Claim Smart: Social Security Mistakes You Can't Take Back

This week episode of ClearPath Retirement Radio covers Social Security claiming strategies for retirees and pre-retirees in Greenville and Upstate South Carolina.

Retirement advisor Stewart Smith, LUTCF®, RICP®, and Mitch Davies break down the most common Social Security mistakes, including when to claim, spousal benefits, survivor income, and how Social Security taxes work in retirement.

Social Security is not a simple age decision.

It is a long-term income strategy, and once you make it, you generally can't undo it. Stewart and Mitch walk through why the break-even calculator most people find online is only the starting point and what the real moving parts are that could cost you or your spouse hundreds of thousands of dollars over a lifetime.

In This Episode: 
→ Why claiming at 62 may permanently reduce your benefit by 25 to 30% 
→ The spousal benefit most married couples don't know they're missing 
→ How your decision as the higher earner determines your spouse's survivor benefit 
→ Why the Social Security office won't give you strategy advice 
→ The one-year do-over — and exactly how it works 
→ Why waiting until 70 could mean an 8% annual increase — and when waiting may not make sense 
→ How working in semi-retirement may affect your benefit more than you'd expect → Why Social Security needs to be treated as an asset, not just a check you turn on → Mitch's Market Minute — staying calm in headline-driven markets

Before you claim, grab the free Social Security Optimization Checklist at clearpathretirement.com. 

The Social Security guide walks you through the questions most people never think to ask — timing, taxes, spousal coordination, and more — so you can see exactly where your strategy stands before you make a permanent decision.

Ready to stress-test your retirement plan?

ClearPath Retirement Planning helps retirees and pre-retirees in the Upstate SC and Columbia areas create tax-efficient retirement income strategies. 

📍 300 Executive Center Drive, Suite 104 | Greenville, SC 29615
 📞 (864) 775-5033

Schedule your complimentary consultation today at www.clearpathretirement.com

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Important Disclosure:

Investment advisory services offered through Alphastar Capital Management, LLC, a SEC-registered investment adviser. SEC registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Fixed insurance products are offered through Clearpath Retirement Planning, LLC and Alphastar Capital Management is not involved in the offer, recommendation, sale or management of commission-based fixed Insurance products. Alphastar Capital Management and Clearpath Retirement Plannin...

Transcript

SPEAKER_00 0:00

Welcome to ClearPath Retirement Radio. From retirement income and tax planning to protecting the savings you've worked a lifetime to build. This is Real World Financial Talk designed for real people. People who want clear answers, not sales pitches. So you can make informed decisions and plan for retirement with confidence. Now, here are your hosts, Stuart Smith and Mitch Davies.

SPEAKER_02 0:23

Good morning and welcome to Clear Path Retirement Radio. I am Stuart Smith here with Mitch Davies. Good morning, guys. And um, we have a great show for you guys today. This one is going to be all about Social Security decisions that can cost or make you hundreds of thousands.

SPEAKER_01 0:42

That's right, man. I'm excited. This can be a good one.

SPEAKER_02 0:44

Yeah. People don't know. Social Security is a very, very important decision that people make. And it's not just a simple age decision, it's a long-term income strategy.

SPEAKER_01 0:58

That's exactly right. And there's so many ways that it can interact with other assets that you built up. And when it comes to retirement income planning, it's so important to look at it in a you know wider lens. So I'm excited. This is gonna work a lot of good stuff to talk about today.

SPEAKER_02 1:11

Yeah. So a couple things about Social Security important to understand. And the first one is this is one of the few financial decisions you can't undo. Meaning you make that decision, it's made. And there is a kind of one little get out of jail free card, I guess they would call it, where if you change your mind in that first year, you can go back and undo that decision as long as it's within twelve months. But the caveat to that, Mitch, is you have to pay back every penny they paid you and um then hit the reset button, and a lot of people, once they've received that money, it's boy, it's hard to pay it back, isn't it?

SPEAKER_01 1:58

It's hard, man. And it's you know, like we talked about last week, this is another situation where they're not calling you and letting you know you can do this, right? A lot of people will start it and not really understand. You know, it's probably hidden in the fine print somewhere, but they're not like, hey, heads up, you can undo this if you want. So another situation where it's very unlikely to, you know, happen, a lot of people don't even know about it.

SPEAKER_02 2:17

Yeah. Yeah, and I can tell you that, you know, a lot of folks come into us and they've thought through this somewhat and they've kind of do these what you know, what we would call a break-even analysis. And what I mean by that is they've kind of done the math on, you know, does it make sense to get smaller checks for a longer period of time or larger checks for a shorter period of time, and where that kind of crossover crosses over age-wise. And, you know, I wish it was that simple, Mitch.

SPEAKER_01 2:49

We see it every week, man. You know, they're so excited to come in and say, hey, I we did the math. My if I live till this age, I'm good. I'm making money. You know, they come in and they've they've got it all figured out, but it's not that simple. There's a lot going on.

