What are common things that most people don’t know about social security?

Narrator
00:00:02

Welcome to the Ask Ralph podcast where listening to an experienced financial professional with over 30 years of experience can help you make sense of confusing questions, current headlines and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting. Ask Ralph makes the complex simple by sharing his real world knowledge from a Christian perspective with all things financial.

Now here's your host, Ralph Estep Jr.

Ralph
00:00:30

Welcome to the show tonight. I want to start tonight with a question. It's a simple question, but do you lie awake at night, worried that social security won't be enough to cover your retirement? You know, I hear from Christians just like you and me all the time who feel overwhelmed about their future. So tonight I'm going to share 9 critical things about social security that a lot of financial advisors won't tell you. And this is information that could help you sleep better tonight and secure your financial future.

Well, thank you for joining me on this election day. We're all anticipating these results, and I just heard something that amazed me. Do you realize that almost 2 billion dollars has been spent on this election campaign? Well anyway, we'll see what the results are here and probably in just a few hours. I want to give you this opportunity at this weekly show to get your questions answered.

You go right to the chat. If you put a Q and a colon sign there, it'll help me see them right away. Feel free to comment. And remember, I do a daily podcast. You can see that every day at askralph.com. I also release it on YouTube and Rumble and stick around till later in the show, because one of you lucky listeners tonight is going to win a hundred-dollar Amazon gift card.

I'll do that later in the show. Well, let's jump right into our first topic. And we got a listener question for that. So let's go to the listener question here. And the listener question says this, "Dear Ralph, I'm 45 and I'm completely overwhelmed about retirement. My church friends tell me not to worry because social security will take care of me, but something doesn't feel right about that. I've worked hard my entire life, but I haven't saved much. Should I just plan on working longer? I feel like I've failed both financially and spiritually by not preparing better." Well, let me just tell you, that's a tough place to be Brooke. And first of all, let me tell you this. You haven't failed. Many Christians struggle with this and they have these same concerns. I talk to these people all the time in my practice. And, but here's the thing I'm going to say to you. Your awareness is a blessing because I feel like it's kind of God nudging you to take action.

So let's get right to our Bible verse. I always like to start with a Bible verse. And this tonight's Bible verse comes to us from Proverbs and that's Proverbs 21:20. And it says this. "The wise store up choice food and olive oil, but fools gulp theirs down." Well, I would say that's a pretty straightforward way to say it, isn't it?

And the truth is, you know, we can all do better, you know, it's not just about our physical provisions. We've also got to learn to be a wise steward of all God's blessings. And this has to be included when you're looking at that retirement planning. So let's get right into it. Now, let me tell you about a couple I met last year.

I don't like to use real names, so I'm going to call them Tom and Mary. And listen, they were both 62 at the time, and they were convinced they needed to start social security at age 62. And they told me, Ralph, they said, listen, we're afraid social security is going to run out of money. And they were living in fear.

And listen, they're not alone because sadly, many of us live in this fear. We're worried about what's going to happen in the future. And the truth is, in this case, the real issue was they didn't fully understand social security. So let me break down 9 crucial elements of social security that many people are not aware of.

Let's start with the first one. This one comes as a big surprise to everybody. Number one. And that's your full retirement age surprise. Now I met this lady, Betty last month. She's a schoolteacher and she was devastated when I told her that claiming her benefits at 62 would permanently reduce her benefits by 30%.

Yes, that's right. That's 30 percent for the rest of her life. Like many, she thought that age 65 was that magic number. But in her case, it was actually age 67. So you might be asking Ralph, what'd you do? Well, we worked together to create what I call a bridge strategy. In her particular case, we used her 403B savings.

Think about it like a 401k. And we delayed her claiming social security until she got to that full retirement age. And you might ask Ralph, what was the result of that? Well, guess what? It increased her potential lifetime benefits, and are you ready for this one? By $100,000 just by waiting until that full retirement age.

Well, let's look at number two, and that's what we call the spousal benefit secret. Let me tell you about James and Linda. Now, James and Linda came to see me, they thought they would have to live on just James' larger social security benefit. See, Linda was a stay-at-home mom. She hadn't really paid into the system.

