Navigating Social Security with Christopher Hensley

Welcome to today's episode. I'm excited to have guest Christopher Hensley with over two decades in the financial services realm. Christopher's journey has been driven by a singular passion, helping individuals navigate the intricate paths of finance to achieve their life aspirations. His dedication isn't just rooted in numbers and strategies. It's about making genuine connections and empowering people with the knowledge they need for a secure future. Thank you for joining me on the podcast today, Christopher. I'm excited to dive into our topic. Absolutely excited to be here. Thank you. So today's topic that we're going to have guest expert, Christopher talk to us about is social security. Now, as you're getting older, you probably heard some things people share their little tidbits or their knowledge, but Chris is the expert. And so we're just going to ask him some questions to help us navigate this in the next 10, 20 years, wherever you're at on your wealth stage here. It's very, very important. Christopher, what are the key factors people should consider when deciding the best time to start claiming social security benefits? Yeah, you know, I'm a big advocate of pushing as long as you possibly can on Social Security benefits. The reason for that is if you take it early, which 62 is considered early. That's the, if you're not a widow, that's the earliest that you can actually turn on your Social Security is 62. So anything between 62 and 65, 66, 67. Depending on what your your full retirement age is, you're going to get somewhere between 70 to 100 percent of what your social security is. So you always want to, when possible, to push as long as you possibly can. It's very difficult to make general recommendations for everybody across the board. In fact, I'm going to shy away from from doing that. But this is one of those things I can almost say, Okay. Almost across the board, it's pretty good to push as long as you can. I have found some exceptions to that. I work a lot with state employees, with teachers, and even anybody who is subject to, from a pension, from any, either city, state federal, local government. There may be some exceptions there because they have what's called windfall elimination provision or government pension offset. And when I do find those exceptions where I tell people you might need to take it early, it makes sense. And there's math behind it and I have to see it, but sometimes I'll see those exceptions there and that's typically where I see it. There are a lot of things to think about because it's not just the retirement benefit. It's also the disability benefit or the survivor benefit. If you're married and your spouse passes away. So we try to get them. You know, perfect world. We want to get them the highest social security retirement benefit, but we also want to get the survivor benefit the highest possible as well in case somebody passes away and it won't offset the family with what they have coming in for the budget. You mentioned widow and then you kind of touched on it a little bit more. Can you maybe expand and share like what individuals need to do if they find themselves in that situation and who would that be? You know, do they have to be of social security age? Yeah, so you actually are able to take it a little bit early. You could take it at 60, so even a little bit early, even earlier than full retirement age or 62 which was what we're calling early retire early social security. So you have a little bit of a earlier window and again, it still may not be the best thing. You, you're going to have two decision points there. One is to turn on the widow's benefit and one is to turn on your own benefit. One strategy is to turn it off. On the widow's benefit and let your own grow and then switch 'em at later on down the road. All of this, it's not a guessing thing. we literally have to see it. So a lot of this has to do some of the decision points. Here are the age, if it's, if it's a couple, if somebody's passed away what's the age difference between the two people who was the highest income earner? It may not make sense to take one if. If it's based on the earned income throughout their lifetime you know, so these are all things that we look at when we're looking at the widow's benefit. And then if, if they haven't already passed, then we definitely, that's when we want to look at maximizing Both of the benefits on the survivor side and the retirement benefit side. This often looks like this, I'll get somebody who's super excited about retiring and they're saying that, okay, social security is going to help solve my income problem. And they're only looking at it as the retirement side. And then when I tell them once again, Usually it's better to wait to turn on your social security. It has the same result. The longer you wait to turn on your social security, the higher that surviving spousal benefits going to be, so it's kind of like a double edged sword in a good way. The longer that you wait, you're boosting the survivor benefit, but also the retirement benefit there. Yeah. Yeah. I know my brother in law, he waited well, you know, 70 years old for that purpose for that survivorship, just to be able to provide some more for my sister. I don't, I guess he's got some inkling that he'll go first. I mean, he is older, but that's not always the way it goes, but it's so important to make those plans for possibilities because you know, life is full of possibilities. Being able to do that is so very important. I know when he was talking about it got me. Interested in learning a little bit more. And so I jumped on my own social security and was looking at that. Range from you know, waiting until 70 for me. And I think maybe even 72 now and Holy cow, it's a great, huge jump from, you know, being able to wait for those. So I think people should delay. Any advice for that, how people can kind of navigate that if they go and look themselves and see that, are there other ways to. Maybe circumvent, or maybe they should jump in earlier. I know some people are like, I need the money now, but. What would help them? Yeah. It comes down to a couple of things. I like to say, everything's a math problem, but