WEBVTT - Can Millennials Count on Social Security? w/ Mike Piper #1127 0:00:00.080 --> 0:00:02.880 Welcome to How to Money. I'm Joel, and today I'm 0:00:02.880 --> 0:00:06.320 asking the question can millennials count on Social Security? With 0:00:06.600 --> 0:00:30.120 Mike Piper. Social security more than music, clothing, or political use. 0:00:30.200 --> 0:00:34.519 It's potentially the biggest generational divide. Boomers are stoked to 0:00:34.600 --> 0:00:37.839 finally be receiving their promise checks, while Millennials and gen 0:00:37.960 --> 0:00:41.080 Z sit on the sidelines, wondering if social Security is 0:00:41.120 --> 0:00:44.320 even going to exist when the time comes for them 0:00:44.360 --> 0:00:47.519 to collect. And while social Security is highly unlikely to 0:00:47.600 --> 0:00:52.120 disappear entirely to evaporate overnight, it probably won't look exactly 0:00:52.240 --> 0:00:55.640 the same as it does today either. My guest today 0:00:55.680 --> 0:00:58.640 is Mike Piper. He's a CFP, he's an author, he's 0:00:59.160 --> 0:01:01.960 an og blog from two thousand and eight over at 0:01:01.960 --> 0:01:04.520 his site, The Oblivious Investor, and I couldn't think of 0:01:04.600 --> 0:01:08.840 anyone better to discuss this tumultuous topic with. So Mike, 0:01:08.920 --> 0:01:10.320 thank you so much for joining me today. 0:01:10.840 --> 0:01:11.600 Very happy to be here. 0:01:11.680 --> 0:01:14.800 Quick quick correction note there, I'm a CPA rather than 0:01:14.840 --> 0:01:15.440 a CFP. 0:01:15.760 --> 0:01:19.320 That's what I should us said, CPA, not CFP. All right, 0:01:19.560 --> 0:01:21.839 So I love making mistakes early on in the podcast. 0:01:21.880 --> 0:01:23.760 That way, you know, I fall out on my face 0:01:23.920 --> 0:01:26.840 and hopefully it's all perfect from here on out. First 0:01:26.920 --> 0:01:29.199 question I ask everyone who comes on the show, Mike, 0:01:29.600 --> 0:01:32.399 is what do you like to splore? John Kraft Beer 0:01:32.800 --> 0:01:35.360 one of my you know, main things. I'm willing to 0:01:35.360 --> 0:01:37.200 spend a lot more than most people would, but it's 0:01:37.200 --> 0:01:39.679 okay because I'm saving and investing for the future at 0:01:39.720 --> 0:01:41.200 the same time. What is that for you? 0:01:41.800 --> 0:01:42.039 Sure? 0:01:42.920 --> 0:01:46.440 My number one hobby for the last fifteen years or 0:01:46.440 --> 0:01:51.320 so has been rock climbing, and so that involves travel 0:01:51.360 --> 0:01:53.520 to a different places, especially because I live in Missouri 0:01:53.600 --> 0:01:55.560 where there aren't a lot of mountains, so travelize you 0:01:55.600 --> 0:01:57.400 might have badge it, but also various types of gear. 0:01:57.680 --> 0:01:59.640 If you ever see movies or people. 0:01:59.440 --> 0:02:01.480 Are put in gear into cracks and things like that, 0:02:03.360 --> 0:02:07.400 all of that gear costs money and you eventually build 0:02:07.440 --> 0:02:08.640 up a collection of it over time. 0:02:09.320 --> 0:02:11.800 Were you were you glued to the screen when Alex 0:02:11.840 --> 0:02:15.080 Hanald was making his recent ascent in Type A. 0:02:15.240 --> 0:02:18.320 Yeah, myself and my wife and a bunch of friends 0:02:18.320 --> 0:02:20.600 we were all watching it, and you know, we have 0:02:20.760 --> 0:02:22.760 a group chat on What's app that we're kind of 0:02:23.280 --> 0:02:26.160 narrating it to each other and then chatting about it. 0:02:26.160 --> 0:02:28.799 It was fun as someone who's like into it. I'm 0:02:28.840 --> 0:02:32.480 like barely in the beginnings of rock climbing with my 0:02:32.600 --> 0:02:36.520 daughter as someone who's into it. How impressive is that feet. 0:02:36.040 --> 0:02:37.200 It's very impressive. 