Joe Anderson
ABOUT Joseph

As CEO and President, Joe Anderson has created a unique, ambitious business model utilizing advanced service, training, sales, and marketing strategies to grow Pure Financial Advisors into the trustworthy, client-focused company it is today. Pure Financial, a Registered Investment Advisor (RIA), was ranked 15 out of 100 top ETF Power Users by RIA channel (2023), was [...]

Alan Clopine

Alan Clopine is the Executive Chairman of Pure Financial Advisors, LLC (Pure). He has been an executive leader of the Company for over a decade, including CFO, CEO, and Chairman. Alan joined the firm in 2008, about one year after it was established. In his tenure at Pure, the firm has grown from approximately $50 [...]


Andi Last brings over 30 years of broadcasting, media, and marketing experience to Pure Financial Advisors. She is the producer of the Your Money, Your Wealth® podcast, radio show, and TV show and manages the firm's YouTube channels. Prior to joining Pure, Andi was Media Operations Manager for a San Diego-based financial services firm with [...]

Published On
February 14, 2023

Joe and Big Al spitball on set-and-forget brokerage investments for 30-something investors, real estate as a substitute for bonds in a diversified portfolio, and options for taking a state pension with or without sick time pay. The fellas also discuss how to bridge the gap until collecting Social Security, strategies for claiming spousal Social Security benefits, and whether you need to sign up for Medicare if you’d rather keep the healthcare you already have. 

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Show Notes

  • (00:49) Set-It-and-Forget-It Brokerage Investments for a 30-Something Investor? (Chris, Scottsdale)
  • (07:56) Is Real Estate a Substitute for Bonds in a Diversified Investment Portfolio? (Don, VA)
  • (12:42) State Pension Options: $21K at Age 55 Plus $13K Sick Time, or $30K at Age 62? (Rich, NY/NC – voice)
  • (19:35) Which Funds Should We Use to Bridge the Gap Until Collecting Social Security? (Jeff, San Diego)
  • (25:29) When Will I Receive Spousal Social Security Benefits? (Sharon)
  • (28:37) Spitballing a Spousal Social Security Claiming Strategy (G, Philly)
  • (33:50) Do We Have to Register for Medicare If We Aren’t Going to Use it? (Jim Santa Cruz)
  • (39:03) The Derails

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Today on Your Money, Your Wealth® podcast 416 Joe and Big Al spitball on set and forget brokerage investments for 30-something investors, real estate as a substitute for bonds in a diversified portfolio, and options for taking a state pension with or without sick time pay. The fellas also discuss how to bridge the gap until collecting Social Security, strategies for claiming spousal Social Security benefits, and whether you need to sign up for Medicare if you’d rather keep the healthcare you already have. Get your money questions answered: click the link in the description of today’s episode in your favorite podcast app to go to the show notes, then click Ask Joe & Big Al On Air and send ‘em on in via voice message or email. I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Set-It-and-Forget-It Brokerage Investments for a 30-Something Investor? (Chris, Scottsdale)

Joe: I got one from Scottsdale, Arizona, Chris. He goes, “Hey, Joe. Oh, I’m sorry. Hey Andi, Joe, and Big Al. I’m obsessed with your podcast. And I always look forward to a new episode every Tuesday so I can listen to it while running or sweating it out in the sauna.”

Al: Wow.

Joe: “I want to follow up on my original question. Thank you so much for answering it in reference to our capital gain situation.” Oh, all right.

Andi: That was in episode 374. I would imagine you guys don’t remember that one.

Joe: Do not remember that. So anyway, he’s “much more educated on net investment income tax and how it’s calculated with your spitball analysis. We are very much enjoying traveling the countryside since the sale of our primary residence back in June. In addition, I am most definitely not the most interesting man in the world, as I’m too straight laced and probably need to learn how to have more fun, but these markets have definitely enjoyed a few more whisky neats lately. I plan on dollar cost averaging our proceeds from the sale of our house into the brokerage account while we travel around the country and I’m looking for simplicity. I’d love to hear your thoughts on the new ETF, AVGE, Avantis all equity markets versus VT. AVGE seems more expensive to own, but also has slight tilts towards smaller companies that may be benefit- may benefit someone who is still in accumulation phase of their retirement planning. Is this something that would benefit a 30-year-old? To purchase and set it and forget it? Good luck on the golf course and hope you have a few cold ones for me. Thanks for always making my Tuesdays runs more enjoyable. Chris.” Sweating it out in the sauna or he’s running his ass off.