it's not just about the numbers. The numbers are super important. When I do a social security solve, I literally, these are tools that I use even, it's not something I do by hand. We plug in your social security or your earnings history throughout your life. That job you had at the bookstore or at the dairy queen when you're a teenager, from now, you know, all the way from that first year of earnings till now, and each year has a minimum of how much you have to make for that to be counted towards your your credits or Social Security So you get a certain amount of credits. And the second part of it is how much. Okay, I qualify for Social Security, but how much do I actually get? The, you know, the idea of pushing between your full retirement age and age 7070 is the longest that they'll let you go. So you got to take it. Somewhere between 70 and six months or else they'll go ahead and turn it off for you. But, but the, the advantage of pushing between, you know, I told you to, to wait at least to your full retirement age, but pushing between your full retirement age and 70 is you get an 8 percent delayed retirement credit for every year. between your full retirement age and 70. And that's compounding. So it's, it's 108 percent the first year, 116, 124, so every year. So if you look at it, that benefit when you log on to social security. So say. gov and you get that four page PDF. They're going to give you an estimate. They're going to tell you, here's your full retirement age. Here's how much it would be. And they will show you every year that you push between then and 70 and you're a hundred percent, the years there that you wait, you get a big kicker. And you know, if you're working with a financial advisor and you ask them, where can I put money and park it and get an 8 percent guaranteed. That's the word we can't use. Guaranteed return. That's about as close as you're going to get. The social security, the income from social security is, is a really good. Good thing. It's something that we can budget off of, there's very, between a pension and your your social security, there's very few things that we, when we're putting together a retirement income plan, have a floor for, and that's going to be something that's guaranteed and that we have a income floor coming in. So we look at that. As a good number, because it takes the question mark out of it. The market, you know, when it's up, that's great. But trying to budget off of that, sometimes there's a question mark or to be determined because we just don't know what the market's going to do from each year to year. Yes. Very good. Are there any common misconceptions about social security? that people, you know, share with you or you think people should be aware of if they hear it through the quote grapevine. Yes. So there are a couple of different ones there. The most common one is I'm not going to look at social security because I'm worried it's not going to be around. So I'm just going to kind of bury my head in the sand like an ostrich and not look at it. That is the wrong thing to do, so that is a fear based idea. It's not wrong. You know, we've, we've all heard that, you know, social security doesn't have any reform that these, the two trust funds. There's one that's for the retirement benefit and one for the disability benefit will run out before X number of years. And that kind of changes. We'll go on to Yahoo finance and you'll see that, you know, kind of Negative fear based headline. They're saying it's gonna run out, there is some truth to that. But for people who are our age or boomers, baby boomers, even this isn't going to change that drastically for them. and that's the people that I work with right now that are looking at social security, although I'm 50. So my age group, we're right behind them, so there's concern there. But what happens is that what will happen first is the disability fund would run out before the retirement fund. There's a really good explanation if you log onto ssa.gov. The, the splash screen of the social security website has a a, a letter basically explaining, that's one of the very first things they do is, you know, is social security gonna run, run out? And it explains how those trust funds, how the, the disability one would run out. Before that if I had to speculate, and I don't like to speculate. But I can tell you being plugged into this space and kind of knowing having my ear to the ground here. There is a high likelihood that we will see massive reform prior to that. The idea that Social Security would go belly up. People would be running down the street with their hair on fire. If we, if we just take away this this benefit and some people like to say what do they call it? Yeah. Entitlement. It's not an entitlement. We've worked for this benefit. It's something that we've paid all along the way. And if they change it negatively, it's kind of changing the rules mid you know, mid game here. So I think if anything, we'll see reform in that area, they may raise the age of full retirement age up. So that's kind of a stealthy way of, of kind of doing a little bit of a grab back from social security. But on the other side of that, we are living longer. You know, our life expectancy has gone up tremendously in the past you know X number of years we were having much higher life expectancy than generations before us. And so, you know, it's not crazy to think that they will extend the full retirement age out. And that might be one of the ways that they do it. Yeah. Yeah, that makes sense. I know, you know, Talking about retirement and looking at that. They say you spend a lot more when you're younger, you know, your earlier years, regardless of when you retire. And then you kind of fall into a lower, and then you come back up as your health, and so pushing off social, social security makes sense to actually cover that increase in medical care, medical costs. So I think people need to maybe consider, yes, we are living longer, and even if you're somebody, my husband's such a pessimist, he's like, I'm not going to live past 60, which only gives him three more years, and I'm like, really? Really? You know, and so it's like, if you are a pessimist, you've got to still think about that optimistic