Marc Killian  00:52

Good. well, so I want to get your take on this as a planner, right? Someone who does this, you know, because obviously Social Security is a big chunk of many people’s retirement strategy, and this is something we really have to talk about, right? So this Congress, let me kind of set the table for everybody a little bit. This congressman, Brendan Boyle asked the CBO, which is the Congressional Budget Office, about, I don’t know, six or nine months ago something like that, they started talking about that. And again, this is not in place. What the effects might be if we move full retirement age from currently 67 to 69 we’ll stop right there. What’s your thoughts?

 

Jude Wilson  01:28

Well, let’s, let’s pull back a little bit. Some people may be wondering, why are we talking about social security on the Roth guy? Well, just to refresh everybody’s memory, the Roth guy isn’t just about Roth. It’s about tax efficient, holistic planning, right? And I can’t think of a bigger topic to talk about than social security, because it we’re all paying into it, and we hope to get a return from what we’re paying into, you know? So when we, when we look at it, and when I’m talking to clients, it’s, it’s usually two different attitudes about Social Security, people who are retired or already and are receiving Social Security, or people who are just about retired, most of them feel pretty good about their social security. They feel a little bit of angst because they they hear things like, Social Security is running out, but they feel like, Okay, I’m getting this, or I’m about to get it, I’m going to be okay. And then there’s people who are not retired yet, got a lot of runway before they get there. And the reason why I bring those two groups up is that if you’re the type of person that’s got some runway, well, this could be significant to you, because moving that full retirement age, from where it is now to potentially much higher, 69, or 70 is going to affect you in a couple of ways. Number one, those dollars that you were expecting for income well at full retirement age, that’s when you receive the full benefit. If you retire before that, you receive a discounted benefit. So that can definitely affect your planning. For how much income do you believe in total that you’re going to receive in retirement? So that usually Social Security is like the the the foundation, because that’s guaranteed income,

 

Marc Killian  03:16

yeah, yeah,

 

Jude Wilson  03:16

it could be a Linch for that hour. Yeah, yeah. Absolutely. Moving that out would definitely affect your planning. And then the the other thing that what the other way that it affects you, is that if you look at your Social Security statement on the first page, it says the Social Security Trust Fund may be depleted by around 2033 2034 Yeah, you know, what does that mean for everyday people like you and me? Well, if nothing is done, then this current rate benefits would have to be cut back. So those are

 

Marc Killian  03:52

75% I think, is what they’re what they’re kind of saying. And you know, a couple months ago we did, we did a conversation with former Comptroller General, David Walker, he was part of the, the team that helped kind of deal with this back in the 90s, right? There was an issue then as well, right? So it’s, and we know it’s a problem, right? It’s continuing to be a problem more. We’ve talked about it before on our show, prior to going to video version. You know, more and more people are, or excuse me, less and less people are paying in, you know, versus what’s taking out. There’s all these things going on. There’s a million reasons why. But basically this, this congressman said, hey, look, let’s take a look at seeing the effects of what might happen. So let’s look at a couple of things that kind of stand out, you know, to me in this conversation. So full retirement age fra is currently 6766 and some change, right? Depending on when you’re born, they don’t talk about the early, they don’t talk about the max at 70. They just talk about the FRA age, right? So let’s just kind of operate from the assumption that 62 stays as the early by moving this back two years. You know, that could potentially be, you know? Yeah, it gives you, I guess, from a planning standpoint, it gives you more time to work on some things, right? But you’re talking about, when you take it early. You talked earlier about a reduction in benefits. It’s what a 30, 30% haircut if you take it early, yeah, just about right. So the numbers on this would be 40% so think about that just for a minute. Just from that standpoint. Jude, if they move it to 69 and you’re thinking, Hey, I’ve got to retire early, or whatever reef for whatever reason, or I want to get mine before it runs out, or whatever. You’re talking about a 40% reduction that could be

 

Jude Wilson  05:31

painful. Yeah, and most people now, you know, you probably reach some financial magazine that says when you retire, you’re not going to need your full pre retirement income, you could probably live on somewhere between 80% of what you’re making. Let me tell you, I’ve been doing this for almost 30 years. There’s nobody that I know that’s living on 80% of their full retirement income. So imagine if Social Security is part of your base, and that’s cut back, yeah, 40% and so it really needs some proactive planning. Now, even if your runway is much longer, most of the people I know that I’m working with that have a long runway. And by long I mean 10 years or more. Okay, some of them don’t even believe Social Security will be around at all, yeah. And so we’re planning sometimes on a worst case scenario, what if it was all left to you on your back? And that’s something that we need to kind of take into consideration, well.

