I was at a speaking engagement this week, and we received several questions from the audience about Social Security. Questions like: When should I start Social Security—at 62 or 67? How do spousal benefits work? Will Social Security be there for me?
In today’s podcast, Tim and I discuss these important questions. We also talk about a new survey from the Reagan National Institute that found many Americans believe affluent households should bear more of the cost of funding entitlement programs.
As always, I’ll include links to the articles and resources we mention in today’s show at SoundRetirementPlanning.com. Just click on Episode 476, titled “Will Social Security Be There for Me?”
We’re also hosting a special webinar on Social Security and how to integrate it into your retirement plan. If you’d like to attend and see how we help our clients determine the right time to claim Social Security benefits, simply visit the show notes and click the webinar registration link.
Articles, Links & Resources:
Please register for Parker Financial Webinar: Integrating Social Security into your Retirement Plan on Jul 28, 2026 5:00 PM PDT:
Social Security: Will Social Security Be There For Me?
Reagan National Economic Survey. Key Findings on Entitlements on page 1 and page 11.
Transcript:
476 – Will Social Security Be There For Me?
Speaker: [00:00:00] Welcome back, America, to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now, here is your host, Jason Parker.
Speaker 2: America, welcome back to another round of Sound Retirement Radio.
You’re listening to episode number 476. The title is, “Will Social Security Be There For Me?” I was at a speaking engagement this week, and I received several questions from the audience about Social Security. Questions like, “When should I start Social Security, at 62 or 67? How do spousal benefits work? Will Social Security be there for me?”
So in today’s podcast, Tim and I discuss these important questions. We also talk about a new survey from the Reagan National Institute that found many Americans believe affluent households should bear more of the cost of funding entitlement programs. As [00:01:00] always, I’ll include the links to the articles and the resources that I mention in today’s show at soundretirementplanning.com.
Just click on episode number 476. The title is, “Will Social Security Be There For Me?” We’re also hosting a special webinar on Social Security on how to integrate it into your retirement plan. If you’d like to attend and see how we help our clients determine the right time to claim Social Security benefits, simply visit the show notes and click on the webinar registration link.
Before we get into today’s podcast, let’s start out by renewing our minds. Matthew 6:34, “Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.” And of course, uh, uh, something to put a smile on your face. What kind of music do balloons hate? Pop music.
Why did the ice cream truck break down? Because it drove over some rocky road.
Okay, and so without any further ado, let’s get into this conversation about Social Security. It’s my good fortune to welcome Tim Tenbrink [00:02:00] back onto the program. Tim’s a certified financial planner with Parker Financial. He’s somebody– he and I both, we walk life with a lot of people. We help them make decisions about Social Security.
Tim, uh, welcome back to Sound Retirement Radio.
Speaker 3: Thanks, Jason. Good to be back with you.
Speaker 2: I’m so glad to have you here. You know, I had a speaking engagement last night, and we had a lot of people asking questions about Social Security, like, “Should I start it at 62 or 67 or 70?” And, um, one of the people asked, “Will Social Security be there for me when we need it?”
So I thought it would be a good time to just circle back around, talk about Social Security. The other thing is there tends to be a lot of fear-mongering out there, a lot of people trying to scare people about Social Security. There was this new Reagan national economic survey that was published recently that talks about potential ways to fix Social Security, so I wanna, at the end of our program today, I wanna circle back and talk about some of these ideas that they have about how Social Security is running into problems right now, but also some of [00:03:00] the, the ideas that have been proposed for how to fix it.
Um, the first thing I just wanna… At a high level, when you’re meeting with people and you’re talking to them about retirement and cash flow, Social Security, from my experience, has been a, a, a hot topic. What do you find out there when you’re talking to people about Social Security?
Speaker 3: Yeah, Jason, I’m glad we’re having the conversation ’cause certainly as we meet with people, it is common for us to have questions that are brought up regarding Social Security.
Everyone knows that there’s, there’s question marks about the funding, and we’ll circle back to that in terms of just some of the fears that are out there. But one of the things we often tell our clients and, and a big part of why we do the work that we do is let’s not just make decisions based on fear.
Let’s look at the information. Let’s ana- do an analysis. And there’s a lot of pieces here. So, you know, Social Security, you know, is a great benefit, and what we want to do is help people get the most out of it. Yeah. And, um, we’ll di- we’ll dive in a little bit more about the, the ins and outs of what that means and the thoroughness of the [00:04:00] analysis we do.