side is what if you are, what if you are? So I think that's so important. All right. So how does working after retirement age affect social security benefits? How does all of that you know, working X number of years, maybe you retire, maybe you're of social security age and you're still working maybe part time, probably part time. What does that look like? Well, thing is that if you wait all the way to full retirement age, it doesn't affect you a bit negatively, so if you wait to, if your full retirement age is either 65, 66, 67, depending on the year that you were born, whatever your full retirement age is. If you take a job. Or time or either full time after that, it will not affect you negatively on your social security. In fact, it might actually affect you positively if you've had some zero years. So maybe you worked at a junior college where they didn't pay into social security, but or you had some earning years where the annual income that they use as an average to figure out how much your social security is going to be was a low number so you can actually knock out some of those zero years or knock out some of those. At low averages by working, they fit, they refigure your social security on an annual basis. So that can only affect you positively. Now there is something called deeming. So deeming is if you turn on social security prior to your full retirement age. So remember we said you could turn it on as early as 62. If you turn it on between 62 and whatever your full retirement age, they're only going to let you get a certain dollar amount of your social security and it. It there's a limit every year it changes. I want to say it was like 22, 000 recently. Don't quote me on that because this stuff changes all the time. And I don't know when somebody's going to listen to this, but I went jump from 19 to 20, I think it's about 22, 000. And for every dollar that you go over that on your social security benefit, they're only going to give you 50 cents on the dollar. And so there is a calculation. It's not like they're taking your funds away. The math works out, it all goes back into what your new social security will be after you hit full retirement age. And it's, it's recalculated on an annual basis. So I never I never discouraged people from either working part time or, or going back to work. It used to be like, well, if you don't want that to happen, don't go back to work. Right. But the math, it, it actually is about the same and it still could have positive effects. If you had some of those. Things that I mentioned like zero years or a low annual income that they're basing your social security on only can only really can affect you positively that way. You just have to understand that they're not taking, it's not a a negative thing where they're taking money away from you, it will be recalculated later. If you want to avoid it altogether, we'll just wait. Wait, wait to turn on your social security to later. Yeah. So smart. I know earlier you mentioned windfall and then now you've mentioned zero years. So really I'm asking out of interest for myself, but I'm sure there's a listeners in the same boat. I changed government agencies and the one I left, I was paying social security and I had met my 40 quarters. So had met that right and then move to another agency that no longer contributed to social security. How does that affect and is that considered windfall or is that just zero years? Yeah, so this is a very specific question, it's for people who have pensions and the here's the two questions. Yes. Do I have a pension? Yes, I do. So the second one is, did I when I got the when I paid into this pension, whether it's city, state, federal or local government. Was I paying into Social Security at the same time, or was I only paying into that pension, and so those two questions if the answer is yes for both of them, right then you're gonna, you possibly can be subject to something called windfall elimination provision and government pension offset. It's the same problem. It means you're going to get less Social Security than you expected. One of them has to do with the retirement benefit, and then the other one has to do with the, the other parts of the benefits, even your spousal. It affects whether you can pull from your spousal benefit it puts caps on it and limits on it. It's a big deal. You, you end up if, if you go, if I tell somebody to go to social security ssa. gov and get an estimate of their statement and they look at page two and they say, okay, well, based on this, I'm getting about 2, 500 a month from social security. And they're trying to solve that math number. Can I, can I afford to retire? If you go down to the bottom of page two in italics, I call this fine print, the stuff we never look at. It says, if you receive a pension from a city, state, or local government it may not be accurate at this number above may not be accurate. And you'll be subject to windfall. You may be subject to windfall elimination provision and government pension offset. And if that's the case, you may receive somewhere between a reduction of somewhere between 40 to 90 percent of what you think you're getting. So that's a big deal, that's a big deal when it comes to having good math good numbers knowing whether you're able to answer that question, do I have enough money to afford to retire, and all of this is done through software. So, so it's, it's not willy nilly. Here is, I'll give you a really easy way to do it manually to see if this is something I should worry about, when you get that PDF. Go to page three and remember when we were talking about when you worked at Dairy Queen or you worked at the bookstore when you're in college, all of those jobs are going to be in there. You're going to see two columns. You're going to see every year that you've ever worked in column one and you're going to see Medicare earnings, so if you look at both of these columns and you see a zero in the earnings column, But you see every year, doesn't matter whether you're paying into social security or not, your employer will still pay into Medicare for you. So if you see what looks like, I made about 100, 000 at the hospital, but I'm showing a zero in the earnings year, that's a red flag. That's