062 Bob Carlson: Unlocking the Secrets of Social Security and Your Retirement Plan

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welcome to

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fun with annuities with your host me

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stan

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the annuity man america's annuity agent

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can annuities be fun

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can contractual guarantees be fun

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absolutely they can

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find out the brutal facts about

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annuities with no sales pitches or high

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pressure nonsense

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just the brutal and factual annuity

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truth which is all you need to hear

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let's have some fun with annuities and

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let's have that fun

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start right now

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[Music]

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welcome to fun with annuities the number

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one annuity podcast on the planet i'm

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your host stan the annuity man america's

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annuity agent licensed in all 50 states

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we have a great guest today his name is

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bob

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carlson and i've known bob for a long

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long time he's well respected in the

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financial services industry

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in financial advice industry but it's

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bigger than that with him and i'm gonna

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i'm gonna run through some of the things

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that he has accomplished and you need to

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know about before we get started with

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this

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podcast um and i've synopsized this and

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that's a lot

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okay but i i really um took it down to

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the bare essentials but the bare

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essentials for bob is more than most

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people ever do in their life so let's

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get started with that

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bob is the editor of uh the monthly

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newsletter and website called

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retirement watch he's served on the

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board of trustees of the fairfax

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virginia county employees retirement

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system since 1992

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and has been chairman since 1995.

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oh by the way that retirement system has

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more than four billion in assets he's

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all he was also a member of the board of

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trustees

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of the virginia retirement system which

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oversees more than 42 billion

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in assets he did that from 2001 to 2005.

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he also served on the

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virginia retirement system deferred

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compensation plan advisory committee

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his latest book that was published this

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year you need to get it it's called

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where's my money

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secrets to getting the most out of your

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social security

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he he's published other books uh

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including the revised edition of the new

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rules of retirement

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um he's also co-authored the personal

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finance after 50 for dummies

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and the new additions coming out this

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year as well and he also wrote the

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classic i love this title

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it's called invest like a fox not like a

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hedgehog that came out in 2007. you need

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that one

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he's written numerous other books and

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reports

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including such topics as the new rules

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of estate planning securing your

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lifetime income

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lifetime lifetime stream of income tax

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wise money strategies

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he's been interviewed by everybody every

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large publication tv

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you know outlet has interviewed him

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he's the past editor of tax wise money

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and just to pile on a little bit more

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bob is an attorney and he's even passed

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the cpa

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exam he he received his law degree and

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his master's in accounting

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from the university of virginia go

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wahoos go cavaliers however you want to

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say that

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and got his bachelor's degree in

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financial management from clemson

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university go tigers

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obviously he likes the atlantic coast

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conference but one last thing

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just just to let you know that bob is

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legit

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he's also an instrument rated private

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pilot

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wow so welcome to fun with annuities bob

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carlson how are you i'm doing well stan

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how are you that's the that's the best

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rap sheet i've ever heard

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of in my life so let's jump right in and

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i i'm dying to get your opinion

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and insight and outlook on a lot of

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things let's let's go to

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hal covid and the pandemic

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has affected retirement plans

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yeah this is really interesting you know

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from the starting in the 1960s

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the average retirement age in the u.s

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kept going down

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and down and then finally in the late

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90s

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it started increasing not rapidly but

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steadily increasing

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and then during covid it flipped back

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again uh one study of uh you know social

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security

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benefit applications found that about 50

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percent more people applied for their

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retirement benefits

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in 2020 than did on average in the four

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previous years instead of a little under

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2 million people applying for benefits

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over 3 million people applied and some

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surveys of people have all indicated

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that

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people who are over 60 are generally

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saying that they've revised their

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retirement plans and they plan to

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leave the workforce earlier than they

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had previously

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now some of this is due to people

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leaving the workforce involuntarily

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they lost their jobs there were no other

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jobs to go so they just left the

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workforce and applied for social

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security

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and that that typically applies to

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people 64 and under who

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retired um but uh there are others who

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uh

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you know they reassessed their life

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priorities they they figured life is

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more fragile than they thought it was

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and

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that they didn't have as many years to

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live as they might have or it was

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you know uncertain so they reassessed

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things plus they looked at

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you know how the stock market and the

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housing markets really boomed in the

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latter part of 2020 and

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figured they're financially in better

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shape than they had been

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uh so they decided they're going to

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retire earlier than they previous were

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just because they wanted to do things

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other than work and they figured they

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didn't have as many years to do that as

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they

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thought they did so there revised their

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plans so uh

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it was a big change and it'll be

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interesting to see if this continues

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perhaps as the economy does better

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and wages increase some of those uh

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people in their 50s and early 60s will

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come back into the workforce for at

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least a year or two or three

