The Crotchety Old Men Podcast
Will Social Security be there when you retire?
Ever puzzled about the optimal time to claim Social Security or how spousal benefits actually work? Fret not; we've got you covered. Should we end tax-deferred 401(k)s to support Social Security? Through candid anecdotes, we illustrate the urgent need for strategic retirement planning and the reality that for many, working past the golden age of 65 is more necessity but for some a choice.
Ever puzzled about the optimal time to claim Social Security or how spousal benefits actually work? Fret not; we've got you covered. Should we end tax-deferred 401(k)s to support Social Security? Through candid anecdotes, we illustrate the urgent need for strategic retirement planning and the reality that for many, working past the golden age of 65 is more necessity but for some a choice.
Welcome to another edition of the Crotchety Omen podcast. This is one of your hosts, George Crumley, and also in the studio with me today is my man PC, PC. How are we doing today?
Speaker 2:Hey man, I'm six feet above, which is about as tall as I'm ever going to get in this life. I'm talking. So you've got to figure that life is very good for the both of us.
Speaker 1:I know that's right. I know that's right, man, I have no complaints whatsoever. No, what's on this? Here again a great day to join together with you and address our audience and talk about a new subject and maybe help them with their finances. So what we got on store for them today?
Speaker 2:You know social security benefits has been a big thing and a big story in news and in financial publications and whatnot. So I think we get this party started, man, by talking about social security, the benefits, how it came about and all of that.
Speaker 1:That sounds good, man. You know I always like to you know, talk about as far as social security is is you need to understand the rules that go along with social security. There's probably about 10 to 15 different ways you can actually draw down your social security and that comes in those it also comes with like spousal benefits and things of that nature. So you really need to educate yourself. It's not just about reaching that ripe old age and then saying you know, uncle Sam wears my money. You got to make sure that you're drawing that money down at the right time, that it's going to benefit you, because you could be leaving some on the table. But then you got to look at it and say, well, if I take it now, I'm in great health and I may outrun this, so I'll get the money back on the back end. So it's all an individual choice. So we make sure my audience understands that, that it's individually on how you want to take that and how it's going to benefit your lifestyle.
Speaker 2:So let's start off, george, by talking about what social security is in the first place, for our audience. Sure, and some folks that are real familiar with social security and some folks that are listeners that are that have no idea what it's like. So I'll start off by saying that social security was meant to be a safety net for retirees to maintain their standard of living. It started out in 1935. Really, it'd be to be quite frank with you August 14th of 1935. Roosevelt was. Roosevelt started at President Roosevelt and he was trying to help disadvantaged Americans. You have to remember this was, this was right around the crash of the stock market between 1929 and 1935. So there was a lot of impoverished families as a result of the crash of the stock market and that's what. That's what led to Roosevelt's decision to start this, this safety net, in the first place.
Speaker 1:So it was never supposed to be a crutch. It was just supposed to be something that was going to help folks for was it a short period of time? Was it for a long period of time? Was it not even discussed?
Speaker 2:Well, they, I think, as far as Roosevelt was concerned, to put it in context, it was, it was for a long period of time and the concept was to pay into this, and the paying into this from people's from people's payments from their jobs and so forth and so on, would support the monies that are taken out from people that do retire Right.
Speaker 1:Well, as we've known over the years, social security has really grown. So just to kind of hear, again put it in perspective you know, if you were born in 1958, your, your full retirement age is 66 and an eighth eight months. 66 and eight months. Okay, so you know you can start receiving your benefits at 62, but you're going to receive considerably less than you would if you waited to that age of 66. And then if you go to 70, you're even going to make more. So you know, over the years that has changed because it used to be 65. But here again, as you can see, by changes the government has made, that that age of 65 has moved up to 66 and eight months.
