Social Security at 62 vs 70: What to Know Before You Claim

Cold Open: $20 Now Or $40 Later?

[0:00] DANO WEIR: Daren, I can give you 20 bucks now or 40 bucks in a week. Which one do you want?

[0:06] DAREN BLONSKI CFP®: You know, there's a famous, in every psychology class in America, they talk about the study, and I forget the name of the researcher that gives some kids some marshmallows. Have you heard this one? Yes. And, you know, the one kid gets one marshmallow, and they tell the kid, hey, if you don't eat this, you're going to get two later. And then they look at which kid actually eats the marshmallow.

[0:29] DAREN BLONSKI CFP®: Versus who waits, and they correlate that to success in life. So I'm trained because I'm an advisor to say I'll take 40 in two weeks.

[0:40] DANO WEIR: And it would depend, I guess, on when you might need it.

[0:45] DANO WEIR: Financial confidence for your hip pocket. Money is really good energy. If you're checking out, It's All Money.

Welcome: When To Claim Social Security

[0:56] DANO WEIR: Are we talking about Social Security today? We are.

[1:00] DANO WEIR: Welcome to It's All Money. Show today is recorded. We're right off the square in a beautiful space. Thanks to our friends, friends of the show, Brooke and Matt Sevenau. Thanks for letting us record here today. I'm joined by managing principal of the firm, Daren Blonski, CFP®, our advisor, Clay Dunkle, CFP®. And we are asking the question, when to claim Social Security and when waiting might cost you?

[1:27] DANO WEIR: It's a question you may find yourself asking as you approach retirement age, as you think about retirement. Social Security, you can get a little bit sometime, and then there's another time. And Daren, actually, let's start with the guardrails here. What is taking Social Security? And what exactly is the situation we're talking about here when it comes to Social Security timing?

What Social Security Is Designed To Do

[1:47] DAREN BLONSKI CFP®: So I think the first thing you need to understand about Social Security is it's designed to keep you at poverty level.

[1:53] DAREN BLONSKI CFP®: So it's not a great retirement strategy, right? They don't design it to make you rich and to live plentiful. Well, I guess it depends on what part of the country you live on and where not. It will make it plentiful for you. But certainly here in the Bay Area, it's not going to get you very far. And so...

[2:08] DAREN BLONSKI CFP®: When you take Social Security, it depends on a whole lot of financial planning factors that it's hard for us to answer in any quick way. But generally, when you need it, you should take it. There's a lot of questions out there, and I'm sure we'll get into this in a minute. About will it exist when I take it? And we, I guess, hear that probably every day almost.

[2:28] CLAY DUNKLE CFP®: Take it now because it'll be gone.

[2:30] DAREN BLONSKI CFP®: Okay, so that's one perspective.

[2:31] DANO WEIR: That's something you hear. You're not saying that necessarily as advice, right?

The $40 Trillion Debt And Social Security Worries

[2:35] DAREN BLONSKI CFP®: Well, and that's one perspective. So I think it was three weeks ago, we crossed the $40 trillion Mark for debt, U. S. Debt, which is pretty scary. I was actually in New York. I was in Times Square in New York right before COVID at a conference, and I saw a little U. S. Debt ticker that's all over the square there at 19 trillion.

[2:56] DAREN BLONSKI CFP®: And since COVID, we've added in our 20 trillion in debt. Up until that point, the whole entirety existence of the U. S. Got to 19 trillion. So the amount of debt we've stacked on in the last few years is insane. Well, one of the big areas where we're drawing and creating more and more debt in some ways is because of what we have to pay out for Social Security, what we have to pay out for medical.

[3:22] DAREN BLONSKI CFP®: Medicare, Medicaid, what we have to pay out for U. S. Defense, and now because interest rates are higher, the cost of interest. And so Social Security is an entitlement, right? It's considered an entitlement. It's untouchable by the politicians.

[3:35] DAREN BLONSKI CFP®: What politician can last through an election cycle if they mess with Social Security? No one wants to touch it. It's a hot potato. And that's really creating a lot of hysteria and confusion about, should I take it, should I not take it, take it today because it's going to be gone? Well, not really, but we can get into that.

Claiming At 62, Full Retirement Age, Or 70

[3:52] DANO WEIR: Further the general idea is you can take it as early as 62 but it's a reduced monthly payment 67 depends it's 66 and some days yeah so that's your full retirement age that would be what you're entitled to entitlement there right there and then you can then if you take it late Later than that, they'll give you more per month.

[4:15] DANO WEIR: So we're going to be talking about what might work depending on your situation, some scenarios, and some of the questions around that. That's what taking Social Security is all about. Clay, you're special at our firm.

Clay's National Social Security Advisor Certification

[4:27] DANO WEIR: You have... What's called a NSSA certification. I could have sworn that meant that you worked in military intelligence. Probably stalking my cell phone but no it's a National Social Security Advisor. Could you tell me about that certification and why you sought it?

