Jude Wilson  00:46

I’m doing excellent. I could not think about a topic more apropos for our listeners today.

Marc Killian  00:53

Yeah. I mean, it’s anytime you hear Social Security and stuff, they people get nervous, right? Absolutely. So there’s certainly some interesting stuff. So let me do the setup for the listeners, and we can debate it here. So again, just a proposal, but news proposal out of Washington from I think this is hilarious, from the Committee for a Responsible Federal Budget that, and of itself, sounds

01:15

like an oxymoron, right?

Marc Killian  01:17

With 39 trillion in debt. Where are these guys been? But anyway, they released a plan at the end of March, June, we’re taping this in early April, right? That would cap Social Security benefits at $100,000 annually for a couple 50,000 for an individual, starting at full retirement age 67 right? Yeah. So the goal is to address the program’s insolvency now by 2032 they’re claiming no longer 2033 now by 2032 when an automatic 24% across the board cut may kick in come 2032 unless Congress does something, the cap could save between 100 and 190 billion over a decade, but that only solves half of the 75 year deficiency issue. So again, this is one proposal might address some of the issues. There are several other ones out there as well. We can talk about on another day. But for context, Jude, for listeners talking about the 50,000 for an individual, capping it at that right now, today’s maximum individual benefit exceeds that. It’s at 62 grand. So thoughts on this, pros, cons, let’s debate

Jude Wilson  02:24

it so. So the problem has been around for decades, and you know, this is not a political statement. This is just what it is, right? Our our representatives keep kicking the can down the road and until something becomes urgent and important is when people decide to get

Marc Killian  02:44

activated, and we may be there. I mean, a lot rare, yeah, a lot of people don’t realize. Jude we had David Walker on the show a while back, and he was part of the group in the 90s that made the 85% change Clinton’s administration. Because, as he even said people didn’t realize it was going to run out then, right? So they wait till the last second to do things. So this is going to be one of those times. But anyway, back to the topic.

Jude Wilson  03:09

This is the most important topic if you’re five to 10 years out, and even if your your horizon is longer than that, the the most pertinent thing that you need to take away from this is that social security, Social Security as we know it, must change and will change. And what we’re really referring to is the Social Security Trust Fund and how it is running out. And if you, if you still get your Social Security statement, or if you download it from the website, you’ll see what we talked about earlier. By 2032 if nothing is done, what we believe will happen is a 24% cut in the benefits. And so there’s there’s really only one of three ways to solve this problem, or combination of the three, either we’re going to raise the Social Security full retirement age, either we’re going to that’s our that’s on

Marc Killian  04:09

the table too, yep, yep,

Jude Wilson  04:11

or either we’re going to borrow money to help with the shortfall or print it Yeah, or We’re going to figure out a way of reducing benefits for certain people, and right now, as you were saying before, one of the proposals that’s on the table that seems to be getting the most steam is reducing the maximum Social Security benefit to 50,000 most People don’t know that. There are some people out there that are getting about 62,000 in maximum Social Security benefit.

Marc Killian  04:47

Yeah, and let’s, let’s put a little context here. Jude, so diving into this further, it looks like this particular proposal would affect only, only the upper per only the upper high wealth folks. Okay, so. About 70% of people that would get Social Security would not be affected by this, so that’s a huge number of people. And so it brings open the debate as to whether or not people who are ultra wealthy or very wealthy, even they’re paying into the system too. Are they? Is it fair to make them carry the lion’s share while they’re not going to get the benefit because they’re going to get capped or whatever, versus, hey, it’s a system that was put in place to help people stay out of poverty. So there’s a social, economic thing that’s always been tied to it for

Jude Wilson  05:32

sure, because, as you know, you’re taxed on your income up to about $184,000 and after that, you’re not paying into the Social Security trust fund. So there’s all this debate as to well. One way to possibly solve it is to remove the cap for all income. But there’s pros and cons about that too, because certain people that make above that are not always being paid. W2 income, some of their income is coming from other sources. So how do you work your way around that? Here’s the bottom line, I think we cannot control Congress. Yes, we vote for our representatives, and we hope they follow our wishes, but once they’re in office, you know, that’s when the negotiation starts. So we have no direct control. The only thing that we have direct control over is our personal finances, and that’s why I am so determined to help people put together a financial plan that gives them options, as we’ve talked about with the with the three buckets, and as we’ve talked about with the tax filters, if you understand how all these things work together, it empowers you to be able to take care of yourself, no matter what people are doing in Congress, exactly.

