Transcription
She was like some sort of regional manager or something like that, but she spent a lot of time lifting bags and bricks and everything like that. She ended up getting injured. Comps run out, and then the last actual thing that she can use is Social Security.
Um, so planning phases of it, I'm trying to help her. Calling into Social Security, and I intentionally called in three different times. Three different people asked the same question. How many? How many different answers do you think I got? Okay. Sounds like some of y'all have already had this experience. Okay. So, the reason that is, is because Social Security is not allowed to give you any advice. They're only allowed to give you information. Sometimes that information. So, that is the reason I'm here is to give back because nobody helped my mom. Okay.
So, I am a national Social Security. I'm also, and you might see some agents in the back here that are helping out. I also have Mama Bear here. She is the rock that holds this crazy town together. Um, you guys met her on the way in, and she'll be collecting all the sheets on the way out. So, um, up on the screen here, you will see my beautiful family. Right here is my beautiful wife, Kim. Uh, she always looks that good. I don't. She is a hair stylist right outside of Sun City. We moved here in 2019 from Southern California. Don't shoot me. I promise I'm not that California. I swear to God. But we absolutely love it here. Wouldn't move back if they offered me a large sum of money.
Here in the middle is my little ninja. This is Bri. She just turned 11 yesterday, and she's already a black belt. And yeah, really proud of her. It's not a participation black belt either. She actually had to learn all the material that all the adult black belts know. So, really proud of her. She'll be able to kick some boys in the neck later. And this is our most recent trip to Hawaii. It was Bri's pick. So she did the most expensive way to go. But that's my tribe. That's my inspiration. That's why I strive to be better.
So, getting started here is a disclaimer about this class here. Okay. This class was designed to talk about specifically Social Security. I've been to seminars who say, "Hey, come learn about Social Security." They talk about Social Security for about three minutes, and then they try to sell you a time-sharing in Mexico. Okay? That's that's not this. Okay? This is all high-level information that pertains to and is Social Security. Okay?
Um, also at the bottom here, at the end of the presentation, you'll have the opportunity to meet with me for the second part of the class because today, first part of the class, all high-level general information about Social Security. The second part is where we can meet one-on-one, and I have a piece of Social Security software that I use that we can actually print you out a 29-page report with different filing strategies, filing now, later, full retirement age, 70, whatever that your your situation may be. So that's the second part of the class.
But to begin, let's go over some frequently used terms. FRA, that is your full retirement age. That is at the age to where you will receive your primary insurance amount with zero reductions. Does anybody know why your Social Security benefits are called the primary insurance amount? Anybody have any idea? Social Security is one giant annuity going to pay you back the money that you put in first, right? Uncostation. Um, and then it's going to pay you that for the rest of your life. It's a pension. Okay. SSA, the Social Security Administration.
Now, how did Social Security all begin? Social Security began back in 1935, and the first payment was received in 1937. And this is Ida Mae Fuller. And there's a reason that she smiled. Ida Mae Fuller put a total of $22.54 into the system, and by the time that she died, she collected just under $23,000. That is a 92,000%. Who here thinks they're going to get a 92,000%? Nobody. Okay, we would have to have that one-on-one sooner if you raise your hand. Uh, the point is, and and why I share this is because a lot has changed obviously, and this is no way to stay solvent. Even still, there's some problems going on with Social Security, which we're going to get into here in a little bit as well. But I am Ida Mae Fuller. Teaching is almost 100 years old. Back in those days in the '30s, life expectancy was what? Mid-60s, right? You had to be 65 to claim your benefits. So then the government was like, we're going to win on this one. And then people started living really, really long, and that became a problem. Okay. Some of those problems we're actually witnessing today.
So, moving forward, speaking of the problems. Okay. A lot of lot of stuff in the news right now. I'm in the camp of all the, but there is some statistics and real numbers here to work with. Social Security trust fund is projected to run a deficit by 2034. That means over the next 30 years, the program will have unfunded obligations of $7.7 trillion. We're just talking about the Social Security trust fund. We're not talking about the hospital insurance trust fund, better known as Medicare. Not talking about, just talking about Social Security. So, is anybody else in here numb to the trillion-dollar number? It's getting thrown around like it's nothing, right? Trillion-dollar bill, this trillion-dollar bill passed in the house, 30-some odd trillion dollars in debt. If I got paid a dollar every second, you know how long it would take for me to get to a trillion? That it would take me 31,700 years to get to that number. Like I said, just thrown around like we haven't just printed out. Right.
Um, what are the solutions for this problem specifically? Well, a few bozos in the House of Representatives and Senate have been thrown around a few ideas. The first idea is extending the FRA, the full retirement age, to later years. Now, this probably won't affect me at all, but it will affect me. I might not be able to take my Social Security until 85. If I get a call, which I'm not. But they are also talking about increasing taxes. How many people think taxes are going to go down in the future? Cool. Uh, a few really, really dumb bozos are talking about cutting benefits. I'm sure you guys have heard this on the news. Once again, when I see it, there's only been a few that have actually, on the record, saying we need to do this. Now, if you know politicians like I know politicians, they love their power. So if they cut the largest voting blocks ever created, baby boomers, they cut your benefits, political suicide, right? You're not going to get voted back. So I don't think they're going to do that. But what I do think they're going to do, and what they do with pretty much everything else, is just print more money and bail it out. Not to start any rumors, but I heard they've done this a couple times. So, but anyways, moving forward.