[4:45] CLAY DUNKLE CFP®: Yeah, it's a, as you can imagine, it's a program that goes through education on all things Social Security, but it was a really cool program.

[4:54] CLAY DUNKLE CFP®: I think, you know, we work with clients every day and Being a wealth management firm, particularly, you know, one of our specialties is retirement planning. And, you know, when retirement planning is in the mix, you're talking about Social Security. So I felt like it was a good program just to sharpen the saw on how does the program work? Are there any kind of interesting intricacies that most people don't know about?

[5:24] CLAY DUNKLE CFP®: It's a beast. It's a big program. I think what I took away from it is you don't know what you don't know, and every situation deserves some level of scrutiny. Don't take it at face value when the client says it. I'm taking it at 67. I've already thought through this. Like, well, there could be some other factors at play that might provide you a better long-term benefit.

[5:50] CLAY DUNKLE CFP®: You know, it could be disabled children, could be maybe they're a widow or widower. There's an ex-spouse involved and kind of integrating all of that is is important so people aren't leaving money on the table and Daren i feel like it's a forgotten part of retirement planning because the general public when they sit down i think they're going to talk to a financial advisor about retirement it's.

The Forgotten Part Of Retirement Planning

[6:12] DANO WEIR: Is it a 60 40 give me a hot stock tip tax planning even and maybe if they're going there but when you take your Social Security is an investment an alpha as well, is it not?

[6:23] DAREN BLONSKI CFP®: Well, I think... I think it's an important consideration, like Clay said. And pro tip here, they don't send out the statements anymore to Social Security. So a lot of people, when we talk to them, like, well, I don't get my Social Security statement anymore. Where did it go? Well, you actually have to log in now to the site. And we'll put that in the show notes for those who are listening to this, where you log in.

[6:41] DAREN BLONSKI CFP®: And then that's where you would get it. They don't just automatically mail it out to the public anymore. So it does at times get forgotten because it's not in your face, right? But there is strategy. There's especially strategy for someone who's still working. We Sat with a couple the other day who runs a small business, and they've got a husband who's got a pension through the fire department.

[7:06] DAREN BLONSKI CFP®: Wife is running his business, not taking a salary from the business. And one of the conversation and planning pieces is like, well, if you're running the business, you should be getting paid for that because that's going to benefit you later on to get Social Security. Those are the things you think about and strategies you look at. And then we forecast that out using some of our planning tools.

How Your Portfolio Affects When You Claim

[7:30] DANO WEIR: Clay, the monthly amount, when you may take it, full retirement age, should I take it later? How much does your existing portfolio outside of Social Security impact the decision as to when you may take it?

[7:47] CLAY DUNKLE CFP®: Yeah, well, it's, I mean, it's one of the big pieces in your retirement plan, right? Social Security is a big piece, but your retirement portfolio is a big piece as well. And at the end of the day, you know, the simple retirement equation is how do I get enough income to cover my expenses, right?

[8:06] CLAY DUNKLE CFP®: And Social Security is going to cover part of that. Then you might have to go to your retirement portfolio and draw some cash flow. But it really... Depends on where you're at in the Social Security cycle, right? If you're 67 and you're saying, do I wait till 68? Do I wait till 69? Do I wait till 70?

[8:30] CLAY DUNKLE CFP®: If you're not working, you don't really have a choice if there's no retirement portfolio to draw on, right? Because how are you going to get your income? But if you do have some, you know, some wiggle room there to delay, well, your retirement portfolio is going to be the piece that kicks in and allows you to delay. So how much do you? You have there? How's it invested? Is it paying you a cash flow?

[8:52] CLAY DUNKLE CFP®: I mean, they're, they're, they're totally linked, right? You have to look at both of them together.

Your Portfolio's Dependency Factor

[8:59] DANO WEIR: Daren, this is sounding suspiciously like I'm going to have to do a budget. Are you serious? Do I really have to do that?

[9:08] DAREN BLONSKI CFP®: So one of the things that to know.

[9:10] DANO WEIR: To know what my monthly needs are, that's everybody watching right now.

[9:16] DAREN BLONSKI CFP®: Well, we don't want to turn you off by talking about budgets, because if there's any quicker way to turn a listener off, it's to talk about a budget. Just about nobody is successful with a budget at first, so everyone thinks they're awful.

[9:30] DAREN BLONSKI CFP®: But beside the point, when we think about Social Security, Let's say you're a retiree, you've got an investment portfolio. You're not sure how much to draw from it, or when to draw from it, or in what sequence to draw from it. One of the things that a good financial advisor, a certified financial planner is going to do, is they're going to look at what your dependency factor is on that portfolio.

[9:58] DAREN BLONSKI CFP®: If I've got money coming in from Social Security predictably, I should say that with air quotes, predictably, and we'll get into that in a little bit. If I've got predictable income, I then can then make some presumptions about how dependent you are on that investment portfolio.

