Income Planning for Retirement + Info on Social Security

10.25.24: Audio automatically transcribed by Sonix

10.25.24: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to Money Matters with Mike, with your host, Mike Zeno. Get set for a full hour of financial information and economic news affecting your bottom line. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for, and he can help you too. So now let's start the show. Here's Mike Zeno.

Speaker3:
What's up people? Welcome to the show. I'm Mike Zeno, coming to you from Fort Mill, South Carolina. And boy, have we got a ton of great information for you today. Today we're going to talk about planning your income sources in retirement and everything that goes along with Social Security. As always, I have the distinct honor and privilege of being joined by the one and only my co-host and producer extraordinaire, Mr. Matt McClure. Matthew, how are you doing today, brother?

Speaker1:
I'm doing great, Mike. I hope you are as well, sir.

Speaker3:
I am doing amazing. I am enjoying this cooler weather that we in the South have enjoyed this past week. Um, you know, it's it is a breath of fresh air. Literally.

Speaker1:
It really, really is. I was getting tired of those hot temperatures here. I'm like, you know, it's it's been October for a while now and we need the fall like weather. But yeah, it's it's been great. And I love that we're having this discussion today too about Social Security, Mike. Because primarily, anyway, people think I feel like a lot of the time that they don't, that there aren't many decision points that go into Social Security on their end. They might feel like, oh, well, it's a it's a government program. So it must be like a one size fits all deal. But there really are a lot of different decisions and things to be taken into consideration, right?

Speaker3:
There are so many different decisions when it comes to when to take Social Security and how to take Social Security, that if you are going at this alone, uh, there's a chance that you could be leaving a lot of money on the table. And so we always suggest that our listeners take advantage of our complimentary reviews and Social Security maximization plans just by giving us a call. We love meeting with them to discuss all things retirement, you know, especially with maximizing social security, risk management, estate planning, and a whole lot more because building sound financial plans for our listeners is what we do best.

Speaker1:
It's really kind of Mike Zeno's thing. And so if you want to get started along that road, folks, with a call, you can do it. (700) 456-0157 45601573. You can also go online to the website. It's Money Matters with mike.com. There you will find links to all of the past episodes of the show. You'll also see a lot of great information and you know, check us out on YouTube. We're on Facebook. We are just kind of all over the place online, on the socials and on the website and all of the places. Subscribe to the podcast as well, anywhere you get your podcasts. Once again, the website is Money Matters with mike.com. All right Mike, so what say we get started with our conversations today with a little bit of inspiration for the conversation? It's our financial wisdom. Quote of the week.

Speaker4:
And now for some financial wisdom. It's time for the quote of the week.

Speaker1:
And this week's quote comes from David Bock, who said this one time about Social Security in particular. Social security was never intended to be a retirement plan. At most. It was designed to provide an income supplement. I think that is very, very poignant because a lot of people today are relying on Social Security for their primary source, if not only source of income in retirement.

Speaker3:
Yeah, it is. It's it's kind of devastating when I sit down with people. And Social Security is their only source of retirement income. And the fact is, is that it was never intended to serve as a full fledged retirement plan. It was established way back in 1935 during the Great Depression, and it was primarily supposed to be a safety net to help prevent poverty for older Americans. Right. The goal was just to provide a basic level of financial support for retirees, not to cover all of their living expenses in retirement. And here is why relying solely on Social Security as your retirement income can leave you in fact, will leave you financially vulnerable.

Speaker2:
Hungry for something to chew on? Here's some meat on the bone.

Speaker3:
We're going to talk about how not to miss the boat, so to speak. Right. So we've already established the fact that it was designed as a supplement, not a solution. Right. Again, back then most workers had additional retirement income. They had these magical unicorn things called pensions, okay, uh, along with personal savings. And some of them continued to work even into retirement, just not as much. Maybe they they backed off a little bit and did more of a phased retirement. So it was just designed to supplement those other resources. And even today Social Security is structured to replace only a percentage of a worker's pre-retirement income. Okay. For the average earner in the United States, it typically represents around 40% of pre-retirement earnings, which means there's a 60% drop off in what you are used to making while you were working, and what you're going to expect from Social Security. And then if you're a higher income earner, that percentage that is replaced, it's even lower because Social Security benefits are designed to favor lower income workers who need more help.

