions regarding Social Security. I want to get you involved here because you are also quite helpful in getting these things tackled with your clients. Absolutely. Some of the misconceptions
Randy Woodruff:
We do come across states from time to time. So the first one is everyone's Social Security benefit is the same amount. Ok, have you heard that?
Erick Arnett:
Yeah. Not very often, but sometimes folks may think that, hey, these are just solid benefits in line and you get a certain amount, but it is based on your wages over, you know, I think it's is it 40 of your highest earning quarters, something along that line?
Randy Woodruff:
Yeah, it's changed over the years. It used to be 40. You had to have 40 quarters to qualify then. I think I've heard it one time. It was the last five years of earnings. That was what it was years and years ago. So they I know they have changed it over the
Producer:
Years to I heard 10 years. So that would be
Erick Arnett:
40 quarters correct, right? Ok, yeah. Yeah. Is that the math on it? Let me get my calculator...
Erick Arnett:
Yeah, oh my gosh, man, you did it. Yeah, yeah, you don't even know there was.
Randy Woodruff:
And now 40 in that 40 quarter thing is something that we do work with clients on because sometimes we'll work with with business owners that they've they've been married for a long time. They've always had their own business since they've been, you know, before they got married or when they got married. And so sometimes the spouse may be at home taking care of the kids or not actually getting a paycheck. And it's like, Wait, you got to get you got to get these 40 quarters in. So you qualify for. Social Security, so that is something that I think is surprising for most people. Another misconception is your benefit amount is fixed forever.
Erick Arnett:
Definitely not because you can rise with inflation, right? We just got a big cola increase this year that we're going to talk about a little bit later. But for the first time in a long time, the Social Security cola was set to five point nine percent increase for twenty twenty two. So that's huge.
Randy Woodruff:
Yeah, I can't remember a couple of years ago when there was little or no increase a couple of years back to back, right? And so that big of an increase, corporate inflation has gone up. We've been talking about inflation on the show
Erick Arnett:
So well, thank goodness like our government did respond, at least in a positive and intelligent way when I saw how rampant inflation is by some of the policies and the stimulus that they've inflicted on us here. But at least they said, Hey, we're going to go ahead and raise those folks on Social Security this year to try to keep up with that inflation. So kudos to them. Mm hmm.
Randy Woodruff:
You are stuck with the benefit offered to you.
Erick Arnett:
You are stuck with the benefit offered to you. That's an interesting bullet point there. Yeah, you are actually right. I mean, in a sense, but you have options like if you so you're at sixty two, you're obviously you're eligible. But every year you defer it, it grows by eight percent. So you do have some flexibility there. You can change things. You can even stop Social Security if you've started it right. So in your benefit can defer longer and increase that way. So not necessarily true. It can actually change a little bit there.
Randy Woodruff:
You're one of the things we we talked on prior shows is, you know, people that have worked at at larger companies where they have access to a 401K plan and they basically just stick their money into the four one K plan. And there aren't a lot of options for them to pick from. So they can't just throw the money in and kind of forget about it, you know, they don't really, it's not being actively managed. And I think Social Security is the same way people just have it taken out of their paychecks and they get to Social Security and they have this benefit, which, you know, can be a significant portion of your cash flow in retirement. And they don't do any take any time to to realize and educate themselves on what kind of options they have so they can maximize this particular item of cash flow in their retirement.
Erick Arnett:
It's a great point. Unfortunately, our retirement warriors out there, if you have not become one, you need to become one very soon. But our retirement, there's a lot of retirement or is out there coming on board. And the common thing theme that I'm seeing is, you know, I haven't even looked at my 401k for 10 years. As an example, I was talking to a lady not too long ago, and she literally broke down in tears in my office. It was because during the last downturn, she kind of panicked and was scared, which was totally understandable. And she moved her entire for one k like into like some type of just stable money market account or whatever. And therefore, you know, we had then we have had almost a 12 year run bull run here in the markets, and she's found that, you know, her 401k isn't where it should be for her for retirement in order for her to reach your goals because it was just sitting there making nothing for 10 years. So they kind of set it and forget it and to contribute to it and they see it going up, but they don't realize it's really only going up because of the money that you're putting into it. So I'm also offering out there.
Erick Arnett:
If you if you're if you have another 10 years to work, five years to work. I don't care if you have a four oh one K and you don't know what to do. You don't know what to select. I'll sit down with you and help you select the proper funds and the mutual funds and everything for you to move forward and feel a little bit more comfortable with what you're doing and hopefully put a target in place to where can reach those goals. So I feel somewhat a sense of sadness for those folks out there that almost feel kind of helpless because they don't get a lot of help. You know, it's kind of like, here's your four one K. Well, tell us how much you want deducted from your check and then you're on your own. I mean, it's just no education. No, nothing. And then this person is left with the choice of trying to pick the right investments for them. And you know, they may not have the right counseling or help, as opposed to getting just a one 800 number at that air or corporate. Come in and see us, and we'll be happy to help you pick those out and get you on, get you back on track.
Randy Woodruff:
Mm hmm. Another misconception is you should draw from Social Security as soon as possible.
Erick Arnett:
Yeah, this is one that I hear all the time, right? And we talk about this all the time, and I've heard you talk to clients about it. And it's that's not that's not true. You should sit down and weigh all of the pros and cons of taking it early or deferring it if you're married, if you're working. Still, you know, if your spouse is still working, this can create some taxation on that Social Security. That's not necessary. You should not necessarily just take it because it's available, right? What do you think?