[10:18] DAREN BLONSKI CFP®: If I can't make those assumptions, if I don't get to a clear answer how dependent you are on that portfolio, then I really should not be investing that portfolio. Sat with a couple yesterday, got a retirement account with the organization he worked for.

[10:36] DAREN BLONSKI CFP®: The entire retirement account was invested in all stocks. It's done incredibly well. It's gone to the moon with NVIDIA and every other AI stock out there. And I looked at him and I said, do you realize that this portfolio could easily take a 50% haircut? His eyes got really big and he's like, no, what do you mean?

[10:52] DAREN BLONSKI CFP®: How's that even possible? Has these incredible returns, but didn't realize the downside. So understanding the makeup of the portfolio in conjunction with what the income sources were, as it's pensions, Social Security. Retirement, any other sources of income in conjunction to that portfolio is absolutely critical.

[11:11] DAREN BLONSKI CFP®: So we have to understand Social Security when we start the financial planning process with people so that we can know how to invest the portfolio and whether or not we should be aggressive, not aggressive, because we're going to determine what the dependency factor is on that portfolio.

[11:25] DANO WEIR: And this is just a personal opinion that I'm going to share based on what you just said about that client and a 50% haircut, which is that, in my opinion, Because digital checking and digital investments are functionally for your brain the same thing, right? So if you look at your checking and there's $10,000 in your checking, the only way that number goes down is if you took out five, right?

[11:50] DANO WEIR: You know that you did that. But the investment account, which for your brain is the exact same thing, sitting at whatever number that guy's at, can just drop for no reason, without warning. And you didn't have a chance to get out or do whatever. It is you thought you were going to do.

[12:06] DANO WEIR: And for someone who is not working with it day in and day out, I just say word to the wise, keep that in mind as you're thinking about downsides, because there's just a brain, there's a, the mush up there tends to think like, oh, I have this. I look at my investment, I go, I have this. And it's like, well, maybe tomorrow you don't, you know, if it can go up for no reason, it can go down for no reason too.

What's Underneath Social Security And Pensions

[12:26] DAREN BLONSKI CFP®: Well, and I think that's important to, you point out a really important point about any pension system, right? So you've got Social Security, you've got pensions, right? So maybe Maybe you worked for the fire department, the fire department's got this pension. What a lot of people don't understand is that underneath Social Security, underneath pension system, there is investments. Okay?

[12:47] DANO WEIR: That's the episode. There you go. Nothing certain.

[12:52] DAREN BLONSKI CFP®: There are investments, and how they function, the investments underneath.

[12:58] DAREN BLONSKI CFP®: Allows that organization that gave you the entitlement, that gave you the commitment to meet those needs and to meet that promise. All too often, and you want to know a really scary fact, go look up any pension in California, and I'm sure it's true across the country.

[13:13] DAREN BLONSKI CFP®: Across the country and ask Gemini or Claude, ask it to run an analysis on how well funded are all the major pensions in the United States. And generally you're gonna get 60 to 80% funded. So let me interpret that. That means that what the pension is telling you in their reporting that they only have 60% of the money that they're gonna need for the current entitlements on the book.

[13:38] DAREN BLONSKI CFP®: That means that all the other future workers have to dump cash into that entitlement in order to make those payments. So when we're talking about Social Security and we're saying, hey, Social Security is going to fold, it's not going to fold per se. Why? Because we're still working. We're still paying in. What's going to fold is the trust account.

[13:56] DAREN BLONSKI CFP®: That's the overage that's making up for that underfunding. And I probably jumped ahead of the script where Dan wanted to go here. But it's such an important point because people go, oh, I have my Social Security. I got my pension. I've actually seen fire departments, their pension systems, call up the fire department and the retirees in there and say, yo, Bob, if you give us some more cash, we'll...

[14:19] DAREN BLONSKI CFP®: Pre-fund your retirement, you can retire a few years earlier. That's a mayday call. That is the pension saying we're so underfunded that we're going to let you retire earlier if you give us cash out of your 457 or your whatever retirement plan you have.

[14:34] DAREN BLONSKI CFP®: That's them admitting to you without saying it, we're in trouble and we have an entitlement we're not going to be able to pay. Well, Social Security is no different. So when you, we were just, before we came on, we were just talking with some people who were filming and they're like, yeah, I heard Social Security is going to fail.

[14:49] DAREN BLONSKI CFP®: Fail. And well, it's not going to fail because there's still going to be people paying into it. But you could get less because there is an overage trust fund. And unless we're going to pay in more as workers, we're not going to be a payoff to entitlement. I'm not as much of a doomsday, right? Well, let's be fair.

[15:05] DAREN BLONSKI CFP®: I could go into a really dark place about the U. S. Debt. I could go into a really dark place about all the underfunding going on out there for our pension systems. But here's the truth. The truth is they're going to change the game. And they can always change the game because nobody's going to take it down, lying down, saying, oh, we're done, we're over. They'll just change the game on us somehow.