But certainly as we meet with people, this is one of the big topics that, that people are asking questions about. When should they start it? A- a- and, and when you answer that question, there’s all kinds of different thoughts about Social Security that people are, you know, have in their minds the, the, the s- suppositions they have about what’s gonna happen with it and thinking that should then inform their decision on, on the timing of it.
And so we, we look at a little bit more in-depth of that and try to help people come up with a really good decision ’cause it is a big decision you make when it comes to retirement.
Speaker 2: Well, let’s start with the very b- the very first question that I had last night, which is people are trying to decide the right time to start Social Security, and what are the ages?
How does that work?
Speaker 3: Yeah. So I always just start with telling people, “Okay, here’s the window. You’ve got between age 62 and 70. 62nd birthday is the very earliest that you can start. 70th birthday’s gonna be the latest, and somewhere in there is gonna be the ideal time for your situation.”
Speaker 2: And wh-
Speaker 3: And so [00:05:00] that’s…
Go ahead.
Speaker 2: Oh, I was just gonna say, why does it matter? I mean, why doesn’t everybody just start right at 62, soon as they become eligible?
Speaker 3: Yeah, and that’s… So we’ve gotta understand that 67, if, uh, depending on when you’re born, but for most folks that are retiring now, age 67 is considered full retirement age.
So to get your full benefit, you’ve gotta wait until age 67. So if you take it at 62, what’s gonna happen is you’re taking a reduced benefit. It’s gonna be reduced every year you’re taking it before 67. So you start earlier, you’re gonna have more years of getting paid Social Security, but it’s gonna be less of a payment.
Where you defer till 70 after that age 67 full retirement age, it’s gonna go up 8% annually. So to max out your, your monthly benefit, you’re gonna wanna defer till age 70. So, uh, you know, everyone’s situation is different, and that’s why there’s no one-size-fits-all answer for that because, you know, people have different [00:06:00] benefit amounts.
People have different life expectancies. There’s a lot that goes into, um, finding that ideal time. But th- but that’s, that’s the downside. If we look at downside of starting at 62 is you get less of a benefit that’s gonna last the rest of your life. Downside of waiting till 70 is if you die at 71 You’ve left a lot of money that you missed out on Social Security-wise.
So that’s why it’s an important to consider all these, these different factors that go into the calculation.
Speaker 2: Yeah. And I think it’s also important when we say full retirement age at 67, some people get confused and they think, “You mean I can’t retire until I’m 67?” And when you retire is completely a different decision from when you start Social Security.
I mean, we’re just trying to figure out, at the end of the day, retirement’s all about cash flow, and we want to optimize and maximize cash flow. So, um, 67 is when you don’t take a reduction for starting benefits for most people today, but that doesn’t have anything… When we have a lot of people that retire at 57 or 58 or 59 or 60, [00:07:00] and they don’t start Social Security till 70.
So I just wanna make sure our listeners understand that when you retire and when you start Social Security, those are two different conversations.
Speaker 3: Yeah, absolutely. You may have a 25 to 30-year retirement, so, you know, that funding for year one is gonna m- possibly be different than year 15. And so that Social Security income is gonna be part of your retirement plan, but it may not be your funding for year one if you’ve got savings in retirement that you’ve, you’ve built a 401and IRA, things that you can draw from earlier in retirement before that starts.
Speaker 2: Yeah. And of course, 67’s full retirement age. If you start at 62, you’re gonna take a permanent reduction that’s, that’s 30%. So if you ha- if your benefit had been $1,000, that was gonna start at 67, and now you started at 62, you’re looking at only receiving $700 per month, and there’s a lot that goes into that.
Okay. So when to start Social Security, it’s really an important decision, but we can’t make it just based on rules of thumb. Like, we [00:08:00] can’t just say, “Well, everybody should start at 62,” or, “Everybody should start at 67.” And when you do the analysis, when you crunch the numbers on this, I’m actually always surprised every…
‘Cause every client situation is so unique about the right time for them to start Social Security. Unfortunately, we can’t just give a rule of thumb and say, “Well, everybody start at this point.” And I think that’s what we really wanna emphasize, is that it’s your plan that should help make this decision.
And if we’re gonna have a plan, we always have to start the plan with the right questions, and the question that we always start with is: What’s the purpose of the money? What are we trying to accomplish? Like, are we trying to get the most money out of Social Security over two people’s lifetimes? Are we trying to optimize your assets so that you’re leaving behind the most wealth to the next generation?