Speaker 2:That's true. That is true, that is true, and when you think about it you had mentioned earlier that there there are so many reasons and so much money. There are about 15 or 16 different things that you were talking about that social security is used for. One of the things that's used for it supports retirees, of course. But the other thing that social security covers is disability, that that, where people are put out of work because of disabilities, it covers for them. They're paid at a higher benefit until there's full retirement or social security age is concerned, and it pops right back to the age at the, where there's the currency, at where they're supposed to be at that particular point in time. The other one that you talked about briefly was spousal support. You know, when a spouse dies, this the the spouse is living and the children get a social security benefit.
Speaker 1:Well, let's stop right there. So that's the age old question. So if you're married and you take social security, does your wife get half of yours?
Speaker 2:Yes, and then the children have a percentage that just taken out of your benefit, that they get paid for as well.
Speaker 1:So that's if you, that's if you pass, but I'm saying if you're still alive. So for say, for example, your wife retires before you, she's gonna get the social security based on her age and based on what she's paid in then once you retire. Me maybe people don't realize that, but if you make more money than your wife, she's gonna now get a raise and she's gonna be making half of what you make now.
Speaker 2:See, I didn't know that, george.
Speaker 1:Right, yeah, so yeah, if you, if you just, for example, if, if, um, you're, you're, you're yearly benefit, your monthly benefit is $3,000 and she's getting, say, $900, because she, you know that that's what her numbers came out to. Once you retire and she retires first, yeah, once you retire She'll go up from 900 to 1500 because she'll, so she'll get half Okay.
Speaker 1:Oh wow, yeah. The second piece to that is If you pass first, she'll get all of yours. So meaning that Instead of the 15, she'll get a bump up to three grand as to what you were getting. Okay, so it's. And I said that start off saying misnomer or or confusion, because a lot of people think, especially on the, the female or the person that's making less money thinks that they'll get there's plus half of yours. It don't work that way.
Speaker 2:Then my question, george's, doesn't work out the opposite way?
Speaker 1:yeah.
Speaker 2:Making less money and the woman is making more. Let's, let's talk about that, for, yes, I mean, it's the same thing?
Speaker 1:Yeah, absolutely. So the woman's making more money and you retire first or you still retire second. Once she retires, you'll get a bump in yours. We check this out, okay, so if you're, if you're divorced, okay, but you were married at least 10 years and you retire. Your wife, here again, is entitled to half of your social security, here again, does it affect your check? No, but then whatever, that number is again three, three thousand. So you get fifteen hundred a month, effective because of the fact that you were married for ten years, but it has nothing to do with your three thousand. You'll still get three thousand.
Speaker 2:Well, actually, actually, if I could augment what you were saying, depending upon. So let's say, for instance, you're married for ten years to that, to the woman, mm-hmm, they're going to, first of all, you're not going to be able to receive that benefit Until her retirement age. Okay, that's number one. Number two your benefit is going to be based on the amount of time that you were married. So, let's say, a person that was married to 15 years, okay, they're only going to get that benefit From the time they were married to the time that they divorced. So within that 15 year period, or within that 10 year period. So in a divorce, social security is a little tricky and social security is used as a way of of Of putting money into the pot. In terms of you, you know what you're going to get out of the divorce Once you dissolve the marriage, so to speak.
Speaker 1:I think you're saying the same thing. I'm saying, you know you got to be married at least a minimum of ten years and yeah, you both have to be retired to receive it, either one to receive it. You can't receive it if you're still working. It's not until you retire. And but as far as the last piece, I'm not sure how it's regulated as far as if you were married for 10 years, 15 or 20 years. I've never heard it regulated that way. But you know that's something that that's something for our audience that maybe need to go back and research for themselves. But I know the minimum you got to be married for 10 years and here again it doesn't affect what you get as the person, as the main or the higher-bred winner. It doesn't have any effect on that.
Speaker 2:That's true, that's true. So people would ask you know how does? How does social security work? And I would say that Social security is paid by payroll taxes and it's also paid by trust funds. Okay, and so right now, as of 2022, the payout for social security was 66 million dollars on a monthly basis. Whereas people were retiring and they were Tapping into their social security, this was the amount of money that they got paid, and that's that's. That's a lot of money, right?
