Micah Shilanski (00:00)

Welcome to the Plan Your Federal Retirement Podcast. I’m your co-host, Micah Shilanski. And today we are going to talk about things that are hot topic items. We’re going to talk about things that are definitely I’m going to say clickbaity. Hopefully, this isn’t going to be a clickbait aspect of it. But we get questions from clients about this, I think, because of other clickbait articles that are out there that that affect us mentally, but don’t affect our bottom line at the end of the day. And it’s really important to see the difference between these.

And that’s why I’ve invited to talk on this podcast back a regular guest, my father, Floyd Shalanski, because he has years, decades of experience, actually, decades of experience working through this side by side with clients. So Pops, thanks for joining us.

Floyd Shilanski (00:43)

I guess I need to get my crush out of my cane as I struggle up here, right? Decades of stuff, I tell ya. Decades of

Micah Shilanski (00:49)

Experience. Come on now, you’re not that old.

Floyd Shilanski (00:52)

You know, Micah, one of the things when you said that ratchet back to ⁓ I doubt if any of the listeners will know and remember this, but we used to have a magazine called Money Magazine. And I had to subscribe to it in the firm because everyone would walk in with these money magazine articles that says, This is what we should be doing. And that’s kind of what’s happening today, what you saw clickbait, but across the memes and across TikTok and all these other things, we’re hearing these articles from these people that talk about to the public all the stuff that’s going on.

And especially with Social Security right now, probably because of demographics, or at people turning, I think the numbers like people reaching age sixty-five isn’t like two hundred thousand a day as they migrate to age sixty-seven or sixty-two, should I start or not start Social Security? But I think having this conversation about what’s real and not real and how it affects the individuals themselves, not the general public, the individuals is extremely important.

Micah Shilanski (01:50)

So one of the questions when you come in and and meet with us or one of our our financial advisors, we’re always going to talk about is we’re going to ask you a question like this, all right, what’s your strategy for turning on social security? And this in no way is a trap, right? It’s a very genuine question. Is have you put thought into do you have a strategy for turning on social security? Now some people really haven’t thought about it. They’re like, Hey, I’m sixty two, I’m gonna turn it on. As soon as I retire, I’m gonna turn it on. Or some people are I’m gonna delay it just because I want it to grow, but I really haven’t

put it together in in a in in a my complex financial plan, I’m looking at it as a one-off thing. So a couple of things that I want to draw together by the end of the podcast pops. Number one, what you just talked about, which is saying, all right, the clickbait stuff, what are the news talking about right now? What are things we should pay attention to? What are things we should completely avoid because they’re irrelevant? But then let’s make sure we’re morphing this a little bit later in the podcast into how do we look at it from a financial planning standpoint.

And social security is not a s a standalone decision. It’s one of many decisions we need to put together in a plan for clients when they retire. Does that sound good? ⁓

Floyd Shilanski (02:52)

Without

a doubt. And in fact, if if any of the listeners have heard my other podcasts, I talk just as specifically about that. Just because, you know, you read a reel or you see a reel or you read an article, this affects me. And and we do the same thing. We’re giv give we are painting with a very broad brush. Here’s what’s out there, here’s the basics effects, but it’s gonna be different for almost everyone that’s listening to this. So at sixty two, when you can first qualify for FERS social security,

I can’t tell you how many times, my gosh, my god Floyd, it’s my money. I paid for it. I want it today. I don’t trust the government. All right, I don’t care about taxes. I won’t live that long. I could do a litany of conversations on why I shouldn’t postpone. But mathematically, if you’re gonna live past 80, I hope most of us listen to do past 80, it might make a ton of sense to delay. And then especially with rates of return, the markers are doing stupid things today when

We we love it. I’d love to look at the the the statements as they go up. But what investment today can give you a guarantee? That’s a big G word, eight percent plus COLA. And it’s social security after sixty seven, right? So Ian, I think you’re a hundred percent correct, son.