Al: That’s right. Or running.

Joe: So Avantis all equity markets. So that’s a fund to funds. You know Avantis.

Al: Yes, I do.

Joe: That’s the old DFA.

Al: Yeah. I’m aware of that. Yeah, we use Avantis funds here. Full disclosure.

Al: We do.

Joe: Here at Pure Financial Advisors.

Al: We do. And they’ve got some similar characteristics as Dimensional fund advisors and as a company and as an approach, I kind of like a lot of what they do.

Joe: So what this all equity markets fund is, is basically, I don’t know how many funds are- I don’t have a prospectus in front of me, but I’m guessing it’s probably like 5 or 6 different funds inside one fund. So you have a fully globally diversified portfolio. It’s probably anywhere from 60% to 80% equities. I’m guessing. But they have tilts, right? Just like if you want to tilt a portfolio towards small companies, value companies, you’re going to get higher expected returns over the long term because they’re more volatile. And so if you want to set it and forget it, that seems like a good choice to me. VT is just a total global stock market index fund or ETF through Vanguard. So that’s a really good choice too. Either one is probably going to get you to where you want to go. I would imagine over time you’re going to just see more volatility in the Avantis fund than you would in a global ETF because there’s no tilts in that.

Al: Got it. So the tilts- so you’re talking about smaller companies and value companies, which tend to be more volatile. They tend to have long- better rates return over the long term- and when I say long term, I mean long term- long, long, long term. But they’re more volatile to get there.

Joe: So how you construct like a global US or- I mean, global US- a global fund, right? You’re taking stocks across the globe into one index fund or ETF, they’ll probably market cap weighted. So your larger type companies-

Al: There would be more shares of those. More value.

Joe: There would be more value or the funds composition will have more percentage of those types of companies.

Al: So you kind of, maybe you come closer to mirroring the indexes, internationally, and domestically.

Joe: Correct. But if you look at the Avantis fund where there’s fund to funds, you’re probably going to have more exposure to small companies. If I take a global index fund, the percentage of that fund for small companies is going to be very, very low. And so if you want a little bit more juice, then I would go the Avantis route. This is not advice, by the way.

Al: Yeah. For sure. Let’s be clear on that.

Joe: This is not advice, but it’s an interesting thought, right? Because they’re both very similar. If I look at a fund to funds that is a globally diversified portfolio, you think, okay, well, I have a globally diversified portfolio here, or I can just buy one fund that’s globally diversified as well, which one is better? I mean, they’re both really, really good. It really depends on the preference of the overall investor. This Avantis fund is trying to put some ribbons and sexy it up a little bit. You know, with the fund to funds, but either/or I feel like-

Al: I agree, either/or is fine. So here’s another question. So Chris sold his house. He’s got a pile of money. He wants to invest. He wants to dollar cost average. Good idea? Or would you just invest it?

Joe: A 100% invest a 100% of it.

Al: Right off the bat.

Joe: Right off the bat.

Al: And why is that?

Joe: Because you’re going to get a better return long term.

Al: Long term.

Joe: If the money should be invested, invest it. Because it’s impossible to time the market. So let’s say he’s going to put in 1/10 of the money in, for the next 10 months. Or 1/12 over the next 12 months or whatever his strategy is. That’s a way to ease into the overall markets, but you’ve seen the studies.

Al: Yes. Yeah, for sure. I think that- well, and that’s because the market goes up more than it goes down on average. In fact, it goes up about twice as often as it goes down. If you look at year in, year out, year in, year out. So what that tells you is that you have a better odds of the market going up by just putting all the money in. That’s not to say you go 100% stocks. You put it into whatever portfolio makes sense for you. And see, that’s the key, right? It’s not like you’re going all in. It’s like, well, what kind of portfolio do you need? Do you need 50% stocks, 50% bonds? Great. Then do it. Put it in. And I 100% agree with you because the studies show you’re better off. Now, the problem with that though is people’s emotions.

Joe: Right, because the next day you put some money in, the market’s going to drop 10%.

Al: And then he’s going, why did I do that?

Joe: Why don’t I just do that?

Al: Exactly. So you have to be able to be okay with that because it may go down for a month or two or 5 months or a year or two. But on average, you’re better staying invested with the portfolio that is appropriate for you, rather than just inching in one little bit at a time.

Joe: Yeah, I would set it and forget it, invest everything, and then just don’t look at it, right? If this is for long term, then go for it. He’s 30-something.