What is your full retirement age? Okay. Based on your, the year that you were born, next to your year is your full retirement age. If you're born in 1960 or later, your full retirement age is 67 years old. For every one year before that, just two months, all the way until you get back to 1954. So, 67 is the new 65 for baby boomers.
Now, I get asked a few specific questions all the time. The top ones. Okay. When do I take my benefit? Well, let's try to tackle that one right now. How long you going to live? >> Anybody know? >> Be a lot easier to plan for this stuff. I'm pretty over 100. My grandmother. >> My dad and mother are both still living. My mom just turned 90. My dad turns 92. >> So you got a lot to think about. >> So you're on the right side of this coin. Okay. So if you're female, age 60, you have a 50% chance to live. If you're a male, age 65, you have a 50% chance to age. That's literally a coin. People always think of this scenario here. Okay, I live till 90. If you live till 90, then how much longer you going to live after, right? So, a lot of people that I meet with have heard this or have family health history that tells them they're going to live to a certain age, and they plan their retirement and underfunded it for that specific company. So, on the question of when to take my benefits, a lot more comes into play. Family health history, life expectancy, any other assets and savings that you may have, all that kind of good stuff comes into play. Social Security is never meant to be the end-all, be-all in retirement. It's a three-legged stool. Your Social Security, any pensions that you may have had, which are by the way growing obsolete due to the 401k, and any investment savings, that's your retirement, not just Social Security. And a lot to look at there. We look through all that on the second part of the class and try to get down to the bottom. Okay.
Now, another question when I ask folks, when do I take my benefit, right? Well, are you still working? And that's something else to consider because as soon as you're eligible for your benefits at age 62 years old, that's when everybody's eligible to take their benefits. Don't let, don't think Uncle Sam is going to let you buy by taking it early without penalizing. So up on the screen here, you can see it full retirement age, and I'm just assuming 67 is the full retirement age. For every, if you were to take your benefits at age 62, you're going to face a 30% permanent reduction in your primary insurance, 30%. We're going to get to the other stipulations on collecting your benefits here shortly, too. But I do also want to go over the 8% rule. Does everybody know what the 8% rule is? Okay. So, for every full year that you wait to take your benefit past your full retirement age, you're going to get an 8% increase in your monthly benefit. 8%. Now, remember on the, uh, what is your full retirement age screen to where some folks' full retirement age is age 66? What does that mean for the new full retirement age 67? 70 is the max. Okay? If you're in this room and you're over 70 and you have not taken your benefits, go file because you're not getting any more money at it. Right? So the the rule for the 66-year-old at the full retirement age, they have four years for the 8%. A lot of people don't know they're raising the full retirement age to 66. 8% got taken off of their actual lifetime benefit. If they now, it's only 24%. Everybody just say, crap, I have to wait one more year. No, they actually took away 8%. That's a big deal. So the closer to God that you get, the more that they're going to pay. That's basically how it works. And that works with your pension. If you guys do have a pension, you're a teacher, firefighter, something like that. Same way it works with pension. It's exactly how it is. That's why they call it insurance. Okay.
So, moving forward, another thing to consider when actually trying to figure out when to start your Social Security benefits is what's called the break-even analysis. So, up on the screen here, this is a tale of triplets. Three brothers. They work at the same job, same town, same manufacturing facility for the same amount of time. Brother number one says, "I am tired of this factor. I'm calling quits at 62 when I'm first eligible for my Social Security." He files for his benefit at age 62 and he starts to collect $8,400 a year. Brother number two says, "Man, you're crazy. I worked hard for that money that I put in there, and I'm not having to reduce my benefit by any means. I'm going to wait till my full retirement age and start to collect a thousand bucks a month." Brother number three says, "Man, you both are crazy. I'm going to max this thing out, and I'm going to wait more money than you in retirement." So, he files at 70 and starts to collect $14,880. Now, the highlighted blue areas here are how much farther brother number one is ahead in total deposit security than brother number two. Same with brother number two and brother number three. And if you look, it takes about 11 years for brother number two to catch up to brother number one. That adds up. Same thing with brother number three trying to catch up to brother number two, takes about 11 years just based on these strategies here. But let's say brother number three did wait till he was 70 to, and then he died at 72. How much money did he miss out on? It's easy to find out. They missed out on $84,000 or take us. So, not the only reason to file for your benefits. There's a lot more to it. A lot of people see this and they're like, "Oh, I'm just going to break even. I'm just going to file now." Hold on. There's a lot more to talk about. This is just a visual graph of the break-even analysis here. And through those three strategies, they all break even about age 80 years old, right? So when are you going to enjoy the money the most? Your knees are still, um, so yeah, I mean, moving forward, if you are considering collecting your benefits early, there's also the earnings test that you have to be aware of. The earnings test goes like this. If you are under your full retirement age and you start collecting your benefit, Uncle Sam is going to limit the amount of money that you can make on wages and self-employment. Uncle Sam says if you're collecting under your full retirement age, $1,950 a month is all that you can make. Or else for every $2 of earnings you go above the limit, they're going to withhold $1. Now, the year that you reach your full retirement age, Sam says, "Hey, thanks for keeping money in that trust fund a little longer. We're going to allow you to make some more money. Thanks." Uh, $5,180 a month is the cap in that scenario there. Now, in this case, for every $3 of earnings you go above the limit, they're going to withhold $1. A lot of people look at me and they say, "That doesn't sound like that big of a deal." In this example, I go over $10, they withhold $5. If Social Security has to just withhold $1 from your check, they're going to withhold the whole month's check. Very, very important on the planning part on that aspect.