Micah Shilanski (04:05)

Yeah, yeah. So social security after you’re like full retirement age, right, is is kicking in for that, which is fantastic. And pops I was no, no, no, was like, Well, hey, you’re getting into the details too soon, right? Let’s step back a little bit. So let’s talk about some of the things that we’re seeing in the media today. Now, by the way, this isn’t new, which is really cool about this. We could also air this the three years ago and it would be relevant. I’m sure in three years from today, this would also be relevant and talk about the same things. But there’s always that fear that they’re gonna take your social security away and they’re gonna take it away because it’s gonna run out of money.

And so one of the questions we always get is, you know, is Social Security safe? Is it fully funded? Well, the answer is no, it’s not fully funded, right? The Congress has blown that money. There is no trust fund that has a few trillion dollars in it. There’s no bank account with a few trillion dollars in it sitting there to pay out social security benefits. They’re IOUs from the government because the government’s already spent all of that money. Now

Is does that mean that I think a social is going to go away? No, I don’t. But this is a very easy fear play that we see a lot of times being played out by different medias because they want you to read their articles, they want you to click on their things, etc. And it’s something that that’s kind of constant. So pops is you see either them talking about number one, I’ll put it in two categories, running out of money with social security, or two.

Really putting limitations on social security, like some of the articles we’re seeing now, which by the way aren’t in Congress as like a pending thing to be done, but people are talking about them as ideas Congress might have. But I guess that’s true, right? Congress might have any idea. That doesn’t mean it’s going forward anywhere. But they’re talking about ideas that says, okay, if you make over X amount of dollars, you’re not going to get social security or they’re going to max out what your social security benefits are going to be. So whenever you hear those types of things, how do you approach it with clients?

Floyd Shilanski (05:46)

You know, one of the first things we talk about is what where did the conversation come from? Did they read it in a magazine? ⁓ was it presented someplace? You know, and as you and I do seminars all the time, we get these questions. You know, will Social Security be there when I retire? The answer is yes, it will be there when you retire. The question is, how much? All right. And you know, I as long as I’ve been in this, been doing financial planning, that’s always been a

question about that. You know, back in the mid eighties, Social Security was going to run out of money. We had to fix it. How did we fix it? We adjusted the basis. And in fact, early eighties or late seventies, when I started doing seminars, the joke was in the state of Alaska in May, you fully paid your Social Security benefits in. So I got an extra twenty dollars a month that I could spend to go down and go fishing. It was phenomenal. You know, then a couple of years later it it came out in

Well, you fully max funded it in September. Well, now it’s going to go loose, honey. So I got a little bit more money. And now most people fully fund their Social Security benefits in December. And it’s late December, not early December. So what did Congress do? We took that floor and said this floor is X and we’re going to adjust it up higher and adjust it up higher. And today you have to do over 130,000 before you max I’m I might be off my math on that one, before we max out what they withhold for Social Security benefits.

Micah Shilanski (07:06)

Yeah, the earnings cap now is like 184,000 in in change. Right. But in 1970 pops, the the earnings cap is like $7,800. $7,800. I know I didn’t know that I did have to look that one up that the $7,800. I was like, what was it at the time? Right. And so that was that’s a huge difference. That is one of the ways that Congress is is adjusting this is every year they raise that cap a little bit more. What does that mean? It means as your income goes up, more of it or all of it is subject to social security.

taxes, which is roughly fourteen percent, right? Half is paid by you, half is paid by your employer when it goes in.

Floyd Shilanski (07:43)

You know, Micah, the the crazy part, you know, and the government does a phenomenal job in marketing, right? Because they come out and say, Tax the rich, you know, and everyone says, you you take all their money. And you know, and the prior administration did that, didn’t they? They said if you make between the two hundred and four hundred thousand bucks a year, you know, you’re capped out. But once you made over four hundred thousand dollars a year, we’re gonna tax your money again with Social Security. But mentally, if I use that four hundred thousand dollar number, most of the people that we talk to, what do they think?

That’s not me. So I’m not worried about it, right? Well, what what happens is it it it all gets adjusted. And that’s what we forget. It all gets adjusted. So to not to balance the budget to, but to secure Social Security for the future, what are we going to have to do? They’re going to raise that. And they did that with Medicare. And I can’t remember it was in the mid-90s or mid eighties, early nineties, ⁓ that once you turned 65, you didn’t have to pay Medicare premiums anymore. And what did that do to Medicare? It almost bankrupted them.

