so you're planning to retire around age 62 and you've got a major decision to make do you take social security at age 62 or de delay it let it grow maybe take it at age 70 instead and working with a lot of people just like you I understand how you might feel right now no paycheck coming in no income coming in it might feel really scary or really uncomfortable because it's a lifetime decision and so today we're going to walk you through a sample case in regards to that decision we're going to talk about three factors that you want to consider that could make the difference between hundreds or thousands of dollars first off let's just talk about this sample hypothetical case that we're going to walk you through today showing you all the different projections in regards to um Social Security in this scenario so Jim plans to retire as I mentioned at age 62 if you take a look here he is age 62 so he's retiring um just to show you a little bit of behind the scenes in regards to the projection cuz it does come into play and you'll see how that fits in uh Jim has saved up about $1.5 million all in his Ira's 401ks meaning that money is all in the tax deferred column there meaning he will have to pay income tax on all those dollars that he takes out now from a projection standpoint just so you know we've got about 70% of this in equities 30% of it in fixed income now Jim also has a residence about 550,000 there and he's got the mortgage paid off so there's no mortgage um in the overall expenses and so total net worth just over $2 million but when it comes to money that he'll have to be able to help pay for those expenses he doesn't plan to move anytime soon so really has got about 1.5 million in investable assets to be able to utilize for income to help supplement his Social Security decision okay moving forward let's talk about Jim's retirement story now Jim as I had mentioned retired age 62 going right into retirement something that we need to understand in regards to retirement story especially when it comes to Social Security is the planning Horizon so we're putting in age 95 people are living a lot longer in Jim's case there's a lot of longevity in his family so he said hey we need to plan for this we got to make sure that your plan lasts as long as you do and you'll see how that comes into play in regards to these Social Security decisions and we'll talk about some Alternatives as well and then some things Jim you know said hey I live what I'll call is just a a basic lifestyle I want to maintain and be comfortable in retirement so maintain my lifestyle I need about 5600 a month don't forget I am retiring early and so what we had told Jim is because you're retiring early don't forget you have to factor in some increased health insurance costs and so health insurance we've got about $112,000 a year from when he retired here at age 62 through age 65 at that point that's when he'll switch over to Medicare and either a Medicare supplement or Medicare Advantage and then also part of his retirement stories that I love to do some different activities throughout the and I want to do some travel each and every year can we put about $7,500 a year aside for that and I think you know what I'd really like to frontload my plan so let's do that early on but at come age 75 I'm not sure if I'm going to you know plan to do those activities anymore so we've got comfortable lifestyle activities that we wanted to do and we've got to throw in there some money for health insurance between 62 and 65 when Medicare comes in now Jim's Social Security is primary Insurance amount which is the amount that you would get at your full retirement age a very key amount as we talk about things today specifically regarding Social Security everything is based on this amount so Jim since he was born after 1960 his full retirement age would be age 67 at that age he would get the $22,900 a month now everything in Social Security is based off of that age calculations if you were to delay and get more or if Jim was a was to take early everything is based off that age let me show you here in a second so um current income Jim's retired he doesn't have a pension doesn't have anything else coming in his Social Security will be his primary insurance or income source with the Investments being that supplement income Source the Social Security decisions that Jim needs to make is kind of Falls Within These ranges or somewhere in between them all but Jim could take Social Security as early as age 62 if he were to do that it is a 30% reduction on his Social Security meaning he would get 70% of his benefit at full retirement age so he can take it early he can take it as early as age 62 meaning start it right now if so he'd get 20 ,30 a month because it's a 30% reduction he can also take it anywhere between age 62 and an age 67 if so it's going to be a pro-rated amount based on when he decides to take it between those two ages he can take it at any year or any month between those two ages now maybe one of the things that you've heard to do is wait as long as possible to take Social Security why is that well for every year that you delay take taking social security you get an 8% bump on that Social Security every year you delay taking it and so how that plays in is if Jim were to say well wait a second I'm instead of taking it at full retirement age age 67 I take it at age 70 instead that's 124% increase from if you were to take it at age 67 and you can see here that $2,900 instead becomes 3596 a month and so again he can take it anywhere any month any year between age 67 and age 70 and it's going to be a pro-rated amount based on that 8% bump that he would get each and every year now when you do decide to take it that's a lifetime decision now there are yes some go back so we're not going to get get into that today where you'd have to actually pay it back but it's more or less a lifetime decision so when you take it that's the amount that you're going to get for life and the only thing that you would get on top