0:02:38.400 --> 0:02:43.160 There's the difficulty of it, of course, but completely separate 0:02:43.200 --> 0:02:47.679 from the difficulty of it is the mental control, right, 0:02:48.000 --> 0:02:51.640 I mean the difficulty grade. Of course, buildings don't have 0:02:51.720 --> 0:02:55.919 established climbing grades, but he estimated it's a quote five 0:02:55.919 --> 0:02:59.760 to eleven D, which is a grade that many many, 0:02:59.760 --> 0:03:03.160 many people could climb right with rope and so on 0:03:03.360 --> 0:03:04.280 experienced climbers. 0:03:05.440 --> 0:03:07.920 But of course with a rope, not me though, but with. 0:03:08.120 --> 0:03:10.360 A rope is very different than without a rope in 0:03:10.440 --> 0:03:14.160 terms of keeping everything together mentally. 0:03:14.440 --> 0:03:17.880 Yeah, no, I mean, yeah, he's a freak. Like you 0:03:17.880 --> 0:03:19.960 think about people that are just at the furthest extent 0:03:20.000 --> 0:03:22.760 of what they do in terms of like skill and 0:03:22.800 --> 0:03:25.799 mental awareness and ability to just to kind of lock 0:03:25.880 --> 0:03:29.240 in and do the job. He's definitely up there as 0:03:29.320 --> 0:03:32.760 like one of the most fascinating athletes absolutely currently in existence. 0:03:33.040 --> 0:03:34.680 Him and Killy and Jordanett are up there for me 0:03:34.720 --> 0:03:38.240 on the Mount Rushmore. Let's talk about social security. It's 0:03:38.280 --> 0:03:41.520 become a polarizing topic, of course, and I feel like 0:03:41.520 --> 0:03:44.600 we're seeing more headlines, more doom and gloom predictions about 0:03:44.640 --> 0:03:47.280 Social Security. Why do you think, well, why is that 0:03:47.360 --> 0:03:50.160 and why do you think people are so like sour 0:03:50.200 --> 0:03:51.000 on Social Security. 0:03:51.160 --> 0:03:53.960 Yeah, there's been headlines, well for a long time now 0:03:54.880 --> 0:03:58.560 about the trust fund running out of money, and you'll 0:03:58.560 --> 0:04:00.760 hear it sometimes they're saying that So Security is going 0:04:00.760 --> 0:04:03.400 broke or Social Security is running out of money, because 0:04:03.440 --> 0:04:10.400 for many years, the program took in more money than 0:04:10.440 --> 0:04:14.000 it paid out in benefits each year. Because every year, 0:04:14.080 --> 0:04:17.039 when we work, the payroll taxes that you're paying, or 0:04:17.040 --> 0:04:19.159 if you're self employed, the self employment tax you're paying, 0:04:19.400 --> 0:04:21.479 most of that is Social Security tax. So the program 0:04:21.560 --> 0:04:23.800 takes in money every year, and for many years it 0:04:23.880 --> 0:04:26.159 was taking in more than it was paying out. So 0:04:26.279 --> 0:04:30.960 over that time it built up a trust fund, an 0:04:31.000 --> 0:04:36.880 excess pool of capital basically. But now now that baby 0:04:36.880 --> 0:04:42.719 boomers reached social security age, largely the opposite has happened 0:04:42.800 --> 0:04:46.920 has been going on, where the trust fund is now 0:04:47.600 --> 0:04:50.280 dwindling because the program is paying out more every year 0:04:50.320 --> 0:04:51.120 than it's taking in. 0:04:52.160 --> 0:04:53.680 And this is not a surprise. 0:04:54.000 --> 0:04:57.279 Obviously, we've known that Baby boomers would eventually reach age 0:04:57.320 --> 0:05:00.240 sixty two and start collecting social Security right the we 0:05:00.320 --> 0:05:07.840 had several decades to see this problem coming. And what 0:05:07.880 --> 0:05:11.360 many people see, though, is this headline that the trust 0:05:11.360 --> 0:05:14.880 fund is expected to be depleted, and every year the 0:05:14.920 --> 0:05:17.920 Social Security Trustees put out a new report with the 0:05:17.920 --> 0:05:23.160 most recent information, and it moves around that the estimated 0:05:23.240 --> 0:05:26.799 date a little bit. Twenty thirty two to twenty thirty 0:05:26.800 --> 0:05:29.920 four somewhere in that window is probably what we're looking at, 0:05:30.240 --> 0:05:31.920 and it moves around a little bit, but not very much, 0:05:31.960 --> 0:05:33.520 like it's not going to be twenty forty seven or 0:05:33.520 --> 0:05:35.120 something like that. It's not going to happen in twenty 0:05:35.120 --> 