[15:25] DAREN BLONSKI CFP®: So I am not a doomsday. I'm actually really positive about the future, and I'm positive about the American spirit's ability to pivot. I'm just saying with the current variables at play in the same way, it ain't going to happen, folks. They're going to have to change the game. And the game is going to get changed. We just don't know what, when, and how.

How The Trust Fund Shortfall Might Be Covered

[15:41] CLAY DUNKLE CFP®: Yeah, something has to change for sure.

[15:43] DAREN BLONSKI CFP®: Right.

[15:43] CLAY DUNKLE CFP®: Yeah. I think it's probably less likely on the retiree benefit side. I think it's more likely on the income side, right? Because that's the equation.

[15:54] CLAY DUNKLE CFP®: When that trust fund runs out in 2033 or 2034, whatever the estimates are, the money coming in is going to be what's funding the money going out. And it's just a little bit of a shortfall there. So I think they increase the money coming in to...

[16:11] CLAY DUNKLE CFP®: Keep the money going out relatively level. Now they could shift the tax brackets around, right? Because Social Security is taxable piece of income, right? But it's taxed at different levels depending on what your overall income is. So if you may make more money, for example, if you have some rental property income or some retirement income coming off a pension or something like that, right?

[16:35] CLAY DUNKLE CFP®: More of your Social Security benefit is going to be taxed and therefore you're taking home less. You might not see that because you don't look at your taxes every day, and it's a little bit confusing and convoluted how they do it. But effectively, that's a means testing right there saying, hey, you have the means, we're going to hold back a little bit more.

[16:55] CLAY DUNKLE CFP®: So they could do something like that. I don't think people would notice dramatically. But I think more than likely what happens is people that are working, they just increase the amount of the Social Security wage base, which I think right now is like 170. $175,000. You're only taxed on $175,000 for Social Security.

[17:16] CLAY DUNKLE CFP®: Why don't they make that $2,000 or $250,000? Are people really going to notice that much? That's how they'll cover. Yeah, that's how they cover the difference. Exactly.

[17:24] DAREN BLONSKI CFP®: And here's why I think you're absolutely right, Clay. We're in Sonoma. All but 100 feet from us, there's the square. And on that square, I don't know if it's Fridays or Tuesdays, there's people out protesting about whatever cause all through the year for whatever reason, right? Is it Friday? So how often do you see someone under the age of 60 out there protesting?

[17:47] DAREN BLONSKI CFP®: Never never right well guess who's not going to protest if they increase the Social Security taxation to say 200 000 the people working because they're too busy working raising kids etc but if you go mess with how much money is actually going to go out to the Social Security recipients that square is going to fill up full of protesters completely so if you're any politician man this isn't rocket science.

[18:12] DAREN BLONSKI CFP®: This is sociology, psychology, human math. It's really simple. Who are you going to impact first? You're going to go after the people working who aren't going to protest. They're not going to have time to even realize that their $15,000 or $25,000 more of their money is paying Social Security tax.

Why CPI Adjustments Matter

[18:28] DAREN BLONSKI CFP®: So they're going to mess with that. The other place I think they mess with is they're going to, so Social Security is chained to CPI. When I say CPI to most people, their eyes go, what are you even talking about? What? And all of us experience CPI, consumer price inflation, or consumer price index differently, right? Clay's about to have a baby.

[18:46] DAREN BLONSKI CFP®: My kids are in their teens. I'm not buying Barbies anymore. You might be soon. Well, we have a boy, maybe. I don't know. So I'm not going to go there. But the bottom line is that he buys something different than I buy. So how I experience inflation is different than how Dan experiences inflation or the person who's 70 years old, how they experience inflation.

[19:10] DAREN BLONSKI CFP®: So the beauty of messing with how they chain the inflation rider to CPI is they can mess with how they let that thing float up or down and they can construct it and engineer it in a way that's not going to impact the people who vote. It will impact the people who don't vote, who don't show up to the polls, because what do they care if they get re-elected?

Tax Planning And The Golden Window

[19:32] DANO WEIR: Clay, you were speaking about the tax planning aspect of this, and I'm speaking about our services now. I always tell you when... When I'm doing that, can you tell me when you sit down with a prospective client or a client, you know, that scenario is that one where you're sitting there and maybe you've got a few documents and you go, hold on, this feels like math.

[19:55] DANO WEIR: This is feeling like something's happening here. Maybe I should be talking to a professional. What are the factors when it comes to tax planning? Which contribute to the decision as to when you may or may not take your Social Security.

[20:10] DANO WEIR: How long are you working? What's your work plan? Because that's a big piece. If you still have income coming in.

[20:16] CLAY DUNKLE CFP®: Likely Social Security won't really be a good option for you. But let's assume that you're retired and you're in your early 60s. There's a There's this window, we call it the golden window, until you have required minimum distributions out of your IRA, which for a lot of folks right now is about 73, and then it phases up to 74 and 75.