Um, are we trying to structure your plan so that you’re paying the least amount of money in taxes over your lifetime? I mean, depending on what somebody’s purpose is, what the purpose of the money is, is really gonna determine s- a lot of these decisions. But the next thing I wanted to talk about is the tax [00:09:00] efficiency of Social Security.
One of the reasons it makes it a really powerful benefit is that it’s tax-efficient income. Will you take a minute and talk about that?
Speaker 3: Yeah. Well, and one thing that people don’t know is to, to start out with when you’re talking about adjusted gross income, it’s up to 85%. So, you know, at the most, 85% of your Social Security dollars are gonna be taxed.
If you’re lower income, it’s possible that only half of it is taxed. And so, um, from that aspect, if you’re comparing that to, you know, maybe a distribution from an IRA that’s 100%, it is tax-efficient income. And, um, thinking about the tax implications is part of why we wanna look at optimizing instead of just saying, “Okay, what gets the most, uh, out of Social Security?”
And really we’ve been thinking, “Well, what gets the most after tax, um, out of Social Security?”
Speaker 2: Yeah, that’s really good. And you know, we’ve even seen situations, especially early in retirement, where people might start Social Security early and then they’re taking withdrawals from non-qualified accounts, like maybe they have a, a bunch of money in, uh, [00:10:00] bank CDs, so they have a little bit of interest income, and none of their Social Security’s taxed.
But then what happens for some people is there’s this surprise that hits them when they, um, have to start taking their required minimum distributions. And now all of a sudden they’ve got this, this large sum of income that’s coming in from their retirement accounts and all their Social Security becomes taxable, and all of a sudden they’re getting hit with a ton of taxes.
So when we talk about Social Security being tax efficient, it’s because we’re thinking about financial planning, retirement planning holistically. We’re not just thinking about how to make your investments work the best way possible. We’re thinking about how much of your money are you gonna pay in taxes now, and how much money are you gonna pay in taxes over your lifetime?
And optimizing just for paying the least amount of money in taxes in the current year isn’t always the best strategy if ultimately what we’re trying to do is pay the least amount of money in taxes over an entire lifetime, not just worried about the current year. So I th- I think that’s one of the things, one of the reasons we emphasize, um, that Social Security is really a [00:11:00] tax efficient way to generate cash flow.
The other thing that, um, still surprises me, we get people that come into the office th- that don’t understand spousal benefits. They don’t understand that it’s possible that your spouse may have a benefit even if they never worked. Do you wanna take a minute and just talk about that?
Speaker 3: Yeah, definitely that is one that is, I, I would say misunderstood, is people think, “Well, I’ve been a stay-at-home mom, I’m not gonna have any benefit,” but they don’t realize, well, your, you know, maybe, uh, maybe your spouse has worked and has a, a full benefit that you’re gonna get 50% of that when they file for their benefit.
And so, um, that, that’s a pleasant surprise for folks who didn’t know that. But that’s why it’s always important, even if you have not, you know, worked much and don’t have qual- y- you know, qualified under Social Security, meaning you’ve got the required amount of quarters and everything, then, um, you still, if, if you’ve got a spouse that you’ve been married o- over a certain period of time, you’re gonna get that spousal benefit that’s gonna get you some type of benefit.
Speaker 2: Yeah. And like you said, it’s [00:12:00] 50% of what the full retirement benefit would’ve been for the spouse. So let’s say in an example, the s- uh, one spouse, um, we’ll say the wife never worked. She stayed at home and, and raised the family, raised the kids, which, and as you and I both know, that’s very hard work, so we shouldn’t say never worked, never worked in the workforce and paid into Social Security.
Yeah. Yeah. Um, but, uh, so the husband’s Social Security at full retirement age would be $3,000 per month. Well, the wife’s eligible for a Social Security benefit based on his earnings record, so she would be eligible for $1,500 per month, 50% of his benefit. So they may be going into retirement thinking they only have $3,000 a month of Social Security, and then after going through the planning process, they realize, oh, we’re actually gonna have $4,500 a month of Social Security.
And, and that gets them, you know, that provides a much stronger baseline for the cash flow. Again, retirement’s all about cash flow. But the other thing I wanted to talk about is survivor benefits, ’cause this is another great feature of Social Security, is [00:13:00] understanding what happens to Social Security when you’re in a married couple and one person dies.
So will you take a minute and talk about survivor benefits?