Randy Woodruff:
I agree. And we had a client. Last week and they were challenged with, you know, not being at full retirement age but wanting to retire, not being 65 yet, so not being on Medicare, still willing to work, wanting to draw Social Security, trying to keep under a certain threshold to avoid their Obamacare, the Obamacare or Affordable Care Act insurance plenty from kicking in. So lots of when you're in that that age, when you're in your early 60s and not quite on Medicare and but but you want to start your own Social Security, but you want to keep working and all these different things. There's a lot of of challenges there and a lot of considerations that make that plan a little more complicated. But yeah, so you know, to Eric's point, you know, it's definitely not want to feel like you have to draw it as soon as possible and sit down and weigh all the options the next one on our list. The misconceptions is your benefit will increase every year.
Erick Arnett:
So no, I mean, it's not guaranteed, right? It's not guaranteed to increase every year. However, we're hopeful that the Social Security Administration does increase it every year based on inflation. I think in years past, they bumped it up a couple percent here or there this year. What, like we said, for two. They're going to be boosting Social Security by five point nine percent, basically six percent. That's the largest increase since 1983. So good. Good news for our folks on Social Security and the fixed income. So everything's going up, so we need to take care of our seniors as well. Yeah, it does. It's not mandated that it will increase every year, but typically they're going to increase it with inflation. However, I think what this might be alluding to, too, is if you don't decide, let's say you reach sixty two and you decide not to collect it, it's going to go up eight percent automatically every year for for every year that you defer it to age 70 so you can actually defer your Social Security all the way to age 70, and you're going to get an eight percent increase every year, which when you come in, we'll pull your report off of SSA.gov and it's going to show us exactly what your estimated benefit is at 60 to at full retirement age.
Erick Arnett:
Probably most of our listeners out there are sixty six and some odd months or sixty seven. It'll tell you what the benefit is then, and it's also going to tell you what the benefit is estimated at age 70. So and then Randy and I sit down, we put everything in a computer, we do a tax projection and we'll pull out, Hey, does this make sense? Or Hey, look, you here, you're deciding to take your Social Security, but you're giving up a dollar for every two dollars that you collect. So a lot of taxation there. So you've got to be careful. So let us play with the numbers and work on the taxes a little bit and then see if it makes sense. If if it makes sense, then hey, yeah, go ahead and start collecting it. But also think about the spousal benefit. So a lot of different strategies are available out there. Wow, we'll discuss more when we return.
Producer:
I'm going to take a quick break, though. In the meantime, the phone number for Take Point Wealth Management (352) 616-0511 You need to call them now they're available twenty four seven. To take your call, at least leave a message they'll get back to you. First step, though, is to reach out to them. That's take point. Wealth Management (352) 616-0511 We're talking about everything you need to know about Social Security on Take Point on retirement. The show brought to you by take point wealth management along the Nature Coast here are in person ready to assist and serve you. Take point on retirement, the website. Just Google Take Point Wealth Management that will bring into Lead Advisor Retirement Planner Eric Arnett, Randy Woodruff and a CPA with us to team members of that Take Point on Retirement team and you want to avoid a 50 percent penalty from the IRS. As Eric just mentioned, we'll talk about that next. Hang on. Eric Arnett is an investment adviser, representative of Retirement Wealth Advisors LLC, an SEC registered adviser to wealth management. This station and RWA are not affiliated exposure to ideas and financial vehicles discussed. It should not be considered investment advice or recommendation to buy or sell any financial vehicle.
Producer:
Any comments regarding safe and secure investments in guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered my retirement wealth advisors. Well, we've already started now we're once again taking the point on your retirement. We're not going to finish until it's over. That's right, until you're satisfied, until we meet your needs. I say we I mean, take point wealth management, they're here to do that for you. That stress free retirement take advantage by the way of that free consultation, that financial analysis evaluation. Are you going to do is call take point wealth management at three five two six one six two zero five one one. Google take point. Wealth or take point. Wealth management. They point on retirement. The name of the show every weekend here on this station. Only at this time. One full hour chock full of the information you need to know, like Social Security. That's what we're talking about this morning as I turn it over once again. Delete Advisor Retirement Planner Eric Arnett and Certified Public Accountant Randy Woodruff would take point wealth management.
Erick Arnett:
Awesome. Thank you, sir. Welcome back our retirement warriors to Take Point on Retirement radio. If you're wondering who a retirement warrior is, it's somebody who wants a tax efficient, a fee efficient and a market efficient portfolio. They want to keep growing their wealth and put their dollars to work for them. So those words, we we don't take those lightly. It's I mean, we really just, you know, yeah, that's a tagline, you know, to open the show, but think about it for a second. Tax efficiency fee, efficiency and market efficiency. You really owe it to yourself, guys, folks, ladies, men, women, children, whoever is listening out there. You owe it to yourself to get really educated on those three things and take the time out of your out of your busy lives to really sit down with us and go through those three things to make sure that your plan is just that because it's an amazingly powerful and it adds so much money and efficiency to your portfolio over time. If we can conquer those three variables, right,
Randy Woodruff:
And to echo your point, you know, it's not just a tagline for us. I mean, we sat down with with clients and work with them on their portfolios and in the meetings, try to put it together because a lot of people are worried about taxes, especially talking about taxes going up. So trying to put them in their portfolio, put them into transactions that are going to be tax efficient both today and, you know, looking forward for the future. And then, you know, people in our meetings always ask about fees. What are your fees going to be, you know? So to Eric's point, we're not just saying that as a tagline, we really do work to make your portfolio a fish in all three of these areas.