Speaker1:
Matt. Yeah. So when you take a look at how it was intended in its original, uh, you know, when it when it was originally passed, when it originally became law of the land here, as you did a minute ago. That's exactly what it was. It was it was a poverty prevention tool. Right. And so, you know, the higher income earners, uh, it's not really who it was intended to, to help. And now, you know, it's only going to replace that small, tiny portion of especially their paycheck from when, from when the higher income folks were, you know, going to the going to the job every day. And so, yeah, I mean, it leaves you with a big income gap that you're going to have to fill in retirement.

Speaker3:
Yeah. And then folks, here's a reality check, right? Most financial experts recommend that retirees aim to replace somewhere between 70 to 80% of their pre-retirement income in order to maintain their standard of living and Social Security alone. That won't even get you halfway there. But, you know, I don't consider myself most financial experts, right? I'm going to aim to replace 100% of your pre-retirement income with a properly structured financial plan. So if that interests you, you definitely want to not delay. The earlier you start, the better off you're going to be to take advantage of this little thing called compound interest that Albert Einstein just happened to, you know, call the eighth wonder of the world. So, um, another thing that Social Security benefits do is they adjust annually for this, uh, silent tax that we affectionately know as inflation. Okay. And that was a joke when I say affectionately, um, and they do that through what are known as cost of living adjustments or Colas as the acronym. But those increases often fall short of the actual rising costs that retirees face, particularly in healthcare and in housing expenses, medical expenses, long term care, and even the everyday cost of living can rise much, much faster than any Cola increases can keep up with.

Speaker1:
Yeah, it's very true. And you know, this year they've just not that long ago announced the Cola for 2025. And beneficiaries will receive a 2.5% increase. So 2.5% increase in their, um, you know, cost of living adjustment. So in their Social Security payments each month, that's going to go up by 2.5%. I actually spoke Mike recently here with Jen Jones of AARP to kind of get her thoughts about the the Cola for this coming year for Social Security beneficiaries. Let's hear what she had to say about that. 2.5% increase.

Speaker5:
Not as big as it has been in prior years, but you are absolutely correct. Um, a lower Cola means lower prices at the pump, lower, lower grocery prices. And so it's a it's a good thing, even though it doesn't exactly feel that way for many retirees. Um, this cost of living adjustment. This annual increase is honestly essential for ensuring that Social Security recipients receive the full value of their earned benefit, and we know just how important that is given that, you know, for 40% of older Americans, Social Security is their primary source of retirement income. And as you.

Speaker1:
Said, it's it's kind of a double edged sword, because the fact that there is a lower cost of living adjustment, that means overall inflation is not as high as it has been in previous years. So that's kind of the good side. The bad side, though, is, yeah, the cost of living adjustment is not as big as it was. So there's not as big of a raise for our for our, you know, Social Security recipients, the seniors out there. And also, as you were saying Mike, earlier, there's a lot of in a lot of scenarios, a lot of cases for a lot of people, the actual cost of living adjustment that is given doesn't really keep pace with the real cost increases that people are seeing every year.

Speaker3:
Absolutely. I mean, and if there's a gap, right, which means the cost is rising at a much higher rate than your cost of living is actually providing you, that gap is going to put a strain on your finances, right. And so if your Social Security is the only source of your retirement income, you're going to have to cut back on other necessities, things like food, utilities or transportation. And so you just want to make sure, again, I can't harp on it enough that having a properly structured retirement plan is is not one that only includes Social Security. And then, you know, on top of that, we've got these concerns, ongoing concerns about the Social Security trust Fund and all of the challenges that it's had as far as solvency is concerned. And due to just demographic shifts, Namely an ageing population with fewer workers that are paying into the system relative to the largest, um, you know, majority of of baby boomers who are now retiring and receiving benefits. The Social Security Trust Fund is facing funding challenges, and currently it is expected to be able to pay out benefits only until 2033. And then during that years, at some point, it's going to have to adjust the amount that it pays out. And there now, if no changes are made, the program expects to only be able to pay out around 77% of of benefits based on current projections. Um, so what does that mean? That means that if you are planning to rely solely on Social Security, there is a risk and a strong risk that future benefit reductions could significantly impact your financial stability, even if you don't have other sources of income to fall out. Or I should say, especially if you don't have other sources of income to fall back on.