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uh but perhaps they won't uh perhaps

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we'll continue this uh

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this pattern of people looking to retire

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earlier and doing things other than work

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and of course how the stock market does

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in the next few years will

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partly determine that because if it goes

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down significantly and stays down

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then people will just decide they need

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to work longer to have that nest egg

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where they want it but

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uh but covin's made a big difference so

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far

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in uh both actual retirements and

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retirement plans

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and it's going to be interesting to see

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if that continues

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so this was kind of a retirement wake-up

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call as you're as you're mentioning all

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that i'm like i think people just

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kind of got smacked in the head with a

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2x4

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reality of wait a minute um you know

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life's short

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i might i might need to reevaluate what

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i'm doing

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with all of the foundation that you just

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laid out

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and no one can predict the future what

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are possible

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both positive and negative repercussions

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from

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this type of um these decisions that

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were made

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well you know on the positive side one

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thing i've told people

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for years is while the focus of

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retirement planning is usually

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on the financial side that's really the

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least

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important side and that's not really

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what determines whether or not you have

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a successful retirement

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what you need to spend at least as much

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time on

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in your planning is looking at how you

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want to spend your time in retirement

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you have all this time you spent

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commuting and working

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you're going to have to fill that up and

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there's a lot of people

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when they retire they have this list of

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things to do whether it's work around

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the house or

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travel or things like that but that's

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usually done within a year or two

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and then suddenly they have all this

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time

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they don't know what to do with they

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might not have enough hobbies

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or they've done all the traveling they

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want to do

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uh they don't belong to enough

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organizations or other things so

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you know when we look at statistics in

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the

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retirement age people 65 and over

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there's a higher incidence of depression

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alcoholism suicide all those problems

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and it's because people don't plan what

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they're going to do in retirement they

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know what they're not going to do and

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they're really looking forward to not

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doing that

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but they don't realize how much time

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they have to fill retirement can last

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20 or 30 years these days and you need a

8:32
plan

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and you need to constantly adjust that

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plan because you'll have new interests

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or lose interest in things you had or

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some things you just won't be able to do

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anymore so

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you know that's the good part is that

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people

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now are focusing on these these

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non-financial aspects of retirement

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planning

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which they hadn't been doing enough

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before and that's that's really good

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thing

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uh you know on the negative side uh

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people you know they just might not

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still be financially prepared enough

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you know the stock market went up a lot

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last year and a lot of people are

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you know just depending on that staying

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there continuing to go up

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uh you know interest rates are near zero

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still so

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if you want to take risk off the table

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and try to generate income from your

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portfolio

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you're not going to do it in the current

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markets without taking some level of

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risk

9:25
beyond what retirees traditionally take

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so that's the negative size there's

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still a lot of financial uncertainty

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particularly for people who are counting

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on the stock market

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to fund their retirement

9:39
tell people about retirement watch and

9:41
i've been getting that for a long long

9:42
time it's retirementwatch.com am i

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correct about that

9:45
that's correct so retirementwatch.com i

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do

9:48
recommend you go in and checking that

9:50
out tell people

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kind of a brief synopsis of what that

9:54
newsletter is all about the frequency

9:56
you've been doing this for so many years

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and so many people depend upon that

10:00
newsletter

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as kind of a foundational piece of

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advice

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that they get tell people about about

10:07
your newsletter

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yeah i've been doing it we're now in the

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30th year

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and you know another effect of this

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pandemic is our subscriptions really

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increased over the last year so it's

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become more popular and more people

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recognize they need it

10:21
but what i try to do is cover all the

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financial aspects of retirement

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whatever they be estate planning

10:28
investments income

10:29
taxes annuities long-term care medicare

10:32
you know anything that can come up in

10:34
your retirement or your retirement

10:36
planning it's it's basically for anyone

10:38
50 or older who's either already retired

10:41
or seriously thinking about retirement

10:43
and you know the important thing about

10:45
it is all these issues change

10:48
uh the tax law changes estate planning

10:51
all that stuff changes and so what i

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what one thing i emphasize there is you

10:56
have to keep up with the changes and you

10:57
have to revise your plan

10:59
you know i frequently uh when i go to

11:01
the money show or something like that

11:03
i'll run into people who say you know

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i've been retired for 15 years i really