Al: Yeah, particularly when you’re in your 30s.

Joe: You know, that’s the strategy, Scott- or I’m sorry, Chris- Chris.

Al: Yeah, Chris. Scottsdale.

Is Real Estate a Substitute for Bonds in a Diversified Investment Portfolio? (Don, VA)

Joe: Got Don from Virginia. “I am recently retired, sold a business in 2019 and another in 2022. I am semi-retired because I have a small real estate business that produces on average, $100,000 a year net revenue after taxes in the form of 11 single-family houses. We spend about a $125,000 a year, $25,000 of which is health insurance and costs. Just venting, that is not my question.” Okay. Didn’t sound like a question. “I had two questions, but I’m realizing now my second is dumb.”

Al: Oh, and there’s only one question here.

Joe: “First one. In addition to my rental properties, I have more money in real estate in form of QOZs.”

Al: Qualified Opportunity Zones.

Joe: QOZs. He’s fancy. “A Vanguard REIT index in my IRAs, my personal house, and a little in a private REIT. Overall, my asset allocation is approximately 46% equities, 46% real estate and 8% bonds. The equities are BRKB.” What’s that, Berkshire? “Some large cap individual stocks and broad market Vanguard ETFs. Obviously, I am low on bonds and high on real estate. But what would you all say about real estate? Is that an okay substitute for bonds? Reallocating would be a slow process.”

Al: Selling properties.

Joe: “Best dog in the world, 11-year-old, 3-legged mutt, Tacoma. No alcohol in a long time. Sadly.” Okay, Don from Virginia. Thanks for the question. So he’s got a ton of real estate. And he’s like, man, if I’m going to sell this real estate and reallocate it to bonds, that’s going to take me forever.

Al: Yeah, super expensive too, with taxes.

Joe: He’s got 11 single-family homes. So he has loaded up on real estate. He spends a $125,000 a year. The real estate is giving him a $100,000 a year. I have no idea how much money he has in the other portion of his portfolio.

Al: Doesn’t say that. I guess- so with what we know, I would say, well, first of all, I don’t think real estate is a great substitute for bonds because with bonds, you can sell and get cash the next day. Real estate you cannot.

Joe: It’s very illiquid.

Al: Illiquid. Now you do get similar income maybe. Maybe you get a little bit better income on real estate, depending upon where you’re located in the country, maybe. But maybe the income is somewhat similar, but the liquidity is not. So I don’t really think it’s a substitute for bonds. However, you know what? I don’t really know what your other assets are. And with 11 single-family homes, I’m hoping you’ve got a pretty good chunk of cash just for-

Joe: Maintenance?

Al: Well, for maintenance, for market crashes, for loss of tenants, for new vacancies. Blah, blah, blah, blah. I’ve lived all that. And it can be tricky. I think if you got plenty of cash for your rental properties and you’re basically almost covering expenses from the rentals, I wouldn’t worry too much about it, but we don’t really have enough information. I wouldn’t sell real estate to get bonds. If you feel like you want a little bit more safety and have a little bit more fixed income in bonds, you could sell some of your equities, maybe, but I don’t know. I mean, based upon what little we know about you, it seems like you got it pretty dialed in.

Joe: Yeah, I mean, he’s covering his fixed expenses.

Al: Yeah, that’s the main thing.

Joe: Right. And then do you have enough cushion? Do you have enough cash? Do you have enough reserves just in case something happened just as Al said?

Al: See here’s what can happen. So we have another Great Recession. Properties go down in value. People are losing their jobs. They can’t afford to pay the rent. So now you’re not getting a $100,000 a year. Now you’re getting $20,000 or zero or negative $10,000. Whatever the number is. And now at the same time, your stocks are down. But now you’ve got to pay your bills, right? So just be aware that’s what you have to think about here.

Joe: All right, great question, Don.

How much money do you need in retirement, and how does your retirement account balance stack up right now? What’s your contribution rate? How much of your portfolio should be in cash? Are your assets properly allocated? Learn how to answer these questions find out how to manage your assets at any age in the Portfolio Tracker guide, available for free download from the podcast show notes at YourMoneyYourWealth.com. Just click the link in the description of today’s episode in your favorite podcast app to get there. You can say thanks just by spreading the love and sharing the knowledge: tell your friends and colleagues about YMYW and all the free financial resources.