Speaker 1:but even what that said. Like I said, the elephant in the room is that 2035 2034, they think is gonna go away.
Speaker 2:Well, well, you know, they're pros and cons to that and I kind of I kind of agree with that in a sense and I and I disagree with it from a sense that, you know, it really depends upon what the solutions will be, and we can talk about that a little later. But you've got, for instance, you've got 2.9 trillion dollars that is used for budgetary needs from the Congress. So, in other words, my point here is that the Congress borrows money from our social security benefit. Now, that's one of the reasons why people say that, you know, by 1930, by 2034, 2035, the benefit won't be available.
Speaker 2:However, the 2.9 trillion dollars that's used for budgetary needs from the Congress is is is borrowed with interest, and so that means to say that, and also the borrowing with interest, the interest is backed by government bonds. So actually, that know misnomer about the fact that because they're borrowing money and taking money and funds out of the Social Security pot is Going to deplete funds, is not necessarily so, because when you think of the borrowing of the social security funds, it nets an Approximately 804 billion dollars between 2018 and 2027. Let's say so. There's a situation there, and this was. This was conducted, this survey was conducted by the Motley Fool, and so their point of view is that because they're borrowing at such a rate and the, the bonds are protecting that, but that interest at such and such a rate, that may not necessarily be true, that that by 2034 the, the Social Security benefit, is going to be depleted.
Speaker 1:Yeah, I mean those are pretty good assumptions. Yeah, I mean based on that. But I think what the most politicians are are saying that is because we have less people in the workforce, and a lot of this started with COVID. You know a lot of people jumped out of the workforce after COVID. But there's just not. It's just, you know, money in and money out. There's more money, like you said, there's more people retiring, there's more people retiring with full, full benefits and you have less people working. So you've got to get more people in the system working, put them providing to the fund To keep it going. And that's the rule of thumb is you got to have money coming in and to support the money going out. And that's why they think 2034, that Social Security will be in trouble.
Speaker 1:But you hear again, from my point of view, I don't think there's a politician out there that's gonna Cut his own throat by saying let's do away with Social Security. I mean that's, that's a, that's a Big one. We not gonna vote for you because there's too many people that's on this serve, this System, and there's too many people coming onto the system that are looking for Social Security to be a part of their, their retirement. So I don't think it's gonna go that way. I think what you're probably gonna see and we kind of talked about that before where the age has gone from 65 now to 66 and Eight months is probably gonna remove up of the scale a little bit more, may rule up to 67, 68 and who knows where it's gonna stop. But obviously If the age Goes up that you can receive full retirement, that will give them enough time to put more money in there to bolster the Social Security pot.
Speaker 2:And you know I want to ask a very good point that you just raised about the reasons why and some of the other reasons why they the decline in Social Security is. Is the shift in demographics, for instance? That's, that's another reason. And also the interest rates. When the interest rates are low, the lower the returns on the on the borrowing of surplus funds, and so you have less surplus funds coming into the pot because the fact that the borrowing is is that a lower interest rate, so they're not making as much money off the off the interest as they would be if the interest rates was higher. And, of course, like you also eloquently stated, political challenges the need for part of part Partisanship on how to address these long-term issues will either bring Long-term solvency or not.
Speaker 1:Well you know it's interesting because you know, what I just talked about was one of the Proposals as far as, like I said, increasing the age, increasing the amount of the payroll tax to bolster Social Security. But there's a couple economists out there that are saying what they need to do is they need to get away, they need to end the 401k and program. And On the surface you say, well, why would they want to do that? But one of the things that we we may not understand is that when you enroll in a 401k, that money is not taxed. So for example here again I'll use a simple map so if you, if you make three thousand dollars and you've got two hundred dollars going into your 401k, you're only taxed at the twenty eight hundred dollars. So those numbers to China put them in perspective. It's their estimate at over 200 billion Are going is going into 401k, therefore not being taxed, therefore not generating revenue to superior, again, support, so security. So that's money they want to tap into.