0:05:38.000 twenty eight, because again, we have a pretty good idea 0:05:38.360 --> 0:05:40.200 of how much the program is going to have to 0:05:40.200 --> 0:05:42.120 pay out every year, Like we know how many people 0:05:42.160 --> 0:05:43.920 there are who are sixty one this year, and who 0:05:43.960 --> 0:05:46.479 are of them, how many you're going to live to 0:05:46.480 --> 0:05:48.120 be sixty two next year, and so on. We have 0:05:48.120 --> 0:05:50.560 a very good idea of, you know, all of the 0:05:50.640 --> 0:05:54.880 estimated costs here. But what a lot of people miss 0:05:55.680 --> 0:05:58.400 when they see that headline that the trust fund is 0:05:58.480 --> 0:06:00.240 going broke. The trust fund is running out of money 0:06:00.240 --> 0:06:01.719 and it's going to run out. And you know, twenty 0:06:01.760 --> 0:06:04.840 thirty three, a lot of people think that that means 0:06:04.839 --> 0:06:07.320 that Social Security is going to go to zero, and 0:06:07.440 --> 0:06:10.040 that's that's not correct at all, because again, the program 0:06:10.080 --> 0:06:13.520 takes in money every year. Every time that we earn 0:06:13.560 --> 0:06:17.839 wages or self employment income, we're paying Social Security tax. 0:06:18.960 --> 0:06:22.520 And the trustees of the Social Security Trust Fund that 0:06:22.760 --> 0:06:27.640 estimate that even if Congress does nothing, so absolutely no 0:06:27.760 --> 0:06:31.440 changes to improve the funding of the program, the ongoing 0:06:31.520 --> 0:06:35.440 revenue would be enough to pay for about three quarters 0:06:35.480 --> 0:06:39.400 seventy six percent of the promised benefits basically indefinitely. 0:06:40.480 --> 0:06:44.000 That bigs a lot of questions though, right, so like 0:06:44.080 --> 0:06:49.159 in particular in twenty thirty three, right, it's it sounds 0:06:49.160 --> 0:06:53.560 like a long way off, but it's really is coming. Yeah, 0:06:53.839 --> 0:06:59.240 what happens to current retirees in twenty thirty three our 0:06:59.400 --> 0:07:02.640 checks and immediately just cut in a quarter of the 0:07:03.920 --> 0:07:06.119 check that retirees getting, Is it cut? 0:07:06.640 --> 0:07:06.800 Right? 0:07:07.400 --> 0:07:10.200 That's an open question because it's ultimately going to be 0:07:10.800 --> 0:07:13.320 up to Congress, Right, what happens on that date if 0:07:13.360 --> 0:07:16.440 they don't do anything between now and then. And you know, 0:07:17.080 --> 0:07:19.880 fifteen years ago when I started writing about this, topic. 0:07:20.240 --> 0:07:24.080 Kind of the conventional wisdom, frankly, was that Congress would 0:07:24.720 --> 0:07:29.240 would have done something already by this point to do 0:07:29.320 --> 0:07:33.800 you know, whether it's increasing taxes or reducing benefits or 0:07:33.840 --> 0:07:37.400 some combination thereof most likely to improve the funding of 0:07:37.400 --> 0:07:41.960 the program. And that hasn't happened yet. So here we 0:07:42.000 --> 0:07:47.840 are with that date coming up, and what actually does 0:07:47.920 --> 0:07:52.360 happen on that date will be up to Congress. I 0:07:52.440 --> 0:07:56.760 in the last few years have heard more people proposing 0:07:56.800 --> 0:08:00.440 a scenario where Congress basically just says, Okay, we'll just 0:08:00.480 --> 0:08:04.240 fund that gap out of just general tax revenue. Whereas 0:08:04.240 --> 0:08:07.000 the way the program is set up right now, benefits 0:08:07.040 --> 0:08:10.240 are always specifically paid from the trust fund and from 0:08:10.560 --> 0:08:15.880 incoming revenue social Security tax specifically every year, whereas it 0:08:16.160 --> 0:08:19.320 could be changed so that, you know, any shortfall is 0:08:19.680 --> 0:08:22.960 paid out of the there's just general you know, federal 0:08:22.960 --> 0:08:23.880 income tax revenue. 