Powering Your Retirement Radio

Welcome back to Powering Your Retirement Radio. Today, we're going to talk about college planning, and I've been looking forward to this show because I get to interview my lifelong friend and college roommate, Dr. Bryon L Grigsby. Bryon happens to be the President of Moravian University in Bethlehem, Pennsylvania. Bryon is one of the few university presidents that is the President of his Alma Mater. Moravian was founded in 1742. It's the sixth-oldest school in the country. It was the first to educate women, and it has been thriving since Bryon became President in 2013. So with that, I want to welcome President Bryon Grigsby. Bryon, why don't you take a second to tell the listeners a little bit about yourself and Moravian?

President Bryon L. Grigsby:

Hey, Dan, it's great to be here. Moravian is a unique university. It has about 2,600 students. As Dan said, it's the sixth oldest in the nation. Harvard, Yale, Princeton, College of William and Mary, St. John's Annapolis, and the University of Pennsylvania are the ones that precede us. We were the first school founded to educate women. I've been the President at my Alma Mater for nine years now. I'm in my ninth year. We built a lot of healthcare programs over these past few years. We have multiple doctoral programs, including a doctorate in physical therapy and a doctorate in nursing practice. We have occupational therapy, athletic training, a very vibrant nursing program, and an incredibly vibrant undergraduate liberal arts college.

• Affordability of College

Average tuition of $54,000, average student pays $26,000.

• Value Proposition

Apple MacBooks & iPads for every student, small class sizes, full-time faculty, not grad student teachers.

• US News & World Reports – College Metrics

Ignore the glamour numbers and look at Freshman retention rates and four-year graduation rates.

See the details on the website Blog page or listen to the show today.

Interview Transcript:

Dan:

Fantastic. Thank you, Bryon. So, as I think we've talked about, but just so you know, a bit of the listener, primarily most of the people listening to the show today, will be in one of two areas. They either work for PG&E, our power company ranging from the guys out in the field to people in the office, doing everything it takes to run a company. The other is Kaiser Permanente, which you're probably familiar with them as a healthcare provider. But, again, most of those people here in Northern California do have some clients in other parts of the country. And what I find is when I'm talking to parents and grandparents, there are similar themes that come up in almost every conversation. So, I want to address a few of those and get your take on what you tell a parent that's about to send their child to Moravian as far as you're concerned about X, and this is what we can do. The first one I think goes without saying for many people is how do I afford college today? You look at the predictions of a newborn baby today, and it's, you might as well take the ride on Elon Musk's rocket and call it a day. And it would be the same as an education, but I know from our own experience at Moravian that it was affordable, and we could get through it. So how do you ease parents' concerns there?

President Bryon L. Grigsby:

Well, one thing that is a challenge for private schools is that independent schools like Moravian, which are not controlled by the federal government or controlled by state governments, have sticker shock. If you look at Moravian, our sticker shock is $54,000 a year for tuition. The average student pays around $26,000 a year. So that gives you some idea. We have a $150 million endowment that spins off scholarship money. We raise about $6 million a year from alumni like you and me that pay it forward. And that offsets the next generation. You'll find that many students who apply to these independent colleges will pay less than tuition at a public university. And they're getting a lot more for that. They're getting a lot more in smaller classes, not being taught by graduate assistants but by full-time faculty. So, I would encourage everybody to apply to the institutions that they want to apply to and see what their tuition will be. Please don't assume that the sticker price they see is what they're going to pay because they're going to pay less than that sticker price at almost every independent college and university in the nation.

Dan:

Fantastic. That's, uh, it's good advice. And most people do know how to ask for a bargain.

President Bryon L. Grigsby:

And the public universities do not do discounting in any significant way. So, their sticker price is most likely their sticker price, unless you're in an honors college or something else because they operate by state government regulations. The independents are just that independent, so they can raise money from their alums and redirect it as the alumni dictated to offset costs.

Dan:

Okay, I don't have kids in schools in California, but I know Berkeley and Chico, and a lot of the schools that are state schools here are impacted where, you know, if you don't have over a four-point O, you don't have a shot at getting in. So talk to me a bit about when you're looking at a school and use a term earlier value proposition. When you're looking at a school other than obviously the name, the mascot, the sports teams, all the things that people think about for college, what should a parent, even a student, be thinking about?