Erick Arnett:
So let's talk about it. The longer you wait, the longer you wait, the more you make. We talked about that a little bit earlier, so let's just look at an example here. For example, if you're a monthly benefit is $2000, the difference could be as high as thirteen thousand six hundred eighty dollars a year. That's that's real money. As an example, if you look up on SSA.gov and you pull your statement, you're finding your Social Security statement. It says your full retirement age or FRA air full retirement age. Let's just say as an example, is 67. Mm hmm. Because that's kind of where most of us are at and our listeners at this point. If you're full retirement age, say for an example, pays you two thousand a month, that's twenty four thousand a year, right? Mm hmm. So if you decide that you want to take that early at age sixty two, which is the minimum age you can take Social Security, that benefits are going to be dropped all the way down to fifteen hundred a month or eighteen thousand a year. And if you wait to age 70, that's going to be
Randy Woodruff:
Twenty six point forty a month or thirty one thousand six hundred and eighty one dollars a year, which is a huge difference. Just by waiting eight years. It's, as you mentioned, somewhat thirteen thousand six eighty per year, almost $14000 a year. Right. So taking it early is not always the best option, especially if you one you still need to continue working or other issues. And we talked to clients, too, as they're thinking about Social Security, you know, take a look at your health as well. That's that's, you know, because I know nobody can predict how long they're going to live. But you know, I think that we can all take a look at the the health of our of our parents, our grandparents and and honestly assess how we are taking care of our own bodies, what we've been alive and we eat and healthy and we exercise regularly that we have re prone to other other health issues. And and so, you know, that's it's not just money, but your health should be a, in my opinion, a determining factor and how long you wait to draw Social Security.
Erick Arnett:
Yeah. And I wanted to stress something that I hear pretty commonly don't make your decisions based on fear and stuff that you hear on the news and the radio and the TV and social media in there and from your friends. I mean, unfortunately, in today's environment, where bombarded with so much noise and it creates so much confusion and what does confusion create? It creates fear, right? So that was a six year active duty veteran in the United States Army and. Was in several combat situations, and one of the things that creates fear is confusion. I remember what that feels like when the confusion hit. It was an awful feeling in my stomach because then the fear sets in, right? Because you start kind of losing control, you don't understand what's going on or what's coming, and the plan kind of breaks down, right? So I understand how people feel. I mean, people literally have nerves and the pit of their stomach because they're fearful of, Oh, you know, I'm hearing that Social Security is going to run out or they're going to take Social Security away completely. So I should start taking it now. And folks, you don't know what's going to happen until something's written into law. Let's not worry about it until then, and I have a pretty good feeling that Social Security is here to stay and it's going to be around for a very long time.
Erick Arnett:
It's interwoven into the fabric of our country. Mm hmm. Will they reduce the benefit? A little? Perhaps, but that's not going to be very popular. I mean, look at what our government has done in the last couple of years. They've they've pumped trillions of of dollars into the system. I'm pretty sure it's going to be a pretty important topic someday to save Social Security and make sure we put something in place to fix it. Currently, some of the politicians have been kind of kicking that can down the road, but I'm encouraged that they're really going to get in front of that and fix that problem here soon. And Social Security is going to be here or some form of it. So please don't make your decision based on fear. Make your decision based on what's best for your retirement plan and your family. And that only way to do that is to really come in and get educated and truly understand how, how and what it means to you, depending on when you decide to take it. So don't just take it based on fear, I guess, is my point.
Producer:
You know, the fight or flight syndrome? Yeah, where people just get all worked up. Exactly. And that's you mentioned it in the first segment, the common misconceptions regarding Social Security, there's one right there you could add to that list.
Erick Arnett:
There you go. Yeah, yeah, absolutely. And I think that's probably the biggest one. Oh yeah, I can. I can use a family member as an example. My dad without, you know, discussing it with me. He decided that my mom and him decided I'm going to start taking. I'm going to take Social Security right at 62 because my dad was one of those fearful people. I wasn't going to be around, so I better get it while I can. Well, my dad was still working at the time and didn't realize, you know, he was basically going to pay all that Social Security back in penalties at the end of the year and our penalties and taxes. And so bam, all of a sudden you spent that money, right? Or, you know, and then also when you get hit with this bill and you got to pay half of it back. So let's talk about that, Randy, because that's something you you deal with a lot as Mr. IRS, right?
Randy Woodruff:
Yeah. So there you know, there are income limitations, you know, until you reach full retirement age and how much money you can make, it's around 17, $18000 a year. I think the year that you're eligible for Social Security, it can be around the thirty five to thirty eight thousand mark. And I have those numbers in front of me. Exactly, but those are some rough numbers. And so so basically, you know, if you're not at full retirement age and you're still working and working means you're out going to a job every day, whether you're a W-2 employee or you're self-employed, if you have earned income of around $18000, they're going to take back one dollar of your Social Security for every two dollars that they give you. And so you're really limited on how much you can actually make unless you're working a part time job or have the ability to control how much income you get. So it really is important to air mentioning is his dad situation. You know that you don't just start turning your Social Security on and without fully understanding the implications of what you're doing. And most times people do that because they're operating out of fear or they're just, you know, worried about the unknowns or running out of money, like, you know, people worried about Social Security going broke. So also tier one thing to keep in mind that that is even if you're at full retirement, I had people of people who come in and surprise at how often did you get asked this question? But as we started going through their tax liability and what's what taxable income is going to wind up being for them, I say, well, they're going to tax depending upon their income, up to 85 percent of their Social Security.
Randy Woodruff:
So the government, the government can take your Social Security back one or two ways they can if you're not at full retirement age and you're still working and you have earned income over 18, let's just say $18000 is or as an average threshold, they take back one dollar for every two dollars that they give you because you're over that earned income threshold. The earned income does not include interest income, dividend income, capital gains, income, rental income or if you've got passive investments in other businesses that you may be a partner in, that's not earned income. Earned income is for this. For this definition. If this is, this purpose is income that you're going out, working at a job, getting a W-2 or your self-employed that's earned income or you're going in and actually physically or mentally producing the income. So there's there's there's that one way they potentially can get back at your Social Security. The second way is let's say you're let's say you're at full retirement age or your pre full retirement age, but you're not working and your total income or your adjusted gross income goes over certain thresholds and they're not really all that high. You know, if you're if you're single, once you're over thirty four thousand. Of income, they tax up to 85 percent of your Social Security at whatever tax bracket you're in. And if you're married filing joint, I think it's 42 or $44000.