0:08:24.960 --> 0:08:26.160 This is one of those things that would have been 0:08:26.200 --> 0:08:28.880 easier to fix when you first started writing about it. 0:08:29.040 --> 0:08:31.600 But does it mean that the fixes need to be 0:08:31.640 --> 0:08:34.800 more substantial because we've waited so long to address it. 0:08:35.200 --> 0:08:36.040 Yes, exactly. 0:08:36.520 --> 0:08:38.679 The fact that we've waited means that the you know, 0:08:38.679 --> 0:08:42.080 because for instance, if the fix was entirely done by 0:08:42.160 --> 0:08:44.880 increasing taxes, well, if we would have done it ten 0:08:44.960 --> 0:08:47.640 years ago, we would have been able to do it 0:08:47.679 --> 0:08:50.000 by a smaller tax increase, right, because we've had more 0:08:50.080 --> 0:08:53.840 years to pull in that extra revenue. The longer we wait, 0:08:53.920 --> 0:08:55.400 the more drastic the chaines have to be. 0:08:55.480 --> 0:08:59.360 Absolutely, from a return standpoint, I think, especially how to 0:08:59.400 --> 0:09:03.920 money listeners tend to skew towards millennial gen z. From 0:09:04.080 --> 0:09:07.000 a return standpoint, does social Security provide a good return 0:09:07.040 --> 0:09:08.960 for the average person? Because I know there are a 0:09:09.160 --> 0:09:11.640 lot of people who listen to the show and they're 0:09:11.679 --> 0:09:13.480 trying to be intelligent with their money, and they're like, 0:09:13.520 --> 0:09:15.120 my goodness, I feel like I could do a lot 0:09:15.160 --> 0:09:18.439 better if I had that money in my hands, right, 0:09:18.440 --> 0:09:22.560 And I understand why the Social Security system exists, and 0:09:22.600 --> 0:09:25.280 it's to prevent you know, a white swath of Americans 0:09:25.320 --> 0:09:27.120 who don't do smart things with their money from being 0:09:27.400 --> 0:09:31.720 destitute and retirement. But what would you say, how would 0:09:31.720 --> 0:09:34.520 you help somebody understand what the returns are, Like we're 0:09:34.880 --> 0:09:36.720 investing in their four O one K versus what they 0:09:36.760 --> 0:09:38.440 get from Social Security and what they paid in and 0:09:38.440 --> 0:09:39.000 what they get out. 0:09:39.480 --> 0:09:42.760 Yeah, It's a very interesting question, but one that's actually 0:09:43.040 --> 0:09:47.760 fairly tricky to answer because social security has other components 0:09:47.800 --> 0:09:52.320 than just retirement benefits. Right when we pay Social Security tax, 0:09:52.880 --> 0:10:00.720 there's also social Security disability benefits. There's also survivor benefits. So, 0:10:00.920 --> 0:10:06.000 for instance, if somebody dies and they have minor children, 0:10:06.160 --> 0:10:08.320 those minor children will in many cases be able to 0:10:08.320 --> 0:10:12.520 receive a Social Security benefit until a certain age, things 0:10:12.520 --> 0:10:13.160 of that nature. 0:10:13.840 --> 0:10:14.199 And so. 0:10:15.840 --> 0:10:19.240 The tax revenue that you're paying, some portion of it 0:10:19.280 --> 0:10:22.640 is going to those retirement benefits, but another chunk is 0:10:22.679 --> 0:10:27.040 going to these other social safety net protection programs essentially, 0:10:27.440 --> 0:10:30.800 And so if you ignore those things and only look 0:10:30.880 --> 0:10:34.040 at you know, assume that every dollar is going towards 0:10:34.080 --> 0:10:35.880 retirement benefits, and you look at how much you put 0:10:35.920 --> 0:10:37.960 in and how much you're expected to get out, the 0:10:38.040 --> 0:10:41.439 rate of return is modest. It's not atrocious, but it's 0:10:41.480 --> 0:10:42.800 you know, it would be modest, of course, and that 0:10:43.000 --> 0:10:46.320 depends on how long you ultimately live and so on 0:10:46.400 --> 0:10:51.520 to collect benefits. But the key thing is that a 0:10:51.559 --> 0:10:53.559 significant part of the money that we're putting in every 0:10:53.600 --> 0:10:57.120 year goes to pay for other protections. So you could 0:10:57.160 --> 0:11:01.400 model it as saying Okay, I'm paying x amount every year, 0:11:02.320 --> 0:11:04.880 and I can think of that as buying a disability 0:11:04.880 --> 0:11:07.440 policy and that would cost them dollars, and buying a 0:11:07.440 --> 0:11:09.280 life insurance policy and that would cost them dollars. And 0:11:09.280 --> 0:11:13.520 then what's left is what's actually going into this retirement program. 