Douglas Goldstein: Andy Landis is probably one of America’s foremost authorities on
social security and Medicare.
He wrote a piece in Market Watch called Five Bad Reasons to Take Social Security Early.
Is there ever a reason to take social security early?
Andy Landis: There are some good reasons to take social security early and I’m going
to give you a very concrete example.
The nice lady across the street from me has very little money.
She has a husband who’s still working.
She works very little and her health is not good.
It just makes sense when you pile all those together for her to start the social security
now at 62.
So needing the money is probably number one.
If you need the money, go ahead and take it.
And what if you don’t have a long life expectancy, what if you are in poor health.
That’s another good reason to take it early.
There’s a very wise financial strategy which I’m sure you are aware of.
It could be part of the detour strategy like taking a widow’s payment early and then
switching to your own later if you have access to that.
So there are times when it just makes sense to take it early.
Douglas Goldstein: What if you are afraid that social security will default?
Are you just being crazy or is that possibly a reason to take it early?
Andy Landis: I would say that’s one of the poor reasons for taking it early.
I’ve been hearing it since the 1970s when I worked at social securities and it’s going
to go broke any time now and here we are 40 years later and it’s still in good shape
and if you look at the projections, social security should have all the money it needs
to pay benefits at this level until 2034 and even after that, it has 79% of the money it
needs for the rest of the century.
So it’s not like it’s about to go broke or facing immediate default or something like
that.
Douglas Goldstein: A guy who is let’s say in his 40s or early 50s, he’s looking to
get 80 cents on a dollar at some point.
Do you think that’s something he should weigh into the equation or do you think they’ll
just solve it by then?
Andy Landis: Here’s what I would do if I was in my 30s or 40s and looking at social
security’s finances, there’s no doubt that social security faces a short fall in
the 2030s and beyond.
So what that means is congress needs to fix the short fall by some combination of raising
taxes and cutting benefits.
I hate to say it, but younger workers will pay more for their social security and get
less out of it.
It’s simple demographics, there are just not enough young people to pay the benefits
for old people going forward.
So it will change and they will pay more.
Here’s what I would not do, that same 40-year-old worker might say “Oh just put in zero for
my future estimates.
I don’t think it’s going to be there.”
And instead of being that pessimistic, I’d say a pessimistic worker might say “Well
put in 75% of my estimated social security because I know they are going to cut it.”
Douglas Goldstein: You gave a good example when someone should do that, but in general
I think you feel people should wait.
How come?
Andy Landis: If you live the average life expectancy or beyond, you’ll get more money
out of social security if you wait.
And let’s face it, we can all use higher payments in our retirement and I hate to say
it, but it might mean working a couple of years longer, waiting on your social security
or exercising one of these strategies that are available, but it just means more money
in your pocket the longer you wait up to age 70.
It’s a little different by the way for spousal and widow’s payments.
They maximize at 66 or other full retirement age, but the retirement benefits maximize
at 70.
I’m not saying everybody should wait until 70, only about 1% or 2% of people do, as I’m
sure you are aware Doug, but they’ll end up with more money, to spend more money for
other needs and maybe a better lifestyle as they just wait a couple of years on their
social security.
Douglas Goldstein: Let’s discuss for a minute why people would wait?
I just want to make sure everyone is clear on the rules which is if you wait, every year
you delay taking your social security, your monthly payments will be a little bit higher.
How does that work?
Andy Landis: It’s pretty simple actually.
First of all social security names a full retirement age which is currently 66 for retirees
now, and then if you take the social security early, as early as 62 for retirement payments,
each month you take it early there’s a slight reduction in the payments and each month you
take it later than full retirement age, it goes up a little bit.
What that means is there’s a whole spectrum of payments from 62 to 70 and each month that
you postpone the social security makes the payment a little bit higher per month.
Sadly, that’s for fewer months before the big date when you pass away from this earth,
but it does make sense to plan to have more money.
So if you can somehow delay the social security, and there’s lots of ways to do that, delay
it months, years, that will just make your retirement that much fatter in the long run.
Douglas Goldstein: One of the numbers that I’ve heard people batting around is they
say every year you wait it’s like making an extra 8% on your money.
Is that true?
Andy Landis: If you wait after your full retirement age, currently 66, it goes up monthly but
there’s an annual rate of 8% and that’s 8% above and beyond the inflation rate and
it’s guaranteed by the government.
So you are a financial expert, you can tell me if there are some investments out there
where I’m guaranteed 8% plus inflation, guaranteed by the government.
Boy I want to get on that bandwagon.
That sounds like a good deal.
Douglas Goldstein: Let’s touch on the inflation thing because over the years, I’ve watched
my clients who gets social security and sometimes it goes up a little bit as the cost of living
adjustments, and sometimes it seems client will say you know everything is getting more
expensive but the government says there’s isn’t inflation and you know there are a
lot of different ways of measuring inflation.
Why do you think people feel it’s not really in line with the actual cost of expenses that
they have?
Andy Landis: A couple of reasons, one, what government uses to inflate the social security
payment is the CPI, the Consumer Price Index and that has been you saw no raise in the
social security this year because CPI was actually negative in the U.S. last year mostly
because oil went way down so gasoline was cheaper oil and so on, everything was cheaper
because of oil.
But, you still see other things going up like food and so on.
So that’s part of it.
And then there’s another angle and that is older people who may be on social security
may experience a higher inflation rate than the CPI and I’ll let you guess why that
might be.
Older people over consume on healthcare and that goes up faster than inflation or at least
traditionally it has, so that’s a factor and some people even say we should use a different
inflation rate for older people, that would be interesting.
Douglas Goldstein: Tell me a little bit about how a person can make a decision about trying
a more sophisticated strategy to maximize his/her benefits?
Andy Landis: I’ll give you a really brief one if I can name a private company that I’m
not affiliated with.
First of all, get your estimates on your social security payments, from social security online.
Just go online at www.ssa.gov, find the “My social security account” button and download
your social security statement, do the same if you are married with your spouse, now you
have two social security amounts and let’s see if we can play with that.
I would simply put those numbers into an online calculator at financial engines, so simply
Google financial engines social security calculator.
That’s the last of the free ones that I know of that has been updated to the new rules
that just came out of congress.
So if you do just those simple steps, I’m talking about taking 10 minutes on your social
security.
I bet you that financial engines will find extra money that you can get by playing with
your application dates.
Concrete example, boy with the changes that came out of congress in November, my main
plan for social security with my spouse went out the window.
We don’t qualify under the new rules.
I run the numbers through financial engines just as a test and guess what, it came up
with a new strategy where my wife files early and I file on her record, still under the
new rules, it found $8000 more in social security for us, not a lot.
It’s a long time to get that $8000, so we may not do that pathway, but for some people
this could be $50,000 or $60,000 stated when I was there.
That’s definitely worth going after.
As a financial planner, that’s something you would help the client with to make sure
that they were getting the most out of their social security that good, hey that’s a
lot of money.
Douglas Goldstein: How can people follow you and follow your work and get a hold of some
of your books?
Andy Landis: The easy way to say it is go to my website at www.andylandis.biz and right
there, you will find links to my Facebook, blogs, and to my book, hey I’m so excited
Doug, I just rolled out a brand new version of social security the inside story, it’s
got the new rules, it’s bigger, it’s clearer, I think it’s the best I’ve done and it
looks like it would be a good supplement to your book on financial planning.