Erick Arnett:
So that's 40 for 44.
Randy Woodruff:
So they so that's not all that much money, you know? And so then they can begin here again. They begin taxing your Social Security every tax bracket you're in, so they can. So if you're making, let's say, $75000 of income, including 85 percent of your Social Security, you know you could wind up paying two or three or four or five $6000 on your Social Security or more, depending upon how much money you're making. And so that's a common misconception I had with clients is that, you know, now that I'm retired or I'm over, I for people, I'm over 90. My Social Social Security shouldn't be taxed anymore. Doesn't matter how old you are, if you make over a certain amount of income, they're going to tax your Social Security as part of your income and include it into your adjusted gross income for determine how much tax you have to pay. So as long as you're alive, all your unless you have muni bonds, which aren't taxable unless there's some other tax free items. But basically, as long as you're alive, you're paying taxes. And Social Security is also is also taxable. And you know, one of the things that we talked about this, you know, months and months ago on the Social Security topic is that gets people is they haven't raised those thresholds we just talked about. If you're single, I think it's $34000. If you're married, it's it's forty two or forty four thousand. That's the threshold of where they begin to tax up to 85 percent of your Social Security benefits at whatever tax bracket you're in. I've been doing this for 27 years. That threshold hasn't changed at all, so they have it indexed that for inflation every year. So as everybody's income has been indexing up for inflation every year, that number hasn't gone.
Erick Arnett:
Oh yeah. Well, we laugh about it all the time. The government considers you as a couple if you make over forty four thousand dollars a year to be in the wealthy category. Yeah. You know, meanwhile, our friends up in Congress are making, you know, a couple of hundred thousand dollars a year in income and benefits. And but they consider you, America, near the listeners out there to be extremely wealthy if you're making over forty four thousand. So they figure, well, that's why we should take some of this Social Security back in taxation. Pretty crazy. So but that's why we really want you out there listening to be able to avoid this 50 percent penalty from the IRS. That's a 50 percent penalty from the IRS. So learn how to avoid that 50 percent in IRS tax penalties with a proper required minimum distribution withdrawal planning. You can just visit us at Take Point on Retirement and we're just a click away and to set up an appointment in the upper right hand corner. Hey, or you can give us a call at (352) 616-0511. So the next segment, I hope folks tune in and stay tuned in because after the break, we're going to come back. I'm going to dove into this even more and talk about how to assess your income needs and and do some proper planning when it comes to Social Security.
Producer:
Well, the best way to keep track of all this and so much more it's so important for your financial future is to contact Take Point Wealth Management this show Take Point on Retirement hurt every weekend on this station at this time. All the information you need to know, especially today everything you need to know about Social Security with Lead Advisor Retirement Planner Eric Arnett. Fiduciary services up and down the nature coast. That's right here within our listening area, folks there in person in there ready to help you. (352) 616-0511 We'll be back after this. President Biden has promised to repeal Trump's tax cuts, don't get campaign too much in taxes with your retirement plan, my friends at take point, well, we'll give you a free no obligation Roth Ladder Conversion plan so you can make an informed decision about your financial future. Take point well, a local judiciary service visit. Take point wealth that's take point wealth pick Poison Wealth Management is an investment adviser, representative of Retirement and Wealth Advisors Inc., an SEC registered advisor. Ok, everything you need to know about Social Security, we've been talking about it for the last half hour as we continue with everything you need to know about Social Security from our friends at Datapoint Wealth Management here on the Nature Coast of Florida within our listening area. Pick up the phone. Give him a call now. (352) 616-0511 Lead Advisor Retirement Planner Eric Arnett his staff, along with Randy Woodruff, certified public accountant. Two professionals, just two of them that are ready to assist you and standing by to help you into that stress free retirement with a financial analysis evaluation consultation. We call it the take point blueprint on retirement. Yours no obligation. Free today for our listeners. If you call (352) 616-0511, it is a $500 value, folks. They'll sit down with you for as long as it takes for your stress free retirement. As we continue anything and everything to know about your Social Security boom.
Erick Arnett:
So we want to talk a little bit more about Social Security and some of the penalties out there. And one thing you got to do first and foremost before you decide if it's a good time to take Social Security or not, is you got a first in the basics of retirement plan? You have to assess your income needs, right? It's really important we talk about the income gap. And so how do you do that? You know, a good idea is to take two months of your expenses and total them and divide by two and just to kind of learn what your true expenses are per month kind of keep an eye on and try to get an average. That's the most important thing about retirement planning is how much is going out, right? So and then you need to collect and calculate your Social Security income and your pension income that you possibly have and then learn. And then you need to learn about how RMDs work required minimum distributions. You really need to educate yourself on how they work and how they affect your retirement income and withdrawal rates. And then if you can, we want to help you try to reinvest and not spend all of your RMD each year. But a big thing to avoid is that 50 percent penalty from the IRS, right? If you don't take your RMD and they catch it, you could pay 50 percent penalty on that. So that's pretty, pretty big.
Randy Woodruff:
So this does happen. We've had we've had clients come in that, you know, they seventy four or seventy five years old, never take it on RMD. And it's usually people that are managing their own money or trying to manage their own money and don't really have a financial advisor. And they forget all about taking in RMD, you know? And so then we have we can typically and this is an IRS penalty that's assessed. It's basically it's a 50 percent penalty in what the RMD would have been for that year, which is, you know, if you had a ten thousand RMD, they can assess your penalty of $5000. So it's the penalty for for noncompliance is very, very steep in this situation. Now we've had a few clients come in over the years. We've been actually able to get them out of this penalty. Yeah, but it's it's a letter writing campaign and and it's, you know, several months of and this goes back a few years ago with this unorganized, as the IRS is these days, it could be a year or two before this is finally resolved because it's everything is taking significantly longer and any kind of IRS administrative work is just taking significantly longer.