SPEAKER_02 3:01

Yeah, there's a lot going on. And um, so we're gonna go through those today. We're gonna get real clear on some of the strategies that make sense for folks out there, but you know, there's a lot of moving parts here, and you know, w since, you know, they started taxing Social Security, um, which has been quite a while now, um you could potentially be in a situation where 85% of that Social Security payment gets taxed as regular income. So that's one of the moving parts I think people don't really consider in enough depth before they make this decision. You know, we see a lot of folks come in and they're like, hey, you know, I'm turning 62, I'm still working, but I why wouldn't I just go ahead and cut on this check and just put it in savings um so that I have this extra money coming in, and that is absolutely one of the biggest mistakes we see.

SPEAKER_01 4:04

It is, Stuart. And not only, you know, there's two things working against you there, right? There's the taxation of it, which you know we're talking about now, and there's another component where you're actually penalized, you can be reduced some of that benefit if you're still working and under certain age thresholds. We'll talk about that later, but they've started making this more complicated, especially once taxation got introduced. So it's very important to, like Stuart said, I mean, you don't want to just rush into this, it's not a simple math problem. There's a ton of other things outside of the break-even that everyone finds online with these calculators. It's a great start, but there's so much more to talk about.

SPEAKER_02 4:38

There is, and and you know, you can start with the fact that early filing, we call it, and that would be the first opportunity you get to file and start receiving social security is at age 62 currently. And early filing is, you know, rarely works in your benefit. Um, you know, your benefits are reduced at that point by somewhere in that 25 to 30 percent range permanently. Permanently. And that is a big haircut to take when it comes to a guaranteed income stream that you're gonna be receiving for the rest of your life. But even beyond that, Mitch, one of the things that we like to bring up to folks is that, you know, hey, you're not only reducing the benefits for yourself for life, but but hey, you're reducing the benefits for your spouse as well. That's extremely important, Stuart. In most cases, so you know, especially when they're the higher higher earner and and that that couple, you know, because what happens when a married couple is receiving social security benefits and one of them passes away.

SPEAKER_01 5:48

Great question, Stuart. So when one passes away, if you're both you know receiving benefits, when one of the spouses passes away, the the remaining spouse gets the higher of the two social securities. That's right. Now that's extremely important to understand because like Stuart mentioned, you're making that decision for both. And there's another component to this where if like like you mentioned, where if you're the high if you're gonna be taking up the spousal benefit and you're gonna be claiming benefit based on the um the other spouse's benefit, then you can be permanently reducing that in another way, right?

SPEAKER_02 6:20

Yeah, absolutely. And these are just things, you know, to clarify what Mitch is saying is, and a lot of people don't even know about the spousal benefit, so let's break that down a little bit. So, you know, let's say that you have one spouse who is a higher income earner and one that just never really worked or paid into the system and and in that circumstance or worked very little and has a very small Social Security benefit, they can instead of electing their own benefit, once their spouse is full retirement age and and and elects their benefit, they have to wait until that that the the hire earner elects their benefit. They can choose to do what's called the spousal benefit at that time. And the spousal benefit is half of what the other what their spouse is getting in Social Security. We see this mistake all the time where you know we'll come in and we'll be um going through just what we call discovery with our clients, where we're just getting asking a lot of questions and getting to understand their situation intimately. And when I ask them what they're currently drawing in Social Security payments, and one of them says, Well, I'm drawing $3,000 a month, and the other one says they're drawing $800 a month, we know there's an issue almost immediately, right? Right. If that lower earner is not drawing at least half of what the higher earn earning spouse is getting, they're missing out on a quite a bit of money. And that circumstance I just gave you, that's a, you know, that's a considerable um cut from, you know, the $1,500 that that lower earning spouse can be getting with the spousal benefit. And a lot of people just they don't have any clue about this.

SPEAKER_01 8:13

No, they don't. And you know, if you if you catch that and try to switch, is the IRS gonna pay you back all that missed earnings that you might have missed for some years?

SPEAKER_02 8:22

Unfortunately, no. No. No, that's not that is not the way it works. And so, you know, sometimes we're able to catch that early on and go ahead and get that spousal benefit elected for them and get them the higher check coming in every month. And, you know, these are just one of the mistakes that we see people making. But, you know, I think the other big mistake people make is they think that when they go to s uh elect their Social Security benefit that the Social Security Office is gonna give them advice and and help them to make sure they optimize their benefit. And we both know from from experience that not only do they not give you advice, and not only will they not tell you if there's a more optimal strategy, they're not allowed to.

SPEAKER_01 9:10

They can't. It's uh it's purely transactional, right? They're gonna you're gonna make an appointment with the Social Security Office and you're gonna say, hey, I'm ready to take the benefit, and they're gonna say, okay, here's the data we need, and it's gonna begin. They're not gonna tell you, hey, if you wait an extra three days, you're gonna get into the next month. They're not gonna tell you anything. And it's they don't want to give advice. You know, they don't want to be held liable for any advice, they don't want to say anything, so they're just gonna transact. And they're not gonna give you any guidance there. And it's again, it's a permanent decision that you've spent 30, 40 years building into a system for. You'd think they'd help you out some and try to optimize it, but they don't. And once, like Stuart said, once you're in this, you're this is a lifetime decision.