And let me just tell you, they were shocked when I told them that she could claim 50 percent of her husband's benefit while continuing to let hers grow. It was a weight lifted from her shoulder. You might be asking Ralph, what was the result? Well, here's the result. It added $1,200 monthly to their retirement income. So that was a great result for them.

Well, let's look at number three and this one's called the working penalty. Let me share this heartbreaking story. This one was really sad. I had a client named Mike. Now Mike was one of these guys. He had worked hard his whole life. He decided to start taking his benefits at 62 and he went out and got a job at a hardware store, part time job.

Now Mike had no idea about what they call the social security earnings limit. And guess what? He ended up having to repay $7,000 in benefits. You might be asking why? Because he earned too much. And here's the problem a lot of people don't know about this. If you retire before that full retirement age, they're going to deduct $1 for every $2 you make over that limit.

You might be saying, well, Ralph, what's that limit? Well, I'm going to give you the limit for 2025. In 2025, that limit will be $23,400. So think about it like this. Let's say you retire, you take your early social security benefits and then you say, well, you know, times are kind of tough. I'm going to go get this part time job. Well that part time job maybe grows a little bit as you, you maybe want to get a new car or something like that.

And then all of a sudden you've gone over that $23,400, then you're going to start losing those social security benefits. So you got to think about this and you got to look at your budget and more importantly, you got to plan accordingly. Well, let's move on to number four and that's what we call the tax trap.

I recently met with this couple named the Johnsons. And listen, they were shocked. We're doing their taxes, and I told them that they're going to have to pay tax on 85 percent of their social security benefits. And let me just tell you, they didn't realize that. They didn't realize that their other income was going to trigger this social security tax.

Now, there wasn't a whole lot we could do, but I sat with them. We made a plan, and I showed them how to better structure their income. We planned for these taxes and trust me, this is a huge surprise for many. I don't know how many times I've done tax returns for clients in their first year of social security.

They come in and get their taxes done and all of a sudden, it's like, whammo, we weren't expecting that, Ralph. And trust me, you got to be aware of this because as I always say on the show, knowledge is power. Well, let's look at number five. This is myth number five, we'll call it, and that's what we call the survivor benefit.

It wasn't too long ago I had a new client. Maria came to me, and she just lost her husband and that was tragic. And she was struggling financially. She was taking her own $1,400 a month in social security benefits. And she confided to me, she said, Ralph, I'm having a hard time making ends meet. And I gave her some hope because I showed her. She could switch to her husband's benefit.

So she got in touch with social security, and she realized she would get $2,200 a month instead of the $1,400 she was getting before and now she broke down. She cried in my office. And that was moving for me because think about it. That little change, that's $800 a month extra per month than what she was getting, and it was a lifesaver. So the moral of the story is you got to understand these issues. And it really made a difference for Maria between struggling and that limited stability gave her peace of mind. Well, let's look at number six and I call this one the do-over rule. Here's one that a lot of many people don't know about.

A lot of people don't know about this one. So I had a client named Robert. Robert's another guy. He had worked hard his whole life, and he decided he was going to claim early at 62. So he went to get his social security, started collecting it. Three months later, he gets a job offer. And he thought, you know, I could make more money.

I don't need to do this. And so what did Robert do? He used a little-known do over rule. Now, the way that works is he did have to repay the benefits he received. That's just the way it is, but he was able to stop his benefits. You know, he stopped his social security altogether and then he was able to reapply when he turned 67. And think about that for a second.

So he had taken it at 62. So he was going to get less benefits, but then he waited till 67 and what that did is it resulted him in getting an increased benefit of $800 a month. Now listen, you only get one time to do this reset, but it became a financial lifesaver for him. Well, let's look at number seven and that's what I call the divorce benefit.

See there may be actually some benefits to divorce. Just kidding. I'm not wishing that upon anybody. But let me tell you about Patricia. Now Patricia, in her particular case had been divorced for over 20 years and she was struggling with a small benefit and she had no clue that she could claim her ex-husband's record.

And the reason she was able to do that is 'cause they've been married for 15 years. You might be saying, Ralph, what happened to her? Well, it increased her monthly benefit by 600 bucks a month. And here's the best part, it has absolutely no effect on your ex. Not a lot of people could care less, but it has no effect on them.