0:11:12.960 --> 0:11:15.600 And exactly how to model it. 0:11:15.920 --> 0:11:17.240 You know, there's a lot of different ways, a lot 0:11:17.280 --> 0:11:21.200 of differ assumptions you would need to make. But that's 0:11:21.280 --> 0:11:22.920 I think a lot of people when they look at 0:11:22.920 --> 0:11:25.760 the modest rate of return, they're just missing a couple 0:11:25.760 --> 0:11:27.800 of key components of what the program does. 0:11:27.960 --> 0:11:29.760 Yeah, and if you are one of those people, right 0:11:29.800 --> 0:11:33.960 who does become disabled and qualifies for those disability benefits 0:11:34.000 --> 0:11:36.920 like your ROI, essentially on the money you put into 0:11:36.960 --> 0:11:42.680 the system skyrockets. But if you're fortunate, right, then your 0:11:42.760 --> 0:11:45.800 return is doesn't look nearly as enticing. 0:11:46.320 --> 0:11:48.960 Precisely, it's a social safety net program and it's a 0:11:49.000 --> 0:11:52.880 social insurance program. So for the people who need, those 0:11:53.120 --> 0:11:56.560 who end up needing that insurance essentially who become disabled, yes, 0:11:56.880 --> 0:11:59.280 the payout is much much higher than for those of 0:11:59.320 --> 0:12:01.679 us who end up I say us on the assumption 0:12:01.679 --> 0:12:03.600 that I won't become disabled but of course who knows. Ye, 0:12:04.000 --> 0:12:07.720 then for anyone who doesn't become disabled and doesn't die 0:12:08.080 --> 0:12:12.720 and then have young dependents who are receiving benefits. 0:12:12.920 --> 0:12:16.240 How do you help, especially with kind of the up 0:12:16.280 --> 0:12:20.760 in the air reality of how Congress addresses the Social 0:12:20.760 --> 0:12:25.640 Security Trust Fund running out and potential cutback in benefits 0:12:25.760 --> 0:12:28.760 or potential just changes to how Social Security gets funded, 0:12:28.960 --> 0:12:31.679 how do you help younger investors think about the piece 0:12:31.679 --> 0:12:33.760 of the pie that Social Security will play for them 0:12:34.000 --> 0:12:35.160 in their retirement years. 0:12:36.600 --> 0:12:41.679 I think that a reasonable approach is the assume Congress 0:12:41.720 --> 0:12:45.760 does nothing plan essentially, so there's no reason to really 0:12:45.840 --> 0:12:49.160 assume that Social Security is going to disappear, because that 0:12:49.200 --> 0:12:52.480 would require Congress not doing nothing. That would require Congress 0:12:53.080 --> 0:12:56.040 doing something. It would require Congress eliminating this program that is, 0:12:56.760 --> 0:13:00.319 according to many surveys, literally the single most popular program 0:13:00.360 --> 0:13:01.560 that the federal government. 0:13:01.240 --> 0:13:04.040 Has, and the biggest voting block, the most active voting block, 0:13:04.120 --> 0:13:05.920 like really really annoying those. 0:13:05.800 --> 0:13:07.280 People exactly right. 0:13:07.360 --> 0:13:11.640 So it's it's not a very politically likely scenario that 0:13:11.720 --> 0:13:15.600 Congress will just eliminate Social Security. So I do think 0:13:15.640 --> 0:13:18.240 though it's reasonable to say, well, let's assume they do 0:13:18.280 --> 0:13:21.400 nothing and so assume that instead of however much my 0:13:22.040 --> 0:13:24.480 social Security statement when I log in at SSA dot gov, 0:13:24.480 --> 0:13:26.920 it says I'm going to get this much, maybe use 0:13:26.960 --> 0:13:28.640 about three quarters of that much instead. 