State Pension Options: $21K at Age 55 Plus $13K Sick Time, or $30K at Age 62? (Rich, NY/NC – voice)

Joe: Thanks for joining us once again. Go to YourMoneyYourWealth.com. Click on Ask Joe and Al On the Air. We’ll answer all and any questions that you have. Just like Rich did.

Rich: “Good afternoon, Joe and Al. My name is Rich. I currently live in New York. However, we will be moving to North Carolina in the next year or so. My question is, my wife works for a school district and she has an opportunity to get a pension at 55 years old for $21,000 per year. Or at 62, it would be $30,000 a year. A pension does have a cost-of-living adjustment because it’s a state pension. Now, if she takes it at 55, she will also get a payout of her sick time into her 403(b) of about $13,000. Or if she takes it at 62, there is no payout of the sick time, the school district won’t let her keep the money and she would just get $30,000 and it would start at that point. Now, I don’t know what I should do. Should we take the $21,000? We don’t need it and just totally invest it? Or wait until 62 and get the $30,000? I figure if we bank it, if the tax- it might be about a $100,000, but we also have to take into the account the sick pay that’s being put into the 403(b), what that could grow to. So let’s say everything is a $125,000. For a $125,000, can I regenerate the $8,000 a year or am I just better off waiting? Your expertise are appreciated. In addition, we have a $1,000,000 in pre-tax retirement, $25,000 in brokerage, $100,000 in Roth and $80,000 in non-qualified annuities, and we make about $200,000 combined right now. Thank you.”

Al: All right, Rich. Thanks for the question. Hey, you’ve been calculating stuff.

Joe: No, I was just-

Al: Let me start. Really, the best answer here is more sophisticated financial planner software to figure this out. However, here’s what I did with my simple mind, which is I just said, okay, if you have $13,000 now, and you put in $21,000 a year for 7 years, first of all, I did it without tax. So I’ll qualify that right off the bat. And it came out to about $200,000 that Rich would have. With tax, you know, probably- probably closer to what he thought, maybe $125,000, maybe $150,000, but let’s just say $125,000. But if it was $200,000 he had, I would be likely to just go ahead and do that because 4% rule $200,000, $8000, you’re in about the same place and you’ve got access to those funds anytime you want. However, I think- as I think about this, when I think about income taxes, I think I would probably not do it because you’re not going to end up with $200,000. You’re going to end up with something quite a bit less. And then I would just have, Rich, I’d have your wife as she got closer to retirement 62, just take more sick time, just take some more mental health days, use that time, and have fun. So I probably- I would probably wait is what I would do.

Joe: So what he’s asking is that- it’s like a Social Security question, right? So you take it at 62, I get $21,000, if I wait until full retirement age, I get $30,000- which is a better deal?

Al: Yeah, and you can do break-even, but then you’ve got to figure taxes and it’s-

Joe: And if you just look at simple math at- let’s say they live until age 85, you take it at 62, roughly they’re going to- and then you add another $13,000 on it. You get about $640,000. If you wait, and you die at age 85, you’re going to get $690,000. And so I mean, the delta is not that huge.

Al: Yeah, that’s kind of the same conclusion. I just felt like if there was no such thing as income taxes, I probably would go ahead and take the money and start banking it and investing. But because of taxes, I think that changes my mind to just wait to get the $30,000 at age 62.

Joe: Right. But if you take the money, it depends on all the assumptions that you want to make.

Al: Sure. I just used 6% is what I did.

Joe: But if you get 8%, you’re going to be way off. If you get 4%-

Al: If you get 2%, forget about it.

Joe: -it’s going to go the other way.

Al: Correct.

Joe: So it all really depends on the assumptions that Rich wants to make. So if he wants to be aggressive and he doesn’t necessarily need the money and it says, you know, I want a full stock portfolio. And maybe I want to be in asset classes that are a little bit more volatile or risky to even boost a return even more over a certain time period. Well, the numbers are probably going to work in his favor long term, right?
Because if you look at the delta of return here, it’s probably 3%. I don’t know. I would have to do the present value.

Al: I guess the message- and I sort of came to the same conclusion. It’s not that big a deal. One way or another, they’re somewhat equivalent, right? We also can get into life expectancy. Are you guys healthy? Great. If not, if you have impaired life expectancy, maybe you go ahead and take the money and enjoy your life and go from there.

Joe: But I think what I would be looking at this as is just a guaranteed income stream.

Al: Yeah, me too.

Joe: And I would push it out and get the $30,000 because it sounds like he doesn’t necessarily need the cash.