So, like for instance, with my mom, she now works at a thrift store. Her nickname is Auntie Talking. She loves to talk to people. So, she gets to fold clothes and just talk to people all day. It's perfect. So, all we did was we calculated the maximum amount of hours that she can work, and she just adjusted her hours and time not to go over that limit because now she's relying on that subre. So, the month that you reach your full retirement age and beyond, there's no limit. Go make as much money as you want. You're welcome. >> Yes. The $23,000 and $62,000 is earned income. It's not income off of investments or anything like that. >> Correct. Yes. Wages. Ernie looks at wages and net profit from self-employment, interest, dividends, guaranteed income, annuity payouts. None of that applies. Simply wages. >> Yes, sir. >> What about, um, income from rental properties? >> That is not wages. >> Just making sure. >> No, you're good. Now, it also depends. I mean, that's something else to kind of dig into because is that count you 1099? Is that your from self-employment? How is this how is it structured? All stuff, right? >> So, yeah. Any other questions on the earnings test? >> You ever get that back when you reach >> You get it back very, very slowly. Very slow. >> Yeah. Yeah. They they'll adjust your benefit at your full retirement age. It's it's kind of a complicated aspect there, but every amount that they've withheld, they're going to pay you back January 1st, the next year, and then they use the remainder of that benefit and recalculate it at your full retirement age. They make that one real easy for me to explain.
Um, okay. Spousal benefits. There's two sections to this part here. Spousal benefit, both of you guys are still alive. Survivor benefits, someone has passed away. Okay. We're going to get into ex-spousal benefits. So, the rule of the spousal benefit states that the higher, sorry, the lower income earning spouse is eligible for up to half of the higher income earning spouse's benefit earning credit for retirement. So, in this example, Jeremy has a primary insurance amount of $2,500. Samantha was a homemaker. She didn't work outside the home. Okay. Her spousal benefit is half of Jeremy's, $1,250 that she's eligible. Bringing the total deposits in the household from Social Security per month, $3,750. Different example. Samantha did work. She has her own benefit coming in. Samantha files for her benefit when Jeremy files for his benefit. That's the new rule. Okay. So, in this case, Samantha has $1,000 a month coming in. Half of Jeremy's benefit is still $1,250. So, there's a $250 spousal benefit. I kind of rushed through that last part that I said. In order to collect your spousal benefit, both must be filed. It used to be to where the lower income earning spouse could collect the spousal benefit while Jeremy, in this case, continued to work to get his higher benefit. They didn't like that. >> Of course. >> They didn't like that. >> Yes, ma'am. >> But what if Samantha's older than Jeremy? >> What if she's older? >> Yeah. What if she hits her full retirement before Jeremy? >> Uh, that's great. >> She can still do that. >> Yeah, because we'll get into the reductions right now. So, the spousal benefit does go on the spouse's age. So, if she's older than Jeremy, there's not going to be, and if she's younger than Jeremy, there's a long time before she files. >> You'll see, you'll see here coming up. So, >> Yeah. If there's a big age gap, then I mean, depending on what she's eligible, right? If it's like a 10-year gap or something like that, >> she's just going to receive half minus the reduction. It's like he retired. I was 62. >> So I get what he would have gotten at age 62. Part of what he would have gotten at age 62. >> Right? Yeah. I'll show you. >> So in the final example here, Samantha's benefit is already $1,500. So there is zero spousal benefit in this case. So she's at or above the halfway mark of Jeremy's. No spousal benefit. Okay. >> What if Samantha worked at a school district? >> Samantha gets all of her Social Security. >> I thought that was a rule, but it wasn't. I've just like anybody else. >> Correct. So, the one of the only thing good things that have happened to the actual Social Security legislation in a long time was the Social Security Fairness Act, and that completely repealed the Windfall Elimination Provision and the Government Pension Offset, which has to do with uncovered pensions. So teachers, firefighters, government workers, things like that. It used to be to where your Social Security benefits would be cut more than in half. Now that went away, so you get all of your benefits. And you mentioned >> I'm glad to hear that. >> No, totally. Yeah. So, my dad was ex-law enforcement, and he got a big in this. He actually got some as well. >> It is true. Okay.