Speaker 2:And and how do you think that's going to affect the solvency of Social Security?
Speaker 1:Well, I think it would have to heck help the solvency issue. But it's gonna make a lot of people upset because here again, I mean I probably wouldn't be retired if, if I couldn't have taken advantage of the 401k program. I mean, you think about that 401k program where they're matching a certain percentage of dollars you're putting in. Is is something that really, you know, people have um Relying on you uh to to uh bolster and to get them in position to retire. But there's a flip side to that and that is middle class and low income people. Most of them aren't in the 401k program. So what do you think that is?
Speaker 2:why do you? Why do you say that, george?
Speaker 1:because because the fact that the they're leaving pay I'm making a real claim they're living paycheck to paycheck, so at the end, at the end of the day, you don't have money to put in the 401k program and that's not a priority. It's more priority to put food on your table and pay your rent. So the flip. So what happens is, if they're not putting money in a 401k program, they're not putting the money in an IRA program, so security is is going away, or or then they're not going to really have an avenue to retire at a decent age. I mean, they're going to find themselves working for a long time because of the fact that the, the system has now been designed against them, which is not the first time we'll see something like that no, and I agree with you because, in my particular case, uh, I retired in in, in, uh, in uh, 2020.
Speaker 2:I enjoyed getting up at 12 o'clock at remote and in the afternoon if I wanted to sleep in or do whatever I wanted to do. And because, um, uh, the housing industry is going up, rents are going up I mean, they're going through the roof. People who are renting right now are paying a house note, uh, uh, in most cases for rent, um, so, um, I'm having to go back to work. You know it's at almost 72 years of age, uh, uh, just to augment, you know what I'm getting from social security and living the kind of lifestyle that I want to live, because I like to party, to be honest with you. So you know, without, without a job that would augment the, the, the, the social security benefit. It's hard for a lot of people who, uh, we're in the workforce, uh to, to really not work unless you know you work to the point where you know your social security can keep you from having to work, you know, the rest of your life well, absolutely and and piece of what.
Speaker 1:Go back to some of the things we were talking about earlier. Say, for example, you worked um w w2 for, say, 10 years, 15 years. You decided to be an entrepreneur, um, you struggled through that. You took a couple odd jobs. You know um, maybe 1099, whereas the w2 were paying into payroll tax. But your, your entrepreneurial, was not and you didn't put together a um.
Speaker 1:You know a, a retirement program. You're not putting into a IRA, so you're real heavily dependent on that social security. But here's the kicker here. So security is based on the amount of money that you put in so you could be on the low end when you retire. So you could be making $2,000 a month. Who can live on $2,000 a month exactly, you know.
Speaker 1:So you're forced to to work longer, to get a second job to support yourself and your family. I mean here again, that's the way the system is built. But you know, as I tell my young folks, you need to look at your social security now. You know when you get 45 and 50 and see where you are in the program. You know how much money you put in, how many quarters you put in, to see what that payout is going to be. You don't want to wait till you're 62 65 and then looking and just assuming you're going to get an x number amount you need to look earlier yeah, you got to look earlier to see where I'm at and say, hey, well, hey, maybe I got, I need to go out.
Speaker 1:For example, um, real dear friend of mine was was an entrepreneur and uh, we actually were the same age and what he looked at was when he was maybe 45, he had an opportunity to go to work for the public um school district, and that's what he decided to do smart thing, because then he could put money in social security for the next 15, 30, actually put in for the next 30 years and uh, therefore being able to retire with a nice social security, you know. So those are the decisions that sometimes you have to make when you start getting to 45 and 50, knowing that those earlier years you didn't put money in social security. Now you need to get a regular job so you can bolster what your social security is going to look like and another thing.
Speaker 2:Another thing to add to your point is that the younger people need to look at what kind of jobs and what the benefits of those jobs will offer you once you get to this age of retirement. Because you've got some jobs to deal with the 401k, as far as savings goes. You got other jobs that you buy into that have pensions. So you figure like this if you have a job that has a pension, you've been working that job for 10, 20, 30 years. Okay, you're going to pull out a certain amount, um, are you going to be awarded a certain amount through your pension and you're going to be able to add that to your social security benefit for whatever it is, and you may have a very decent way of living from that point on.