Speaker 3: Yeah. So whenever you’ve got a, a spousal couple and one dies, the lower of the two benefits is gonna go away. And so, you know, that’s one of the things when, when I’m meeting with people, I like to start with that in terms of when we’re talking about optimizing.
If you’ve got one spouse that’s got a higher benefit amount, maybe they, uh, maybe one spouse was self-employed and just didn’t have as much taxable income for Social Security. I, I really like to emphasize trying to, to max out one of those benefits for the sake of longevity because if one of them passes away, the remaining spouse, they’re gonna get that higher benefit amount for the rest of their life.
So, you know, y- you and I are both husbands just thinking about, “Okay, how can I take care of my wife if something were to happen to me?” Well, being able to maximize that benefit is a great way of doing that. And so, um, just thinking through i- i- you know, you’ve got each person’s [00:14:00] benefit, but as a team, how can you maybe get that one benefit that’s gonna be guaranteed for your life in case one spouse passes and the other lives a longer life for a good number of years after that?
You know, that’s certainly a, a situation that I think plays out more often than people plan for, and we’ve got a lot of widows that we serve. And from a financial planning s- perspective, it’s very rare that both spouses pass away around the same time. Mm-hmm. Normally, there’s one that has a longer life.
And so one, one way to prepare for that is maybe thinking, “Okay, what– How do we, how do we maximize that one benefit, um, so that that’s gonna last for, for either spouse if they’re gonna have a longer life?”
Speaker 2: So using the example that we just used, husband has $3,000 a month. The wife never paid into Social Security, but she gets the spousal benefit of $1,500 per month.
Combined, they have 4,500 per month to start. What happens now the husband dies, Tim? What, what’s gonna happen with that $4,500 per month that they had been receiving?
Speaker 3: Yeah, so the, the surviving wife in that case would get the $3,000 benefit. They– She would [00:15:00] get the husband’s benefit. Um, you’re not gonna be able to keep two.
You’ll, you’ll have the basically the rest of the year when they pass away, but then after that, it’s, it’s gonna be, uh, whatever the higher of the two is. So in that case, that’s where if the husband were to defer and get an 8% increase, that 3,000 then becomes 24% more than that 3,000. So, you know, that’s where, you know, that can be beneficial for just that survivorship, you know, thinking about it as longevity insurance by, by max- maximizing the benefit.
Speaker 2: Yeah, that’s great. So we have to be planning for when one person passes away, that surviving spouse is gonna see a reduction in income. They had been receiving 4,500 per month, now they’ve got $3,000 per month. But you just referenced the delayed retirement credits, um, that 8% per year, and that is part of what makes this, uh, complicated.
And I found like in YouTube when I’ve posted YouTube videos about Social Security, people feel so strongly about this subject. I mean, some people are just adamant you should start Social Security right when you’re [00:16:00] eligible at 62 in one month. Other people feel very strongly that you’re leaving money on the table if you have longevity in your family, you should wait till 70.
But let’s talk, uh, in a little bit more detail about this trade-off, you know, starting at s- 62, 67 or 70, and those delayed retirement credits you just referenced for the spouse with the higher earnings.
Speaker 3: Well, let’s just kind of in, in a scenario if someone’s retiring at 60, now they’ve got f- They’ve got to replace their income.
And so, you know, at 62, part of that replacement income could be Social Security, or it could be 100% maybe portfolio withdrawals. If we– If they don’t have a pension, then all of it’s gonna come from their retirement savings. And so, um, by deferring, what you’re doing is you’re, you’re waiting till 70, you’re gonna maximize that benefit.
So from 70 on, you’re gonna have more replacement income coming from Social Security that’s gonna be guaranteed. The downside is from 62 to 70, you’re gonna be having to supplement that from withdrawals from the portfolio. And so by starting at 62, [00:17:00] you can allow yourself to be able to keep more in your retirement savings.
And I like to, you know, as we work with people, just ask them specifically, what gives you a little bit more security? Having a higher monthly payment that you know is guaranteed for your life or having more savings in your retirement accounts? For some people, having… You know, you’ve worked all your life and you’ve seen that amount saved, it’s harder for them to take distributions from that balance because they’re just savers.
So for them, starting at 62 is a good trade-off. Um, for, for others, getting that guaranteed income that they know, “Okay, once I get to 70, I’m not gonna have to touch my investments much at all,” that, that then becomes the, the benefit. And it just reminds me of is, you know, as we meet with people, we, we work with a lot of engineers, and, uh, so sometimes when we’ve got an engineer, it’s like, okay, here’s the paper answer.