So, once again, you are going to have your benefits reduced on your own primary insurance amount and the spousal benefit. Look at the reduction on the spousal benefit at age 62. 35% reduction. Not only are you getting a 30% reduction in your own benefit, but anything left on the spousal benefit is going to suffer 35% permanent reductions. Now, the rule of the spousal benefit rule, I run into this quite a bit, and a lot of folks that I meet with have had or have a financial advisor that they for a long time, decades ago, okay, which is totally fine. It's not common. But there is a common theme that I run into a lot. How many people in here have heard, "Wait till 70 to take your class. You're going to get the most out of it." Just wait till that. That doesn't work all the time, and I'll prove there is no 8% increase or any increase on your spousal benefits. None. Okay.
Now, in order for me to prove what I just said, we're going to look at Samantha and Jeremy. In this case, Samantha has a $500 primary insurance amount to it. Jeremy still has his $2,500, leaving the spousal benefit at $1,250. Okay. Samantha takes her benefit early, she gets that 30% reduction. She takes it late at 70, she gets $612. Now, if Samantha files for the spousal benefit at her full retirement age, she's going to get $1,250, up to half of Jeremy's. If she files early, there's that 35% reduction on her spousal benefits. Total deposits monthly is $837. Here's why 70 doesn't work all the time. Samantha's going to get the exact same amount at 70 in this case as she would at 67 because there's no 8% almost passive. So imagine we we meet, and Samantha's 69 years old, and we figure this out. You think she's going to be able to call Social Security and be like, "Hey, I made a mistake. Can you go ahead and pay me back the last three years?" No, it's not going to happen. That's why the one-on-one is so important because the amount of times that we've uncovered this is just amazing. Actually save people from making a big mistake, very costly. So that's one rule with the spousal benefit.
Okay, so let's get into ex-spousal benefits. Okay. In order to be eligible for your ex-spousal benefit, you must have been married for at least 10 years. The person trying to claim the ex-spousal benefit must not be remarried. You must be divorced for at least 2 years, or if your ex is already claiming his benefit or her benefit, you can start claiming right away. Your ex must be at least 62 years old or on Social Security disability. If your ex remarries, it does not affect you. Good news, you don't have to talk to them. You can simply call into Social Security to get the information to confirm you're eligible. If it says call, you can call. Probably have to go into proof who you are and all that stuff. Call to make people. Okay. And last but certainly not least, married more than once. Just pick the highest order. Take them. I'll make the rules. >> Now, I had one lady last week go, "Well, if you've been married five times, then you could just pick the highest." Like, "Well, that you had to have been married 10 years to all of them, so you must have been busy." But but no, I don't make the rules, but that is part of the rules. But you just can't be remarried. If you've been married twice or three times, whatever, as long as the 10-year rule has been made and you're not currently remarried, then you're still survivor benefits.
Somebody has passed away. The rule of the survivor benefit means only one check remains, and this is a big gap in some of the financial plans that I've seen, huge gap. You rely on the two checks coming in, somebody passes away, now only the higher of the two checks remains. A very, very big gap in retirement, and something that's not mentioned all the time as well is widow tax. Familiar with that? >> Widow tax. So, you've been filing jointly for the last hopefully 40, 50 years on a really great long marriage. Somebody passed away, you're now a single filer to consider for all of your planning. Um, you can receive a survivor check as early as age 60. Disabled earnings limits do collecting a a survivorship check. You still are subject to the earnings test over a certain amount of money. You can switch between your benefit and the survivor benefit or vice versa. And on that, the delayed earnings credits will apply to your own benefit. So, if you need the survivor check, let's say you're 64 years old, you can collect the survivor check. If your benefit is close to the survivor check, you can allow yours to keep getting that increase every year. And in a certain year, you can switch it. Okay? So, your own benefit does still get 8% as well. Okay? You can file for survivor benefits on your deceased ex-spouse's record as long as you marry before the age of 60 years old. We caught this one time. Lady that we've been working with for quite a long time. She came in, she was really happy. She wanted to talk about one of her accounts she had with us. Hey, I'm getting married next month. And her birthday was three months away from being 60 years old. >> He said, "No, you're not." We showed her why, and it was like a $3,000 survivorship. She almost didn't marry back in a couple months later, check everything, really happy. We small example of just the planning, right? The deceased person at age 62, Social Security is actually going to do something good, and they're going to bump you up to 82.5% of the survivor benefit. You must have been married for at least 9 months. And there are exceptions to this rule, very tragic exceptions. And lady that I was working with also, husband passed away in a motorcycle accident four months after they got married. It's a very tragic accident, but she qualified for this exemption. So, let's take a look at some examples here. As we can see, the survivor benefit does not increase, but like I said, your bill. So that's something you can consider and switch them over later. But if you do take your the survivor benefit as early as you're eligible at age 60, you're going to have a 28.5% reduction of that survivor benefit. Obviously, the closer you get to your full retirement age, that percentage decreases. So, okay, same example as last time. Jeremy's PIA is $2,500. Samantha has $500 on her own primary insurance amount plus the $750 spousal benefit. Jeremy has a similar situation as my mother. Got hurt at work, had to take her benefits early. Jeremy passed away later, only $1,927 remains in the household. This is another reason to consider delaying your benefits, okay? And on any stagnant assets, anything that you could mind the gap in income in retirement would be to leave a higher survivor benefit for your surviving spouse. That's something we take a look at as well. What do you possibly have? What else do you have that can act like Social Security, but in this case, passes away at 70, benefit goes away.