President Bryon L. Grigsby:

I think you want to think about what value add any institution is giving you. For example, at Moravian University, we pride ourselves on leveling the playing field and ensuring everybody has technology skills by the time they graduate. We provide every student with a Mac book and an iPad. That's a value proposition that you don't see at many institutions. There are only 16 apple distinguished college campuses. Moravian happens to be one of them in the nation, small classrooms. I talked about this in the last set of comments. You are paying for a faculty member to be at your child's side, working on the skills that will make them successful in life. That's what your dollars are paying for. Do you want to have that in a classroom of 450 students? Or do you want to have that in a classroom of 10? Which one will give you the most significant value add of small colleges and universities like Moravian? They don't have a lot of dollars for marketing. They don't get on national football channels and get to get their brand out there. But from a value-add standpoint, you're getting more time with a professor with a Ph.D. in that area working on your child's skills than any state university with a Division One football program.

Dan:

Now, I know we've talked about this in the past, not on this show, but just in general, I had come across a podcast that was talking about the US News and World Report. You know, where some of the schools ranked some of the historically black colleges ranked lower, but the studies said, if we gave them a new dorm and a football team and few other advantages, they'd be in the top 10. As lovely as that sounds, one university president of a university will go unnamed because it might be in the same region as Moravian. Still, that school's President was giving out hot sauce to everybody to help increase name recognition. So what kind of metrics should somebody be looking at other than the ones that all the high school seniors look at the top party schools and all of that? What should we be looking at?

President Bryon L. Grigsby:

Yeah, I would stay away from the US news and world report rankings. We call the beauty school rankings college presidents have to say whether they like all the other colleges are not like them or recognize them. And they weigh that pretty heavily in the US news world report. Here are the measures. And you can find these measures out on any website colleges publish them all the time. I would look for a retention rate of first-year students. Moravian's retention rate is 83%. That means that 83% of our students choose to stay with us into their sophomore year. Uh, we have a 70% four-year graduation rate. Most public universities don't get up to 70% until six years. So that's two more years of tuition and two fewer years of your child working in the workforce. So, there's an advantage to how quickly does the school graduate? The students once they enter the doors? The last thing I would look at is the statistic on how six months after graduation, how many employed students are in graduate school. A Moravian is 98% of our students are employed or in graduate school six months after graduation. You want something as high as that because you're getting the greatest value for your money.

Dan:

Fantastic. Every parent's dream is to have a kid with a job six months after graduating from college and maybe not living in the basement. It depends on where they are in the country. Quite a few people moved back with mom and dad during the pandemic. So, I think that's an excellent place to wrap up for today. We're going to continue this interview in our next show as well. So, w

Welcome back to Powering Your Retirement Radio. In this episode, I will explain the MEGA QCD and why the opportunity goes away on New Year's Eve. QCD stands for Qualified Charitable Distribution. Thanks to America's IRA expert Ed Slott for sharing this information in his Fall gathering of his Elite and Masters Elite Groups. I am a member of his Elite Group and find his training incredibly helpful.

What is a QCD?

A Qualified Charitable Distribution is available to anyone aged 70 1/2 and older. You have to be 70 1/2 when the distribution is done, not just in the year your turn 70 1/2. A QCD can satisfy the need to take an RMD (Required Minimum Distribution). Money withdrawn from an IRA that satisfies your RMD is made on a First Out basis. Meaning if you only want to take out the RMD and take out a portion in February and then decide to take more out later in the amount of your QCD, you can. Still, the first distribution will count towards the RMD, and then other money would come out  - meaning you will have pulled out more than you needed to.

A QCD goes from your IRA directly to a charity. If done this way, the entire distribution amount is not taxable to you even though it came from your IRA. You will get a 1099 like usual, so you must inform your tax professional that you did a QCD to ensure it is reported correctly.

What is a MEGA QCD?

A MEGA QCD works just like a QCD, with one exception. Until December 31. 2021, a section of one of the Coronavirus Relief Bills allows you to deduct up to 100% of your AGI. Anyone can take advantage of this. If you are over 59 ½, you can take a distribution from an IRA without any penalties, but you have to pay income tax on the distribution. 

If you are 60 years old and happen to have millions of dollars in an IRA, and you know you won't spend all your money, you may have a charitable intent in the future. For example, imagine you decided you want to give $1,000,000 away, and your salary is $250,000 a year. Typically, you can only give up to 50% of your Adjusted Gross Income (AGI) away and take a tax deduction. However, until December 31, 2021, it is 100% AGI. So it would be $250,000.