0:13:28.800 --> 0:13:31.280 Okay, Yeah, I was like literally about to log in 0:13:31.760 --> 0:13:34.200 right now as you're speaking and see what it would 0:13:34.240 --> 0:13:37.960 tell me. I've looked it up in recent months, and yeah, 0:13:38.000 --> 0:13:39.319 it's it's not one of those things you want to 0:13:39.360 --> 0:13:41.560 take with a grain of salt. You don't want it 0:13:41.600 --> 0:13:45.440 to be It's not completely inaccurate, but you would say, 0:13:46.200 --> 0:13:49.960 temper your expectations and maybe don't no factor in the 0:13:50.040 --> 0:13:52.240 full amount that SSI dot Gov is telling you you're 0:13:52.240 --> 0:13:54.800 going to get into your spending plans for retirement. 0:13:55.360 --> 0:13:56.240 Yes, exactly. 0:13:56.320 --> 0:14:02.600 Okay, So yeah, do you think that social security pessimism 0:14:03.040 --> 0:14:06.480 is leading some young people to oversave, maybe maybe causing 0:14:06.520 --> 0:14:09.120 them to spend too little right now? Because I do, 0:14:09.200 --> 0:14:11.240 I mean, I do think there is a prevailing attitude 0:14:11.840 --> 0:14:15.160 that doesn't have that like tempered expectation. It's like, screw it. 0:14:15.160 --> 0:14:17.920 I'm just I'm just totally gonna figure this out on 0:14:17.960 --> 0:14:19.760 my own because I don't trust that this is going 0:14:19.760 --> 0:14:22.840 to be around for my future, and especially like in 0:14:22.880 --> 0:14:26.240 those years where you have good health, you have more freedom. 0:14:26.840 --> 0:14:29.400 It's it's really tough to think, like I've got to 0:14:29.440 --> 0:14:31.120 go at one hundred percent on my own if there 0:14:31.120 --> 0:14:33.640 are let's say, thousands of dollars waiting for you in 0:14:33.680 --> 0:14:37.360 your sixties when you do retire, to not factor that 0:14:37.480 --> 0:14:40.920 in would essentially mean you have to forego more enjoyment 0:14:40.960 --> 0:14:42.880 of those dollars. Now do you do you see that 0:14:42.920 --> 0:14:45.360 as like an overreaction and as a common reaction. 0:14:46.240 --> 0:14:49.880 Emphatically, yes to everything you just said. That's exactly right. 0:14:50.280 --> 0:14:54.760 That it's I really don't think it's necessary to assume 0:14:54.880 --> 0:14:58.840 zero dollars coming from Social Security, even even for you know, 0:14:58.960 --> 0:15:04.240 the youngest of the workers today. And exactly what you said, 0:15:04.360 --> 0:15:07.600 The only way to make a plan work when we're 0:15:07.720 --> 0:15:12.880 using super pessimistic assumptions is to spend much lessons save 0:15:13.040 --> 0:15:15.120 much more than we really needed to. Like you could 0:15:15.120 --> 0:15:16.680 also assume that you're going to live to be one 0:15:16.760 --> 0:15:19.840 hundred and forty in retirement and that your portfolio is 0:15:19.840 --> 0:15:23.080 going to earn zero you know, like, yes, that will 0:15:23.120 --> 0:15:27.480 make your plan very very safe, very conservative, And there's 0:15:28.320 --> 0:15:32.640 you know, we want to be reasonably conservative, but within 0:15:32.880 --> 0:15:34.280 a realm of realism. 0:15:34.480 --> 0:15:37.800 Yeah right, you could be overly conservative and really hamper 0:15:38.240 --> 0:15:40.440 some of the other things you want the money to do. 0:15:40.440 --> 0:15:42.200 For you, absolutely right. 0:15:42.200 --> 0:15:45.040 The way that you achieve conservativism and financial planning is 0:15:45.520 --> 0:15:49.920 by not spending money, and that's a real sacrifice. 0:15:50.280 --> 0:15:55.160 Yeah, okay, So in terms of and you maybe briefly 0:15:55.200 --> 0:15:57.360 alluded to what it could look like to fix the 0:15:57.440 --> 0:16:01.880 social Security system so that it is robust right for 0:16:02.480 --> 0:16:07.400 decades centuries to come, right, especially with like the demographics 0:16:07.440 --> 0:16:12.160 issues that we face as a country. How do what 0:16:12.200 --> 0:16:15.640 are your thoughts for rebuilding the Social Security program? What 0:16:15.760 --> 0:16:17.920 needs to be done to ensure that it's shored up, 0:16:18.280 --> 0:16:22.520 especially as older you know, we're seeing an older, aging 0:16:22.560 --> 0:16:27.240 population and the replacement like just your kids being born. 0:16:27.800 --> 0:16:30.960 I think most likely the way that we