Randy Woodruff:
So if you have if you're you're at that age, you start taking our RMDs, make sure that you are on top of it. If you're not working with a financial adviser, please come in and see us. Let us help you plan those RMDs the amount. And then, as Eric mentioned, just because you haven't RMD doesn't mean you have to spend it, and it's good to if you can save some money and reinvest it. Absolutely. I want to circle back up to something back up there, and we talked about planning your expenses. We've talked about this in prior shows, and I want to go back to that. But again, but just I can't tell you how many times I've seen, I'm sure you've seen over the years to where where people don't properly plan for what they're going to need in retirement. Absolutely. And so and so they get to the important retirement and they want to live this lifestyle and they can't afford to and
Erick Arnett:
Or they are given a lot of money away still to their kids or something
Randy Woodruff:
Like that, or they haven't properly estimated what their monthly expenses are going to be, you know, and then once they really start, then they and they just kind of roll them in retirement, not really knowing what their real numbers are. Then they start realizing, Hey, my, my net worth is decreasing. And why is that? Because you're basically spending more than you're making. So, you know, knowing where you're at, educating yourself, planning all that stuff, it just can't, can't stress it enough how important it is.
Erick Arnett:
I had that same situation happen to me this past week. I had some new clients come in and we're building out their retirement plan. And of course, I'm drilling into the expense report that they give me in the budget that they give me and find out that, OK, based on my planning here, it seems like you guys have about $40000 a year left in income, and they looked at each other and like, huh, like, where's the forty thousand going like? And it was kind of funny. The husband looked at the wife's like, Are you bearing this under the mattress or something like, Where's this money is? I need to find this money? And I said, you know, because based on my planning, this excess saving that you have, we need to be rolling that into something to grow. And keep growing it for your future. He's like, we don't have an extra forty thousand dollars in income, so they had to go back and I sent them back home to really dove into and really take the time to pull out every single expense as an example. This gentleman had a hobby that was is fairly expensive, didn't have a bit of that in their expense and budget was missing the mortgage payment. Little things like that. So you really can't just say, Oh, you know, I think it costs me about three thousand a month to lift now. I mean, if you have $80000 a year in income coming in and your expenses are only $30000 a year, that means you have 50 grand just piling up in the banks.
Erick Arnett:
Right? So if you don't have that, then we really need to dove in and figure out where all your money's going. And hey, figure out, is it possible that you might have what we call the retirement income gap? And so that's one of the biggest things we solve for is that retirement income gap. If we look at, hey, you've got, you know, pension coming in and Social Security coming in, maybe some investment income coming in and OK, we got that number there. And then here's your expenses and then you take the expenses away from the income. And if you have a gap there, we've got to figure out how to fill that gap. Not only do we have to fill that gap and figure out or or decrease it right, but we've also got to continue to grow your assets and grow that income by two three percent a year. This is a perfect example. People do this blanket kind of retirement plan and they think that, oh, if I can just pull $5000 a month right now, I'll be fine for the rest of my life and retirement. Well, think about things just went up six percent this year on average across the board. How much is it for a tank of gas? How much is it for health care? How much is it for a loaf of bread and milk at the grocery store? Now, if you didn't plan for that now, all of a sudden you might find out my income gaps a lot bigger than it.
Erick Arnett:
It may be, but our planning process, that free analysis that we give you that free retirement plan that we give you going out to age ninety five, we factor in inflation, we factor in good markets, we factor in bad markets, we factor in deflation, inflation, high rates, low rates, black swan events. We factor all that in. We throw a thousand different scenarios and combinations at your retirement plan and we stress test it to make sure that it's going to hold up under all those situations. But the most important thing right now is to figure out what your retirement income gap is. And if you don't have a retirement income gap out there and you're listening to me right now, that's great. That's fantastic. But are you tax efficient? Are you putting that extra money that you don't need into something that's benefiting for you and your family and your future as opposed to maybe just let it sit in the bank and decay? Let's get in here. Let's talk about it just by listening to this show right now in this information provided to you, you're you're already bettering your retirement future. So take the next steps schedule an appointment with us online at Take Point on Retirement, or just pick up the phone and give me a call. (352) 616-0511 We're ready to chat with you and and get some of these questions answered and get you on track for a solid, solid retirement.
Randy Woodruff:
And the sooner you know what your retirement income gap is, the sooner you can get the work solving it. Not taking that first step, not making it a priority. You let the days, weeks, months, years click buy. When you get to when you get to retirement, that's at the time and try and fix this retirement gap. The sooner you can fix it in life, the better change you are that you're going to actually be able to fix it and to fill the gap and have some excess.
Erick Arnett:
And we have real solutions to fill that gap. We have real solutions to help fill that. And there's some great ideas, strategies and products out there that can not only protect your hard earned assets, we can grow your money tax deferred. You can get market like gains without market risk. Let me say that again, you can get market like gains without the market risk
Randy Woodruff:
And say one more time. Okay, one more time.
Erick Arnett:
You can eliminate market like gains without market risk and even eliminate. We can even show you how to eliminate advisory and investment management fees you pay on your bond income if you currently have bond income. So if we can reduce your fees, reduce your taxes and put something in place, that's going to get you a good solid returns and provide an income for your future.
Randy Woodruff:
Why would you not do it?