[20:41] CLAY DUNKLE CFP®: So that window right there is really good for Roth conversions, which has been talked about in previous episodes, right? But Roth conversions are a taxable event, right? When you make that transfer from your pre-tax IRA to your Roth, that's income right there. That goes on your 1040, you pay tax on it.

[21:03] CLAY DUNKLE CFP®: The problem is when you do that, you're also potentially taking, it if you add Social Security into the mix, right now, all that Social Security is increasing your income. So the Roth conversion is going to be taxed at a higher rate and potentially the Social Security is going to be taxed at a higher rate because you have other sources of income. Right.

[21:27] DANO WEIR: So, so, so it's basically a dance, what you're saying. It's basically a dance between your portfolio, how your portfolio is already invested, whether you're still working and whether, you You know, you need this.

[21:41] DANO WEIR: Money right now and what may end between those factors what may end up being the most optimal tax scenario for you because there's a world where you pay perhaps more than you would need to than if you were to spread it over a certain timeline yeah.

[21:56] CLAY DUNKLE CFP®: I mean it's is that what you're saying it's it's just like anything in financial planning you know there's a lot of integration all these different moving parts come together and you know you got to look at the whole picture How does this impact that? Which impacts that? Which impacts that?

[22:11] DAREN BLONSKI CFP®: That and really what are your goals and what are we getting at and what's important to you and how do we most efficiently i think what you're also saying Clay is that it's not as simple as people want to make it exactly right like all too often we want to the brain and it's natural you want to oversimplify it right and so it's so easy to be like hey Social Security is just a simple thing you take or not and what Clay's like no like there's all these variables that are moving around that impact when how if you take it So let me just slap the tinfoil hat on for a SEC, because you just referred to RMDs, Clay.

Tinfoil Hat Time: RMD Ages And Social Security

[22:44] DAREN BLONSKI CFP®: And there's not another perfect example of why the government does what it does do that's not in the best interest of society. It's RMDs. Okay, so, Clay, what's happened to RMDs over the last few years?

[22:59] CLAY DUNKLE CFP®: Keep kicking the can down the road.

[23:01] DAREN BLONSKI CFP®: Why? But don't we need more income for Social Security? Because if you take out RMDs sooner, people have to pay more taxes. And if you have to pay more taxes, then we...

[23:09] DAREN BLONSKI CFP®: Our Social Security's upheld right what do you think Dan should i stay out of this one come on feel like you have a point you want to make let's go make it bring it let's hear it Darren so we got if the government was really serious about protecting Social Security they would not be expanding the age of rmds why because all those people that Now that are 72 that would have had to pay an RMD and would have paid income and would have potentially filled up the coffers of the government.

[23:35] DAREN BLONSKI CFP®: They don't have to do it to 73. I contend because all our politicians are getting older and they don't want to pay RMDs. But that's another story. So the idea that we're pushing out further and further down when they pay Social Security, when they contribute to government taxation.

[23:52] DAREN BLONSKI CFP®: To the people who vote is another example of why they're just going to mess with things in Social Security that don't impact the main voting base because we watch it just happen with rmds it makes no sense that we have these massive deficits and we're pushing it out well the reason it makes sense is because the people who have time to call up their politicians and be really angry with them Well, they're doing it.

[24:15] DAREN BLONSKI CFP®: And then they're creating law and crafting law that is basically kicking the can down. And this is kind of, I hope I don't offend anyone here, but kicking the can on the next generation. Because guess who's going to pay? The next generation.

Does Anyone Regret Claiming Early?

[24:29] DANO WEIR: Let's stick on this generation and someone who may be thinking about retiring now or taking Social Security early. You've worked with thousands at this point of retirees.

[24:42] DANO WEIR: Have you ever had a client who regretted taking it early?

[24:49] DAREN BLONSKI CFP®: Regret taking? No, because the problem, the reality is once you start taking it, you get used to taking it. Very few people take Social Security and this is another way where they might tweak it. Social Security, they might do what we call means testing it.

[25:02] DAREN BLONSKI CFP®: So, if you make, if in retirement you have an investment portfolio over X, Y, or Z, then you... Get less Social Security, right? Because remember I said earlier on, Social Security is designed to keep you at poverty so you can means test poverty. But the reality is people who take Social Security get used to the money.

[25:18] DAREN BLONSKI CFP®: They're never like, I have too much money in my pocket. I'm not, says no one, right? Like they, people, we spend what we have. Like we get used to living. That's why we always have that saying that, you know, you see someone rolling around that sweet car, they're probably just broke at a higher level.

[25:34] DAREN BLONSKI CFP®: I'd say 70% of the time they make more money, But they're also spending more money they're not any richer than the person who drives the ford pinto from 1950 most people don't live that way below their means depending on your situation is there a case to be made to taking it early and if you were able to well sure like dumping but i'm just saying if you're able to dumping it in the market and thinking you would outpace whatever you were going to make that's gonna so a couple things there so if you're going to slap the tinfoil hat on say the government's going to implode and blah and there's not going to be Social Security then yeah maybe you want to start taking Social Security.