SPEAKER_02 9:50

It's a lifetime decision. You need to understand that. And we don't want you making lifetime mistakes on this. Yeah. And you know, we see it all the time where just simple claiming strategies are are not understood. I mean, we do workshops on this, we do free educational workshops where we teach folks about claiming strategies and how to optimize social security, and it never ceases to amaze me when we come out of one of these workshops, people are just absolutely, you know, amazed that there is, you know, these these you know spousal benefits and and things that we bring up in the workshop that they've never even considered when they were making these type of decisions. And unfortunately, at times it's it's too late and we're not able to correct those. And um, you know, so it's it's really interesting. And so that's what this show is going to be all about today is helping you to understand these things on the front end before you go making these and really impactful, important decisions for you and you know, potentially a spouse. And again, you know, if you are the higher earning spouse and you are electing your benefit early, just understand that you are not only taking a reduced benefit for yourself, but also a reduced benefit for your sta spouse, and that's that's a lifetime decision you're making.

SPEAKER_01 11:18

And I think that's where people come out with the most clarity when they you know they probably didn't think of it at the time. You know, when people when we do those workshops and we come out and people are like, I thought I was just taking income. I didn't realize how I didn't realize the implications that this could affect my spouse 30 years from now, right? But it's so important.

SPEAKER_02 11:33

Yeah. And if you think that you're if you're wondering about your strategy and you're wondering if it's optimal and you you want to know if if there's a better way to do this, just go to Clearpathretirement.com, hit that get started button today. Let's set up a time to sit down and have just a real frank discussion about this and how we might can help you optimize that strategy. We'll be right back. Hey, are you approaching the distribution phase of life where it's time to turn the assets you've worked so hard to accumulate into a reliable retirement income? And are you unsure how to do that in the most tax-efficient way possible? At Clear Path Retirement Planning, we help retirees and pre-retirees design income strategies that aim to reduce taxes, manage risk, and create confidence in retirement. Visit ClearpathRetirement.com to schedule a complimentary consultation.

SPEAKER_00 12:27

Thanks for tuning in to Clear Path Retirement Radio with Stuart Smith and Mitch Davies. Let's get back to the show.

SPEAKER_02 12:33

Hey guys, welcome back to Clearpath Retirement Radio. I am your host, Stuart Smith, with Mitch Davies here, as usual. And you know, we are a locally owned South Carolinian-owned retirement planning firm here in based in Greenville, South Carolina. We are veteran-owned and operated, and if that means something to you and and you want to work with people who are local, people who you can come sit down with and look eye to eye with and have real courageous conversations about your retirement and what that could look like, and really start to get clarity and be able to make those retirement decisions with with clarity and and confidence of knowing you're gonna be okay, and no matter what comes at you, you're gonna be able to handle it. We're your guys.

SPEAKER_01 13:28

That's right, Stuart.

SPEAKER_02 13:30

And today we are having a really great discussion on a topic that it you know gets brought up again and again with with clients and prospects on social security decisions and how they can make or break you in retirement, um, costing you potentially or helping you make potentially hundreds of thousands of dollars. So that is our discussion today. You know, one of the things that that we'll mention is that if you choose to go early at at age 62, we mentioned that's a you're taking a reduced benefit in the nate in the you know realm of 25 to 30 percent reduction permanently for the rest of your life. And if you do that and you are the higher income earner in your marriage, then you are not only taking that reduced benefit for yourself, but you're also taking that reduced benefit for your spouse. So something to think about there, and we want you to make sure that we put that on your radar. But second, if you do choose to go at full retirement age, and for most folks listening to this show, that's going to be in the 66 to 67 age range. And um if you do choose to go at full retirement age, then you will get, you know, what we call your baseline benefit, 100% of your full retirement benefit. And, you know, that's important when you're when you're looking at like a spousal benefit where you're the your spouse is going to be taking the spousal benefit, which would be half of yours. And if your spouse hasn't worked that much in the workforce and is looking at a much lower benefit than half of your Social Security, you definitely want to elect that spousal benefit and let them at least get half of yours. But even beyond that, Mitch, if you go from, you know, let's say your full retirement age is age 67, if you push it off till age 70, which is when you have to declare, there's no reason to wait later than age 70. You're looking at an 8% annual increase each year of how much money you can get on an annual basis for the rest of your life. And not only that 8% increase, but also cost of living adjustments that are included in those three years. So, you know, you're taking, you're looking at about a 75 to 80 percent higher benefit than if you would have elected at age 62. You're also giving your spouse the highest possible survivor benefit.

SPEAKER_01 16:26

That's huge.

SPEAKER_02 16:27

So, you know, those are huge things to be thinking about because most people, when they get to the age of 67, they're not going to be super aggressive in their allocations and how they invest money. So to be guaranteed 8% plus cost of living adjustments for three years would really um be difficult to attain at that age. And, you know, if you look at it like, hey, I may just take and and start spending my IRA money or you know, money that I've saved to bridge me from that age 67 up to age 70 and then elect, then basically what you're doing is giving yourself 8% guaranteed return a year plus cost of living adjustments, and I don't know that that doesn't make sense for most people.