Now, this is a snapshot, a screen grab of my software that we use. Dependent on your guys' situation, if you already even have a plan to retire, I'm going to retire at 65. My wife's going to retire at 64. You can customize this any which way you guys want to see it, and it'll print everything out in black and white, or in this case, red. Okay. Shows things like the break-even analysis for your situation, total deposits over life expectancy, the whole yard. So this is the software that we use here. The funnest part of my workshop.
So, from from taxes on, I mean, there's a few more segments in this workshop here, but from here on, we're talking about your net benefits. Okay? Your net benefit because what you see on your Social Security statement, that is the gross amount. That is not accounting for any taxation. That is also not accounting for Medicare Part B premiums and D premiums. And you guys, any assistance, we do have a Medicare expert, Texas Medicare Advisor, Jason Fisher, in the background, bright shiny bald head. He, uh, he's our Medicare expert in the office. So, we kind of have it all covered when you come to our office. You guys need any assistance on that, let me know as well. But yes, for now, Social Security taxation, yes, there has been this thing in the news though where they're claiming that they're eliminating taxes on Social Security for 90% of the country, right? We're going to get into that in a moment as well. All about, I first want to let you know how taxation on your Social Security benefits work because just happened in the news does have an end date. Okay? So, you need to know what counts. Virtually everything counts to your Social Security taxation. Based on your adjusted gross income, non-taxable interest, your municipal bonds, and they're going to do me a favor. They're going to automatically apply half of your Social Security benefits to this formula. Okay? Once again, your wages and salary counts, self-employment income counts, pensions, IRA distributions, interest, dividends, capital gains, rental income, and royalties, unemployment benefits, other taxable income, alimony. I got back from Vegas not too long ago. Did not bring any of that home, but that will count as well if you are. What doesn't count towards after Social Security taxation? A Roth IRA or Roth 401k withdrawals, life insurance payout. All life insurance payouts are tax-free. VA disability benefits component, inheritance, levels, cash out, refinance. If you have a cash value life insurance policy, all loans from cash value life insurance are tax-free. Reverse mortgages are also not just the last restored. Always been such a negative commentation on reverse mortgage. Really here is the brackets for Social Security taxation. Okay. You are married filing jointly, making less than $32,000 a year. Zero zip, none of your Social Security will count for taxation on your Social Security. If you're married filing jointly, making between $32,000 and $44,000 a year, 50% of your Social Security benefits are going to count towards your taxable income. If you're married filing jointly, surviving, making $44,000 a year, 85% of your Social Security benefits are going to count toward your taxation. Now, I am not a CPA. I'm not a tax advisor. Do not hold any tax certifications or anything like that. But I do have a pretty cool calculator. It's just math, right? Plug in everything. Um, and we can kind of come up with your taxation that you're going to be subject to is personal security. So, in this case here, married filing jointly couple making $60,000 a year. 85% of that comes to $45,000. Taxes due $9,900 out of that $60k. Net benefits are $50,000 for $60,000 part of the plan. Okay.