We’ve got spreadsheets, here’s all the numbers broken down, scenario A, B, C, trying to find to the dollar, okay, what’s the best outcome? But I do find a lot of times as we [00:18:00] talk with people, you know, maybe they wanna spend more early on because they wa- they know they’re gonna vacation. And so starting that income maybe on paper isn’t gonna be the most dollar-wise, but it just fits their retirement plans better And so that’s, you know, those are the things that we’re balancing out between maybe the paper answer and the emotional answer.
Speaker 2: Ah,
Speaker 3: that’s so good. What, what we… Yeah, what we wanna do is provide them good information and data so that, again, they can make the best decision for them. And, uh, sometimes that best decision is, “Okay, here’s what the paper answer is. Here’s the full analysis on how we can get every dollar out of this the best we can.”
Sometimes it’s, you know, “Okay, here’s really what fits what we want to do in retirement better.”
Speaker 2: Yeah. The behavioral side of finance is so important. It’s not just what we think or what we know to be true, but it’s what we believe or what, how we think about what’s happening in the world, and how the behavioral side, the emotional side really impacts our sense of wellbeing in making some of these decisions.
And that brings me [00:19:00] to the next question. So, you know, ultimately, one of the reasons people feel so strongly about this, Tim, is that they’re concerned that they’re gonna run out of money in retirement. It’s probably the number one question that people have is like, “Have I saved enough? Can I actually stop working and know that I’m gonna be okay for the rest of my life?”
On our Social Security statement every year, there’s always a little blurb from the Social Security Trustees report that talks about how Social Security is doing. There’s a, um, a piece that the Social Security Administration puts out called, um, Will Social Security Be There For Me? And I’ll include a link to this in the show notes.
But what it says is, “Even if legislative changes are not made before 2034, we will still be able to pay 83% of scheduled benefits.” S- And that says a- as of June 2026. So people are concerned. They hear all this fear-mongering, “Social Security’s not gonna be there for me.” And the Social Security Administration every year say, “No, it’s still gonna be there for you.
We just might have to reduce benefits by 17% at a future point.” So when people are trying to make this [00:20:00] decision, though, and they know that there’s this potential just a f- it just seems like a few years out now. 2034 is right around the, the corner. How do we help people navigate that, Tim? What, w- how do you think about this when you’re meeting with folks?
Speaker 3: Yeah. Well, let’s just kind of… So, so the, the term that you hear and that is, that is used is insolvency. Social Security will become insolvent in, in the future and then there’ll have to be cuts. And what does that mean? What that means is that right now you’ve got payroll deductions that are funding the vast majority, 87% is what you just shared with us, which means that other 13% to fund current benefits is coming from the Social Security trust fund.
And when they talk about insolvency means that trust fund no longer has reserves to be able to fund that other 13%. So, but, you know, just when you hear that term insolvency, it makes it sound like, okay, bankruptcy. This, this means this has got zero, no more benefits going forward. And what that means is just that there’s not that supplement [00:21:00] unless Congress legislation does something to, to resolve that issue, and we’ll talk more about that.
You know, that 87% is, is gonna continue to be funded. So sometimes, you know what? We’ve talked with people and they wanna go with the worst case scenario from a financial plan. This is the, we don’t even wanna put Social Security in our, in our financial plan, and it’s like, hold on, that’s a little bit of an extreme case because we know that even if it’s just the current payroll deductions that are be- you’re, you’re gonna be able to have, you know, close to 80% at, at, at the very least of your benefit.
So we still wanna be thinking rationally about what, what can we do with these dollars? You’ve got a benefit that you’ve earned. No one is saying it’s gonna go away. You know, I always tell people, and, and I’m sure you would say something along this, we wanna go with what we know, not with what we’re, we don’t know.
And right now what we know is th- this is the benefit that’s promised. If they have to reduce it, it would be reduced to this amount. That’s what we know. Exactly. And so-
Speaker 2: Yeah …
Speaker 3: and so until something changes, let’s, [00:22:00] let’s stick with what we know. That’s perfectly rational and let’s not go… Well, you and I, when we do do plan- planning and our philosophy is let’s hope for the best, plan for the worst- I think, you know, it’s still reasonable to say, okay, worst case scenario is that benefits have this slight reduction, not that they completely go away.