of that amount is what's called cost of living adjustments colas or basically the inflation that the government gives you on your Social Security and you'll see for from our projection standpoint I've put in a 2 and a half% cola on Social Security you might be like wow that seems kind of low to in comparison that to what we just got the last few years how however we're going to go through periods of high inflation and periods of low inflation and so this could be an average but I'm going to show you how this really impacts um your decision as well so Jim then has a big decision to make because if we go back up here remember this we have no income coming in Jim has no income coming in and he's saying wait a second I've got all of these new expenses coming in but I don't have a paycheck and what does that lead to sometimes that leads to being scared uncomfortable a little bit of fear because Jim was a Savor he'd saved up$ and half million doar he's not used to be being a spender and so a lot of times what happens people just make this decision to go gosh I don't want to touch that Ira 401K I'm just going to go ahead and take Social Security it's just going to help me feel comfortable having a little bit of income coming in well that's what Jim decided to do was that the right decision let's take a look so if we go over to to Jim's um forecast here his projection now maybe you've seen in our uh videos before but if not I'm just going to explain how to how to understand this really quick all of the things that we just talked about is part of this projection Jim retiring at age 62 uh Jim then needing those lifetime expenses plus the travel expenses through age 75 plus the increased health insurance and he's got all his money invested so it's saying okay based on all of that and the fact that he took age social security at age 62 um there's money that he's going to have to take out of his account what does that do to the account value over time and we've got the gray marks kind of on the top and the bottom so it's saying hey if we've got um good markets we could potentially see the top of this overall chart if we have poor markets we could see the bottom of this overall chart meaning Jim could run out of money somewhere around age 86 now we're not going to let Jim run out of money we're going to have to make some adjustments before then but that means that he's going to have to do what most likely he's going to have to reduce his lifestyle quit traveling quit doing some of those things that were important to him or the middle line here is out of all the hundreds and hundreds and hundreds and hundreds of projections it's saying hey here's kind of that middle grounds of of all the different calculations of of of markets so if if we take a look here and go to the end Jim just barely squeaks out um you know of taking social security at age 62 and and having his money um go to the end there again poor Economic Times poor markets he would have ran out of money middle calculation says okay hey maybe we've got uh somewhere around $250,000 left so you might look at that and say Jim made a great decision but did he make a great decision was it the best decision and to do that we have to kind of look at Social Security um and a social security summary now if we take a look at the Social Security summary meaning over Jim's lifetime how much Social Security income would he have taken in now Jim took it as early as possible so over his lifetime he would have taken in over 1.2 million of social security income but was that the right decision did that give him the most money over his lifetime well immediate reaction you'd look at this chart and say no it wasn't the right decision because you see if Jim would have waited till age 70 he would have actually taken in 1.8 to 1.9 million so he would have taken in about6 to 700,000 more of Lifetime income if he would have waited till age 70 to take Social Security so did Jim make the right decision or the wrong decision well this still doesn't tell us and that's what we that's why we want to look at the three factors that impact your Social Security and talk about those now before we get into those I'm guessing that you're watching this video because Social Security is on your mind in addition to the three factors that we're going to talk about today there's additional factors that you might want to consider and we've got a free guide that you can download to helping you understand Social Security benefits and it might help you improve your lifetime benefits by hundreds of thousands of dollars you can get it at lifemoney show.com slso security again lifemoney show.com Social Security all right so the first factor that Jim wants to consider is longevity now when we looked at our view here we were just looking at the summation of how much you would collect again this is all based on Jim living till age 95 he said that there was a lot of longevity in his family but let's just kind of look at things because maybe Health has changed or maybe things change or just in regards to your situation it's helping you out understand how does longevity actually factor in to your Social Security decision so what we're looking at in the chart here is we've got two lines we've got a light blue line that is saying hey if Jim were to take Social Security as early as possible here's how much he would accumulate over his lifetime and then we've got the darker blue blue line to saying okay now if Jim were to wait till age 70 here's how much that would accumulate over his lifetime all based on living till age 95 but what if Jim didn't necessarily live to age 95 would 70 would waiting until age 70 still be the best decision well let's kind of start from the left here and and work our way over in the chart so you know starting at age 62 if he did take it as early as possible well that year he that's his first year he's going to have just over $22,000 of Social Security coming in now if he was to say well I'm going to wait till age 70 he wouldn't have anything