If you know a little about a tax return, you know distributions from an IRA are taxable and add to your AGI. So, for example, if you made $250,000 and took a $1,000,000 distribution, your AGI would be $1,250,000 (ignore deductions, consult a tax professional familiar with your situation). So under the current rules, you could donate $1,250,000.

You can have the money sent directly from your IRA to the charity and not pay tax on it. If you were so inclined, you could empty your entire account, give it to a charity, and not owe any taxes.

Reality

Here is an extreme example: you would have to be sure you would never need the money. My suggestion and reason for bringing this up are that many people have charities they donate to and care about. I am a financial professional and have talked with several other professionals since I learned this information. Unfortunately, nobody I have spoken to was aware of this, including myself, until I took the Ed Slott training.

If you are involved in a charity, especially on the fundraising side, or know someone, this is something to share with them. Most charities have major donors that could do more but hate paying taxes. Until New Year's Eve, that is not a concern, so mention it to people you know. It could help someone who might be willing to donate now if they could avoid the taxes. It could also help a charity make a difference.

I am happy to talk with anyone interested in this idea or to explain it to a charity if they want more information on the opportunity.

For more information, visit the podcast's website:

https://poweringyourretirement.com/2021/11/05/mega-qualified-charitable-distributions

42% of working Americans surveyed by Pew Research in December of 2018 said they fear they would receive zero benefits from Social Security.

Social Security Trustees announced at the end of August this year that in 2033 unless changes are made, Social Security benefits would drop to 75% of their promised initial amounts.

50% of receipts rely on Social Security for ½ their income(Link #7). And for 1 in 4 seniors, it makes up over 90% of their income.

Having watched the recent debt limit talks and how Congress handled that, I’m not very encouraged that the politicians in Washington will do anything to fix Social Security any time soon. There are three Presidential elections and six Congressional elections before 2033. So expect to hear about it in passing in 2024. It will be a bigger deal in 2028 and, by 2032, a keystone issue if it has not been addressed by then.

David M Walker, United States Comptroller General from 1998 to 2008, wrote a book, Comeback America, where he goes through many ways to fix Social Security and other government spending issues.

I want to share five ways Social Security is fixable.

1. Raise the wage base
2. Change the PIA Formula
3. Add a 3rd Bend Point
4. Raise the claiming age
5. Increase the early claiming penalties and decrease the delayed retirement credits

Realistically, the fix will be a combination of several fixes. Some of these might even be included, but likely any solution will be multifaceted as there is no simple answer. However, all you have to do is look back at Ronald Reagan’s changes in April of 1983, which will be entirely in place next year after 40 years.

1) Raise the wage base

This one happens every year, but an inflation calculation dictates this one. In 2021 the wage base was $142,800, and in 2022 it is projected to be $147,000. Suppose you have ever reviewed your earnings history or noticed that your withholding changes at the end of the year, the wage base is usually the culprit. FICA taxes are in two parts: Social Security at 6.2% and Medicare at 1.45%. Social Security is only paid until you reach the wage base. Medicare is paid on all earnings.

The solution would be to raise the wage base significantly - to say $500,000, which means that 6.2% on everything between $147,000 and $500,000 (or whatever the number goes to) would be taxed. That would bring three times as much money into the system. If this happens, it would be because of the second way to fix Social Security.

2) Change the PIA Formula

A formula figures out your Primary Insurance Amount. In 2022, the first $1,024 you make in monthly income is replaced at 90%. Then from $1,024 to $6,172, your income is replaced at 32%. From $6,172 up to $12,250, which is equivalent to the annual wage base of $147,000, it is replaced at 15%. Social Security could lower the rate at which they replace your income.

The Monthly Income is calculated by your AMIE (Average Monthly Indexed Earnings), which is the average monthly earnings for the highest 35 years of your working career. The point at which the percentage replacement changes is called a bend point. The third way to fix Social Security would be to add a 3rd Bend Point.

3) Add a 3rd Bend Point

This idea is a bit of a combination of the first two ideas. The concept here will be if the wage base is increased, instead of replacing income at 15% up to the current wage base of $12,250, add a 3rd bend point and of 5% until the monthly income hits $41,667. This change would give people with significant incomes a bigger Social Security payment. In return, they would pay more into the system, helping it become solvent.