Speaker1:
Yeah. And that's the thing is, and I know we talk about this quite a bit on the show, but it bears repeating right here is that you need a plan in place so that Social Security is obviously not the only thing that you're relying on first and foremost. But ideally you want a plan in place so that Social Security is just kind of the gravy or the the cherry on top, whatever food related analogy you want to use, that is what you want Social Security to be, not the end all, be all for you. And that is why I believe you should call Mr. Mike Zeno at (704) 560-1573 or go to Money Matters with Mike. Dot com. Another concern here, Mike too is that that people are living longer. And so that is putting more financial strain, not only on on them, but on the Social Security Administration, the trust fund, all of that as well.

Speaker3:
Right. I mean, people are living longer today than they were when Social Security was first created, way back in 1935. Back then, the average life expectancy was literally only 58 years old. So you should have been dead for four years before you could even start to claim your benefits. Well, today, many people live well into their 80s or beyond, and that extended lifespan means that retirees need a more robust financial plan to help cover all of their needs, potentially for 2 to 3 and even in some cases, four decades. Okay. Social security benefits don't increase significantly based on longevity. So someone who lives longer is going to face increasing financial pressure, especially if they have not planned for the rising costs of aging, such as long term care or major health issues.

Speaker1:
Yeah, and you talk about long term care there. People are maybe thinking that, oh, well, surely Medicare will just cover that because, you know, I'll have Medicare when I, when I retire. But wake up call. As far as that goes, Medicare does not cover long term care. So you will have to have a plan in place so that you can cover that if and when you do need it. That's one of those big things that that goes into a financial plan, a comprehensive one like Mike Zeno can put in place for you.

Speaker3:
Yeah. I mean, if you're thinking about retiring around the age of 65, okay, that seems to be a very average, uh, you know, target point for a lot of folks. And then you live until 90. Well, that's 25 years of retirement that you are going to need to have to finance. Okay. And relying again, solely on Social Security is going to leave you short on cash, particularly as inflation erodes purchasing power over time. And you know what, Matt? You mentioned Medicare. Well, what about just regular healthcare? Healthcare costs in retirement? Believe it or not, folks are one of the largest expenses that retirees actually face. And according to fidelity, the average couple okay, retiring today is going to need around $315,000 just to cover healthcare expenses alone during retirement. And that is like you just pointed out, Matt. Above and beyond what Medicare will cover. So again, relying solely on Social Security to cover those expenses, folks, it's just unrealistic. Okay. The average Social Security benefit in 2024 is right around $1,900 a month, or roughly $22,800 a year. Now, imagine covering your mortgage or rent, your utilities, your food, your transportation, and skyrocketing health care costs. Um, not to mention any type of enjoyment of, you know, the golden years, right? On that income alone, $22,800 a year. I mean, we're talking about below the poverty line at that point.

Speaker1:
Yeah. I mean, we really are. And, you know, I mean, that's the thing, just trying to cover the basics on that income alone. You're not going to get very far doing that. And then on top of that, you want to actually be able to do the things that you want to do in retirement and go where you want to go and and travel while you can and all of those things. So yeah I mean, it really is a big concern for people to, to, you know, have a plan in place so they don't have to rely simply on Social Security to get by, because that would at the at a very bare minimum, even if you're able to just get by, that would be all that you are doing in retirement if you were even able to make ends meet on what is pretty much a pittance. If you're getting just the average Social Security income every month.