Erick Arnett:
We're hitting a home run there, so it just get in and educate yourself. Let's do this. Let's get a plan together for you guys out there listening to day. Don't stop. Don't don't think about it. Just pick up the phone, get the ball rolling. We're going to and we're going to get we're going to get started for you,
Producer:
By the way, as a fiduciary. Isn't that your job?
Erick Arnett:
That's right. Fiduciary? Yeah, absolutely. 100 percent. So that's important. That's really important.
Producer:
Yeah. You can see the take point wealth management clients because they're not living in fear. They're walking around with smiles on their face. They know that they're secure. And let me go. Let me circle back around. And Randy Woodroof, we'll put it. We'll circle back around, see, instead of, let's say people are are sort of riding the fence, know they don't know which
Erick Arnett:
Way to go, who to who to see or what to
Producer:
Do. Let me tell you right now. I'll take advantage of that of that service that they're offering with take power and wealth management right now, that analysis evaluation. You can't go wrong there. It's free, but without having to go to an independent wealth advisor, those that are sitting on the fence deciding on what to do, what is the simplest way for us to gauge this, that gap that you're talking about in as we're getting ready to take Social Security? What's the simplest way that someone can gauge that on a regular basis? Because say, you're still working and you're getting ready to take Social Security and you still want to continue to work, but throughout the years, you may get raises, inflation, taxation, all these risks that you're talking about as well. What's the simplest way to gauge that, maybe that we can make sure that we don't fall between the gaps? Is there a simple way to do that to plan ahead?
Randy Woodruff:
So I think for me, I think every year doing your budget, every year, knowing what your budget is and that way you think when you're still working and you know you have a retirement gap, you need to be managing your budget very, very efficiently because you need to be saving as much money as you can. Ok, then I think also, you know, projecting out what you think your what do you think you want your retirement to look like? You know what you want? Are you going to have a mortgage? You can have a car pay or you're going to have? Are you going to want to be able to travel? How much money do you want to spend a year? Because when you're in retirement, you know what your expenses are, you kind of know. But if you're five or 10 years out, you kind of go, OK, well, how do I want my retirement to look like because I'm doing that right now? I'll be fifty one at the end of this month. I want to. I like working shop. I worked a lot in my seventies, but I still want to be OK. What income am I going to do in retirement? How much time do I want to spend traveling? What's that going to cost? How much would I want to live? You know? So, OK, what's that going to cost me? I know it's still 20, 25 years away, so I get a factor in inflation. So it's not an easy process that you need to be doing today to make sure that you're saving enough money for retirement. And I think budgeting, and not just to me, like I met with my business clients and we produce financial statements for them.
Randy Woodruff:
And so I can show them in black and white. This is what you this is what where you spend your money at. And so I think that people need to do the same thing in their house or they need to do a budget and they need to print that budget out monthly annually and say, Okay, this is what I projected to spend, but I actually spent this amount of money. And if I need to start saving more money, where can I cut back? And that's the first step, in my opinion. And then here again, projecting where you want to be in retirement, what do you think you're going to have saved up by the time you reach retirement? You know, analyzing outgrowth and analyzing out savings and then Social Security, what that's going to look like in retirement or other pension income IRAs for one case and then getting a nest in what that's going to be. Here again, it's to me just, I think, the first year that you do that, if you're not at retirement age and you're trying to project the first year that you do, it's going to be the most, I won't say difficult. We're going to take the most time because you're you're thinking it through, but then, you know, make some notes, put together a retirement budget. You know that where you want to be in five or 10 years when you hit retirement, put that budget together and then every year go back and reflect upon it and adjust it. Tweak it
Erick Arnett:
A J.W.. I think that most of us out there listening today probably are going to have an income gap. So whether you're five years out of retirement, 10 years out of retirement, let's put something in place right now to fill that gap and plan for that gap because more than likely, you're going to have a gap. More likely your Social Security, you need it if you get a pension or a small pension is not going to cover all your retirement needs and costs. So we need to put something in place now to essentially create your own personal pension to supplement your Social Security. And so I think when we come back in our next segment, our final segment, we're going to play Chapter nine from our book Annuity 360 that if you call or click or get a hold of us, we'll send you out a free copy for that because we want to talk about how important it is to create your own personal pension to fill that income gap.
Producer:
Ok, very good. So it's not as simple as I thought it would be. That's why take point wealth management is here. They make it look and sound simple. You can turn to take point wealth management to take point on your retirement and fill those gaps and take care of all those risks that you are facing in retirement. We'll be back once again with everything you need to know about Social Security today on this episode of Take Point on Retirement. We hear from our sponsors and we'll be back after this, folks. President Biden has promised to repeal Trump's tax cuts, don't get caught paying too much in taxes with your retirement plan, my friends had take point wealth. We'll give you a free no obligation Roth Ladder Conversion plan so you can make an informed decision about your financial future. Take point well, a local judiciary service visit. Take point wealth that's take point wealth. Big Point in Wealth Management is an Investment Advisor Representative of Retirement Wealth Advisors Inc., an SEC registered advisor. Well, unfortunately, all good things come to an end sooner or later, we'll accept retirement that can go on for a while. That's why it's so important to reach out to take point wealth management. They'll take the lead on that retirement stress free retirement, by the way, take advantage of that financial analysis, consultation evaluation, see where you stand and what your retirement is going to look like. Although we can't see the future, we can plan for it. And that's why Take Point Wealth Management is here every weekend as we wrap up, Take Point on Retirement. Eric Arnett, Lead Advisor, Retirement Planner and of course, certified public accountant Randy Woodruff, take us home.