4) Raise the claiming age

The age when you can first claim Social Security benefits is 62. Starting in 2022, everyone turning 62 will have a full retirement age of 67. The age at which your payment stops growing for everyone is age 70. Increasing the claiming age by two years, so the earliest you could collect is 64, would delay people claiming while keeping the formula the same. This change would reduce the amount of money Social Security would pay out during a retiree’s lifetime. The flip side of this idea would be idea number five.

5) Increase the early claiming penalties and decrease the delayed retirement credits

Currently, if you claim your benefit early, there is a reduction in your payment in the first 36 months. After that, your monthly payment is reduced by 5/9th of a percent. Anything over 36 months is reduced by 5/12th of a percent for each additional month early. The fix here would be to increase the penalty for claiming early. For instance, you could potentially claim early at 5/9th of a percent for any of the 60 months. The other possibility is to reduce the delayed retirement credits. Instead of the current 2/3rd of a percent increase per month for each month, you wait, and lower that percentage to entice people not to delay and reduce lifetime benefits.

To end on a positive note, I believe Social Security will be there for retirees. However, it may not be what you see today. Make no mistake, fixing Social Security does not mean keeping it the same. On the contrary, fixing Social Security means higher taxes for some, and in many cases, those same people may receive less or have to wait longer.

Fixing Social Security will be unpopular and a minefield for the politicians in office, but a 24% decrease in benefits will surely be less popular if not addressed. From a cynical standpoint, the most significant problem against real reform is that many people who could start the ball running will not be in office in 2033 and have an election or two before then. In the climate in Washington today, why tackle a problematic issue when you can kick it down the road? Sadly the answer is you do not.

Social Security was never meant to make up half of someone’s retirement income as it does now for almost 50% of American seniors. The younger you are, the more time you have to take responsibility for your future and prioritize retirement savings.

Post Link: https://poweringyourretirement.com/2021/10/22/5-ways-to-fix-social-security-2/

Welcome back to Powering Your Retirement Radio. This week we are going to talk about when to claim Social Security. This is basically your claiming decision. We discussed this before, but I still get many questions about the best time to collect. Like most things, the correct answer is it depends. It is a simple math problem if you happen to know what your investments will do and when you will pass away. Thankfully, nobody knows when their end will come, but we can make some assumptions.

The Guidelines

I will use the calculations for someone born in 1960 or later. The numbers work similarly, but they are slightly different for people born before 1960. A table shows notes to see the options at other ages. I will also use a Primary Insurance Amount of $1,000 to try and keep the numbers more straightforward.

Claim Social Security at 62

Claiming Social Security at age 62. The reduction in the payment would be 30%, and you would get $700 a month instead of $1,000. So if you claim at age 62 or 67, you would have received $42,000. At 67, you could start claiming $1,000 a month, which would be $300 a month more. It would take 140 months or 11 years and eight months, which means that by your 79 birthday, waiting would result in more money over your lifetime.

Disclaimer

Now, I have to give you a disclaimer that payments don’t remain unchanged because of Cost-of-Living-Adjustments. They do grow at the same rate, though. So please consult with your local Social Security Office or an advisor to discuss your specific situation.

Claim Social Security at 63

Claiming Social Security at age 63, your payment would only be reduced by 25%, and you would receive $750 monthly. At your full retirement age, you would have received $36,000. The $250 difference a month would take you 12 full years to break even. So at age 79, the total dollars received would be equal.

All other early ages

Claiming Social Security at age 64, your reduction is 20%; at age 65, the reduction is 13 ⅓%. At age 66, the reduction is 6.5%. The breakeven would be 12 years at age 64 or breakeven at age 79. The breakeven would be 13 years for age 65 or breakeven at age 80. The breakeven would be 12 years for age 66 or breakeven between age 81 & 82.

So if you are looking for the most significant lifetime payment from Social Security, waiting tends to make sense if you believe you will live into your mid-80s. In today’s world, that is not that big of a stretch. 

Emotions vs. Facts

I often say most decisions like this are emotional, not financial. You can look at the numbers, but if claiming at age 62 or 63 allows you to retire and reclaim your life, do you care if you might have more money later? Based on the number of people who claim early, it is clearly an emotional choice because waiting generally results in more money. Yet many people claim early because they fear Social Security will go away. I am not concerned about that, and I will tackle that in another show.

Early vs. Late Claiming

If you start claiming Social Security at age 62 or wait until age 70, you would have a $67,200 head start. In 10 years and one month, the person who waited until age 70 would have broken even and would be making more every month. 