SPEAKER_01 17:21

Trevor Burrus It makes a lot of sense, Stuart. And you know, this is we go through this all the time at the office with clients, and I like to say, think of Social Security as an asset. Think of Social Security like an asset. It's got the same fundamentals of an asset. You've spent your a long time building into it, you know, you're contributing into this bucket of money that you're inevitably going to take for the rest of your life. It's really no different than a 401k in that regard, right? People will spend all this time trying to figure out the optimal withdrawal strategy for a 401k and how to make the most money. But to have a guaranteed bucket of money that you can, again, get an 8% in like inflation roll-up on plus inflation adjustments, and that can be 10, 11 percent right there. To have that, a guaranteed bucket that you can do that, you need to treat it like an asset. And we need to plan for it like it's an asset. Because once we make that decision, we can't undo it. So when you start looking at retirement income planning with this as an asset rather than just, oh, I'm about to retire, let me take my Social Security, it allows for so much more strategy and so much more planning.

SPEAKER_02 18:23

Yeah. And I'll tell you, where we see that strategy doesn't make sense is in the rare instance where we're sitting with someone and we're talking about their longevity in their family, we're talking about their health status, and it becomes very evident to us really clearly that not only are they in poor health and don't have have, you know, some issue going on that is going to impact their life expectancy significantly, but maybe they also say, hey, Stuart, you know, everybody, my father, my mother, we all they all passed away in their early 70s, you know, that sort of thing. Those things obviously impact. And if you're in that situation, I think it's a pretty much a no-brainer. You're gonna take it as soon as you can and you're gonna try to get as many checks as you can dealing with those type of variables, but you know, those are rare. That is a rare circumstance. I think the other circumstance where we see that potentially that strategy of waiting till age 70 doesn't make sense is when someone is in a very fixed income situation where they don't have a lot of assets and they need immediate income replacement the minute that they retire, as far as maybe they're gonna retire at 65 and they need a check coming in immediately. There is no way to lean on assets to get them to a later time frame. And so, you know, if you're in those circumstances, maybe it makes sense to go ahead and elect earlier than age 70. But if you have longevity in your family, and I mean, if people are living into their mid to late 80s, more than likely, I mean, doing it at age 70 is a huge deal because I mean it's the only guaranteed inflation-adjusted income source that is backed by the U.S. government that that, you know, is is a lifetime guarantee that you're gonna get. So down the road, you know, if you have some assets and down the road, maybe in your mid to late 80s, now all of a sudden you need long-term care. You need to go into a skilled nursing care facility and receive some very expensive care. Having that higher social security will certainly help the picture there.

SPEAKER_01 20:49

Absolutely, Stuart. And this is why our number one rule at the firm is never take cocktail party advice, is what we call it. This is that advice where you're just talking to a friend and they're like, hey, I I found this calculator online. You you need to do this, and this will tell you the age you need to take it. You know, I had a conversation like that a few weeks ago. A client was like, hey, like my friend said I need to use this guy on YouTube, he has a great calculator. And we did the calculator, and she said, you know, 68 and a half is the perfect age for me based on the math. And I'm like, okay, let's talk about your cash flow for a bit. You know, how does you're about to retire at 67? How does cash flow look? Well, you know, we might have some gaps there. Okay, let's talk about family health. You know, let's talk about these things. And once you talk about these things, I mean, we could almost throw the calculator out the window because of the things you just mentioned. So the most important takeaway here, guys, is that no matter what some break-even math says, there's so many much more factors to to consider.

SPEAKER_02 21:42

Yeah. And and you know, that is a dangerous situation when people use these, you know, these general uh calculators and and take general advice on this stuff. I mean, everybody has very unique circumstances, everybody's at different asset levels. Everybody has different income sources. Everybody's health is is dramatically different from one person to the next. And so, you know, we always recommend, listen, sit down with someone who's really understands all of the moving parts when it comes to this type of decision and really make sure that you're, you know, you're working through all of the different aspects that need to be addressed before you go and make a really important decision that, like we keep saying over and over again, cannot be undone. This is a permanent decision for you. You know, so when we talk about key factors that should drive the decision, I would say again, it it has a lot to do with your your life expectancy and your current health. Those are are are obviously very important factors. You know, when we run breakeven analysis for folks, typically they break even if you're just talking a just straight break-even analysis, none of these other factors involved, they typically break even in that 78 to 82 age range. You know, but the real risk there is living longer than expected. And, you know, married couples probably at least one spouse lives into their 90s. It's very, very high statistically to see that nowadays. And, you know, so this again, this is a decision that needs to be made with very much care. And if you're struggling with this decision and you just really don't know what the optimal strategy is for your social security, and you and your spouse want to sit down with people who have been doing this myself for two and a half decades now of helping people optimize this and figure out the absolute best way to do this, then please go visit our website clearpathretirement.com. You can call our office 864-775-5033. We are a local upstate business that is based here in the upstate, and we'd love to hear from you. We'll be right back to talk more about Social Security. Retirement planning isn't just about growing money, it's about using it wisely, generating income, managing taxes, planning for health care costs, protecting your legacy. At ClearPath Retirement Planning, we specialize in helping retirees and pre-retirees transition from accumulation to distribution with confidence and clarity. If you're approaching retirement and want to plan, not just opinions, discover the Clear Path difference. Visit ClearpathRetirement.com today.