Marc Killian  06:56

And if you think about the secure act, two point or 1.0 and 2.0 changes. I mean, they’ve been putting writing on the wall that something has to shift right, and you can get into the real debate. And again, the debate really seems to live in the not the cap so much, but the fundamental disagreement over what Social Security was supposed to be. Again, originally, only for the most the most impoverished people, to keep them out of complete poverty in old age was the original premise of the system. But then you’ve got the argument, hey, if you’ve worked really hard over your lifetime and you’re not ultra wealthy, but you’ve done well, and let’s say you’ve put a million dollars into Social Security over, you know, 40 years of income, people get pissed off. They’re like, where’s I want this back? Like, why did you take this from me? I could have done better myself. And so you get that whole social debate. Well, yes, but unfortunately, there’s a large number of people who don’t save for their old age and have it for, you know, 70 years, 80 years, which is why the program was put in place to begin with. So the philosophical debate is one piece of it. Jude, but what worries people is when they hear, I may get a cut. So $100,000 between a couple at full retirement age, that’s not, that’s pretty good number, right? That’s a pretty good number. Yeah, it doesn’t take into account the going to 70 would still be, what? Another 24 grand, right? If you max it out, right?

Jude Wilson  08:20

Right, right, and so that goes back to what we were talking about. There needs to be a balancing act between the benefits that you believe that you’re going to receive, and what type of planning are you doing outside of that? Because for what we’ve always thought, since I’ve been in this industry for the last 30 years, is you hear the word entitlement, and people don’t see Social Security as an entitlement. They see that I paid into it, and I want to get my money out, because I deserve

Marc Killian  08:55

that right, instead of realizing that unfortunately, like it or not, the way it was set up was, it was always about future people paying for the prior people, right? I mean, it’s the younger generation paying for the older generation as they get older. That’s the way it was always designed and built, because if you think about it too. Jude, right? I mean, we used to have 2021, people putting in for every one person, every time exactly. We’re now down to three to one, three to one Exactly. Yeah. I mean, it’s so that’s makes it non sustainable. So you have to wrap, I think you got to wrap your mind around it a little bit that you know you’re paying for the future person to retire, you know, a future person who didn’t maybe plan as well. And again, that writing is on the wall, that we need to have a structured plan in place for ourselves, regardless of what government chooses to do, 100%

Jude Wilson  09:45

and the thing that if you survey people and ask them, what do they love about their Social Security is that it’s a guaranteed income. The check is coming every month. But there’s other ways for us individually to structure. Our finances to have that guaranteed income. And I believe everybody in retirement should have a base, kind of like when you’re working, you know, if you show up to work, you’re going to get paid your salary, but if the company does well, you may get a bonus. Well, what we tried to do to help our clients is is make sure that they understand what that base is that, come rain, sleet or snow, I know I’m going to get X amount and above and beyond that. Yeah, that’s what I want to live on to enjoy my retirement. But I know what my worst case scenario is. And so I think when people look at social security, they look at it as that’s my worst case scenario. That’s my, that’s my four that’s my that’s where it should be, foundation, yeah, yeah. And so if we go further, we can help people build that foundation above and beyond just social security.

Marc Killian  10:53

So Jude, check this out. I’m going to pull this up on the screen for you. Sometimes we also forget how lucky we are in the US, right? So this is maximum retirement benefits. It’s called other things in other countries, right? But you know, so in select countries in 2024 look at the far right here, right? So the United States, maximum retirement benefit, $93,452 right? Look right next to us at the United Kingdom, 33,994 sizable sizable difference right in the retirement and this, again, maximum number. So it’s just under that 1000, or the $100,000 cap that this proposal is kind of talking about. So this was back in 2024, but look at some of these other countries. You know, sizable countries. I mean, again, you know France at 69 grand, Australia at 30 grand, that’s the max that their pensioners, I believe, is what they call them in other countries, are really able to get right. So sometimes I think we got to put perspective on this as Americans, that our system is still is pretty stylish and is paid a lot out right? So I think what’s going to have to happen? Jude, and you tell me what you think, but it’s going to have to be a menagerie of things, changing, the age, maybe a cap, maybe some means testing. It’s going to take multiple things to fix this.