The problem for most people is they can’t afford to retire without their Social Security income. The dilemma is Social Security is many people’s only source of lifetime income that will grow. Although these people claim Social Security early, lowering the lifetime benefit they will receive. It is a real-life marshmallow test. If you don’t know what that means, watch the video link in the last sentence.

So I want to keep this week short because there are a lot of numbers. Again remember, if you want the most money possible, generally waiting leads to more money, provide you live into your mid-80s. So if you’re going to retire early or don’t expect to live into your 80s, it makes sense to consider claiming early.

College Planning

That is what I wanted to discuss this week. First, however, I would like to mention an upcoming episode on college planning. I have a lifelong friend with whom I’ve been friends with for so long. My parents and his mother all went to high school together.

As it turns out, my friend Bryon has impacted my life significantly. After we graduated, we went our own way in college. I was accepted to every school I applied to, which wasn’t helpful. I was hoping only to have one or two schools to pick from. I made a wrong choice and knew I didn’t want to return to the school I picked for my Sophomore year. Bryon encouraged me to transfer to Moravian, where he was going. Fast forward many years, and I was back at Moravian for the inauguration of the school’s new President, you guessed it, my friend Bryon. He made Bryon one of the few to be the President of the school he graduated from.

Admissions Season

As we head into college application/admission season, I will share this with you. I plan to have Bryon on as my first guess on the school to answer questions the parents and students might want to know more about. So if this is a topic of interest to you, please visit the Powering Your Retirement Radio website and use the ask a questions tab.

For more information, you can visit my website:

https://poweringyourretirement.com/2021/10/08/what-is-the-best-age-to-claim-social-security

Hello, and welcome back to Powering Your Retirement Radio. This week I will answer a question on spousal benefits from Social Security. I received a call from someone making sure their parent received the correct amount from Social Security.

I will define a few terms and then wrap them all together to answer the question.

Social Security Benefits

There are many types of benefits you can collect from Social Security. Spousal Benefits are the most common. Divorced spouse benefits and widow or widower benefits are common, too. Of course, there is always your own earnings record to collect on, as well.

Spousal benefits are not as common as they used to be, but they are still pretty prevalent. Spousal benefits allow a lower-wage-earning spouse to collect on their spouse's benefit, which is why they are called spousal benefits.

Spousal Benefit

A spousal benefit collected on your spouse's earnings record at full retirement age is ½ of your spouse's primary insurance amount. If you collect at 62, the benefit is reduced, similar to your benefits if you collect early. Since the maximum spouse benefits start at 50%, the reduced benefit can be as little as 32.5% of your spouse's full benefit amount.

Widow/Widowers Benefits

A widow/widower's benefit can start at age 60, two years earlier than if your spouse is still alive. The benefit pays more than a spousal benefit since it is a survivor's benefit. The reduction for claiming a widow/widower's benefit at age 60 is 70.5% of the full retirement age benefit.

Survivor Benefits

Survivor benefits are paid to a living spouse if the living spouse has the lower of the two Social Security benefits. Social Security will not send two checks to a house where one person now lives. However, they will continue to send the larger of the two checks. Technical note: If you are the lower-wage earner, you will still receive your benefits. The survivor benefit is considered the difference between the two checks. You would only receive one check, so it doesn't make a difference.

The Question

How do I know if my parent is getting the correct benefit? First, you must start with what your parent is entitled to collect. Here is the situation: parents divorced before retirement but after a longer than ten-year marriage. One spouse then passed away. So what is the survivor entitled to collect?

Benefits

You need some basic information. First, did both spouses have enough of a work history to qualify for their benefits? Meaning, did they have 40 quarters of employment? Yes, so they both had their own earnings record.

Next, we had to determine who had the better earnings record. Of course, the spousal benefit is not essential if the surviving spouse has a better earnings history. But, on the other hand, if they were the lower-wage earner, the spousal benefit might have been worth more than their benefit. 

Deemed Filing

The key with your benefit or a spousal benefit is you can only collect on one, and it will always be the larger of the two. You used to be able to choose one and let the other grow. The change several years ago changed that. It is called deemed filing. Deemed filing means if you file, you are considered to have filed for all of your possible benefits, and you get the most significant payment.

But...

Of course, it is not that easy. Widow/Widower benefits are calculated separately from your Spousal Benefit and your benefit. You can collect on a Widow/Widower benefit at age 60. It would be reduced, but collecting on the benefit does not affect the growth of your own or your spousal benefit if that would be more.