You just got to know about the rule. So if you've been divorced, you were married at least 15 years, take a look at that. Let's look at number eight. And that's what we call the COLA mystery. So let me tell you about the Andersons. Now the Andersons were people. They took my advice. They did that budget.

Yeah, they had a good budget, but they made a false assumption. And they, they just assumed that there would always be that COLA. Now COLA stance for cost-of-living increase. They just assumed that it'll always be a cost-of-living adjustment each year. But then all of a sudden, they realized that it doesn't always work like that.

They're not guaranteed. In fact, I didn't know this till I did some research for the show. But in 2009, 2010 and 2015, there was no COLA adjustment. There was no change to the social security benefits whatsoever. And I think the moral of the story here is that's why we need to have additional income beyond social security.

If you're counting on social security to meet all your financial obligations, I think you're going to be in trouble. Let's move on to the next thing here and that is number nine and that's what we call the earnings record. So this is my final one of tonight for the earnings record, number nine, let me show you about my client Tom. And again, I don't use clients real names. We're going to use Tom. And he called me last month. He was sort of frantic. He had just reviewed his earnings record, and he found it three years of income wasn't correct on his social security record. And I'm going to encourage you, go to ssa.gov and get on that because you want to make sure that you've got that information in the right place, and you've got it all set up because he found that three years of his income was not correct.

So what do we do? I helped him. He went back and appealed the issue. And guess what? When he did that appeal, they increased his monthly benefit by $175. Now my friends, that's what I call found money. But the key to that is you've got to check your record and make sure it's correct. So I always like to give you action steps.

I've given you a lot of information there, those top 9 things, but I want to give you some action steps. So the first one is this. And I mentioned this a moment ago. You got to go and create your own social security account online, verify your earnings record, make sure that everything is in order, so you don't have those surprises down the road.

The second thing I'm going to encourage you to do is calculate your full retirement age. You got to know what that is. It depends on your birthday. A lot of my clients now are hitting that at 67 or 67 and six months or eight months or something like that. I don't have the numbers right in front of me, but you got to understand what that is and know what their expectations are.

Another thing I'm going to encourage you to do, and I think this is really important. You got to start building additional retirement savings, even if it's just a small amount, that little side hustle or that yard sale that you do, that perennial yards. I had a client one time, he came in to see me to get his taxes done and he said, Ralph, I really need to make some extra money.

He said, here's what I did. I started going around on trash day, grabbing stuff that people put out that I could fix. And then he said, I had a yard selling my yard every week. And he says, you won't believe it, Ralph, but I make a couple hundred bucks a week. And I think that's a great idea. So start building that additional retirement savings and number five, my action step here is consider meeting with a financial advisor who understands both money and faith. I just think that's important.

Let's take a look now at another question I got from a viewer. And this one came to me from a friend, he's a client of mine, and he got this email, and he said, Ralph, I'd never heard of this, but there's this thing called the Medicaid Estate Recovery, or it's called the MERP for short. And like I said, I got this from a client.

And what that really means is that the government can seek reimbursements for benefits if you have somebody that's on Medicaid after they pass away, which was really eye opening to a lot of people. They just assumed that their assets are protected. They figured, hey, you know, my mom or my sister, my aunt qualified for Medicaid.

They just assumed all the assets protected. But here's the problem. It's not true. And the reason they're able to do this is the states are looking for ways to recap costs. Those costs are things like nursing home care, in home care, even certain hospital and prescription costs. But here's the key, you got to understand, you're getting those benefits from Medicaid as the person's alive, but it kicks in after recipient passes away.

It's a terrible thing. So you might be questioning, Ralph, I thought my home was protected under Medicaid. And I'm going to tell you that's generally correct, but let's talk about how this plays out. So the way it plays out is once you pass away, now you're not going to be getting this, but the relative of the deceased get a letter. That could be the beneficiary.

That could be the executive or something like that. And the letter informs that they intend to file a claim against the state. Because the goal of the state, not the estate, but the goal of the state is to cover the cost of care. And remember, just so you understand, they can only recover what was actually paid.