SPEAKER_00 24:48

Welcome to ClearPath Retirement Radio. From retirement income and tax planning to protecting the savings you've worked a lifetime to build. This is Real World Financial Talk, designed for real people. People who want clear answers, not sales pitches. So you can make informed decisions and plan for retirement with confidence. Now, here are your hosts, Stuart Smith and Mitch Davies.

SPEAKER_02 25:11

Welcome back to Clear Path Retirement Radio. I am your host, Stuart Smith, and I am here with Mitch Davies, and we are ready for Mitch's market minute this week. Mitch, update us on those markets.

SPEAKER_01 25:24

Thanks, Stuart. I'm excited as always. So what we're going to do is stick to our same structure. We're going to talk about what's been going on in the markets overall, uh, what we're you know what's what we're expecting over the next month, two months, and then what are we focused on? You know, what are we talking to clients about every week? Again, this is something I do for clients weekly as well, these kind of updates. And what are we focused on, Stuart? So first of all, where we're at, uh, the last few days have been good. You know, we've had some good, good days finally. It's been a tough, uh, tough month of March, actually very similar, almost eerily similar to what we saw last year, where we had a huge dip in March and then things started to recover right around April. March actually historically is a pretty bad month in the market. But you know, SP is sitting right around 6,500, the NASDAQ is just under 22,000, and that VIX, that you know, volatility index that we talked about a couple times before, which again is just a gauge of how volatile things are. How how much is the market expecting fluctuation? And what how what we're gonna see these big red, big green days, and it's still high, but it's starting to come down. So what that tells us is things are starting to get a little more comfortable. Uh we're still not there. You know, we still have that high VIX, and we still have the conflict overseas. This is where this is all driving from. But we're starting to see some de-escalation talks get thrown around. Nothing official, you know, nothing's confirmed, but we started to see from you know the US's side as well as Iran's side some talks about, okay, you know, maybe we're willing to start slowing this down. And what we've seen and what we've been preaching is that the market condition right now is almost solely news-based. It's solely just headline, we call it headline markets, where the market's almost waiting for some kind of update, some kind of information about the conflict to react. And we're seeing a lot of consolidation, a lot of just steady trading until there's some news and then it breaks out one way or breaks out the other way. And what this, you know, these times feel like are hard. This is these are the kind of times where we see the most fear, right? We see the most where we get the most clients saying, hey, like a should we be doing something different? Is everything okay? And our job, Stuart, as advisors, is to understand what these situations have done historically and understand what these situations likely will do after. And something I've been talking about a lot is, you know, historically, when we see situations like this, when we see headline-driven markets, you can look back in the last ten years, and we've had a lot of events like this, right? We've had COVID, we had, you know, the tariffs last year, we've had rate hikes starting in 2021 that were super dramatic. We had, you know, a lot of bank issues part of that. We had we've had a lot of reasons to be fearful. But what we've seen is the history is very straightforward and very clear on what has happened. If we look at twenty of the last major geopolitical events, this is super interesting. Nineteen of them have recovered within the next three to six months. Which is very important to understand because in the time, it always feels like this is this is the worst we've seen. You know, COVID. I mean, the world was shut down, right? Right. We had a three-month dip during that time. And three months after that, the market was well above where it was prior to that. I mean, that was an insane time of life, right? So the point is this is no different. While it feels in well, it feels hectic, and you see the news headlines that are very, you know, scary and we're uncertain. And of course there's other factors, there's inflation, but there's always other factors, right? Whenever there's a lot of conflict going on, we see the price of oil go up, we see spending go up, we're you know, we're spending a lot to be involved in this kind of thing, and we see inflation higher right now. So surely that's a factor. But the main th point here is that historically it's paid dividends to stay calm in these situations and to not panic and start selling off things because a large portion of the gains from these types of events come in the short window after. And that's the most important thing. If you're if you don't have a team to work with who can talk you through these things, what you'll do is you'll sell last week. You'll sell a big portion last week thinking, oh my gosh, who knows what's going to happen. And then in two weeks, if this gets resolved, you miss a huge portion of those gains, and that might be a lot of the gains from the year. You know, if we look at last year, the window after the tariff dip was almost 80% of the gains for the year, just in like a couple months. So the point is in these situations, it's very important to stay calm, to understand the history, and that's what we do, right? That's what we're here for, is to talk our clients through the history and say, hey, we've seen 30, 40 of these types of events in the last hundred years, and almost every time the same outcome happens. So that's what we're here for. If you guys don't have a team of professionals who are focused on this, if you're in re if you're in retirement, your job is to not understand the stock market history. That's our job, right? Our job is to understand exactly what to do in these situations before they happen, how to handle them while they're happening, and what to expect after. If you don't have something like that, please give us a call because this stuff is stressful. We have people who are generally worried. Seriously, like it's it's scary stuff. So if you don't have something like this, give us a call. We'd be happy to be that be that steady rock for you through these times, and that's almost one of the most important things we can do for people in retirement.