Suppose your benefit and your deceased spouse's benefit are close in value. In that case, you could collect your widow/widower's benefit at 60, letting your benefit grow. At some point down the road, your benefit may become more significant. You can choose to switch over then or let it continue to grow and switch over later, and it is worth even more.

Social Security help

Social Security agents should be aware of your previous marriages because of tax filings. However, I would not always assume they know of a deceased former spouse. It should be connected to your record, but be proactive when speaking to a Social Security agent since you can collect on it separately. Also, if you remarry after the age of 60, you are still entitled to Widow/Widower benefits.

Conclusion

In the end, I left my client with a list of things to check on when they spoke with Social Security:

1. Determine what benefit the parent is currently collecting.
2. Determine what the Widow/Widower benefit would be.
3. Determine if leaving one benefit unclaimed would result in that benefit becoming a more significant benefit down the road.

If it becomes more significant, can you live on the other benefit today and get the other benefit later?

When you consider you can claim several different benefits every month from 62 to 70, the multitude of benefits is staggering. You must ensure you understand what is available and get some help understanding your options. A Social Security agent will not give you advice, only information.

Suppose you are facing a Social Security decision shortly. In that case, you can always drop me an email or leave a question on the podcast website. I'd be happy to have a conversation with you.

For more information, visit the show notes at https://poweringyourretirement.com/2021/09/24/social-security-spousal-benefits-2

Hello, and welcome back to Powering Your Retirement Radio. I am Dan Leonard, your host, and a PG&E Retirement Specialist. This week, we will talk about the Social Security clawback, which happens when you earn money and draw Social Security benefits before Full Retirement Age.

What is a PG&E Retirement Specialist?

I receive a question, “What is a PG&E Retirement Specialist?” 

A PG&E Retirement Specialist focuses on helping PG&E employees plan for and retire from PG&E. Why do you need a PG&E Retirement Specialist? Think about going to the Doctor; any competent Doctor can identify many different ailments. Likewise, most competent advisors can advise you on retirement. If you require a specialist, you likely do not want your General Practitioner helping you with major surgery. Instead, you want them to refer you to a Specialist. You can get good advice from many financial advisors if you work with a specialist. However, they have expertise in that particular area. In short, it is easier for a specialist to offer general advice than for a generalist to offer specialized advice. For instance, understanding the cost of your medical insurance. A PG&E Retirement Specialist will know to ask about your Retiree Medical Savings Account and know how it works, and a generalist may ask if you know what your health care will cost in retirement. Hopefully, that helps to clear that up.

Social Security clawback

Let’s move on to today’s topic of the Social Security clawback, which happens when you earn money while collecting Social Security. It is an issue until you reach full retirement age. Until the year you reach FRA, Social Security will claw back $1 for every $2’s you earn above the earnings cap, currently $18,960 in 2021, and it is adjusted annually based on inflation. When you reach FRA, the limit is raised to $50,520.

Most people will avoid working to avoid the Social Security clawback. However, there are a few options. If you decide to go back to work and it has been less than a year, you can take advantage of the one-time do-over and pay back all money paid out on your benefit, which is like it never happened. You can also keep collecting Social Security and limit your income to avoid the Social Security clawback. Neither of these two options is all that popular. Option three is to keep working, earn whatever you can, and know that the Social Security clawback will be calculated over the earnings limit. The key is they are clawed back, not forfeited. 

NOT A FORFEITURE

What happens is the money that is clawed back is kept track of. When you reach your full retirement age, Social Security will automatically recalculate your benefits and adjust your payment to redistribute the clawed-back money over your lifetime, affective raising your benefits. For instance, let's take round numbers to illustrate the concept. Your experience would be different. Let’s say you have $30,000 clawed back as part of the Social Security clawback and your remaining life expectance happened to be 30 years. Your benefit would increase by $1,000 a year. That is oversimplified because interest and other things go into the calculation, but it is the basic idea. You have to consider that some people will live past life expectations, and others won’t. In short, unless you know when you are going to die, you can’t know if it is this calculation will work out in your favor or not.

Conclusion

In the last episode, I said that most people take the money when they want it, not necessarily when needed. If you decided to collect Social Security early, but have an excellent opportunity to earn income, don’t turn it down because there is a clawback on your Social Security. Be aware you will have a Social Security clawback and plan for it. You can be proactive and let Social Security know.

You will get the money back but once your benefit is recalculated at Full Retirement Age. So while many people have strong feelings about the Social Security clawback, they know that it is only a clawback and a forfeiture.