[26:07] DAREN BLONSKI CFP®: But the reality is, just like Madison say, you know, about government, it's going to stay in power. It's going to do things to stay in power. So they're not going to let Social Security totally implode until the wheels are completely off the bus, period. Right. So they're going to extend it as long as they can. So the argument that you're taking it early because you're the only one getting it is less fruitful.

[26:30] DAREN BLONSKI CFP®: However, you are going to die before age 83. Generally, it's 82, 83 is how the math works out. You should not wait till 70. If you think you're going to live older than 82, 83, 84, then you should probably wait till 70 to take it because you're going to ultimately get more money out of the system.

Health, Longevity, And Break-Even Age

[26:51] DANO WEIR: That was my next question. Have you ever had a client who didn't take it and died?

[26:57] DAREN BLONSKI CFP®: All the time. Yeah, I mean, yeah. Unfortunately, the sad part of this business is clients die all the time.

[27:04] DANO WEIR: So that is another element to this, which has nothing to do with math, but is something that actually I know that you're passionate about, Darren, which is that. As you really start approaching retirement, you know, when you're younger, you know, it's your income and your expenses.

[27:19] DANO WEIR: And then as you start approaching retirement, another category to consider is your health span, your time. You know, how long are you planning living? You've told me that before is something to consider. And if you're in ill health or if perhaps you have a family history, I mean, these are things that can factor into the decision, can't they?

[27:37] DAREN BLONSKI CFP®: Yeah, so I was at a conference in, a CPA conference in Las Vegas last year, and a big insurance carrier had this new AI product, and I walked up to him like, oh, this is interesting, and like, we can predict when you die. And I'm like, really?

[27:52] DAREN BLONSKI CFP®: So I walked. Did you do it? Yeah, I did it. So I'm like dead at 80 or something. But anyway, it's not good for me. So you fill out like, yeah, my parents, when they lived, Da-Da-Da-Da-Da-Da, and all this stuff. And then it started giving you.

[28:05] DAREN BLONSKI CFP®: You a percentage of how long you live to whenever we're planning Clay and i whenever we're putting in the financial plan we're like you're gonna live to 90 like we don't really know but that's what we plan for and fairly accurately this insurance company it's a huge one have all these Covid mortality data sets that they can be very predictive of death and i i was just i did it and it was like 80 something i die and then i was just really curious if the business would take off I haven't heard anything about it.

[28:34] DAREN BLONSKI CFP®: And the reality is nobody wants to know when they're going to die. We don't really want to know those things. We have the data sets to get pretty close now, but no one wants to know.

[28:45] DAREN BLONSKI CFP®: So, you know, if you want to be really honest about when you take Social Security, yeah, you should look at all those things. Again, that's why I say 83, 84, if you're going to live past that weight until 70, if not, start taking it. But you don't want to take it before your full retirement age.

[29:02] DAREN BLONSKI CFP®: If you're still working, because it's going to penalize you. Right? So there's different equations, like Clay's saying, you got to kind of massage that based upon what your own desired outcome is and what your variables are for you individually.

[29:15] CLAY DUNKLE CFP®: Going back to that.

[29:16] CLAY DUNKLE CFP®: Break-even point that you talked about that's that's something that's really helpful to look at and we we run this for clients that are looking at this question is it's a break-even analysis how long does it take to to break even to make that making to make taking Social Security at that age worth it right how long do i have to live but one of the pieces that goes into that is how much money could I have gotten that whole time waiting, right?

[29:45] CLAY DUNKLE CFP®: If I wait from 62 to...

[29:46] DANO WEIR: To 70 how many dollars am i giving up during that eight year time period which is you know potentially the better spending years of your life right again trade-off you really have to look at health yeah what are your goals what are you trying to do what haven't you done in your life yet maybe you traveled all through your 20s and you're like i don't need to see europe You know, and so maybe you don't need it right now.

[30:11] DANO WEIR: But to your exact point, I want to throw some numbers to this just so you can conceptualize what we're talking about. I have a totally fictitious scenario here.

The Go-Go, Slow-Go, And No-Go Years

[30:18] DAREN BLONSKI CFP®: Before you go there, let me just add one interjection here because pet peeve, pet peeve warning. So. All the retirement tools we use always have like this like straight line of spending. It goes up with inflation, right? It's not how people spend. Having watched thousands of people retire at this point, what they actually experienced in their life, their life, you basically have three phases of retirement.

[30:46] DAREN BLONSKI CFP®: So when you first retire, every day is Saturday. I call it the go-go years. To Clay's point, you might need more of that Social Security during your go-go years. You're going to outspend your budget, right? Now you have time to fix this thing or to do that or to like, I like to fix things around the house. It gives me lots of satisfaction.

[31:07] DAREN BLONSKI CFP®: I don't know why, but like if I have a Saturday to fix it where I'm not into sports, I'm headed to Home Depot to fix like five different things like this thermometer, that switch, whatever, right? Well, when every day is that day, you spend more and then you're traveling to see the grandkids and oh, that golf game and you're going out to lunch with the buddies all the time.