Erick Arnett:
Welcome back, folks. I'm so glad you're out there listening. How often do we say someday. I'm guilty of it. I am tell you you're guilty of it. J.w. is raising his hand there. We're all guilty of it. So we always say someday we'll do something and and someday never seems to come right. So please do yourself a favor. If you're listening out there, make some day today. Give us a call. At (352) 616-0511. That's (352) 616-0511. It's also easy to schedule a free consultation and let me say free, you're not going to write a check to anybody here. It's completely free. As a listener, to Take Point on Retirement radio, you're going to get a free consultation and all it takes is just a minute of your time. To schedule that appointment and get started, we give away Annuity 360 for free. It's a great book, and unfortunately, folks sometimes shy away from the annuity option just because of the lack of education and fear. So in listening to too much noise, right, as opposed to making the good sound educated, purposeful decision for you and your retirement, so do me a favor. Would you play that create your own personal pension? Because I think it's really important when we're talking about that income gap J.W.
Producer:
Chapter nine, the Annuity 360. Here we go. You can create your own personal pension. Big idea Using an annuity to create a personal pension helps you create a lifetime income stream, but it also helps you leave a legacy for your beneficiaries. All annuities can create annuity income to supplement the income you need before or during retirement. Those who are approaching retirement are afraid that they will run out of money, but an annuity can help make sure you have an income you can never outlive. An annuity can be a great investment for your portfolio, but encourage you to be careful that you don't overpay for your annuity. When you put your money into an annuity, the annuity company will pay you your money back at a date you specify. You don't want an annuity company to charge you too much to simply pay your money back to you. I'm confident that leaving a remarkable family legacy is important to you. You likely want to have money left over when you pass away to leave your beneficiaries. The goal of a personal pension is to generate lifetime income with no risk that grows your money and allows penalty free withdrawals. An annuity can create a lifetime income with market like gains and no market risk, while also allowing you to build enough wealth to leave for your beneficiaries when you pass away. Don't give the annuity company fees for doing nothing. We prefer fixed indexed annuities for our clients that do not have an income rider fee, but you can still create a personal pension without an income rider on your annuity.
Producer:
If you get an annuity with an income rider but don't utilize the features of that income rider, then you are not getting what you paid for. You are literally just paying the annuity company one to two percent each year. You defer annuities in your annuity without receiving a single benefit for that annual fee. This income rider fee will also draw down your account value or principle. Depending on how that index is performing. The growth on your entire account value could be significantly and negatively impacted. Some accumulation focused annuities are built to deliver increasing payments without an income rider. You should consider the features your income rider is providing you before deciding to purchase it as an add on. Make sure you utilize the features you are paying for more ways to get the most out of your annuity. The longer you wait to turn on the annuity, the more you'll receive an annual payments. This is because your annuity will spend a longer time in the accumulation phase, meaning it will spend more time building up your account value. Your annual payments will grow as your account value grows. Believe it or not, you can generate your own personal pension by distributing no more than five percent a year with penalty free withdrawals from your accumulation based annuity policy. Many accumulation annuities are set up to be armed friendly, so you won't suffer a penalty when you have to take your RMD. It would be silly for you to be penalized for something you are required to do. Annuity companies take this into account by creating products that make taking your RMDs easier.
Producer:
Inspect what you expect with any annuity. Don't just go with what the annuity agent or adviser. Tells you. Read it for yourself specifically, you should read the annuity illustration guaranteed and non-guaranteed tables included within the annuity illustration. Also, please remember that annuity policy is a contract between you and the annuity company, so caveat emptor or buyer beware applies here. Be aware of the annuity you are buying and choose an annuity that works best for you. They'll help you build a successful retirement and they'll offer you peace of mind whether you choose to generate income through penalty free withdrawals or invest annually in an income rider. Know the consequences of both. This is a decision you will make at the beginning of the investment process. One poor decision here can cost you one to one and a half percent of annual growth over a 30 year retirement. This could come out to be a significant loss. Educate yourself on your options and the specifics of each option you are considering. Making the right decision up front will save you a lot of frustration in the long run. Also, please remember that if you withdraw too much annually, say 10 percent, you will run out of money in 10 to 12 years. Make sure that you're working with an adviser who can help you choose the appropriate withdrawal amount so that your money lasts for your entire lifetime. As discussed above, we recommend no more than five percent be withdrawn each year from your account.
Producer:
Ok, annuities, how can I get them? How much can I invest in them?
Erick Arnett:
Get that annuity 360 Book. I think it starts there. Like if you're on the fence and maybe you're even apprehensive to come in and sit down with an advisor. Call us and click up there on the chat. The appointment book and send you a free copy. Sit down and read that. Outline it. Hack it up. Do whatever you want your copy to keep, and then give us a call back and we'll chat about it. Ask, answer your questions and then then decide to come in. We'll talk about it, but it's we're not advocating that everybody should have an annuity. Ok, what we're advocating is everybody should start planning now. Yes, and everybody should have a smart what we call a smart financial retirement plan. And that smart plan includes in our strategy a smart, safe strategy. Some of your money has to be in what we call smart safe. Some of your money has to be in what we call smart risk. We certainly have to have smart tax strategies. And of course, we want you to be healthy as well. So we think the total retirement plan is smart health, smart tax, smart risk and smart safe. And we combine all those together to build you a good, clear, confident retirement plan to get you to and through retirement. So you have all those questions answered and you can go out and enjoy your retirement. You've stressed your whole life, you've worked hard, you've put money away, you've been saving, you've been grinding. And I know more than anything in this world today has been more stress created than ever. So it's time for you to put that stress behind you in the way you do that as build confidence and clarity. Don't wait. Just get proactive. Now, give us a call. Let's get started. Randy, talk a little bit about, you know, smart income, smart tax and then IRS rule seventy seven, oh, two. I think it's important to really kind of drill into those topics a little bit.