Al: He doesn’t. And this whole thing is predicated on him saving it. So it’s the same thought as Social Security, which we typically say, wait as long as you can, because it’s a longevity play.

Joe: Right. A lot of things can happen over time. You know, if you have a guaranteed $30,000 coming in, plus your Social Security, I mean, that’s a pretty good floor. And maybe you want to take on a little bit more risk in your other assets because you don’t necessarily need to take that much draw. So you can look at- you could slice and dice this many different ways.

Al: You sure can. I agree.

Joe: Depending on how in depth that you want to get, you might be splitting hairs here.

Al: Well, and I think you said the key. The key is what assumptions are you using because that’s going to give you your answer.

Joe: Right. How much money does he need to live off of on an annual basis? And when is he going to fully retire and what is his other fixed income sources? And he has a really good-sized nest egg.

Al: That’s right. That’s right.

Joe: It sounds like he’s a good saver. And he’s moving to North Carolina.
So he’s getting out of the big city of New York. He’s probably- his life or his living expenses are probably going to go down.

Al: Go down and probably more relaxed, live longer.

Joe: North Carolina. Come on. You’re going to live until at least 100. So I don’t know.

Al: But that’s what I would do. I would wait till 62 and take the $30,000. That’s what I would do. Based upon what I know here.

Joe: Yeah, I think I would do the same. I would do the same.

Which Funds Should We Use to Bridge the Gap Until Collecting Social Security? (Jeff, San Diego)

Joe: “Joe, Big Al and Andi, I’ve been listening to your podcast for several years now and very much appreciate the information you provide and a side of humor. I’m 61 and my wife is 60. Assuming we retire at age 65, we are projected to have approximately $2,000,000 in retirement savings, $200,000 in a Roth, $1,800,000 in pre-tax accounts. Plus $300,000 in an after-tax brokerage account and $200,000 in cash.” Okay, so he’s got $2,000,000 plus $500,000 outside of retirement accounts. $2,500,000.

Al: Yep.

Joe: “Would like to delay collecting Social Security until 70 to maximize my benefits while my wife would like to collect hers at age 67. We expect to need about $120,000 to $140,000 per year. What would you- what would be some spitball strategies to determine where to pull the funds during the 5 years before I start Social Security? One idea is to pull 4% from my pre-retirement tax accounts and then the rest from the brokerage account in cash. The idea is to spend down some of the pre-tax savings before the RMD’s kick in. Some of the brokerage cash withdrawals could be reduced once my wife starts receiving her Social Security benefit. At 70, I would expect my Social Security benefit to be about $54,000 a year. And my 67- and at 67, my wife’s benefit would be around $18,000 a year. At that point, we wouldn’t need to draw as much from our brokerage and cash accounts as well as the Roth account could be earmarked for any significant medical or long-term care expenses that may arise later in life. Is this plan making sense? Thank you and keep up the good work. Best, Jeff from San Diego.” Good question. So he’s got a plan, Al. And I don’t hate his plan. But I think- I think we probably have something maybe a little bit different that could enhance his situation maybe.

Al: I think so too. This looks good in terms of it probably working based upon the spending. Although now you’ve got to step period, right? It’s like how do you pull money out to pay for the bills between 65 and 70 when you’re not- when you’re not taking your Social Security? And Jeff, you plan is fine, but there’s a better one. So you got to take a look at the tax brackets. And so the top of the 12% bracket for this year in round numbers is $90,000 for a married couple. And you get a standard deduction of about $25,000, right? So in other words, you get that for nothing. So you can add the $90,000 and the $25,000, which means you can have a $115,000 of income and stay in virtually the lowest tax bracket. So you want to maximize that. So $115,000 should come out of the pre-tax retirement accounts. Some of that should be converted to Roth conversion. Some of that may be you live off of, you kind of balance it out. If you want to go extreme, you live off your cash and your brokerage account 100%. And you convert $115,000 in a low tax bracket and end up with a lot more in a Roth. If you want to kind of mix and match, you can do that too, but make sure that you maximize that low bracket because right now your current plan, you’re not maximizing the 12% bracket, you’re wasting some of that.

Joe: Spot on. Because at that 12% tax bracket, it’s probably going to go to 15%.

Al: Yeah. Right.