And to fix that problem, what did Congress say? We’re going to tax everything, all your workings right now. You don’t have to pay the was it 2.5% or whatever the number is into Medicare. They’ve already set the floor for that. So one of the easier ways to rectify it is just to 100% of your earnings. You know, you don’t you do not get capped out of that higher number. If you make a million dollars a year, you’re going to have to pay your seven percent on all of that. And then the pushback is, well, it’s not.

It it’s not a social benefit, it’s my money. I invested it. Well, which isn’t really true because you’ve always got the copayment from your employer as well. So, you know, long term, they’re gonna fix this problem. When will they fix it? The day before they should have fixed it ten years ago because they just continue to kick it down the road ⁓ on how to solve this issue.

Micah Shilanski (09:33)

Yeah. So around the early nineties is is when they had you stop. When they removed the Medicare income cap. So that means on all of your earned income, it’s going to be subject to Medicare wages. There still is a social security income cap that we’re talking about, right? So again, that’s one of the ways that that they kind of talk about saying this about a way we’re going to fix it. You know, and then they kind of also will talk about well, we’re just going to restrict benefits, et cetera. Okay. So they talk about all of these different things that are out there, but more important, like we’re talking about all these crazy ideas that are out there and we can

debate the merits plus or cons on all of these things. But guess what? You and I get a vote and that is about it on who we vote for. Then that’s how the republic works, right? Then as those people go to Congress, they get to pass the laws that we’re all subject to. So perhaps when I’m looking at this, like I’ve already casted my vote, it is done. Now I’m waiting for the law. And I don’t get too fussy.

When I start seeing news outlets or even congressmen talking about how they’re going to change this, they’re going to change this, et cetera. I start really paying attention when I start seeing written proposed bills that are getting traction in the Senate or the House. Then I start kind of watching them. And then after they pass the Senate or the House, now I start really watching them, right? To see what’s going to happen. But most of the time, what actually gets passed is not nearly anywhere close to the things they were talking about before.

Floyd Shilanski (10:50)

You know, I I think Micah, if and I haven’t looked at this in a couple of months, but I think there’s either four or five House bills that are been are are floating around today. They got the their HBs are out there, right? But it’s not come out of conference, it’s not come out of budget to go any place else. and they kind of go there and they die, is truly what happens. All right. But until we go to the House or the Senate for a vote, you’re 100% correct. There’s nothing that we can do. Now, for those that want to be proactive, you can

Email and type your letters and send it off to Congress and I did my thing, which is okay. All right. But the real the real question is, is looking how it gets movement when it comes out of budget, when it comes out and when it goes to the floor, then we’ve really got to get concerned. But there’s nothing we can worry, as if if you can see my face, I got tons of white and gray hair. Why? Because I worry about these things, because I don’t want my clients to worry about it and our clients to worry about it.

But we make decisions. And if those people listening today that, well, Social Security won’t be there, then don’t calculate it in the money you’re going to retire on. And while Social Security will be there, I respectfully suggest you reduce. You’re going to get $1,000 a month, budget for $700. If we get the thousand, great. If they have to adjust it, you’re already prepared for it. That’s the idea about planning. We we plan to make sure that, you know, where are the parameters? What are the gaps in between?

So that you don’t get surprises when you decide to make that retirement change.

Micah Shilanski (12:18)

The the biggest thing that I I do pops when I I’m working with clients is we’re gonna go to what is the law today? And then we’re gonna make changes as the law changes. Just like with this last year, we we had a tax law change. And just like four years before that, we had a different tax law change. And a few years before that one, was it six years? I’m gonna be off on that one. Right before that one, we had another tax law change. Right. Tax laws change happened. Our quote, permanent tax code isn’t very permanent. It changes quite consistently with administrations from one to the next.

So I’m not gonna get too bent out of shape about it. You the the big key here is you know look at the law we have today and you make plans based on the rules we have today. Can Congress change the rules in the future? Absolutely. Without a doubt. We always can though. Right. So we’re gonna start with where we stand. We’re gonna review the laws we have today. Now the bad news is Congress gets to make the laws.