SPEAKER_02 30:46

Yeah. Great update, Mitch. And and I'll tell you, it's it's so true that any retirement planning advisor can look great in good markets. But let me tell you when the good ones really shine, and that is when things aren't so great. And when things get volatile, that's when you know if your advisor is in direct communication with you, talking to you, making sure you understand their thought process. And for you guys to know, it's not just Mitch and I. Well, listen, we've got a team behind us of unbelievable investment people that that are coaching us and talking to us on a daily basis that is allowing us to really get the insight that is needed to make sure that we live, eat, breathe, and sleep this stuff and that we understand what is changing and whether making any kind of move makes sense. All of our portfolios are actively managed by our team, meaning that they are making changes as they see fit to adjust to these markets on the fly, so that we make sure that we're not missing out on those really good days because that's where the real mistakes happen. You get scared, you panic, you get out, and then you miss days like the past few days that we've had where things are just going straight up. And that is where it is so important to have an advisor that can really talk you through these situations, help you understand that it's not as bad as it seems, or it or it is as bad as it seems, but to really, you know, give you solid information to make really good foundational, you know, changes to what you're doing, and and you know, that's that's where a really good advisor shines is in these tough, tough moments. And, you know, we hear from people all the time who say, you know, it's in these tough moments. I don't hear from my advisor. They just kind of um go off the radar and and we don't know what's going on, and it it makes us extremely anxious, and really, you know, that's just not what people need. They need to be in constant communication, understanding um what is going on and why they should or should not make changes to how they are allocated and what's you know what they're doing. So all right, so that was great. Let's um let's get back to our topic of the day, which is Social Security claiming strategies and how you know detrimental it can be if you don't do this thing right, because this is one of the few decisions you're gonna make as far as retirement income sources that cannot be undone and is made for life once it is once it is made. So, you know, we've already kind of gone over a lot of good stuff here. The the next thing I want to talk about is common mistakes that that we see um people do when it comes to to claiming their social security benefits. Number one on that would be claiming at age 62 just because you can. Yeah. We see it all the time. You know, people hit that magic age of 62 and they say, you know what, I'm just gonna go ahead and claim my benefit because I can. And guys, we want to tell you that is more than likely in most cases, majority of the time, a mistake to do that. You are taking a reduced benefit of 25 to 30 percent when you do that for life. And you know, there's just so much more optimal ways to do that. Like we said, unless you have serious health issues and you're just not sure whether you're gonna make it to age 70, then that strat you know, strategy of just claiming. And a lot of times people do it and they don't even need the income, Mitch. Right. I mean, what you know, if you don't need the income and you're just going to put that in an account somewhere and you're still working, say you're still working and you're you're earning decent income and you're already in a high tax bracket, then you're just putting yourself to pay in a position to pay 85% of that that payment that you're getting in Social Security is gonna be taxable. So you're you're paying higher taxes on that check than you would normally. And if you're still, you know, you're you're not full retirement age and you're still working and you're you're making over a certain threshold of income every year, which is in that twenty-three, twenty-four thousand dollar range, um, then you're gonna be penalized for taking that check. So um they'll take away a dollar for every two dollars you earn over, I believe.

SPEAKER_01 35:40

And then it's a dollar for every three at full retirement age.

SPEAKER_02 35:42

Yeah. So, you know, that's silly. That's silly. So think this stuff through before you go and make that kind of decision. The next, you know, mistake we see is not coordinating spousal decisions. So you and your spouse not being on the same page. This is if you are a married couple, this is a this needs to be a joint decision. It does. You don't need to be off each doing your own thing, so to speak, and claiming whenever you think it makes sense. This is a very important decision when it comes to married couples because again, we keep saying it, but the higher earning, you know, spouse is making a very important decision for both people when they decide to elect their benefits. Because if s if a married couple is both receiving benefits and one of them passes away, the survivor gets the higher of the two social securities. So you if you're the higher earner, you're making that decision for both of you. So that is very important to understand.

SPEAKER_01 36:50

It is, it is. And we see, you know, we we see that kind of thing all the time where people are like, hey, we both kind of do our own thing, right? We're married, but we kind of handle our money differently, and that's totally fine. We work with people like that all the time. But the one thing that is not gonna change, like like we keep mentioning, is that inevitably you're gonna have one social security together. One of those two is gonna go away at some point when one of one spouse passes. You can do all different things with the assets and you can have different beneficiaries, you can have trusts, you can have all these different things, but the one thing you're gonna count on being there is that social security payment. And it has so that has to be a team decision. Even if you want to do your own thing with assets and stuff, that the Social Security decision has to be a team effort.

SPEAKER_02 37:30

Yeah, and if it's not, a lot of times it plays uh a serious role when it comes to tax planning for that. It does. Because if you're joint filing your taxes, which most married couples do, especially if they cohabitate, um, then you are, you know, you are uh the tax picture is a joint tax picture and it's not gonna change. So that can become a very, very important uh piece of tax planning and making sure that you're being as efficient as you can when you elect those benefits. Again, if you think you're confused about this stuff, you're not sure how to do this, just go to ClearpathRetirement.com, hit that get started button today, and let's just let's have a conversation and let's make sure you're optimizing this. We'll be right back, guys. Are you a business owner with an email list you are not sure is actually growing your business? Most business owners are just guessing, sending emails, hoping for a click. At Kathy Farah Consulting, we take guesswork out of your email marketing. We help you identify what's working and fix what's broken, turning your list into a reliable engine for better leads and consistent sales. Stop wandering, start growing. Visit KathyFarah.com to book your free email clarity call today. Let's make your email marketing work smarter.