basically saying, okay, you had some years that you did not contribute to social s your employer did not contribute to social security and therefore you did not contribute to social security. And so this may be something. And then you'll want to kind of back into it to see if it actually affects you or not. Here's something that will make some people feel good. If you are contributing to a pension, there are hybrid organizations that contribute to a pension, but also contribute to social security. Most of the time they're going to be exempt from this, but the litmus test is, are you paying into a pension, so we kind of have to back into it and solve it and see if it's a thing. If it is a thing, it's a big deal. So. Yeah, Social Security can be, well, kind of like the tax laws and all of that, it's a little cumbersome, but hopefully we're giving listeners some clarity. So, okay, I know we've talked about early age, full age, and max age. Can you maybe just First of all, how does somebody know their full social security age? You know, cause it does depend on that year they were born. How do they go find that? Yeah. So the best way to do it is to go right to social security ssa. gov and, and sign in. They make it a little bit hard for you, but that's because it's got all of your information when you log in there, it's almost like when you they do like a little credit check, they're going to ask you your, your addresses and all of that stuff where they give you, you know, Just know it's very hard for people to get your information. It's hard for you to get it. It's hard for them to get in even worse, so once you're into the website, though, they have a place where you can request the PDF, which is your social security estimate. They used to mail these out to us, but when they did the Paperwork Reduction Act, they stopped doing that. So you really only get them as you approach. Your full retirement age. And if you want to make a good decision, you want to proactively kind of log on there and get it there. That's going to be the best place to get it. And it will tell you what your full retirement age is. So just know 62 is the earliest that you can take it. And then depending on what band you fall into, what year you were born in, then it's going to tell you right on that statement, what it is. So no, no guesswork there. Yeah, perfect. All right. So our last question, what strategies can people use to integrate social security into our overall retirement plan? Yeah. So, when we're doing a budget, right, and we're trying to look at our income and we're trying to look at our expenses. This is the same way that you, if you think about all the budgets you've ever done in your life prior to retirement, retirement is going to be different. You're turning off your paycheck, your normal. Regular earned income square job pay, and it's now becoming your, you're starting again with your, either your pension, your social security. This has value to this because it's, it's predictable. And so that kind of becomes part of your new paycheck, so when you're budgeting, this is going to be a income that we have coming in. We can budget off of this investments or anything else that you have. Are definitely part of that calculation. How much can I afford to spend? But it's going to, you, everybody's heard that number, that 4 percent number out there, now there, this has kind of changed over the years as far as, well, does that make sense? Those numbers were run back in the 80s and the interest rates were high. There's big debate around that, but we can use 4 percent kind of as a thumbnail. So if you take about 4 percent of what you're in. Outside investments are your, whether it's in a retirement account or in a cash account you can peel off about 4 percent a year as a good kind of estimate, so you add the pension, you add the social security up, that's going to be your floor stuff that you know, that's not going to change. If it does change, it's going to be cost of living adjustments every once in a while. So it's only going to go up. It's not going to go down. And then you can put the, the, the The variable investments on top of that. And that's an easy way to kind of back in and give yourself a new budget. I didn't say anything about expenses. I'm really just telling you about, about what your income is going to look like after you've, you've turned off the the employer paycheck and you've made the decision to retire expenses. Again, that's, that's variable, but, you know, things like driving to work gas you know, Property taxes never go away, they're still coming in, taxes are there, but, but things that you have to think about, your budget will literally change once you retire, it's going to be a different thing, even if you confidently budgeted throughout your entire life, you're entering into new territory once you retire. Yeah, so very good. All right, before we close how can people connect with you? And maybe one last piece of advice. Absolutely. So how they can connect with me. So I wear two different hats. I've got my podcast hat. In fact, you were on my podcast. We just put that one out. So I'd encourage listeners to go find us there at www. moneymatterspodcast. com. That's a good way to connect with me. The other way is when I'm a for profit business, I'm a retirement planner, financial advisor, and that's www. houstonfirstfinancialgroup. com. And I guess one of the biggest things that I would leave people with this one's not a shocker or, or super sexy. It's not a great one to leave behind, but save, nobody likes to hear that. Nobody's a fan of that. But we all know that we need to do it. So I've never had a client or anybody come back to me when it's time to retire and say, Oh, sorry, Chris, you made me save too much money. You know, that's not a complaint I hear it's always. It's gonna be the opposite of that. Like, Hey, I didn't have enough. So I always encourage people, you know, you hear that number, put 10 percent of your income aside throughout your lifetime. Because I've helped people get to the finish line. I'm somebody who even encourage you if you can do closer to 20%, do it. Thank you for your time today and we'll see listeners the next week. All right. Have a good one.