get from 0:16:31.000 --> 0:16:35.440 here to there is on both ends of this, right, 0:16:35.480 --> 0:16:38.400 it's probably a reduction in benefits in some way and 0:16:38.480 --> 0:16:40.840 an increase in revenues meaning an increase in taxes in 0:16:40.880 --> 0:16:45.400 some way. Almost certainly not just from a pragmatic point 0:16:45.400 --> 0:16:46.880 of view, but from a political point of view. The 0:16:46.880 --> 0:16:48.800 only way that Congress would agree to this like neither 0:16:49.160 --> 0:16:53.080 you know, Democrats aren't going to agree to just a 0:16:53.080 --> 0:16:56.480 whole bunch of benefit cuts, and Republicans are probably not 0:16:56.560 --> 0:16:59.200 likely to agree to funding everything through increased taxes, So 0:16:59.480 --> 0:17:01.560 from a political point of view, it's probably going to 0:17:01.600 --> 0:17:07.560 be a compromise. And the way that benefit cuts could 0:17:07.600 --> 0:17:11.080 look the two things I see most frequently discussed. Number 0:17:11.080 --> 0:17:13.480 one is an increase in full retirement age, which is 0:17:14.080 --> 0:17:20.159 often misunderstood. You can start receiving Social Security retirement benefits 0:17:20.160 --> 0:17:22.240 as early as sixty two, where you can wait all 0:17:22.280 --> 0:17:25.720 the way until age seventy. We're not talking about changing that. 0:17:26.320 --> 0:17:29.080 We're just talking about changing the what we call full 0:17:29.119 --> 0:17:32.159 retirement age, which is just an age for most of us. 0:17:32.160 --> 0:17:35.040 It's sixty seven that our benefit calculation is pegged to, 0:17:36.119 --> 0:17:41.120 and basically all the math depends on whether you start 0:17:41.119 --> 0:17:44.040 taking your benefits before or after full retirement age. And basically, 0:17:44.119 --> 0:17:47.080 if we bump up a person's full retirement age, that's 0:17:47.200 --> 0:17:50.800 just another way of saying, at any given age, they 0:17:50.840 --> 0:17:54.000 will get less dollars. So when we talk about increasing 0:17:54.040 --> 0:17:57.360 full retirement age, it's a very straightforward, just cut to benefits. 0:17:57.400 --> 0:17:59.520 It's not we're not actually changing the age which somebody 0:17:59.560 --> 0:18:03.119 would start receiving benefits we're just talking about reducing the dollar. 0:18:03.240 --> 0:18:05.679 And this has happened in the past, right, Can you 0:18:05.720 --> 0:18:07.440 talk to me about how that went down? 0:18:08.000 --> 0:18:08.240 Yeah? 0:18:08.240 --> 0:18:12.199 Absolutely, So this was before my time in terms of, 0:18:12.240 --> 0:18:15.080 you know, what the discussions in Congress looked like. But 0:18:16.000 --> 0:18:18.440 full retirement age was it used to be sixty five, 0:18:18.480 --> 0:18:20.399 and then it was gradually increased to sixty six, and 0:18:20.440 --> 0:18:22.960 now and then it's been gradually increased to sixty seven, 0:18:23.400 --> 0:18:26.920 and so it seems very likely that we'll just see 0:18:26.920 --> 0:18:29.199 eventually full retirement age b age seventy. 0:18:29.280 --> 0:18:33.119 Frankly, and in a lot of ways that makes sense too. 0:18:33.240 --> 0:18:35.120 I mean, when you think about the conception of Social 0:18:35.119 --> 0:18:41.640 Security when it first started, the people lived didn't live 0:18:41.640 --> 0:18:45.280 nearly as long, right, So isn't don't we think of 0:18:45.320 --> 0:18:49.800 Social Security differently in twenty twenty six than kind of 0:18:49.800 --> 0:18:51.920 what it was intended to be when it was originally launched? 0:18:52.760 --> 0:18:55.720 Very much so, the program has very much evolved over 0:18:55.760 --> 0:19:02.719 the years. It didn't originally include benefits for spouses or survivors. Uh, 0:19:03.119 --> 0:19:06.560 And then when it did start including benefits for spouse's 0:19:06.720 --> 0:19:08.760 it you know, we had wife's benefits and then they 0:19:08.760 --> 0:19:09.800 had husband's benefits. 0:19:09.840 --> 0:19:10.040 Later. 