Jude Wilson  12:13

For sure, there’s no one size fits all, as you, as you, as you stated there. There’s been some discussion about raising the age, believe it or not, this is one of the few discussions that we’re starting to see that our politicians on both side of the aisle are having constructive conversations about, and the trend seems to be between both Republicans and Democrats that they don’t want to necessarily raise the age too far. There’s been some discussions about that, but there’s a lot of pushback, some discussions about borrowing money to put into the Social Security trust fund. But we’re already at $39 trillion in the deficit. Yeah. And then, of course, the means testing, whether or not, if you’re affluent, that you get your full benefit or a very reduced amount?

Marc Killian  13:05

No, yeah, for sure, there’s gonna be a combination, because there’s been jokes forever, like, does somebody like Oprah really need social security? Like, she’s never gonna turn it on and claim it right? So I think that’s where some of these kind of things, where we’re talking about really ultra, you know, higher our higher net worth, people are never gonna need it. So do we make a cap? And let me pull this graphic back up real fast, just to kind of maybe ease people who see Social Security proposed changes and freak out. And again, let me remind it. It’s just a proposal. It’s not before even Congress or anything. But again, if they cap it at the single individual at 50, and they cap a couple at 100 if you look again on the far right, you can see the green right here is the single person maximum into you know, two years ago, was just under 50. Maximum for a couple was just under 100 so it again, it won’t affect a lot of people. Should this actually go through? It only affect probably about the top 20, 25% right? And so that’s something to bear in mind as well. Again, just to kind of ease some concerns, yeah, 100%

Jude Wilson  14:06

with you. I think as far as what actions can we take? Yeah, again, I think it’s, it’s understanding how far you are to retirement, what is the income that you absolutely need, and then working with either a planner or developing a plan on your own to say, you know, how much of my income do I want to have that’s guaranteed to come in, come rain, sleet or snow, and being able to understand the factors that affect income, not just your investments, but taxation, and how Irma and Medicare play a piece. I get so hyped up when we’re talking about retirement planning because we’re on a trajectory where we’re just kind of set and forget it. We’re putting our money in a way, in our 401, K, but there’s so. Many factors that play into making sure that the lifestyle that you become accustomed to, you have the income to support that in retirement. And so if people get nothing else out of this conversation, understand that Social Security is about to change. It’s not going to affect everyone, but we need to get ahead of this, and we need to start planning now,

Marc Killian  15:24

exactly, and, you know, and that’s where, again, turning their professionals to help sooner than later is always a good idea, so that you can start kind of, you know, removing some of the dependence on whatever government does. I mean, we know we’re in historically low tax rates. We know that’s probably going to change in 29 right? Maybe 30 at the latest, you know, if a different administration, or when a different administration gets in. So, you know there’s, there’s always going to be something happening. So you’ve got to be proactive. The writing is definitely on the wall, whether that’s for 50 and under 50 to 55 who knows, like, what’s going to change? What, as far as the amounts, the ages, lots still out there to speculate on. But again, we wanted to at least talk about this conversation this week here on the podcast, because it is, it is being proposed again by this committee. It is not before Congress or anything like that yet, but some changes definitely have to happen. They’re probing, right? They’re probing in there. They’re getting ideas going. So if you need help, reach out to Jude and his team. Please have a conversation for yourself. You can find the links in the show descriptions below. You can go to the tax bomb.com you can go to his main website, send trust fs.com and again, we’ll have links in the show descriptions. Just click on one of those, and don’t forget to subscribe to the Roth guy on Apple or Spotify or YouTube so that you can catch new episodes when they come out. Jude, my friend, thanks for talking about a an interesting and little scary subject.

Jude Wilson  16:47

Yeah, it’s been fun. Hopefully our audience got a lot out of it today, and

Marc Killian  16:50

not too much, not too much panic, not yet. Yeah, right. So we’ll see you next time here on the Roth guy hit that subscribe button. We’ll catch you later. Thank you.

Walter Storholt  17:03

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