coming in he'd have to go to his retirement portfolio to make that work and I know what you're probably thinking wait a second if he waits till age 70 and takes from his retirement would that work and I'm going to show you that um in our second factor factor number two um just to let you know yeah it's going to work and I feel like there's actually an improvement but we'll show you that in Factor number two so he's not taking anything if you were to do the delay till age 70 meaning he's taking all the money in that case from his retirement portfolio so year by year he accumulates more as he's taking it early and that can make somebody taking it early feel very well then let's just say here oh here we go we get till age 70 now do you remember the the amount at age 62 is right around 22,000 but see by Jim delaying his Social Security all the way until age 70 now instead of 22,000 being his first year benefit his first year benefit is $48,000 and then you'll see that seconde benefit really jumped up even more jumping up to um probably $60,000 because the First full year it's just kind of how the uh the the program works here and so now all of a sudden we've got the com the the comparison going on so right here let's just say Jim were to pass away at age 74 well taking it as early as possible he would have taken in a total of $366,000 of social security income if he would have delayed and waited till age 70 he would have had $271,000 of social security income coming in so at this point in his life which would have been the better decision well if he would have known that he was going to pass away at age 74 it would have made sense to take it as early as possible but we see right here right here at age 78 next thing you know the age 70 amount the cumulative value there starts to surpass if Jim would have taken it as early as possible and then the difference between those starts to grow and grow and grow and so basically what this graph is telling us is that age 78 is is kind of that break even point for if Jim were to take it meaning the break even Point meaning where if Jim takes it at age 70 versus as early as possible age 62 age 78 is that point where it's saying hey you're actually getting a bigger bang for your buck every year that you live past age 78 you're now accumulating more money from Social Security because you waited till age 70 to take him hopefully that makes sense so age 78 every year that Jim lives after that he'll actually have more money that he's getting from Social Security because he waited to take Social Security until age 70 however if you're were to pass away before then then as you could see it would have been in his better interest to take it as early as possible so I bring all of this up because longevity is one of those factors that you have to consider um what is your family longevity what does your health look like what do you think your longevity is going to look like are there any health changes now as you've entered into your 60s and you're about to make this social security decision so longevity is definitely one of the factors to consider but not necessarily all of the factors that you want to consider and so that's why we're going to talk about another couple factors as well and before I get into factors 2 and three what I want to say is that if you are a couple watching this video the decision becomes I'll say even much more impactful as a couple because of what we call survivor benefits now we're not going to get into that in today's video you're still going to see some great factors that will impact your Social Security but we'll create another video in regards to that so you can understand the impact of survivor benefits on your overall Social Security all right with that let's talk about Factor number two so the second factor that Jim sample wants to consider is how much has he saved and let let me just walk you through a really conceptual drawing on this so Jim saved up $1.5 million into his retirement savings now we know in retirement he's going to have to turn on the faucet to that retirement savings to take money out to maintain his lifestyle his Social Security wasn't meant to make up all of his lifestyle income we got $5,600 a month $7,500 a year for travel plus taxes plus health insurance plus inflation so a few things things here that Jim really wants to consider is how much he's saved up because think about this if he takes Social Security too early and he's got a smaller amount of Social Security coming in if he wants to maintain that lifestyle what does that mean that means he's got a bigger Gap to fill so if he takes it too early and the gap's too big well he might be putting too much pressure on that retirement savings and it might not last through his retirement whereas he waits to take it and is taking it now the Gap through the majority of his retirement is a lot smaller that can help his retirement savings last and sometimes can actually mean and help people increase their income so let me just take and show you what that means using our retirement projection from earlier to help bring that conceptual conceptualization over to a projection for you and so if we take a look at our projection now this is where we were at before him taking it at age 62 so now let's go in here and let's just say Jim decides to take it at age 70 and we hit refresh Here and Now take a look at what happens to his overall projections before we were showing boy if we had really bad Market times and maybe run out of money at age 66 or somewhere around there boy it's kind of delayed that for a couple years hopefully we don't have bad Economic Times and then look kind of the middle of the road for all those calculations somewhere before before was somewhere around 250,000 now it's around 827,000 again projections we don't know what's going to happen with the market but what my goal here was to show you is that even though it's scary and way back over here on the leftand side he'll be taking more money out of his um Investments right