So, there was in the big beautiful bill, I don't even know how many people call it that, but anyways, um, there there was a deduction added to your taxes. Okay. If you're eligible for it, if you're single, $6,000 deduction. If you're married, a $12,000 deduction. Years that it is effective between 2025 and 2028. Not a permanent deduction. Qualification: You must be 65 or older. Okay? Applies to both itemizers and non-itemizers. Now, there is a phase-out for this. Okay? Meaning, if you make too much money, you don't get the deduction. Okay? If you're if you're single or you're married, here is the phase-out bracket here. Between $150k married, making between $150k and $250k, a phase-out will start. Make over $250k, no deduction. This is how they're getting away with saying that they've eliminated Social Security taxation on 90%. Just added a deduction, which is great. I I wish they made it permanent, but they weren't allowed to do anything in this recent piece of legislation to Social Security. This is a reconciliation package, was not legislation for Social Security. I hope that's coming, but once again, I'll believe what I see. I think this is great for the me. So, yes. >> On the the taxes, is this standard tax kind of taxes or is it a different way? Social Security. >> So they whatever bracket that you're in, >> It's 85% 85% of your total Social Security benefits will go to your bank to the top tax. Does everybody know what RMDs are? Required Minimum Distributions. Required Minimum Distributions are a required amount that the government is going to make you take from your pre-tax accounts. 401ks, 403bs, 457s, traditional IRAs. Going to be required to take that money out whether you want to or not. Specific design for Required Minimum Distributions. This is not being over-exaggerating. This is the exact design is for you to completely deplete that account by the time. That is the design and how they work. You're born in 1960 or later. Your age that you need to start taking your Required Minimum Distributions is age 75. Keep changing this. This is what it is right now. Your divisor is what Uncle Sam and the government is telling you how long you have left to live. That's your life expectancy. That's your life expectancy. Okay. 99. Uh, and this is the percentage that you're going to have to take out of your account. 4.37%. Does anybody see a problem with that? >> Withdrawal. RMD per $100k balance. If you have $100,000 in that pre-tax account, $4,300 is going to go onto your taxable income because RMDs count as income. That's a big problem. Right now, just speaking specifically with the taxation bracket alone, if you're making $40,000 a year in retirement, you're not past that $44,000 mark for 85% taxation. If you have a $4,300 RMD come out, now you get 50% of your taxation. So, you get 85%. Just talking about $100k here, too. If you're still working, can you dump that back in? >> You can dump it. You can dump it back in no matter what you're doing, but you're going to pay taxes on it on the way out. >> I guess you could. >> Yeah. Whatever Whatever the amount that is left after taxation, you can reinvest, do whatever you want. That's totally fine. A lot of people though, they get this RMD check and they're like, the truth. Yeah. The safe withdrawal rate got revised down from 4% down to 3.1 or so percent. >> Right. 3.1 give or take 3.1%. The safe withdrawal rate has to do with how likely you are to outlive your money. So the safe withdrawal rate is down at 3%, and they're starting you off by taking. That's insane. So, uh, RMDs on a $250,000 balance, looking at $10k added to your income, have taxes on that money coming out. So, not only can RMDs affect your taxation on Social Security, it can also affect your Medicare Part B premiums as well. So Medicare Part B right now is $185 a month per person. And if you're collecting your Social Security benefits, not only does taxation come out of that, but they take your Medicare Part B premiums directly off the top of your Social Security check. You do not have a choice. >> Jason, what's the what's next year projected to be on Part B? For single filer, it's going to be $109, and the joint is going to be $218. >> $218. >> So is every everybody heard of the cost of living adjustments for Social Security? Right? For 2026, they're talking about 2.6%. And Jason just said that the Medicare Part B premiums are going to go up over $20 a month per person. So the cost of living adjustment isn't even keeping up with the Medicare Part B. That's a big problem. It's a huge problem. So dependent on also your income bracket. Once again, I'll just give another example. Let's say your income in retirement as a married filing jointly couple is $200,000. You get a $25,000 RMD come out. You're in the next bracket. Now instead of $185 in this example, you're paying $259. That's per person. So the planning on that, right? How how can we help try to mitigate the RMDs from taking you into the next bracket? You have to look at that. That's a huge part of the plan as well. Anybody aware of the sequence of returns risk? Anybody? Sum it up pretty well for you. I heard actually a man say it the other day in a pretty good way. So the way that you accumulate your money your entire life is never the best way for taking distributions. Never. Your accumulation phase, how you build your money, you're rolling the dice. You're trying to get the risky stuff, maybe get the maximum accumulation every day. It's never the best way in return. So the accumulation phase, we're talking about a starting balance of $100,000. Portfolio A and Portfolio B. We're going to compare. So, I want everybody to notice all I've done with this math here is I've reversed it. 12, 21, 14, 12, 14, 29, 29, 18, 25. I've just flipped the percentages. It's all done. Starting at $100,000, $100,000 balance. It did not matter. Reversing the math has nothing to do with the ending balance. They end up with the same exact amount of money, exact same amount. Now, the distribution phase looks a little different. Starting off with that same balance, $684,000, assuming a 5% withdrawal from their accounts. Look what happened to Portfolio A. They run out of money. Portfolio B never runs out of money. End up with a lot more. Why? It's because they started taking distributions from their funds and their retirement accounts in a recession. It's a big deal. So, what this is all signifying is timing. Are you are you starting off your retirement correctly? Okay? Because between these two examples here, in this example here, I would probably tell you, hey, why don't you start your Social Security and wait to take the withdrawals of your time retirement account, or vice versa? I look here, I say, hey, why don't you start taking distributions from your investments and delay taking your Social Security? Could be either of the two depending on your accounts right now. This also has to has to do with the safe withdrawal rate, and it's just a quick example. Okay. So if you're taking 5% withdrawals from your accounts and the market has a 10% downturn, you're going to need a 62% increase in the market just to break even. That's only on 5%. It's a big deal.