Speaker 2: Yeah. Yeah. And I think one of the things that really makes the work that we do so unique is that we developed in-house software to help crunch these numbers, right? We’re not just… These aren’t rules of thumb. It’s not, well, here’s my opinion. We actually crunch the numbers, and one of the things we built into our retirement planning software is, okay, well, let’s just see.
If you do have a reduction in your benefits in the year 2034 by 17% or 20%, how does that impact your ability to survive retirement, and what do those numbers look like? And like you say, we s- we use really conservative assumptions from the beginning. And so if we can show, hey, you’re gonna be okay, even if there’s a reduction in benefits, man, that just makes people sleep better at night.
And I’m reminded that our [00:23:00] purpose is to deliver clarity, confidence, and freedom to people. And there’s a lot of people out there, especially on YouTube and social media, where they get compensated by having eyeballs on their content that they’re creating. And the more … They’re just trying to get you to watch so they can get advertising revenue, and that, that’s not good planning.
That’s just fear-mongering. One of the things this document says, though, is they say trans- uh, transforming to meet the needs of our customers. And they say the OASI and the DI Trust Funds have reached the brink of depletion of asset reserves in the past. However, in 1977 and 1983, Congress made substantial changes to the program that resulted in the $2.56 trillion in the trust fund today.
So it’s not like these challenges are the– this is the first time we’ve ever faced these challenges as a country. We’ve faced them in the past. We’ve solved the problems in the past, and I’m confident that we’re gonna continue to solve the problems in the future because nobody wants to see people that are retired that aren’t working anymore, you know, um, unable to pay their [00:24:00] rent or their electric bill or whatever, put food on the table.
Speaker 3: No, that’s a great point, Jason. In 1983, when they, when they passed legislation to change Social Security and address this insolvency issue, they were– it, it wasn’t years like we are. It was months away from insolvency. So you know, there, there’s, there’s a precedent that, yeah, it may get to the last hour, and that’s kind of how sometimes Congress works.
But It did get resolved. There was a mutual interest in, in seeing this, uh, situation taken care of and having a solution that could then get us to where we are now. So there’s good reason to believe that that same thing will happen again in the future.
Speaker 2: Absolutely. Before we get into the Reagan National Economic Survey, I want to talk about the fact that Social Security’s an inflation-adjusted benefit, meaning that it’s going to increase every year with inflation based on the consumer price index.
And so a lot of times people aren’t taking into consideration that this isn’t static income. It increases over time, [00:25:00] which really can create a, a wonderful benefit for people. So it’s tax efficient, it’s inflation adjusted, there’s survivor benefits, there’s, uh, s- uh, spousal benefits, there are delayed retirement credits.
Like, like we were saying, there’s a lot that goes into the, the equation, but ultimately the only way to really make an informed decision is by having a comprehensive financial plan that you’re working from and answering the question: what’s the purpose of the money? What am I trying to accomplish with designing this plan?
So with, with that, let’s talk about the Reagan National Economic Survey. Uh, this has been in the headlines. I’ve seen it on YouTube talking about the fact that, um, some people are saying, you know, “If we have to fix Social Security, how are we gonna fix it?” So a couple things I want to talk about with this Reagan National Economic Survey.
First of all, there were only a few… a little more than 1,000 people that were interviewed and asked questions, so this is still a relative- relatively small sample size of people. Ultimately what they’re trying to understand is: how should we fix Social Security? And they provided them with a couple of different options.
So Tim, I’m, I’m gonna [00:26:00] share just a, a brief snippet from this survey, and then I’ll ask you to chime in and, and share your thoughts on it. But when the question is framed somewhat differently, and this is from the report, it says, “One policy enjoys majority support: means testing of benefits for the affluent.
When asked to choose between having their taxes increased by $1,500, having existing retiree benefits cut by $5,000, and cutting benefits to moderately high net worth retirees by $15,000, majorities uniformly chose the last option. 71% of respondents endorsed this approach, including 75% of Democrats, 72% of Independents, and 66% of Republicans.
Even 60% of those currently earning more than $200,000 per year prefer this to other options. There’s widespread agreement, including among the affluent, that me- that means testing is preferable to broad-based tax increases.” So that’s what this survey shows as w- one solution for fixing Social [00:27:00] Security. What are your thoughts when you hear that?
Speaker 3: Well, first I… let me just kind of define means testing, ’cause we may have some listeners that are going, “What does that mean by means testing?” And essentially that, that indicates a reduction or completely eliminating a monthly benefit for retirees that would have higher income or have substantial wealth or assets.