because he's delaying Social Security until age 70 so you can kind of see a de little decline in the Investments but then it gets right there it holds steady longer so it can feel scary it can feel uncomfortable but in Jim's case here delaying till age 70 actually shows a benefit to him taking the money from the Investments first giving him more um more kind of of a of a potential safety net there right um later on in Life or another way that you can look at it here is Jim now has that ability to actually increase his lifestyle increase his income if he so choose he could probably increase things by another $100 $200 a month and get to where he was at before so hopefully that kind of gives you an idea of how your what you've saved comes into play as well because you take it too early it's kind of like driving you know it's it's like your gas tank you've only got so much in it and if you Hammer the gas way too hard meaning the consumption of what you're using as you're driving down the road is more than usual you're going to run yourself out of gas faster versus if you're going with that average or a more efficient um route or or more efficient um car so anyways hopefully that analogy helps a little bit but you can see how what you've saved really factors in to the overall part as well all right before we get into the third factor which is how cost of living adjustments can impact your Social Security decisions if you're enjoying this video so far and you'd like to see additional videos about social security or reducing the taxes on our on your IAS and 401ks subscribe to our YouTube channel as we're coming out with new videos each and every week on topics just like that and those to help you maximize your retirement story okay let's get into the third factor which is those cost of living adjustments as I had mentioned earlier once you make your Social Security decision that's a lifetime decision and the only increases that you're going to get on your social security from that point forward are what we call the colas cost of living adjustments basically it's an inflation to your social security that you get each and every year as I had mentioned today we put in a cost of living adjustment of 22% annually so again what does that look like well right now that means the difference between age 62 and and if you're to take it as early as age 62 or wait till age 70 we've got a break even age of age 78 that's when it again if you're going to live past age 78 it makes sense then to wait till age 70 to take your social security from a cumulative standpoint again living till age 95 here you're looking at $69,000 more waiting till age 70 versus taking it at age 62 now you might be looking at this going but wait a second hey the the cost of living adjustments 2 and a half per. what if it was less and what if it was more and I just want to show you how it impacts those numbers so let's start with what if the cost of living adjustment was only 1% in comparison to the 22% that I had put in so what does that look like well take a look at our chart here um now the break even Point becomes age 79 because we're not getting as much of an increase on the Social Security and the difference and how much you'd accumulate again if Jim sample here lived to age 95 remember this number before it was around 600 and some thousand well now um it's only 397,000 that did difference of if you would have waited till age 70 versus taking at age 62 and lived all the way till age 95 so now we're going to take a look at if the cost of living adjustments were 4% year over year over year and if we take a look at that looking at our chart here our break even age actually drops lower because we're getting more of a bump on our social security so the break even age now becomes age 77 the age that if if Jim were to live past age 77 it makes more for him to start taking his social security at age 70 and from a cumulative standpoint how much more money would he get throughout his lifetime of living till age 95 look at this way more um because of those cost of living adjustments $912,000 so I bring this up just to show you how those cost of living adjustments can make an impact on Social Security from an age a break even age stand standpoint well it's 7778 to 79 not a huge impact there but from a cumulative dollar standpoint if you're to live into your 80s or into your n 90s as you can see it can make a huge impact in how much money you might have coming in throughout your lifetime so lots of factors to consider longevity how much you've saved up the cost of living adjustments um you know I feel like recently I went into the the paint store where trying to paint a a wall in our office here a color blue and as I sat in the paint store there and the last time you've been to the paint store right there are hundreds and hundreds of options of blue and I'm just sitting there overwhelmed super confused wondering what's going to be the right blue color for our office and all I wish is that I had a designer to just pick the right color for us and you see that's what an income plan helps you do putting together an income plan helps take all of those options when to start the investment withdrawals all of the different Social Security factors and it brings them together and helps narrow it down into the right choices for you and if you're wondering what an income plan is or how it works or how it could potentially benefit you we'd be happy to talk to you about that you can go to lifemoney show.com and click on the work with us tab all right hopefully you have enjoyed the video you found a lot of value and benefit in it if so like I mentioned earlier subscribe to our YouTube channel we got new videos coming out each and every week that are going to help you on retirement topics like Social Security like taxes on your IRAs and 401ks and how to reduce them and other retirement topics just like those so subscribe that way you get notified when we come out with those new videos thanks and have a great [Music] day a