SPEAKER_00 38:51

Thanks for tuning in to Clear Path Retirement Radio with Stuart Smith and Mitch Davies. Let's get back to the show.

SPEAKER_02 38:58

Hey guys, welcome back in to Clear Path Retirement Radio. I'm Stuart Smith. I'm here as usual with Mitch Davies, my co-host, and today we are talking all things social security claiming strategies and how to do that correctly and things to consider when you're at that critical point where you're making this decision. Because as we've said over and over again, this social security claiming decision is one that's for life.

SPEAKER_01 39:27

It is, Stuart. And you know, we've been talking about spousal, you know, working through the tax situation, especially as a as joint filing. And something I wanted to bring up that goes in line with the spousal filing is we hear often, am I just am I working just to take so just to pay social security? You know, just to am I it does working really make sense? The situation I guess I'm referring to here is say you're semi-retired and you're taking Social Security, and there's a lot of thresholds we have to manage, right? So there's a lot of, especially with the one big, beautiful bill, there's a lot of income thresholds. So what we'll see happening is, you know, someone's taking Social Security, they're partially retired, and maybe they're earning $15,000, $20,000. You know, they they don't really need the money, but they're just working. And what will happen in that instance is that could, if the other spouse is still working, that could start bumping you up into other thresholds for Medicare premiums, for losing the extra standard deduction gained from the one big beautiful bill from a lot of other things. So when we sit down and plug in that income source into a comprehensive plan and we look at what is that really doing, A, that's probably raising taxes on Social Security. So some of that Social Security you're getting while working is being taxed, probably more now. B, bumping us into a higher overall tax bracket. C maybe losing some standard deductions, some other benefits from being under certain thresholds. So when we look at what that $15,000, $20,000 looks like after all these things, in conjunction with Social Security, we're like, hey, you're only really netting a few thousand dollars here in benefit. And we see that all the time. So it's very important to understand how Social Security interacts with income, especially if you're in that semi-retired phase. Because we see this a lot these days, where people are like, I'm just working for fun, I don't really know if I need to be doing this, and sometimes it's not helping as much as you might think.

SPEAKER_02 41:19

Absolutely. We've seen that a lot. We had we were working with a um uh client the other day who was very concerned about that and just kind of under, you know, wanted to know am I am I working just to pay more taxes and and how much of my income is going just to pay the higher taxes that I wouldn't have to pay if I wasn't working? And that is a really good question. That's the kind of questions that keeps people up at night, and that's the kind of questions that we help definitively answer for them. And, you know, that takes real planning. You know, there are so many thresholds that you're looking at here, like Mitch said. It could be, you know, it could be the one big beautiful bill act and the extra, you know, $12,000 standard deduction that couples get over age 65 under certain income thresholds. It could be, you know, paying going from paying 50% taxes to 85% taxes on your Social Security and what that threshold looks like. Um, it could also, you know, really impact, you know, Roth conversion strategies and things of that nature that you're trying where you're trying to dramatically reduce your lifetime taxes and pass on tax-free money to your heirs for, you know, estate planning purposes. And all of these things are moving parts that you need to understand and really have your arms around if you're going to be making decisions and and doing these kind of things. And I think that's where the type of planning that we do at Clear Path Retirement Planning just is is second to none in what we do as far as a level of planning to understand. It's taken me two and a half decades to learn all of these things and understand all of the thresholds and all of the possible pitfalls that you could be falling into when you make these decisions. And so, you know, I feel like that's where we really bring the greatest value to our clients is that they once they start working with us and they see the deep, you know, level of planning that we do for them and we point out all of these strategies and pitfalls that we can avoid by just really solid good planning, they're they're just very they're amazed and and really are are so happy to have, you know, someone who truly understands this on the level that we do working on their plans and making sure that they're really living the optimal retirement that's possible, um, avoiding a lot of these um these decisions that really can be huge mistakes, and and one of those is not optimizing your social security and not really that can mean that. Literally hundreds of thousands of dollars to you in retirement. And so we want to make sure that you're doing that right. We want to make sure that we're modeling through various scenarios and that we are definitely being as tax efficient as possible. And all of those things are extremely important. Because, again, as we've said before, Social Security is one of the largest income sources you'll have in retirement. And, you know, m most people spend more time planning their vacation than they do deciding how to claim it.

SPEAKER_01 44:32

They do. They really do, Stuart. And we've talked for the past hour about a few different Social Security things, and we could talk for five more hours about all the factors there are, right? But you're exactly right. The reason we're able to do what we do and focus so hyper focused on all these different components is because, like you mentioned, we're fortunate to have a pe an amazing team of people behind us that let us really spend all of our time optimizing these retirement strategies in specific. And if you're working with an advisor who isn't focused on retirement, who's working with all different types of people, that's great. But are they diving into these kinds of decisions this deep? Or are they just meeting with you once or twice a year and saying, hey, your accounts are up this year? Yep. Let me know if you need any money, you know? This is where, you know, this is why I love working for ClearPath. Again, a locally owned firm here in Greenville, because we're able to really dive in and focus on these things. And when we get out of a meeting with clients, they're like, wow, I didn't even know half of this stuff existed, and I would have never heard this. And why would you, right? This is what we do all day. So that's why I just I love being here.