Um, it… Right now, Social Security is a universal entitlement. Everyone is paid into Social Security, everyone then receives a benefit. What this is advocating for with means testing is it would then become a needs-based, um, safety net in a sense. It would be for the, um, those below a certain poverty level.
Even though everyone would pay into it, if you paid into it but you were affluent, essentially it was just another tax. It wouldn’t actually be a benefit. It would become… Means testing is like welfare. It is, it is needs-based, and that would be a vast different, um, way to go about the Social Security benefit.
So that, that’s what means testing is. And when we look at the individual [00:28:00] study, um, an important piece there, because folks are listening, and if they haven’t read it, people were presented with three options Option one, have their benefits reduced by 1,500. Oh, excuse me, 1,500 would be, um, have your taxes increased by $1,500 a year.
Option two is reducing benefits by $5,000 a year. So either increase taxes or reduce the benefit. Option three is you’ve got the moderately affluent, they would have their benefits reduced. In other words, for most people, or those who are not classified as moderately affluent, their benefit’s gonna stay the same.
And, um, what’s interesting as we look into the, the nitty-gritty of the survey is it doesn’t define what moderately affluent is. So even when it shares the information about those who are higher than, uh, earning more than 200% per year, 60% are in favor of means testing. Because it doesn’t [00:29:00] actually give a threshold of here’s moderately affluent, those people may be making the assumption that even making $200,000 a year, that they’re not in the category of moderately affluent.
Um, moderately affluent is probably someone who makes more than I do. And so- Mm … you know, everyone can kind of define it that way. And, and so when presented the three options, well, that sounds the best. Somebody else will fund, you know, people who can afford to give up their benefit will afford to give it up.
Mm-hmm. And, uh, and, and I think that that’s, you know, common with what we see oftentimes about people’s solution for government shortfall. What I think’s interesting in the survey, the next section after that, that three-option survey they give is it says, “When given the choice to raise taxes or cut benefits,” so instead you’ve only got two choices, either raise taxes or cut benefits, the latter, or cutting benefits, wins two to one.
So more people are in favor of cutting benefits if it doesn’t raise their taxes. So what we can draw from that, in [00:30:00] a sense, most people would say, “Hey, I want the benefits to be cut, but only from those who are, can afford to have them cut. We don’t wanna raise taxes unless people can afford to pay the taxes.”
So you kind of just find that that’s where people are at in terms of their solutions.
Speaker 2: Yeah. And this is a limited set of ideas for how to fix Social Security. Yeah. I mean, one of the… I just always think back, you know, when Social Security was first started and those dollars were coming in, if we weren’t restricted to only owning government bonds and we could have invested those, if we could’ve had our own sovereign wealth fund in the United States and that money has been invested all these years, we wouldn’t have any Social Security problem at all right now.
We’d, we’d be overflowing with money if that money was invested. Or the, the idea of raising the retirement age, you know, so maybe you have to be older, or, um, maybe increasing the cap, ’cause right now we cap how much of your income can be taxed for Social Security. So maybe, you know, that, that, uh, that cap goes up so that more of your s- your, um- More of your income is taxed.
So there’s a lot of different ways out [00:31:00] there that Social Security can be fixed. Again, I think for our listeners, the people that we serve, what we want them to take away is there’s a discussion, there’s conversation happening right now about how to fix Social Security so that when we get to the year 2034, we’re not seeing a reduction in benefits by 17%.
I’ll, I’ll share this final key findings from this report. We’ll put the report in the show notes, so Tim, so if anybody wants to go and read it for themselves. But here’s the key findings: Americans want the affluent to foot the bill for entitlements. Means testing Social Security has bipartisan supermajority support, including among high-income respondents.
71% overall, including 60% of those earning more than 200,000 per year, prefer cutting Social Security benefits for high-net-worth retirees over either raising their own taxes or cutting retire- uh, cutting current retirees’ benefits across the board. So the interesting thing that we’re grappling with is, like you said, [00:32:00] nobody’s really defining what high net worth means Does that mean you have a house that’s worth $500,000 and you have 500,000 in retirement accounts?
Does it mean you’re a billionaire? We don’t know. Um, but the, the thought is, or what the data is showing in this very limited pool of, um, participants, is that most people would rather see those with more pay more in some way. And we’re really seeing that across the board. You know, here in Washington State, we just…
The legislature just passed this new state income tax on people that have… They’re calling it the millionaire tax, people that have earned more than a million dollars a year of income. Uh, a couple years ago, we had the new, um, capital gains tax passed in our state. Uh, we’re seeing estate tax, uh, uh, estate taxes increase as a result.