Joe: And so can you get money on a pre-tax retirement account at ordinary income rates at the lowest rate that you might ever see in your life? And so you absolutely don’t use the 4% rule. Use the tax bracket rule. So look at the top of the 15%- or the 12% tax bracket and it’s a $115,000. What I would do, you might convert the whole $115,000 one year so you get $115,000 in year, right? And then you live off of cash in your brokerage accounts, and then the next 4 years, you might split it up a little bit, depending on what the need is. Maybe you go back to work part time and make a couple of bucks. But look at the tax brackets, don’t think about the 4% rule at all. The 4% rule is garbage, in my opinion, when you’re looking at distributions. You don’t want to use that. It’s a good gauge of rule of thumb to determine how much capital or cash that you should have at retirement. But not taking 4% out of your portfolio every year. You don’t want to do that because you could blow yourself up depending on what happens with the overall markets. So especially in his case, because he’s got monies in the Roth account, he’s got money in a retirement account, he’s got a brokerage account, he’s got cash. So he’s diversified somewhat from a tax perspective.

Al: That’s right.

Joe: But he’s heavily overweighted in the retirement account. So if he’s going to pause and not take Social Security until age 70, his wife has got a few years. So you get this dub period. You know, you can control your taxes way more in retirement than any other point in your life. And so this would be a huge opportunity for him to get money, bleed it out. I like where his head’s at. He’s like, I want to bleed some of this money out in that low bracket, but go to the top of the bracket and then probably do some conversions. So great question. Love it. Thanks, Jeff.

The next few questions are all about Social Security and Medicare. Arm yourself with the information you need to make the most of your benefits from these two critical retirement programs, download the Social Security Handbook and the Medicare Check-Up Guide from the podcast show notes at YourMoneyYourWealth.com. Learn the basics, who qualifies, the nuts and bolts of both Social Security and Medicare. Find out how get all the Social Security benefits to which you’re entitled, strategies to choose the best Medicare coverage for your specific needs, and much more. Click the link in the description of this episode in your podcast app to visit the show notes and download The Social Security Handbook and the Medicare Checkup Guide. You’ll find them right before the episode transcript.

When Will I Receive Spousal Social Security Benefits? (Sharon)

Joe: Sharon writes in, Al. “How do I find out when I get my spousal benefits?”

Al: Wow. Okay.

Joe: Well, I don’t know. Talk to your spouse.

Al: Well, I assume because you said spousal, your spouse is living. If your spouse is deceased, then it’s survivor benefit, but maybe we could touch on that.

Joe: How do I find out when I get my spousal benefits?

Al: Well, why don’t we talk about how do you get a spousal benefit?

Joe: I mean- how do I find out? I don’t know how the hell do I know?

Al: She’s asking us.

Andi: Apparently, this is somebody who doesn’t realize that you actually have to apply.

Joe: It just appears. The spousal fairy shows up at your door.

Al: Well, let’s talk about the rules, Sharon. So first of all, your spouse under the current rules has to be collecting benefits for you to get any benefit. So that’s number one.

Joe: Okay, and the spousal benefit is going to be half of your spouse’s benefit.

Al: Yeah. Right. And if they took it after full retirement age, it’s actually going to be half of what it would have been at full retirement age plus inflation. So that’s what it would be. How you get it is you apply for it-

Joe: -through the Social Security Administration.

Al: That’s right. But you have to be careful because if you apply for it before your full retirement age, you’re going to end up with a discounted Social Security benefit for life. So just be careful about that.

Joe: So yeah, you could take a spousal benefit as early as 62, if you take it at 62, it’s going to be discounted.

Al: Right. Forever.

Joe: Forever. Yeah, you lock in that discount forever. So and if you wait until 70 doesn’t make any sense because you’re only going to get 50% of the full retirement age benefit from your spouse. So take it at full retirement age or if you do take it early then take it early.

Al: Now on the other hand, if she meant survivor benefits, which is what you get when your spouse passes away, you’ve got to apply for that too, right? And so you contact Social Security Administration, they’ll ask for a copy of the death certificate. And just follow their instructions and I just did this for my mom because my dad passed away last year and it takes a while. But here’s the good news is they do catch you up, right? It was 6 months late, but we got one big deposit for what we would have gotten. So anyway, but yeah, contact your Social Security Administration office and they’ll get you all figured out.

Joe: So yeah, two things, just to recap, there’s a spousal benefit which is you’re taking half of your spouse’s benefit, but both of you are collecting a benefit. One spouse is alive. The other spouse didn’t have enough earnings on their record to have anything worthwhile. So instead of taking money on their own record, they’re going to take half of their spouses. So the spousal benefit, again, you can take as early as 62, probably makes sense to push it out, depending on your overall situation, who knows? But your spouse needs to be claiming that benefit for you to get the spousal.