[31:26] DAREN BLONSKI CFP®: You actually end up spending more in that first part of retirement than you would predict or think. And we call those the go-go years. So again, going to Clay's point, you want to plan for Social Security. Around these phases. The second phase I call is the slow go, right? Your body hurts, right? So by 75, 73 for most people, you're just not as active.

[31:55] DAREN BLONSKI CFP®: There are a handful of people that bust that mold, but you're just not as active and you're not out there doing as much. It hurts more. You're not spending as much. Maybe you're reading, maybe some light gardening. But you're just not traveling like you used to. You're not seeing the grandkids like you used to. So what we actually find in real life is spending goes down. And you actually start to accumulate wealth again.

[32:19] DAREN BLONSKI CFP®: Because there just isn't the money, there just isn't the draw. So if you think of spending, we have our go-go, our slow-go. And then the phase we all don't want to think about, which is our no-go. And in the no-go phase, you blow budgets up. Because the cost of health care is... Certainly in the United States, is insanity.

Can AI Plan Your Retirement?

[32:39] DAREN BLONSKI CFP®: And we watch states get decimated by health care costs. I was talking to a prospect and they were telling me that, oh, they were doing their retirement planning on Claude. And what I wanted to say to the prospect, and I didn't have time at this point, I was like, I'll bet you that Claude told you nothing about the go-go, the slow-go, and the no-go.

[32:59] DAREN BLONSKI CFP®: Because it isn't projecting that, right? That's the art of the human, right? So everyone's getting super excited about this AI. AI is going to give me my break even, and I know this, and I get my retirement, and I've just clotted my retirement. Or I should say anthropic, my retirement. Opening.

[33:13] DAREN BLONSKI CFP®: It doesn't really matter gem night it it's going to get you 80 the other 20 that's the art that's what people like Clay and i do we do the art of retirement and that's that's the gift we bring and so in a world where technology is taking all this over the reality is there's still lots of room for art and going back to what Clay's saying like there's lots of variables here and there's lots of things that we've seen over time with people and how they really live their life that really impact success.

A Hypothetical Example: Claiming At 62, 67, Or 70

[33:44] DANO WEIR: So I want to throw some numbers on this, just so you can conceptualize numerically what we're talking about. Totally fictitious scenario. Her name is Holly. She's 62.

[33:55] DANO WEIR: At full retirement age, which is 67 for her, she's set to get, let's say, $2,000 a month, which is the national average for a Social Security payment. If she takes it at 62, she's going to get lower than $2,000 a month, which is $1,400 a month. If she takes it at 67, she gets her $2,000. Or if she takes it at 70, they're going to give her $2,480 a month.

[34:24] DANO WEIR: So the difference between the earliest and the latest, so if she took it either at 62 or 70, that difference is 1,080 a month.

[34:33] DANO WEIR: 62 to 70 is 80 years times 12 months.

[34:39] DANO WEIR: Times $1,400 a month, that's $134,400 she won't have until 70. If she waits until 70, between 70 and 80, she's going to have $297,600.

[34:58] DAREN BLONSKI CFP®: So what you're trying to say, Dan, is basically if you wait, you're going to accumulate more in Social Security. But what you really have to ask yourself...

[35:08] DAREN BLONSKI CFP®: Two things. One, am I going to live long enough to wait to 70 and actually get more out of the system?

[35:17] DAREN BLONSKI CFP®: Actually three things. Two, is there going to be reduction in Social Security?

[35:22] DANO WEIR: Unknown.

[35:23] DAREN BLONSKI CFP®: Unknown. And three, what's your quality of life going to be between 70 and 80? Yeah. Because that's the other piece. Like, if a few extra dollars per month means, you know, 500 bucks extra month or whatever it is before 70, you can enjoy more life because of that. You really got to weigh that. Right? Because we talked about the go-go, the slow-go, and the slow-go. And the no-go.

[35:47] DAREN BLONSKI CFP®: If you're enjoying more of your life and you need more of your cash and you're not going to need it anyway over here, well, why not enjoy the heck out of life and see the grandkids more often or travel to one more place? That's the art of retirement that is, I think, really important. So, Clay, what are the top three things people need to think about when it comes to retirement and Social Security?

3 Things To Know Before You Claim

[36:12] CLAY DUNKLE CFP®: I think when it comes to Social Security, The number one thing right, is you have to understand what your different payout options are at different ages. And where do you get that? That's number one. You go to ssa.gov, create a login, and look at your benefit estimates.

[36:28] DAREN BLONSKI CFP®: Okay, point one, point two.

[36:30] CLAY DUNKLE CFP®: Point two would be understand your spouses as well. Because there's integration between your own work history and your spouse's work history, right? So you really have to know what's on the table for both of you guys, how you're going to going to make those match nicely for your retirement picture.

[36:51] DAREN BLONSKI CFP®: Point three.