Good news is we’re pretty good at playing with the rules and figuring out the best ways to maximize the laws so you can get the most advantage of them. And this really comes into long-term planning, which goes to one of the questions I always ask our new clients coming in at the very beginning. What’s your strategy for turning on social security? Because social security is one of many levers you get to pull into retirement. And it really has a lot of effects. It affects survivor benefits.

It affects cash flow. It affects taxes. It affects your Medicare. It affects charitable giving. right. So all of these things, a little bit on estate planning as well. So all of these things get connected by a decision to turn your social security on or not. So it can be really easy to fall into the clickbait that says, my gosh, they’re gonna change social security. And if I get in now, then I’ll be grandfathered and they’ll never take it away from me.

Right. Okay, let’s think about this. Has the government ever promised something and then taken it away? Yes. Right. maybe if you’re 18 listening to this, you haven’t really experienced that yet, but you probably already have. Yes, the government has definitely promised things and then taken them away. ⁓ just look at Medicare. Medicare was supposed to be free after 65, right? And then there were premiums that were added to it. All of these things have changed over time. So that adage, if I start it now, they’ll never gonna take it away. I don’t really fall for that one.

I go a lot more for let’s make a twenty year plan, tax plan, let’s make a thirty, forty year retirement plan. And let’s say, how do we maximize your social security benefit where it’s the best for you? It’s not the best for the government.

Floyd Shilanski (14:44)

Micah a question for ya. If I started sixty two, I just heard this podcast, I went I shouldn’t have done that. Can I change it now that I started it? ⁓

Micah Shilanski (14:54)

Really depends, Pops, but you’re the social security expert. What’s the answer?

Floyd Shilanski (14:58)

The answer is yes, it’s in the first year. All right. So a lot of times we do hear people that come off the podcast and they say, Well, I just started it. Well, we can modify it. Now, this is here’s the crazy part. We can stop it, you don’t get your money back. But if you’ve had taxes withheld, you don’t get that back either. So we have to calculate those things as we lure our tax projections for the following year. And here’s the best things as you talk about your strategy, as we do, as I do cash flow analysis.

I probably got a number of clients at 62. Well, I get them to postpone till FRA, full retirement age of 67, right? And then when they get to 67, then I got three more years to try to convince them to delay. And I’m running, my batting average is pretty good. 80% of them delay. And then I get that phone call on their birthday. Okay, Floyd, you won. I go, what are we talking about? I’m filing for Social Security, you know.

Because they weren’t, they weren’t, they weren’t. But when you start doing the math and you bring in the taxation and then married couples and we start talking about the effect of the surviving spouse, it’s like no one talks about that. And in fact, in all the articles I’m reading and all the things that I’m seeing today about Social Security, no one’s talking about surviving spouses. So having a good advisor, listening to these podcasts, you know, logging in to plan your federal retirement. Let me talk to someone to help.

Worry about what’s good for you. You make decisions based on what is good for you and your family, not the entire world that is reading these articles.

Micah Shilanski (16:30)

Pops, really, that’s a great message right there, right? This podcast is all about action items. And it’s really about saying how do you apply all of this knowledge to your particular situation? Right. If that’s something you got a great handle on, fantastic. If that’s something you’d love some help with, then I’d love to raise your hand as a contact our office. We’d be happy to have you sit down with one of our advisors in person or virtual. And let’s go through this and let’s talk about one of the many levers that you have in your retirement that you can pull to make sure you’re taken care of.

And that’s why we have our retirement confidence sessions just to help tackle questions like that. Well, Pops, I think this has been really good. I appreciate you being on the podcast.

Floyd Shilanski (17:09)

Always a pleasure to pontificate my opinions on

Micah Shilanski (17:14)

All right. Until next time. Happy

Floyd Shilanski (17:16)

Planning.

Happy planning.

The content in Plan Your Federal

Disclaimer (17:21)

Retirement is for general informational purposes only and should not be considered individualized advice. Invest, including possible loss of principal and past performance, does not guarantee future results. Guests are not affiliated with CWM LLC Investment Advisory Services offered through CWM LLC, an SEC registered investment advisor. Plan Your Federal Retirement is not affiliated with the federal government.