 

Marc Killian  06:32

And I think that’s why they’re starting to have these conversations. And again, it’s the third rail of politics. Nobody wants to touch this thing, right? Which is why, again, I’m shocked this. This person even said, Hey, let’s start looking at us. So kudos to them, because we do have to make some changes. Think about what happened in France over last summer, right? They pushed their pension air program back from 62 to 64 and they had like, 60 days worth of rolling right? Oh, yeah, and it was from people 40 years away from retirement. So it’s not a pleasant topic, but we are living longer. Jude, right, we’ve talked about this a million times. We’re living longer. Less people are paying into the system. More people are taking out. With boomers advancing, I think right now, we’re moving into the highest window to around 13,000 boomers a day are retiring or eligible to retire for like, the next six to nine months and going into 2025 so they have to do something because it is suffering. What I found interesting about this conversation Jude, is that I thought it would be, it wouldn’t even get near you’re an ice age, okay? I thought when they started talking about this, it would be, if you’re born after 1980 you know, or something like that. But in this first conversation piece, they’re saying, basically people born after 1972 they might move them to the 69 Well, I’m just within that one. I would now be in that 68 in some a few months window, because I was born in 71 so kind of interesting. It really does change your thought process for planning. By the way, you

 

Jude Wilson  07:58

look good. But thank you, sir. The thing that that I would mention too, I was shocked when this conversation came up, because, and you know, we don’t talk about politics here on the podcast, we talk about government policy, sure, because we’ve got to have government policy in mind when doing some financial planning, right? The thing that I was shocked about is, when you look at the US deficit, you have one camp that says we can cut our way out of this deficit because the government is spending far too much in their inefficient which is another true, yes, you got another camp that says we can tax our way out of this deficit. There’s some people that not paying their fair share right, which is also true, and neither side is 100% correct. It’s gonna take a combination of cuts. It’s gonna take some conversation around increasing revenue to the federal government, but no one is generally talking about the three biggest parts of the deficit, which is Medicare, Medicaid, defense spending and what we’re talking about today, Social Security. Yeah,

 

Marc Killian  09:07

no, that’s great point. As a matter of fact, this conversation piece goes on to say, and we’ll put a link into the show notes for people who want to check where we got this from. But it says that even by making this change, even if this was to happen, and again, this is totally just speculative, they’re just running just running numbers right now that it would fix it would help the actuarial 75 year actuarial deficit by only 25% Jude, so making this change wouldn’t even totally make the thing solvent, right? So it’s gonna take more than just this.

 

Jude Wilson  09:38

Oh, for sure, for sure, and I don’t again. I don’t care what political camp someone falls under, right, change has to happen, and the change is not going to feel good to everybody. There’s going to have to be some amount of pain, based on what we’ve been doing before, because we’ve been kicking the can down the road for so. Long, yeah, it we’re gonna have to experience some changes,

 

Marc Killian  10:03

all right? So let me kind of phrase it like this. So we kind of set the table. We talked about a few of the pieces. Again. There’s not a ton of information because they’re just now kicking this around, but it’s something that we’re gonna probably hear more about. And here’s why I say this, dude, think about the changes we’ve seen, the secure Act and the secure act 2.0 right? And then conversations like this, where we’re going to have to make changes to Social Security, so the information is being put out there. We have to do more on our personal end to get set for our own retirement. So if you are under the age of 55 you know you need to start being real proactive. Yeah.

 

Jude Wilson  10:39

I mean, we used to tell people, when I first started in this industry, to save about 10% of your income for retirement. But when I started, there was still the three legged stool. There was, you know, what you save, Social Security and a pension. Well, most people don’t have access to a pension anymore, and we’re talking about reductions in Social Security. So like

 

Marc Killian  11:02

a pogo, exactly

 

Jude Wilson  11:04

that three legged stool is looking like one leg is really still standing. And the most powerful thing about that, it’s the leg that you control. It’s the leg that you can have the most, the most effect on, because it’s all about how much money you can save if you did nothing else, if you didn’t have a financial advisor, I want you to listen to us every time we come up. But if you did nothing else but save as much as you can, you’d set yourself up for success. Now we can help make that success a little bit better by, you know, some good financial planning, but saving is going to be a piece of that

 