Speaker 1:We'll be right back hi this is George Cronley with the Crotchety Old man podcast. Hopefully you've been enjoying the information we've been providing on the podcast and we'd like to continue to do that, but we'd also like to get some feedback from you. So if you like what you're hearing, or if you don't like what you're hearing, drop us a line at the crotchety old man podcast at gmailcom. That's the crotchety old man podcast at gmailcom. And remember you can hear it's not only on youtube, but you can also hear us on your favorite podcast platform being iHeart, google or wherever you get your favorite podcast. Take care and, as we always say on the crotchety old man podcast, if you did know, nah, you know.
Speaker 2:We're back.
Speaker 1:Well, I mean that's a good thought, but most that's one of the reason that the 401k was kind of brought in the pitches, because most Corporations decided to do away with the, the pension through that and my pension was, my pension was stopped in 94.
Speaker 1:So I got a pension for about ten years, from 84 to 94, but after that they stopped it. Most companies Don't Provide a pension. And, just for our listening audience, the difference between a pension and a 401k is a pension is a hundred percent Money provided by the company you're working for in a, a fund that's going to, like you say, support you, like an annuity, once you retire, whereas a 401k you're putting in amount, they're putting in amount. So you know, companies looked at it and said, well, heck, I'm putting all this money in an account, but you know what's, what's the real benefit? Let's, let's share the wealth. And that's why they came in with the 401k true, true.
Speaker 2:So let's let's talk about some of the solutions that some of these economists have come up with. One of the things that I, I would consider, or that the economists have been talking about, is to adjust the taxable earnings cap, and and only a small portion of of high earners would be subject to SSI taxes, and that's gonna, that's going to Increase the, the, the monies that go into the pool by by large High earners. What do you think about that one?
Speaker 1:Well, you have to kind of be careful with that. If you're only going to tax the high earners, just from a pure number perspective, you have less high earners than you have Middle-class, middle-class and lower earners. So you need everybody putting in. Now, if you're saying You're gonna make the higher earners put in more, it's gonna be a some type of percentage. I Mean something. Maybe that's viable, but you can't cut out More of the population just because they're not making a certain amount of money. Because here again, yeah, the higher earners are making more money, but it's it's less, it's less people right.
Speaker 2:But the higher earners are making enough money to where Some of them aren't paying any into into this, into the fund at all. So if you raise the cap, if you raise the, if you raise the cap Based on their there, whatever it is that they're earning from their businesses, they'll be able to, they'll be able to pay a little bit more than what they're paying now and that'll help to benefit that the social security fund.
Speaker 1:Well, I think you got to identify these higher earners. I mean, when you say a higher earner, I'm thinking of W2 employee. But I mean I'm not sure where you're going with you know higher earners because I mean, if you're talking about business owners, you know your, your Elon Musk and all these guys, they don't get a W2. I mean, their, their money comes from Non-taxable. I mean that's, that's the big misnomers, that people think that you can raise certain taxes and you're gonna hit them in the pocket. But they're not. They're not earning their money that way. The way they earn their money is, you know, through non-taxable sources. So you have to be careful, you have to design something specifically for you know those Billionaires, you know, because of just a regular income tax is not going to hit them in the pocket.
Speaker 2:And that's true, that's true. But you also have higher earners that are making 200,000, 300,000, 400,000, 500,000. That are W2 people, absolutely, and that's gonna help if the cap is raised just a little bit. You know what I mean.
Speaker 1:Well, I said, if it's a sliding scale but you can't eliminate, you can't Lower in, you've got a. If you're talking about a sliding scale, well I mean it really is, it's a. It's a. It is somewhat of a sliding scale because if you make $400,000 a year, your percentage of payroll taxes Obviously going to be higher than someone making $30,000 a year. So you are going to be putting in more, just from a sure numbers perspective.