[36:52] CLAY DUNKLE CFP®: Point three would be what are your other resources, right? What do your retirement accounts look like? What do your brokerage accounts look like? Other sources of income? How long are you working, right? Understanding all these different pieces that flow into your, you know, your financial planning, I think is critical to the conversation around Social Security.

3 Common Claiming Mistakes

[37:17] DAREN BLONSKI CFP®: Okay, now give me three biggest mistakes.

[37:21] CLAY DUNKLE CFP®: Three biggest mistakes. One, I was talking to a guy maybe two or three weeks ago, and he said, hey, my wife is 74, and she hasn't started taking Social Security yet. It's like, okay.

[37:36] CLAY DUNKLE CFP®: You need to get on that right away because you're not, there's no benefit to waiting after age 70, right?

[37:44] CLAY DUNKLE CFP®: Another mistake I think is, this is kind of nuanced, but foregoing the widow benefit until your full retirement age, right? So if your spouse passes away, you can actually start taking a benefit at age 60. And that's completely independent from your own retirement benefit, right?

[38:05] CLAY DUNKLE CFP®: So you don't get penalized on your own benefit by taking your late spouses early. So those two interplay very nicely. And I've actually seen a lot of money left on the table in that scenario. The third one, there was...

[38:24] CLAY DUNKLE CFP®: There was another one that's just not taking a benefit that you're entitled to. So a couple years ago, they added, they, you know, tax law changed, right? And they got rid of the government pension offset and the WEP provisions. So historically, if you had pension income, that would reduce the Social Security you had available. But they got rid of that.

[38:50] CLAY DUNKLE CFP®: I think that was 2024. And we actually had some clients that were... That were on pensions that weren't taking Social Security but had been entitled to it because of the law changes, and they were just leaving money on the table. So we had them schedule appointments with Social Security and start taking benefits, and they were very happy.

Tips For Meeting With Social Security

[39:08] DAREN BLONSKI CFP®: You know, one thing I've heard, and I think this is just important to anecdotally share, Social Security, the bureaucracy that helps you pay that out, is actually pretty good. People who actually go and sit with Social Security, I've heard very few complaints about over the years. So don't be afraid to call up Social Security and go meet with them.

[39:27] DAREN BLONSKI CFP®: Create an appointment. Make sure you've got all those pieces. But when you go, make sure you've got all your work information, your spouse's work information, your ex-spouse's information. They'll help you really look through those details. As advisors, we can help you, but we're not going to help you.

[39:38] DAREN BLONSKI CFP®: Not in the system we don't see the bureaucracy we don't have the green screens to type in and get all the answers for you so we'll get you so far and then we're going to send you to the government site if you want to find out how we can address your specific situation how we help if you're liking our approach here the website SonomaWealth. Com you can book a wealth analysis you can meet with Darren or Clay or any of our and find out how we can help you dance that dance, see where all those pieces fall for you to put you in an optimal situation.

Closing Thoughts

[40:10] DANO WEIR: Thank you so much for checking out our show. This is It's All Money on Sonoma Wealth's YouTube channel, also on Apple Podcasts and Spotify. Wherever you found it, if it's any of those platforms, subscribe and let us know what you think about the show. We love feedback, and we will see you next episode on It's All Money. Thanks for watching and listening to It's All Money.

Credits & Outro

[40:29] DANO WEIR: We hope today's episode shared information to increase your financial confidence. Now is the time in the show for the voiceover with a bunch of words at the end. Listen close though, you might find out something you didn't know. It's All Money is powered by Sonoma Wealth Advisors. Sonoma Wealth Advisors helps individuals and families in Northern California and across the country with building, managing, and sustaining wealth.

[40:54] DANO WEIR: Sonoma Wealth is a comprehensive, holistic finance solution. Offering financial planning, asset management, tax planning, 401k solutions, and appropriate insurance. Take our free wealth analysis now at SonomaWealth. Com. If you haven't already, like and subscribe to It's All Money on YouTube, Spotify, and Apple Podcasts.

[41:17] DANO WEIR: It's All Money features human hosts, musicians, editors, video crew, and voiceover talent. Video production by Forz Media in Roanoke Park, California. Online at forsmedia.com. Music by Neon Beach, Sparkle Rising on Soundstripe. Voice over by me, Dano. Thank you for listening to the very end. We appreciate diligent viewers and listeners.

[41:42] DANO WEIR: Fermata Advisors LLC is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. This content was produced by Fermata Advisors, LLC, DBA Sonoma Wealth Advisors, DBA Fermata 401K, DBA Fermata Tax. The opinions expressed by Fermata Advisors, LLC on this show are their own.

[42:08] DANO WEIR: Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice. But are limited to the dissemination of general information.

[42:27] DANO WEIR: A professional advisor should be consulted before implementing any of the options presented. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed.

[42:48] DANO WEIR: Information expressed does not take into account your specific situation or objectives. And is not intended as recommendations appropriate for any individual. Viewers and listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.