0:19:10.480 --> 0:19:14.359 It's a very It has definitely grown over the years 0:19:14.400 --> 0:19:17.920 to be a more a broader social safety net program 0:19:18.000 --> 0:19:20.879 than how it was originally intended, and even just on 0:19:20.920 --> 0:19:24.480 the basic retirement benefits side. Just like you said, the 0:19:24.600 --> 0:19:26.960 expected length of time for which somebody would now receive 0:19:26.960 --> 0:19:30.520 retirement benefits is longer than it was, you know, almost 0:19:30.560 --> 0:19:31.520 a century ago. 0:19:31.480 --> 0:19:34.440 For sure. Man, so much more to discuss, including well, 0:19:34.440 --> 0:19:37.000 how do you know when you need to change your 0:19:37.000 --> 0:19:41.679 social security claiming strategy? Work, health, those things can impact that. 0:19:41.720 --> 0:19:51.440 We'll talk about that and more. Right after this, I'll 0:19:51.440 --> 0:19:55.200 talk about Mike Piper. We're talking about social security, the 0:19:55.320 --> 0:19:59.400 good and the bad of the social security system, and 0:19:59.119 --> 0:20:01.720 and and where things are headed, especially if things stay 0:20:01.720 --> 0:20:05.840 on their current track. Let's talk We do have older listeners, Mike, 0:20:06.000 --> 0:20:09.720 who listen to How to Money. Let's talk about boomers 0:20:09.720 --> 0:20:12.679 and people who are kind of or people who are 0:20:12.680 --> 0:20:15.760 on the cusp let's say, of making that decision about 0:20:16.760 --> 0:20:19.720 when to claim social security? Can you offer some rules 0:20:19.720 --> 0:20:23.320 of thumb for when someone should Would it make sense 0:20:23.359 --> 0:20:25.360 to take social security versus delaying? 0:20:26.119 --> 0:20:26.359 Yes. 0:20:26.720 --> 0:20:29.800 First thing that I often like to point out is 0:20:29.840 --> 0:20:33.080 that when people think of the risk side of social security, 0:20:33.600 --> 0:20:38.000 they often get it exactly backwards. You'll hear people say 0:20:38.040 --> 0:20:40.640 all the time, I don't know how long I'm going 0:20:40.680 --> 0:20:44.120 to live, and therefore I'm going to claim Social Security 0:20:44.200 --> 0:20:46.280 right away to make sure I get at least something 0:20:46.440 --> 0:20:48.160 right They'll say, you know, it's a bird in the hand, 0:20:49.480 --> 0:20:54.119 and that's literally that's precisely backwards. That's exactly incorrect. Because 0:20:54.160 --> 0:20:59.119 when we talk about retirement planning, the scary scenarios, the 0:20:59.359 --> 0:21:02.520 financially scary scenarios are not the ones. 0:21:02.359 --> 0:21:03.280 Where you die early. 0:21:03.760 --> 0:21:06.000 Right If you retire at sixty and then at sixty 0:21:06.000 --> 0:21:09.280 three you die of a heart attack, you probably did 0:21:09.280 --> 0:21:11.280 not run out of money in retirement. It's the person 0:21:11.320 --> 0:21:13.760 who's still alive at one hundred and three and they've 0:21:13.760 --> 0:21:15.600 been in a nursing home for the last twenty years 0:21:15.760 --> 0:21:18.800 like that's the person who's more likely more at risk 0:21:18.840 --> 0:21:21.960 of running out of money. And so the long life 0:21:22.000 --> 0:21:25.320 scenarios in retirement planning, those are the scary ones. It's 0:21:25.359 --> 0:21:28.560 kind of unusual. We don't normally think of living a 0:21:28.560 --> 0:21:31.240 long time as a bad thing, but when we're talking 0:21:31.240 --> 0:21:34.800 about retirement planning, that's the financially scary scenario, and delaying 0:21:34.840 --> 0:21:39.280 benefits makes you safer in those scenarios where you live 0:21:39.280 --> 0:21:43.680 a long time, So there should already be just from 0:21:43.720 --> 0:21:48.240 the risk point of view, a significant bias in favor 0:21:48.240 --> 0:21:51.359 of filing later. And then we can dig into this 0:21:51.400 --> 0:21:55.080 life expectancy based math and say, okay, well, what's the 0:21:55.160 --> 0:21:58.560 age that would maximize how much I'm likely to get 0:21:58.600 --> 0:22:01.720