Al: Yeah, and the survivor benefit is if your spouse passes, you actually get the higher of the two benefits.

Joe: Because you lose a benefit.

Al: Because you lose one of the benefits, the lower of the two. And then, of course, for our Social Security experts out there, there is deeming rules, and this is actually a little more complicated than what we just said, but that’s the gist of it.

Spitballing a Spousal Social Security Claiming Strategy (G, Philly)

Joe: Let’s go to G from Philly. “Joe, Al, Andi, love the show. Great mix of knowledge and entertainment. We drive a Nissan Moreno and a Subaru Accent. I love them both. I’m a light beer drinker i.e., Mich Ultra, Corona Premier, Coors Lite.”

Al: You can relate to that.

Joe: I can. “My wife enjoys some Patron on the rocks every now and then. Every now and again or every now and then. Life is good. Life is better, with Patron. “My wife will reach her full retirement age at 66 and 6 months in August 2023, but her benefit is minimal, about $600. I am planning to take my benefit, starting January 2024 at 69 years and 3 months.”

Al: That’s not two months or 4. Let’s do it at 3.

Joe: It’s pretty precise. 69 years and 3 months. “My full retirement age was 66. So based on other income from the sale of a business and tax implications, we have determined that this is my optimum Social Security benefits start date.”

Al: Okay. So I’ll calculate it.

Joe: Wow. He’s tight. 66 and 69 and 3 months. “My thought is that she should take her benefit at her full retirement age in August and then switch to her spousal benefit when I start taking my benefit in January 2024. I have a few questions. Is my spouse able to file for her benefit and then switch to the spousal benefit as I have planned? Will the Social Security Administration automatically switch her to the spousal when I file my claim or must we request that she be switched to spousal? Thanks for supporting all of the do-it-yourselfers.” A little DIY. So good question G. Since you’ve got this dialed in to the penny, I would imagine that you probably did the calculation. Let’s just say if you did claim it today, your wife would then be eligible for the spousal benefit, which would be half of your benefit. At your full retirement age. You’re 69 years old. Or 68 years old. So you still have a larger benefit than you do at your full retirement age, your wife is only going to get half of your benefit from your full retirement age. Whatever that delta is. Because you’re pushing it off, I don’t know, maybe 8, 9 months. So you get an 8% delayed retirement credit each year that you hold off taking your benefit from full retirement age. So because she’s not claiming- her benefit $600. So yes, she can claim her own benefit on her record because she doesn’t- she’s not eligible for the spousal benefit because he hasn’t claimed.

Al: So she can start hers and then switch to spousal.

Joe: Correct. But what’s the spousal benefit? If the spousal benefit is, let’s say $2100, they’re leaving maybe $1500 on the table, is that worth whatever calculation he’s running to make sure that he takes it at 69 years and 3 months.

Al: You’re talking about today versus the future. Yeah, I agree with that. But yeah, but when you start claiming, she can claim half of your benefit at age at full retirement age plus with inflation.

Joe: Right. If her full retirement age is August, I believe. Maybe you claim yours in August so she can get the full benefit. Whatever the delta is. Or don’t. And then she could get her $600 and then once you turn- once you claim your benefit, it would switch to the spousal. It doesn’t automatically happen. I would probably talk to the Social Security Administration. Set an appointment. Maybe go into the office. Make sure that you get it.

Al: Yeah, it’s kind of like does the IRS tell you your return’s wrong and send you a refund? No. You won’t get Social Security doing that either.

Joe: Yeah, you probably need to be a little bit proactive. But G, I want to know a little bit more how you were that precise because I’ve been giving people financial advice for over 20 years. And I don’t think I’ve ever said, you know what? 69 and 3 months.

Al: It’s because of the month. Because that’s what the calculation said.

Joe: Because the tax benefits, usually the tax doesn’t really come into play, right? Because he’s over full retirement age. I got to just talk this through. So you’re over full retirement age. You’re not going to receive a reduction in benefit if you have higher income, right? And I would imagine for someone that has it this precise and this dialed in, I’m guessing that 85% of his benefit is going to be taxed anyway.

Al: Yeah, probably. But I guess he’s thinking, he’s selling a business. So maybe whatever that business year business falls in, maybe 69 and 3 months is the following year. Maybe.