SPEAKER_02 45:36

Yeah. Here are a few engagement questions that I would have to ask you guys. And to start, I would say, hey, at what age are you planning to take Social Security and why? Do you know what your benefit will be at 62 versus 67 versus age 70? Have you considered how your decision affects your spouse? You know, those are great questions to consider. And if you haven't done it, I would go to um SSA.gov and um that's SSA.gov and create an account for yourself. You can do that within a matter of minutes, and then when you log into your account, you'll be able to pull down your latest estimate for what your Social Security benefits would look like at these various ages. So that's a good start to start getting your arms around this and start understanding this decision that you're making. And, you know, once you do that, at least you have some data to go by. And I tell you, these estimates are usually pretty dead on. They are. We're usually very, very useful in our analysis and how we start to look at the overall strategy of when how we're gonna optimize things. But start there, get yourself an account, get that estimate, the latest estimate downloaded, and once you have that, if you want some help, you want to understand it, you want us to sit down and do a full analysis, take a look at all these various moving parts that we're talking about, just come see us at ClearpathRetirement.com, hit that get started button today, set up a phone call or a one-on-one appointment with us, and let's get started having that conversation on how to optimize this benefit. This is a major decision and it deserves a strategy, not a guess.

SPEAKER_01 47:41

That's absolutely right, Stuart. And another thing with that, if you hear these questions, remember you get a one-year do-over. You get a one-year get out of jail free card. So if you're listening to these questions and you just elected a few months ago for the first time ever, and you're like, hey, I didn't really have a why I'm taking Social Security. I didn't really think about the implications at 67 or 70. I didn't really think about how this would affect my spouse. If you just elected Social Security in the last year and you didn't have a clear answer to these questions or anything else we've talked about today, give us a call. We can run through the plan, run through different scenarios and maybe see, hey, there was a better claiming strategy. So if you're within that one year, please give us a call. You've got time.

SPEAKER_02 48:24

Yeah, and we have done it before. We've helped folks to fix this. And it is a little painful because, like we said before, you do have to pay back the money that you've received so far. But for a lot of folks, they can do that and it's not a big deal. And then we get to hit the reset button and and really go back at this thing with a real strategy on how we're gonna do this stuff. And the other big mistake that we see here, Mitch, is that people fail to integrate their Social Security claiming decision with a real tax strategy. That's right. And that can be devastating in retirement because again, tax efficiency in retirement is so important and so vital to your success on whether you're gonna have the income you need to live the retirement that you've always dreamed about. And I can tell you that whether you pay zero, fifty percent, or eighty-five percent taxes on your Social Security, that's a big deal. Zero to eighty-five percent is a big deal. That's a lot of tax money that if structured correctly and you're taking money from the correct accounts and you are, you know, deploying Roth conversion type strategies where at some point you could even live that, you know, what everybody dreams about, which is that tax-free retirement, which we've helped a lot of people achieve, then you know, that changes and you know, now you go from paying 85% taxes on your social security to paying zero, and that's a huge deal. And if that can happen sooner rather than later, then that could be another huge impact. We're talking thousands and thousands of dollars a year that you would pay in taxes that you wouldn't have to anymore. And so let us take a look, let us sit down, let my team take a look, and we can definitely help you through this and help you make the right decisions, help you optimize your social security. Again, if you're sitting around confused, you're hearing what we're saying, but you just don't really want to have to do this alone, and you want some help, just give us a call 864-775-5033, or visit ClearpathRetirement.com, hit that get started button, and let's just have a conversation. Guys, it's been a great show. Hope you have learned a lot about Social Security, and until next week, happy retirement. Are you anxious to see what retirement might look like for you? Do you feel like you have the pieces of the puzzle, but you're not sure how they fit together or where to start? At ClearPath Retirement, we help you bring clarity to retirement by organizing your income, taxes, healthcare decisions, and legacy planning into one cohesive plan. Retirement doesn't have to feel uncertain, it just needs a clear path. Schedule your complimentary consultation at Clearpathretirement.com.

SPEAKER_00 51:36

You've been listening to Clearpath Retirement Radio with Stuart Smith and Mitch Davies, helping you make informed decisions so you can plan for retirement with confidence. To learn more, visit Clearpathretirement.com. That's Clearpathretirement.com. Investment advisory service is offered through Alpastar Capital Management LLC, a SEC registered investment advisor. SEC registration does not constitute an endorsement of the firm by the SEC, nor does it indicate that the advisor has attained a particular level of skill or ability. Fixed insurance products are offered through Clearpath Retirement Planning LLC, and AlphaStar Capital Management is not involved in the offer, recommendation, sale, or management of commission based fixed insurance products. Alpha Star Capital Management and Clearpath Retirement Planning LLC are separate and independent entities. This is for informational purposes only and is not intended as legal tax or investment advice or a recommendation of any particular security, investment product, or investment strategy.