So, a big conversation that I do have with folks that have high net worth in the pre-tax accounts is the Roth IRA conversation. Okay? You're going to either pay taxes now or pay taxes later. Once again, how many people think taxes are going down in the future? Nobody. Okay. Tax-free growth, tax-free distributions, and no RMDs. You don't have to worry about what's your break-even point if you convert all at once, assuming a 5% rate of return is roughly 11 years. Do you convert over time? You be taking withdrawals? Do you need the money now? What will you pay in taxes now? And how will it affect my other taxes? All things to consider, and I do have a proprietary piece of software that gives us a pretty good outline of Roth conversions. Okay. This is your Roth, Roth balance in the blue, your IRA balance in the red, crossing, bringing one up while the other's going down. One that's going down is the one you want to go down. Okay. But in this example, we're starting off in this example with a $500,000 balance. In this specific vehicle, they got a 10% bonus for moving their money. Okay? Like they see savings account. So in this example here, they're taking an IRA withdrawal of $106,000 from the $550. They're converting $83,000 to Roth, and they're using the remainder of the withdrawal to pay their taxes. So they're never coming out of pocket to pay the government using this simp this one account that's protected from market volatility to pay their taxation on their conversion. As you can see, on the end of the year balance is never less than the beginning of the year balance. Very, very cool. At 71, this particular individual that I'm working with is going to have 100% of that 401k converted into profit. 100%. That's two years, three years before his RMD age. Never has to worry about RMDs. Never has to worry about climbing the tax brackets in retirement. Never has to worry about IRMA in retirement. Nothing. Everything is now growing tax-free. So, if you guys are interested in this, let me know. We'll have a conversation about that as well. Okay.
Does history repeat itself? How safe is your money? I saw a pretty terrifying statistic the other day that right now we have more defaults on mortgages than we did in 2008. So, is your money safe? Are you planning on retiring soon? I always like to give an example of a made-up gentleman that was planning on retiring in 1999, and then 2000 happened. He had to keep working for seven more years, and he was like, "Yes, finally retired." And then 2008 happened, and then he had to wait six more years just to break even and retire 13 years. I'm only 39, but I was planning on retiring, and then I had to 13 more years, I'd be grumpy as all get out. I'd be so upset. My grandkids would hate me. Everybody would hate me. But how how protected is your number? How safe is it? Because there's many different philosophies on how much you should have in safety. We go over all that on the second class. How do your other assets coordinate with Social Security? Once again, should you take withdrawals from retirement assets first, or start your Social Security? What are your net numbers on your other assets? Here's something to consider. It's a tale of five nest eggs. $100,000 investment 30 years ago, based on a 5% rate of return. With no fee, that account grew to $432,000. You're showing just a 1% fee. That account is only worth $319K. Total fees paid on that account, just 1%, $112 grand for 30 years. Now, fees aren't bad, and I have accounts I have managed because I'm too lazy to manage myself. It takes a lot of time. Can't be a professional in everything, right? But I know exactly what I'm getting for my money. Now, a lot of times I do meet with folks and like I said, financial advisor, totally fine. Not a conflict of interest. You have to know what you're getting for that money. A lot of times what I have people ask is, "Can your financial advisor print you out a printout of total fees paid, total interest on people?" Hey, I've known this guy for years. No problem. They call me back, man, he was pissed. They didn't like, he didn't like me asking it for some reason, right? And that doesn't happen with everybody. It's just a few scenarios, and I've actually been on speakerphone with people. It's kind of funny to me. Um, did you know some fees are actually voluntary? Specifically mutual funds. Imagine you find that out for a mutual fund fee that's voluntary for years. Find that out too. But I'm very, very grateful and blessed to be able to work with over 75 different financial institutions. Okay? I don't charge a fee for anything that I do. I don't manage money, nor do I want to. I like to single. I don't have any licenses to do. Right? But once again, the whole point of it is you got to know what you get.
Now, something that is not spoke about enough in my opinion is the cancer risk, especially when you get to retirement. 40%, about 39% will be diagnosed with cancer. Sometimes the big reason that nobody talks about this enough in my opinion is the initial year out-of-pocket cost. You could have an out-of-pocket accident, but will that pay for all of your treatments? $43,000 is your first year initial average getting cancer. Out-of-pocket financial burden, $592 a month in added cost diagnosis, $180 to $2,600 a month. I met with a gentleman yesterday, one medication is $7,000 a month. It's crazy. Thankfully, he's still able to work to have this group. So there is risk mitigation for this, but I always like to bring it just to kind of get you to think about it. You could write that in on your sheet if you'd like to talk about your exposure to cancer as well. Okay.