They can't take the full amount of any assets or in the estate if they exceed what they've paid in Medicare. Now, there really are two types of methods of recovery for this. There's one called the probate estate, and then there's the one called the expanded definition of a state recovery. Now probate's that legal process.

A lot of people are aware of this. When you pass away, your will gets probated. That's what they call it. It's a legal process that validates a will, and that's where they determine the value of your assets. They make sure your debts are paid, and any remaining assets generally go to beneficiaries. Well, all states are going to look at this process and see is there a way for them to recover some of the monies that they spent on Medicaid?

Because think about it. If the person was collecting Medicaid and then all of a sudden, once they pass away, they've got these assets, there's a question mark there. But now some states go even further. And that's what I was talking about when I mentioned, you know, that some states take that expanded, what we call the expanded definition.

And some States actually look at joint assets. They look at life estate, say, and even some assets that are held in trust. Now I'm not an attorney. I'm not going to give you legal advice tonight, but my goal is to make you aware of the situation. Cause if you're aware, at least you can do something about it.

And I know this is a lot to take in and it can feel overwhelming, but the good news is there are ways to protect your assets, and the key is Medicaid planning. So how do you do that? You might be saying Ralph, how in the world do I do that? Well, the first thing you got to do is you got to hire a professional Medicaid planner.

That is not something I do, but there are people out there that are what they call professional Medicaid planners, and they can help you understand the specific rules and they can help you develop strategies to safeguard your assets. These include things like, and I'm not going to get into details tonight because there's just too much in the weeds, but there's this thing called a Lady Bird Deed.

There's exemptions for siblings and caregivers and listen, these are complex. And that's why I said, it's really important that you hire somebody to walk you through this so that there's no misunderstandings about this. So you better hire somebody. That's just the bottom line. So you might be asking, Ralph, what are your most important takeaways?

Well, the key is this, you got to plan ahead. This is the thing you should be planning for long before you need long-term care. I mean, this isn't the time to plan when you're 78 years old and you're going into long-term care or to a nursing home and you're trying to figure out how do I manage my assets and all that sort of things.

Because the sooner you plan, the more options and flexibility you're going to have. Now, one of the things I'm going to warn you about is you've got to really watch out for scammers. There are a ton of scammers out there. I've had some clients come into me and they say, Ralph, I got involved with this group.

They said they wanted to charge me $15,000, but they were going to show me how to avoid having any issues I can go into Medicaid. I can get the government, the state to pay for everything. I just had to pay them this money up front and they were going to show me how to do it. And I'm going to tell you right now, put on the brakes, watch out for that.

Because that is just crazy and criminal in my view. So you got to be wise about this and not get yourself into big trouble. Well, I’m not seeing any questions in the chat tonight so I’m going to make it a short night so we can all go and watch these election returns and see who's going to win. And one of the things I’m going to ask you for is a favor tonight.

I'm really trying to grow this show. I'm trying to reach more people. So I want to encourage you to do me a favor. Could you share the show with others who will benefit from the information I present? Not just on the Tuesday night live show, but on the daily show. Here's an easy way to do it. All you've got to do is send them an email with a link.

Just say, hey, you got to check out this guy, Ralph. Go to askralph.com and tell them how it's impacted your financial and your faith life. Because here's the truth. My consultants tell me this all the time. The people I work with to bring you better episodes tell me every day that word of mouth is the key and you're sharing with your friends and family is going to help us grow.

And if it grows, we're going to reach more people. We're going to help more people find that balance in their life. We're going to help them break away from that paycheck-to-paycheck cycle, that debt spiral, that feeling of bondage they're in. So I'm going to encourage you again, just send an email to your friends and family and say, hey, check out Ralph's show, it's at askralph.com, and I would really appreciate it. Well, I'm going to close for tonight. I want to thank you for joining me today. Remember, every Tuesday night at 7PM Eastern, share this with your friends and family, and remember this. My passion is to help you achieve financial success. I want to see you live out your dreams.

And I want to see you grow in your faith because I know together, we can master your finances from a Christian perspective. So as I always end this show, stay financially savvy out there and God bless you.

Narrator
00:19:42

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