Randy Woodruff:
Smart taxes, As Eric mentioned, there are some investments that are very smart tax wise. Of course, we talked about muni bonds earlier in the program. I'm not suggesting bonds as an investment, but a muni bonds or regular bonds, but I'm just saying muni bonds. If you want some tax free income, that's a good source. And also, as we've talked on this show for many times, Roth IRA. I mean, we can't, I can't, and I'm sure Eric feels the same way. Can't stress enough how important a Roth IRA should be considered as part of your overall retirement plan. We talked on this show many times about tax rates are on sale right now, especially the capital gains that capital gains tax has been around since nineteen forty. It's the second lowest point in history in twenty eighteen. Republicans and Trump lowered the tax rates for all Americans, not just the wealthy Americans. Every single single American got a tax rate reduction in twenty eighteen, with all the spending going on in Washington that can't last forever. So if you if you have a if you have money in an IRA, you're thinking about rolling your 401k over. Come in and talk to us. We can put together a Roth strategy for you to roll over some of your money into a Roth every year, all in one year. It depends upon your situation there. Again, that's we're planning and education comes into play. Life insurance Life insurance can be a great retirement tool for certain individuals, and one of the big misconceptions that have that people don't understand is when you're a beneficiary and a policy that that cash flow coming to you when that when the insured passes away is all tax free income to you, if you will. So there's no tax to pay on.
Erick Arnett:
Yes, think about it if you can grow your money inside a life insurance policy for years and years and years with no risk and then pass it to your beneficiaries. Tax free super super powerful to leverage life insurance and in a retirement plan. So love. I love, love, love that strategy,
Randy Woodruff:
And that's something that's not done often enough. I know back 20 years ago, when the estate limits were a lot lower, there were a lot more people that had whole life insurance policies, put them in an islet to keep it out of the estate and their pay estate tax then. As the limits climbed up significantly, the need for life insurance to pay state taxes went away for a lot of families. But what hasn't been talked about often enough, in my opinion, is is how life insurance can be used as an income. The provider of income in retirement and as a nice provider of wealth to the next generation when that person passes away.
Erick Arnett:
IRS rules 7702. Here I am quoting IRS rules here. I mean, that's way above and beyond my scope. That's why I that's why I bring you in. But any income generated from life insurance is considered tax free. Folks, take advantage of that one IRS rule that benefits you. And I see not enough people do that. And we just been working with a high net worth family here recently, and we put into implemented some of these strategies. And it was amazing to see, folks. I'm talking about millions of dollars saved and made millions over a 20 30 year time frame by doing the proper planning. And a lot of it that was that keeping that money out of the Uncle Sam's hands. And so I get really excited about that kind of planning and it's available to everybody. It's not just available for the ultra wealthy anymore. We can devise and tailor these life insurance, these Roth conversion strategies, no matter what your wealth category. And I think that's important because I really don't like the way the big industry, the big firms have kind of turned their backs on folks that if you have less than a million dollars, you're not going to get any service. And so we don't do that. We don't discriminate. We want everybody to have the same strategies, the same intelligence thrown at them and help them in their retirement plan. No matter what your wealth category
Randy Woodruff:
Is and to your point about looking into insurance and one of the things I've been so impressed with Eric in our in our meetings is his product knowledge. I mean, we we've had clients that come in that had multiple needs, and Eric can find one product that will fit multiple needs in. The same thing is true with life insurance. There's been so much product development over the last 10 years that if you haven't come in and looked into life insurance as a retirement strategy, you really need to do so or even annuities. There's just so many riders that can go on these and these policies and plans that that make these these plans so much more beneficial for someone's plans, a recommended portion of someone's plans. And here again, sometimes they can fulfill multiple needs in a plan.
Erick Arnett:
Tax savvy investors want to pay as little income tax as possible. Just implementing a Roth Ladder Conversion allows you to make smart tax moves that will save you money in the long run. No RMDs, OK, no RMDs. Let me stress that again, I love this no RMDs, which means Uncle Sam isn't holding a gun to your head anymore and saying, OK, at age seventy two, you got this big fat for IRA or for one case sitting there. We're partners in it. Start drawing it out because we're going to start taxing it when our money. Ok, we like for you to get to age seventy two and have no gun held to your head and you can hold that money in that Roth as long as you want. You don't have to take RMDs and you don't have to pay any future taxes if properly planned. It's just an awesome, awesome strategy.
Randy Woodruff:
They're also a great inheritance or estate planning tool as well. So I have a clients that are have a significant amount of wealth in an IRA they don't need the might live on that money, just sitting there, rowing, they're going to let that pass to their kids through their estate planning process. The kids can now wait to take that money out until they reach retirement age so that you get potentially decades of exponential growth happening. And you can create a legacy for your family with proper planning, with or with a Roth IRA.
Erick Arnett:
So much awesome and powerful stuff, folks. We're running out of time, but I just want to thank everybody out there personally. If you're listening right now, thank you so much for listening to take put on retirement. We're definitely going to be back next week. If you missed today's show, we talked about some amazing things, particularly Social Security maximization and taken Social Security at the right time. And also, what is your retirement income gap? That's really important. So I know that retirement and wealth management can be daunting. So let us help you with that. We're available to you and my listeners receive a free consultation by visiting Take Point on retirement or give us a call (352) 616-0511 I can't wait to meet you, folks, and I can't wait to get your retirement plan in place and get it. Get it going.
Producer:
Yes, sir. And a failure to plan is
Randy Woodruff:
Planning to fail.
Erick Arnett:
A plan to Fail.
Producer:
Ok, thank you very much. That's why you need to contact take point wealth management. There's no failing there, and there's no fear as well on your stress free retirement. Take point on retirement, a show heard every weekend right here by take point wealth management along the Nature Coast. Give him a call now. Today they're ready to assist you standing by. Twenty four seven at (352) 616-0511. Check him out on line. Take Point Wealth Management. We'll see you next week, folks.
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