Speaker 2:Now, and the other thing that that could be a possible solution would be investment deferred diversification, and that's as Exploring alternative investment options beyond the government bonds that that protect the, the, the interest from borrowing. So if you look at other alternatives, like investing in, let's say, investing in opportunities that are coming out of Africa or or or South America, that might help the, the fund as well. You.
Speaker 1:You're so like you want to take my. You don't take my social security money and go to Vegas.
Speaker 2:Take your social security money and go to Ghana, brother.
Speaker 1:Well, I mean, wow, that's it, that's that's. You know, some economists I'm sure I'm thinking of things like that Just like the ones that came up with the 401k thing, so yeah, and then you know, I was on the table. Interesting though, that's an interesting one though.
Speaker 2:We had it. We had a rousing discussion about Comprehensive immigration reform. To legalize more immigrants could expand the the workforce and thereby Contribute contributing more to the social security fund.
Speaker 1:That's another assumption that you know. You're assuming that just because they have a social security card, that they're going to work and get a W2, therefore contributing more to the, the fund. I mean that it's possible but it's not. I don't think it's a fact because of because here again we talked about it earlier there's a lot of people, you know, they Generation Z, there is X, there's a lot of people that are entrepreneurs now and they're not contributing to the social security. So if you have immigrants coming in, they may not necessarily Do the same thing, I mean, but you do.
Speaker 1:We've shown a way. A lot of people are coming from China. They are highly educated and they probably will be the ones. But those coming from other you know less fortunate countries Guatemala, venezuela you know they may end up being your day labor type type individuals, therefore not necessarily paying into the funds but then drawing on the funds in other ways. So that's kind of a double-edged sword. But you know, we can talk about immigration another day, because I think that in itself is a, is a money making or deal that they never talk about. They always talk about the people coming in. I thought and we got we go, had to end this pretty soon, but I want to tell you this interesting story.
Speaker 1:I heard a new story is the news today. So you've got these Thieves, for any other word. So they follow people that are coming in across the border of Mexico. They follow them into the United States and, before the people that are coming in illegally are To surrender themselves, they accost them and they hold them up and they take their money. Now here again if Is it that easy to get in the United States? They hold these people up, they take their money and then they go back into Mexico Because they said they killed one of them and the other three escaped. Back into Mexico. Now it goes. How can people do that? How can you going this like you can go and come into into Mexico across the border at will. So if you can't tell me there's money involved, it's not just a political, it's obviously a political struggle, but there's also a lot of money involved.
Speaker 2:And that's why I would say to our younger listeners that you really need to pay attention and you really need to vote. You need to vote on people who are going to support your interests, and this is a and. When I talk about supporting your interest in particular, we're talking about things like comprehensive immigration reform and Adjusting the means, testing and whatnot An investment diversification. All this depends upon who you put in the office and who's going to represent your interests.
Speaker 1:All good stuff, man and and this has been a really good Crouchy the old man podcast. I've enjoyed the information, hopefully, that our audience is also and, as you know, we're on YouTube now so you can get a Quick snapshot of what we're talking about on YouTube. Crotch it on me and podcasts or wherever you get. Your favorite podcast is Spotify, google. I heart radio because we're coming at you and we're providing all this information that hopefully you can enjoy and use. So what that said, mr PC, what you got for, what kind of pros and wisdom you got for us?
Speaker 2:Well, you know, we're talking about things that are changing. We're talking about change and so forth. So I picked this pearl out of the Out of the harbor here and it goes like this if you feel resistant to change, look in the mirror and affirm it is only thought, and thought can be changed. I am open to change, I am willing to change. I Greet the new with open arms. I am willing to learn, not new things every day. Each problem has a solution. All experiences are opportunities for me to learn and to grow. I am safe.
Speaker 1:Well said, well said, as we always say on a, crotch it on me and podcast, hey, if you didn't know, yeah, you know. No, hey, be safe, peace, peace.