Something that is really near and dear to my heart. And up on the screen here, you see the girl who was kicking the ceiling earlier. That's the same girl, I swear to God. Same exact. She's 11 yesterday, by the way. So anyway, a big softy. This is my grandma. We call her Nana. Nana was awesome. She's a die-hard sports fan. There's a, you can barely see it, UCLA Bruins blanket. There's an Angels blanket. Let's go Angels. In the background, we actually had a family member that played for the Los Angeles Angels quite a long time. Huge baseball fan. But I would come in sometimes, and Amanda would be watching stuff on TV. I'd be like, "Man, what are you doing?" She's like, "Ah, if there's no sports on, I'll just Sorry. Sorry if there's any tennis play." But no, I bring that up for a reason. Okay. Before the end, I heard that every single day she got diagnosed with dementia, and it was five long years of dementia. I was very gracious and once again grateful and blessed to be able to live right around the corner. So I would stop by every morning, make sure she had her coffee, stop by every night, make sure she had enough wine. She absolutely loved wine at the end. She would sometimes forget how much she drank. But it got to a point to where she couldn't be there on. Come by in the morning, there was coffee pot, no water in it, just red hot coffee. Come by at night, the last straw was there was a towel left on a stove that was still. Has anybody had a long-term care with a family member? >> That's that's the point. Okay. Was very free with her savings. She had stocks. She took her RMDs as she was required to do, the whole nine yards. There was no plan in place.
place for that diagnosis. Nothing. No. No plan. Nothing. Okay.
So it turned out that she needed that extra level of care. This is her in her private room in a nursing home, Southern California. $15,000 a month a month a month. Insane. You look at projections in this area. By 2038, you're looking at $150,000 a year for a private room. There is medicating but you have to spend down your assets right? There's a whole yard of that that we can go through the second part of the class and why I show you this is because I think it's a very unserved, very underserved market. This is an example of what happened toward the end. Was completely depleted, never made it back, and the only thing left for a legacy for her four kids was the house. She worked her entire life to build up those funds to leave the kids. That was important to them. And I think the house they bought for like $18,000 back in the day sold for a good amount. So thankfully there was that. And it was never about the money. It was always about recovery. That was it. We would have spent every last dime we had to take care.
So the plan is in place for a reason and it should be okay because Medicare won't cover. We have a slogan, Medicare doesn't care. Medicare will not cover custodial long-term care. Now, what if I told you and I was a door-to-door insurance salesman walking through your neighborhood and I said, "Hey, just let you know in 10 years from now, there's going to be a storm that is guaranteed to run through this area and it's going to wipe out 70% of the homes." Take a look at your homeowners insurance. What would you say? Right. Most people would say yes. Right. But Medicare only covers a potential 20 days of skilled nursing and then a co-pay from day 21 to 100 and then you're on your own. Now, average length of time for long-term care is roughly 5 years. And here's a good one. How many folks in here were told that they can self-insure for long-term care? Did you know there's two ways to do that? Well, the first way is by using your own money in non-guaranteed investments, non-leverage, and potentially taxable. That's the first way. The second way to self-insure is still by using your own money with an insurance company because they're not going to give it to you for free. But these new long-term care plans are guaranteed income tax. 5 to 10x leverage return. You cannot outinvest the money that you can receive on a guaranteed basis from one of these plans. Today's plans offer return of your premium, 100% liquidity, tax deductibility, income tax-free benefits, no rate increases, and best of all, if you don't use it, you don't lose it. Your family gets back all the premiums if you never use it. Significantly changed from the old traditional type of care which was basically car insurance premium every month you never get the benefit, the insurance company keeps all the money and if you were lucky to continue paying your premiums because they always increase. That I only work with about seven companies because of their guarantee and never raise the rates on their plans in the contract guaranteed.
This is my class review sheet. I did like to touch on long-term care, but I don't need it too much. But if you guys are interested in just having a plan for that, even if you say, "Ryan, my plan is to do nothing." Well, at least you have a plan. Okay. Um, this is my class review sheet. If you guys please could fill this out, this is for the second part of the class. When we meet on you guys's way out, you can head back to there and she will look on there for the time that you send a call and she'll give you guys a shot and we'll find a time to go over this. Okay? Even if you don't want to meet with me, that is totally fine. If you could still fill this out, this is my proof to Uncle Sam that I actually did this class.
Okay, so part two of the class. What's next? I asked three simple questions. What's different? It's one-on-one answering all of your questions pertaining to your exact situation. How long will it take? Less than an hour. What to bring? It's up to you. If you do want a social security maximization report, I ask that you bring your statements or your login if you're comfortable logging in on my computer or your primary insurance amount, whatever your benefits would be at your full retirement age. That's what I need. For but not the is this part the sales pitch only for that timeshare in New Mexico you guys want how you going to feel happy and well-informed? Where did we visit anywhere that's convenient for you or my office? That's awesome. I do mean coffee shops too. I like coffee.
The next steps, a few options. Okay, we feel that we like each other. We want to work together. We begin to review specific ideas and strategies. Number two, we like each other, but the timing just isn't right, and we set a date to follow up in the future. Or number three, we decide we don't like each other. We call each other names. This only in Austin. That's why I stay in Williamson County. Yeah.
The three simple questions I'm going to ask you guys. What plans can be made to double your income in retirement? Especially with the inflation projections. What would happen to your financial situation and lifestyle if the stock market dropped 30 to 40% like it did in the 2000s and 2018? And the third, what's most important to me here? What plans have you and your children made for dealing with the rising healthcare costs and long-term care? Once again, I really appreciate you taking your time out of the afternoon to come learn about this. If you could please those in there and I really appreciate it. Thank you. I've seen you. Him be a band.