Speaker3:
Yeah. I mean, in order to build a secure retirement again, Social Security should just be one component of a much larger plan. And that plan should include personal savings, maybe employer based or employer sponsored retirement accounts like 401 S, 403 B's. Uh, Thrift Savings Plan. If you're a federal employment, uh, employee rather as well as other investments. Okay. If you're the person who is relying on Social Security alone, it's as if you're walking a tightrope, okay. 100ft up in the air and you don't have a safety net. One wobble and you're in trouble. Right. So, you know, if you are one of our listeners and you have contributed to a 401 K throughout the entirety of your working career, and let's just say that you've saved $500,000 between your contributions. Any employer match, plus the growth and compound interest over the decades that you've been saving. Right. If you're drawing on that for retirement, along with Social Security, you're going to have a much more comfortable cushion that will help you pay for those things like health care, the enjoyable things like travel, and even the occasional splurge. You're also going to have some flexibility with maybe delaying claiming Social Security that allows your Social Security benefits to grow, um, until you're ready to tap into them. Okay. The problem with counting solely on Social Security is that a lot of, uh, pre-retirees falsely believe that Social Security is going to be enough, but in reality, they are going to find themselves struggling to maintain even a basic standard of living. So without personal savings, without other investments, you can be forced into very difficult decisions, like working longer than you had planned, moving to a lower cost area, which means you're going to be out in the boonies, uh, or in a undesirable area, or worse, drastically reducing your lifestyle. That is not where you want to find yourself going into retirement.

Speaker1:
It really isn't. Those are decisions that you don't want to have to make. Talk about a big upheaval, a big lifestyle change for you potentially. So then, you know, the question becomes what is the solution to all of this? I mean, you've said you kind of have a plan in place. Um, you know, if I'm a if I'm a listener out there and I'm like, okay, you guys, you've been talking about having a plan. So what does that actually mean, having a plan in place? And for that, I will pose that question to you, Mike Zeno.

Speaker3:
Well, you know, first off, a smart as well as comprehensive retirement plan is going to include multiple streams of retirement income. So on top of Social Security, you might have things like a 401 K or a 403 B or a TSP. The employer sponsored plan. You might also have an IRA. You might also have a brokerage account, and you might even work part time in retirement if necessary, or if you get bored. And believe it or not, folks, some people actually do get bored, right? So the earlier you start saving and planning, the more time that your money has to grow and compound, okay? In addition, delaying Social Security if possible, if only for a couple of years, as long as you are in good health is a very smart move because for every year that you delay past your full retirement age for an example up to age 70, your benefits increase by around 8% a year. Which might not sound like a lot, but folks, let me tell you, it makes a very, very big difference. Look at your benefit estimate, and you can find that at Social Security's administration website by@ssa.gov. You can go on there and look at all of your benefits. And if you're not reviewing your benefits on an annual basis. Um, there might be some mistakes on there because all of your earnings are based on your reported income. And so if the, uh, you know, if the Social Security Administration made a mistake, then all you have to do is provide a proof of your tax return and they can increase that. But if you can hold off okay, you can receive significantly more income for the rest of your life. So do not miss the boat again. Relying solely on Social Security as your main source of income in retirement. It's like showing up at a potluck with only a bag of chips. It's just simply not enough.

Speaker1:
Yeah, you got to have you got to bring more than just a bag of chips to the potluck. I mean, you got to bring maybe a big, big crock pot full of chili. You got to bring a dessert. You got to bring something else to the party because you shall not live. I know a couple of weeks ago, we talked about not, uh, not living on bread alone. You know, you shall not live on chips alone. You need more than that to come to the party with because, you know, it's part it can be part of the income plan, but it's not the whole thing.

Speaker3:
Yeah. Stealing a saying from the late 80s and early 90s, you know, when we designed a retirement plan, it is all that and a bag of chips.

Speaker1:
That's right. So you got the bag of chips? The bag of chips is your Social Security. Now, Mike Zeno is going to bring all that to your retirement plan. And if you're ready for all that and a bag of chips, go to Money Matters with mike.com, or call (700) 456-0157 three. And you know, again as we say, Social Security not meant to be your entire plan. And Mike Zeno can help you get to a place where you've got that comprehensive plan that we talk about so that Social Security is just the cherry on top. It's just the chips. It's the side dish. You know, it's not the main course. Right?