Joe: So that’s January? At 69 and 3 months?

Al: Yeah. And maybe he’s in a 12% bracket instead of something-

Joe: Okay, well, no, I buy that. Instead of saying 69 and 3 months, why don’t you say I’m going to claim it in a January?

Al: The year after I sell my business, which is around age 69. Then we’d follow you.

Joe: It’s around 69, 3 months and 4 days.

Do We Have to Register for Medicare If We Aren’t Going to Use it? (Jim Santa Cruz)

Joe: Jim from Santa Cruz calling again. “I’ve now been listening to your podcast for over 5 years, which means one of two things. I’m learning a lot or I’m a slow learner.” 5 years, that’s dedication.

Al: That’s a lot.

Joe: “Instead of my normal tax dodge questions, I’ve got a new topic to discuss.”

Al: Social Security.

Joe: Wow. Wow, we’re hot today. “My wife turns 65 in July of 2023. She began drawing Social Security benefits last Summer. She is a covered dependent on our group health insurance offered by my employer. We prefer to continue using our existing insurance and do not wish to begin utilizing Medicare and we do not want her Social Security debited at each month for premiums. Under these circumstances, is she required to register for Medicare during the 3 months before or after her birthday? If so, how do we prevent deductions from our Social Security checks? Oh yeah. I’m still listening to you while doing the stairs at Apatos Beach-“ right? Apatos?

Al: Aptos?

Andi: I think it’s Aptos.

Joe: “-Aptos Beach which was totally destroyed in this month’s storms. I’m still driving the old Honda CR-V. Except when I’m enjoying a Sierra Nevada pale ale. Thanks always for the great show. Jim from Santa Cruz.” All right, well, this is right in your wheelhouse here, bro.

Al: Because of my age? Yeah. Jim, the answer is you gotta, yeah, you can. She does not have to take Medicare. I would go ahead and have her take Medicare part A because there’s no additional cost to you. But part B is what you’re talking about. And so just contact the Medicare- contact Medicare, probably two, 3 months before she turns 65 and say, you know what? I don’t want it. So don’t- don’t turn it on because they will assume that she wants the Medicare part B at age 65 unless you tell them. So that’s the step here. Just contact them. Have her contact them and say, I don’t want the part B, go ahead with the part A, but I don’t want the part B.

Joe: Because she’s already covered on another plan.

Al: That’s right.

Joe: And here’s that against the caveat or the catch is Jim’s asking the question is because she’s already enrolled in Social Security. And so once you’re already enrolled in Social Security, it automatically enrolls you in Medicare.

Al: That’s right. At age 65.

Joe: At age 65.

Al: Unless you tell them otherwise.

Joe: So if Jim didn’t do anything, she would get her Social Security check and then there would be part B premiums coming out. It was like, okay, now we’re double covered here-

Al: -which we don’t need.

Joe: Exactly.

Andi: Can you sign up for part B later if you need to?

Joe: Yeah, if you have, well, there’s penalties, right? So if you don’t sign up for part B or part C-

Al: Part D-

Joe: Part D, the prescription drug? If you don’t, then there’s a penalty for each month and year that you delay, if you don’t qualify for the delay, that you could. And she does because she’s already covered through another healthcare provider.

Al: She’s covered through her spouse’s plan, which although there’s this weird rule, which is the plan has to be 20 people or more. So I don’t know why they have that rule, to be honest. But anyway, so presuming that’s the case that she’s- that Jim’s got a health insurance with 20 people on it, then yeah, she can wait until he retires and they don’t have Social Security, assuming he’s talking about himself. He’s like- isn’t this the guy that’s always talking to third person with Jack and Diane?

Andi: Always talked about Jack and Diane, yeah.

Joe: Is this Jim? Jim says the Jack and Diana one?

Andi: Yeah, those are his tax dodge questions that he was mentioning earlier.

Al: That’s what I thought. Anyway, so that’s yeah. So she can do it as long as she’s on an employer plan of Jim, assuming it’s his plan.

Joe: If there’s 20 or more employees.

Al: And 20 or more employees.

Joe: Got it. Okay, cool. Thanks, Jim. Long time, no talk. Sorry about the beach that got destroyed.

Andi: Sitting in the sauna, voice to text, and baby YMYW in the Derails, so stick around. Help new listeners find YMYW by leaving your honest reviews and ratings for Your Money, Your Wealth in Apple Podcasts, and any other podcast app that accepts them.

The Derails



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