I hope that helps clear up the Social Security clawback and the earning limit for you. As always, I welcome your question on the Podcast Website, PoweringYourRetirement.com, and you are welcome to reach out if you want to talk in person on my office line, too. 924-726-4015.

For more information, visit the show notes at

https://poweringyourretirement.com/2021/09/10/social-security-clawbacks

Hello, and welcome back to Powering Your Retirement Radio! Today we will talk about how your Primary Insurance Amount is calculated. I will try not to bore you, but there are many factors you need to understand. In addition, I will include several links to the Social Security website if you want to do a deeper dive.

Your Primary Insurance Amount is the basis for your Social Security whether you collect early, on time, or defer your payments. Roughly 54 million Americans receive monthly Social Security retirement benefits. That includes retirees, dependents, and survivors of deceased workers. The average check is $1,503 monthly or just over $18,000 a year. So, how does Social Security figure out what your payment will be?

The basic formula is in the whole Social Security language, and then we will break it down. First, you receive your PIA (Primary Insurance Amount) at your FRA (Full Retirement Age), based on your Earnings Record.

Seems quite simple, but what if you don't collect your Social Security at your FRA? This is where the fun begins. I will tell you most people claim Social Security when they want it rather than when they need it or should take it. I mean, it is an emotional decision, not a financial one.

How do they calculate PIA (Primary Insurance Amount)? I wish I could say it is simple, and it is. They take your highest 35 years of earnings adjusted for inflation until you reach age 62. After 62, those years can be used, but they are not adjusted for inflation.

The earnings are adjusted for inflation based on your AMIE (Average Monthly Index Earnings), which is adjusted annually and affects the annual wage base.

Your PIA Primary Insurance Amount is the starting point. The next thing to determine is when you will collect your Social Security. If you want to claim your benefits early, you can use the calculator on the Social Security website to determine the reduction. For instance, if you were born in 1960 or later, your full retirement age is 67, but you can claim as early as 62. If you were born in 1960, you could start collecting as early as 2022. You will only receive 70% of your PIA Primary Insurance Amount. If you do At 63 and 64, your reduction is 5% less each year, so 75% and 80%, respectively, and at 65 and 66, the removal is slightly more at 6.7%. So 86.7% and 93.3%

The calculation is much more straightforward if you wait until after your FRA. It is 2/3rds of 1% every month you wait until age 70. It is an 8% yearly increase or 24% over the three years. So if your PIA Primary Insurance Amount were $1,000 at FRA, at 62, you would receive $700, and at 70, you would receive $1,240 or 77% more than it would be when collecting at age 62.

That is not an insignificant difference.

That is how to calculate your Primary Insurance Amount, and several links are above. If you'd like, you can set up a time to review your Social Security record with me at www.TalkwithDL.com; mention this Episode in the meeting request. Until next time stay safe.

For more information, visit my website: https://poweringyourretirement.com/2021/08/27/your-social-security-payment-equals-primary-insurance-amount/

Ever wonder why people claim Social Security at age 62? Many people do, even though they should wait until age 70. Is it fear, greed, poor planning, or lack of knowledge? There are many mistakes people make, and I will touch on six other mistakes people often make. Welcome back to Powering Your Retirement Radio. I am your host Dan Leonard, and I am a PG&E Retirement Specialist. I have made it to Episode 10, which means I have now published more episodes than half of all podcasts.

Six Common Mistakes People Make

1. Worrying about dying too young - Longevity Insurance

2. Waiting too long to claim -Disability Benefits

3. Not working because of the earnings limit - Losing money from working

4. Not filing for widow's or widower's benefits - Collect at age 60

5. Getting divorced - Married for 10 years, you are eligible

6. Hitting tax torpedoes - RMD’s & IRMAA charges

Collecting at age 62 or waiting until age 70

There are two paths people follow. One is to collect as soon as possible because you think Social Security will disappear. Two is to collect the biggest pile of money over your lifetime.

Collect ASAP – Age 62

Collecting at age 62 usually means you are collecting because you can't work anymore due to health issues, or you lost your job and couldn't replace it, and you need the income. The other option is to collect Social Security at 62. Finally, you can reach the number you need to retire at 62. The first path is more common than you might think. The second option is not uncommon if you have done an excellent job with your 401k and you have a pension.