Speaker3:
No doubt about it. So if you've got questions about your benefits. Well, I'm going to tell you straight up, choosing correctly when to start taking Social Security is perhaps the most crucial decision that you're going to make when planning for your own retirement, and you want to get it right. So let me help you consider all of your options and provide you with our free, right free Social Security maximization report. It's part of what we provide any of our clients or listeners who reach out.

Speaker1:
Yeah, that's absolutely right. And once again, folks, there's no cost to that. There is no obligation as well. You will only work with Mike Zeno if it is what you both decide. It's a mutual thing, right? You got to both decide that that's the right thing to do for you, because this is the point, and it's really the entire point of the show and the entire point of what Mike does every day. It's all about what's best for you. It's not about what's best for Mike Zeno. It's not about what's best for me or, you know, my neighbor down the street. It's about what's best for you as a listener to the show, as a as a client, especially. It's what's best for you. Mike and I know that, you know, when folks call in, um, just in the last few minutes of the show, we can kind of go through, I guess, kind of that process, like what happens when somebody calls on your number at (704) 560-1573 and that phone rings right there on your hip, or they give a call or give a give a call, give a, um, I guess give a type, I don't know, type in the web address. Money matters with mike.com and reach out to schedule a consultation there. What happens from that point.

Speaker6:
Yeah. So the first the first.

Speaker3:
Contact is going to be a, you know, short 15, maybe 30 minute discovery call. Will I'll tell you a little bit about me and then I'll learn hopefully a little bit about you and what it is that you're trying to accomplish. And then once we actually set a time for a consultation, we can do that consultation in person. If you'd like, I can come to you. You can come to me. Most of my clients prefer, believe it or not, to stay in the comfort of their own home and just, uh, you know, watch me on, on a on a video screen via zoom. All right. So that way I can do that wherever you are in the United States or world for that matter. Right. But we're going to discuss your financial goals and, more importantly, your vision for retirement. We'll take a look at your current plan if you have one, as well as your portfolio of assets. We'll look at how you're allocated. We'll walk you through what our recommended plan might be if we see areas for improvement. Okay. And I would say that in, you know, 75 to 80% of the plans that we look at, uh, they're, you know, okay. But there are some areas that we can tweak. And then the other, um, percentages are actually good. And if you're good, we're going to give you that confirmation and confidence so that you can ask as many questions as you want about your retirement and will provide the answers for you. Okay. So again, all you have to do to reach out and get started is pick up a phone and call (700) 456-0157 three or visit us on the web at Money Matters with mike.com. You can also visit on the socials and post questions and comment or direct message me any way, like if you can't find me. Folks, you're not looking.

Speaker1:
That's right. Everywhere is where you can find Mike Zeno. And once again, folks, it's Money matters with mike.com or the number (704) 560-1573. Look him up on YouTube. Look him up on the Facebook online as well. So you know just about everywhere you can possibly find anyone. You can find Mike Zeno. Well, Mike, that is going to do it for this edition of the show. It's been an education, I know, for our listeners because I've learned many, many things today as well in our discussions about Social Security and the importance of a comprehensive retirement income plan. I thank you, sir, for all that you bring to the table each and every week, and we'll do it again next time.

Speaker3:
Matt, thank you so much for your contributions as well. But most importantly, thank you to our listeners. Without you folks, we don't have a show. Listen, if anything resonated with you from today's show, or more importantly, maybe you're in your 30s or 40s and you're concerned about your parents or your grandparents, right? Make sure to pass this show along on to them so that they can learn why it is important not to rely solely on Social Security. Listen, whatever you're doing this weekend, I hope you enjoy it to its fullest extent. And as always, make it a great day.

Speaker2:
Thanks for listening to Money Matters with Mike. You deserve to work with a licensed financial and insurance professional who can offer strategies for protecting and growing your hard earned money. To schedule your free, no obligation consultation, visit Money Matters with mike.com or pick up the phone and call 704560 1573. That's (704) 560-1573. Not affiliated with the United States government. Mike Zeno does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. Amara Life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or the results obtained from the use of this information.

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