Marc Killian  11:39

well. And so, you know, when we had David Walker on, you know, not long ago, he’s like, look, people have got to start living within their means more. We talked about the fact that, I think I just saw some numbers were 17, I think was $17 billion in credit card debt, I think is what is out there right now for Americans. And I get it, you know, look, inflation has been bad. We’ve been dealing with a rough economy the last couple of years, while the market has been okay with that, you know, people, you know, day to day, life has been tough, so we have to find ways. And I think, I think the point of this conversation this week was to kind of highlight that changes are coming. You know, regardless of any administration, we’re going to see multiple administrations as we go through, you know, getting older, right? I mean, you know, you and I are in our 50s, so, I mean, you know, God willing, we’re gonna see a lot of stuff between now and our mid 80s, you know. So we’ve got to start putting more emphasis on being proactive. And so that’s why it’s important to talk with someone like yourself and find ways to do that. You mentioned that 10% I hear people saying now that that, you know, my daughter’s 27 she should be saving 15 to 17% and she’s thinking how I don’t even know how to do that, like, I don’t even know how to be able to afford

 

Jude Wilson  12:46

to do that, right? Yeah, life has, has definitely changed. And you know, one more note on on the social security aspect. You know, there’s over 500 different combinations of claiming strategies for Social Security, wow. So, you know, we talked about, hey, the most important thing you can do is save but I think in addition to that, you really need to talk to a professional that understands Social Security, because take doing the wrong combinations between yourself and your spouse. Yeah, you could be leaving hundreds of 1000s of dollars on the table by not claiming the right strategy based on your situation. Gonna pay into Social Security? Might as well maximize it as much as you can. And that’s

 

Marc Killian  13:27

a great point, you know, considering if this does you know something at some point, this is coming down the pike, I don’t you know whether that happens, but this particular conversation, this particular proposal for examination that they’re doing, or later, they’re gonna raise it. I don’t think there’s any way around it. They’re going to have to raise it right. And what age demographic gets affected by it? Well, more than likely, probably under 50, certainly under 45 you know. And that strategy of saying, okay, the higher earner, you know, maximizing that thing while they’re working to full retirement age, whatever number that is, needs to probably be a bigger focus now and then, if you have to kind of access that that person making that made less, turning that on early, well, then that’s not as bad, right? Because then when you pass on, then that higher number then goes to your spouse, right?

 

Jude Wilson  14:11

Absolutely. That’s one of the things we talk about so much in our planning, is which particular strategy works best for you. Some people can afford to have that higher earning spouse wait till 70. But some people are like, Look, I need every dollar I can to contribute to my retirement right now, when I’m ready to retire. And so, you know, we can do the math at the end of the day. It’s, it’s about figuring out the math and the right strategy and customizing it to your particular situation, yeah,

 

Marc Killian  14:42

well, at the end of the day, folks, look the writing’s on the wall between the secure act point, you know, 1.0 2.0 the national deficit that we have, the, you know, the debt that we owe changes, you know, coming to Social Security, amount of workers, all that stuff, right? The writing is on the wall. You’ve got to get more proactive. A. Out your own financial situation. The financial strategy, you know, the days of putting your head in the sand or saying, hey, my parents didn’t do a lot of planning and it worked out for them. That’s over, right? You’ve got to be more proactive. Jude, so any any final thoughts from you as we wrap up this week? Yes,

 

Jude Wilson  15:14

I just want to say, look, this is a lot of information, and we don’t tell you this to make you depressed. No, we actually tell you to so that you have the choice of the opportunity to be proactive. And if you’re proactive, you we can help you get to your retirement goals. Yeah, yeah. You

 

Marc Killian  15:32

just got to do something for yourself, right? So reach out to Jude, reach out to a financial professional. Doesn’t matter who you talk to. Make sure you talk to a qualified professional. If you need some help, of course, Jude and his team are here to help you can find all the find all the information in the show note descriptions here. Visit them online. You can subscribe to the podcast. You can check out their tax bomb website, lots of stuff. You can do lots of educational pieces and information. But take some action for yourself. You want a little satisfaction, gotta take a little action. So don’t forget to hit subscribe on, you know, Apple or Spotify or YouTube. That way you catch new episodes of the Roth guy. And of course, if you need some help again, check the Show description links for how to get in contact with Jude and his team, my friend. Thank you very much. Have yourself a great holiday, and we’ll see you guys in a future episode. Yeah, man, and same to your wife as well, Bob.

 

Jude Wilson  16:16

Thank you, brother. Take care.

 

Marc Killian  16:18

We’ll see you next time here on the Roth guy with Jude Wilson.

 

Walter Storholt  16:26

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