The biggest pile of money

The biggest pile of money is available to all. The key is planning. If you wait until age 70 to collect your benefits, you will receive between 70 to 75% more at age 70 than you would have received at age 62. You will also have missed 8 years of payments. Many calculators can calculate the cross-over point where waiting makes more sense. Depending on the marital status, that point is usually between 77 and 83. That is not a big stretch to break even in today's world.

What are you to do?

There is no one correct answer. In the claiming at 62 examples, if you can reclaim your life, replace your income and retire, it is hard to convince someone they need to keep working. On the other hand, if you can afford to go without Social Security and still retire at age 70, you will get the most money possible. It is hard to argue that maximizing the one source of lifetime income will continue to grow over time.

This decision is why it makes sense to talk with your advisor and determine what works best for you. In some cases, you may regret going without the money when you finally get it but don't have the desire to spend it. You may also regret taking Social Security at 62, and you are in your late 80s, and your income is feeling the effects of inflation.

Regarding Social Security, consider it longevity insurance, and planning for the worst-case scenario is not bad.

For more information, visit the show notes at

https://poweringyourretirement.com/2021/08/13/6-social-security-mistakes-why-people-claiming-at-age-62

Welcome back to Powering Your Retirement Radio. I am your host Dan Leonard, and I am a PG&E Retirement Specialist. Social Security is one of the most popular and confusing programs around.  In Season two of Powering Your Retirement Radio, I will talk about Social Security Fundamentals. In addition, we will cover claiming, spousal benefits, delayed retirement credits, and various other topics in the coming episode.

Today I will start with a startling study by Vanguard, in which the results are heartbreaking. The survey of 5 million households with investments at Vanguard illustrates how little the average investor has saved. It also shows how few assets they own. If someone that makes $50,000 a year with a 3% growth rate in their income will earn over $3.5 million in their career, the low savings rate is not because they do not make enough money.

The moral of the story is it doesn't matter when you start saving, but you need to start. The earlier, the better. Social Security is so popular because people don't save enough while they are working.

Then I focus on how Social Security was never designed to be an income-replace vehicle. After that, I will cover a few key terms you should know when you look at your Social Security record. Finally, I will leave you with some thoughts about claiming Social Security. There are a lot of unknowns when making your claiming decision.

How long will you live? How well will your other investments do? What do you want to do with your assets when you pass?

The way I look at it is this. You either want the largest possible payout from Social Security over your lifetime. Or you want to retire and reclaim your life sooner rather than later. There is no one correct answer.

I find decisions around retirement and retirement income are rarely based on facts. Most of the time, money decisions are based on emotions. I don't want to work anymore! I can't leave until I have 40 years on the job. And sadly, many more people retire early because they have to rather than they want to. Early retirement due to health concerns is more common than you might think.

Conclusion

Saving for retirement doesn't have to be complicated. Pay yourself first. Once you have done that, you are on your way to prosperity. If you were 20 years old today and could save $371 a month, you would be a millionaire at age 65. That is 540 months, and the $371 seems easy when you are 40 to 50 years old. At 20, it is a little intimidating. It is a total investment of just over $200,000. Yet Vanguard says their average investor has just under $61,000. If you are listening to this, you can do better. The average person isn't listening to a financial podcast, so keep up the excellent work!

For more information, visit the show notes at: https://poweringyourretirement.com/2021/07/30/social-security-fundamentals-2/

This is the 8th Episode and the end of Season 1. The first 8 Episodes have been focused on the PG&E 401(k). Today, I will cover the different ways to manage your 401(k) investments. Then we'll discuss your options if you have a 401(k) from a former employer.

How you manage your 401(k) can be a frustrating subject. So why is it people struggle with what to do with their money? It is simple if you try to research the topic. There is an astounding number of articles online, and there is actionable advice in most of those articles.

I thought I would give you the four ways to manage your 401k.

1. Default Option – Set it and forget it
2. Financial Engines – Plan managed
3. Individual Managed Help – Getting outside help
4. Self-Managed – DIY

What do you do with your 401(k) when you leave an employer?

• Leave it in the old plan – Leave it behind.
• Consolidate it to your new plan – Take it to your new company
• Roll it over to an IRA – Roll it to your IRA
• Cash It Out – Take the money and run (please don't)

Please have a listen to our final 401k Episode for now. In our next series of shows, we will be taking a look at Social Security.

www.TalkWithDL.com – To set up a time to talk
Investopedia Article (link)

For more information, visit the show notes at:

https://poweringyourretirement.com/2021/07/16/ways-to-manage-your-401k-2/