So there’s definitely a movement right now, um, within the country it seems like from my perspective that, that our legislatures, whether it’s state or federal, are trying to find more dollars, and that typically means taxes are [00:33:00] probably gonna go up in the future. It could mean that. What we know right now, though, is that we have some of the lowest tax rates in the history of our country, and there’s this incredible opportunity to do tax planning, and part of that planning includes this decision on when to start Social Security.
So whether we’re talking about gifting or Roth conversions or qualified charitable distributions or when to start Social Security, I mean, this is all part of the fabric of what makes up a really good financial plan, a really good retirement plan. But Tim, it’s been so good to have you on the show again today.
Any final thoughts that you’ve, uh, been thinking about when it comes to Social Security and some of the things that have been proposed about how it gets fixed?
Speaker 3: Yeah. Well, I just think, you know, to go back w- to what we started with, that Social Security, this benefit for many retirees is gonna be a huge cog in the retirement wheel.
It, it, it is gonna be a huge part of the cash flow plan and, um, and that’s why it’s so important to the, the work that we do where we are looking at it from, um, all the different angles, you know. And, and, and maybe you can even [00:34:00] talk… I know we’ve, um, we’re wrapping up, but you’ve built this tool, Retirement Budget Calculator.
You’re the architect of that. How does that differ than just maybe going on a website, putting in my benefit amount if I start at this age or this age? What i- what is… When we talk about holistic planning, how does that change just looking at Social Security in a silo, in a sense, versus as part of the bigger- complete plan
Speaker 2: That’s probably one of the biggest mistakes people make ’cause there are s- a lot of free Social Security calculators out there that show you how to optimize Social Security over your lifetime or your, or your spouse’s lifetime by doing something like a sim- a simple breakeven analysis.
You know, how much, how much are you gonna earn in, uh, in Social Security, and when do you start it, and how long are you gonna live? And here’s when you, here’s when you should start it. And the problem with that is you’re, you’re making decisions about Social Security in a vacuum. You’re saying, “I’m, I’m only looking at this one piece of my financial life to make the decision.”
And we, what we did, so which I believe is so much different [00:35:00] than the way that most of the world looks at this, and this is, uh, one of the things that makes our software so unique, and the tools that we have available to help the people we serve, is we’re looking at it completely holistically. We’re looking at how much…
how it’s gonna affect your wealth, how it’s gonna affect your taxes, how it’s gonna affect the Social Security, and you really wanna understand how all of those pieces are working together before you make a decision about when to start Social Security. You don’t wanna just look at Social Security in isolation.
I’m, I’m glad you brought that up. That’s really important.
Speaker 3: Yeah. Well, and like I said, uh, Social Security’s gonna be, be a big cog in the machine, but it’s only one cog. And I’m just thinking about conversations where we’re not only talking about optimizing Social Security, we’re also talking about Roth conversions and when and how much should be done there, and we’re talking about pensions and, um, when should pensions be started or what opti- Like, all of these things, it, it’s not just, again, in a silo.
They all work together, and that’s why there’s a lot of complexity, and you wanna make sure that it’s all working together real smoothly. And that’s, that’s the work that we get to [00:36:00] do, is trying to, um, just keep things from a cash flow standpoint, from a tax standpoint, from an estate, like, keeping all this machine moving together and working well so that you can have clarity, confidence, and freedom.
Speaker 2: Awesome. Thanks, Tim. Thanks for being here.
Speaker: Thank you, Jason. Thank you for tuning in to Sound Retirement Radio. For articles, links, and resources from today’s show, visit soundretirementplanning.com. If you enjoy the podcast, share it with a friend and give us a five-star review. Ready to kickstart your retirement planning?
Head over to retirementbudgetcalculator.com. Need assistance with investment management? Explore our services at parker-financial.net. Information and opinions expressed here are believed to be accurate and complete. For general information only, and should not be construed as specific tax, legal, or financial advice for any individual, and does not constitute a solicitation for any securities or insurance products.
Please consult with [00:37:00] your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance-related discussions are subject to the claims-paying ability of the company.
Investing involves risk. Jason Parker is the president of Parker Financial, LLC, an independent fee-based wealth management firm located at 9230 Bayshore Drive Northwest, Suite 201, Silverdale, Washington. For additional information, call 360-337-2701 or visit us online at soundretirementplanning.com.