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don't need that

11:08
and you know you talk to them a while

11:09
and you find out there have been changes

11:11
that

11:12
they've they've missed out on uh they

11:14
don't realize they need to update their

11:16
estate plan or medicare

11:18
long-term care has changed and things of

11:19
that nature

11:21
the changes have been much more rapid

11:23
the last few years and i think that's

11:25
going to continue

11:26
uh both the legal changes and just

11:28
circumstances in the markets

11:31
so you know one thing you really need to

11:34
do with your retirement plan is learn

11:36
it's not a fixed thing it's something

11:38
you have to constantly

11:39
reevaluate and revise as needed and if

11:43
you if you do it every year so

11:45
you'll make small changes but if you

11:47
wait five years or longer before you

11:50
take a serious look at it

11:52
you'll find you might have to make some

11:53
really serious painful changes

11:55
as opposed to making gradual changes

11:57
every year or so

11:59
i totally agree with that in a i guess

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an analogy you change the oil in your

12:03
car you should at least

12:04
update and look at your financial plan

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et cetera one of the things

12:08
that i love about bob's newsletter again

12:11
retirementwatch.com just like it sounds

12:14
one word um retirementwatch.com

12:17
he writes so that anybody at any level

12:20
understands and can comprehend it's not

12:23
so i know he's got his law degree and

12:24
he's got all these

12:25
you know he's he's he's got all of these

12:28
high iq

12:29
things but he brings it down to where

12:32
you can really understand it i think

12:33
that's a skill that he possesses that

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not many people do with his iq

12:37
and that's the reason i like reading it

12:39
is fantastic let's go to another

12:41
question that's kind of on my mind

12:43
it all it has to do with dc and you are

12:45
a person that

12:47
um you always kind of have your finger

12:49
on the pulse of what our crazy

12:50
politicians are doing up

12:52
there um in d.c and obviously that

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trickles down to the states but talk

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about

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what washington's doing that could

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affect

13:00
retirement planning or retirement plans

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in general

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yeah we have a new administration and a

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new congress and

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they want to make their mark so they're

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they've got a lot of things they're

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they're moving forward

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and uh one of them um in the house ways

13:15
and means committee on may 5 approved a

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bill called the securing a strong

13:19
retirement act of

13:21
2021 and this is known generally as

13:24
secure act 2.0 because you might recall

13:27
in december 2019

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congress passed what was called the

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secure act

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it had a lot of provisions in it

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basically they

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they wanted a big bipartisan bill so

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they

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looked at a bunch of little bills that

13:41
different members of congress had put in

13:43
and they just put them all into one so

13:45
that everybody would vote for it because

13:47
their bill was

13:48
in it and that did a lot of things to

13:50
expand the ability to

13:51
plan for retirement contribute to plans

13:54
uh but it also on the negative side to

13:56
pay for all that

13:57
it eliminated the stretch ira

14:00
and that's the big issue for a lot of

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higher income higher wealth people with

14:05
significant iras and so with the secure

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act 2.0 it's

14:09
it's a very similar thing where they

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have a lot of the small

14:14
changes that are going to make

14:16
retirement planning easier

14:17
for a lot of people and they're going to

14:19
encourage businesses especially small

14:22
businesses

14:23
to put in retirement plans that they

14:26
when they didn't have previously they're

14:28
going to

14:28
provide a tax credit for the expenses of

14:31
starting up a plan or there's actually

14:33
credit in place they're going to

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increase the credit

14:35
uh make it more deductible but some

14:38
other things they're going to do

14:39
for example ira owners

14:43
age 55 and older can do what they call a

14:46
catch-up contribution where they can

14:48
increase it

14:48
same with 401k so they're going to

14:50
increase

14:52
um you'll first look at inflation index

14:54
if those two ketchup

14:56
contribution limits have been fixed for

14:57
years so starting next year if this law

15:00
passes

15:01
it's going to be indexed for inflation

15:03
uh they're also going to

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increase it for 401k plans and simple

15:08
ira plans right now for a 401k the

15:10
catch-up is 6500

15:13
that could go up to 10 000 so

15:16
significant increases there

15:18
also for uh employees who are 62 63 or

15:22
64 years old there's going to be another

15:24
boost

15:25
in the catch-up contribution just for

15:27
those years

15:29
another provision that would allow

15:31
employers to make their matching

15:32
contributions

15:34
to a 401k plan based not only on the

15:36
contributions the employee makes

15:39
but also the amount the employee is

15:41
making on student loans

15:43
so for these younger people who aren't

15:45
saving because

15:48
they're paying off student loans this

15:50
allows the employer to start putting

15:52
away retirement money for the

15:54
student or for the former students based

15:57
on the amount that the students

15:59
are paying for their student loans so

16:01
that's another thing

16:03
the amount of the ira that can be

16:05
invested in qlax

16:07
qualify longevity annuity contracts uh

16:10
that's going to increase it will go up

16:11
to two hundred thousand dollars and

16:13
right now there's that percentage

16:15
limit as well and that percentage limit

16:17
will be eliminated

16:19
so more money could go into qlax

16:22
the qualified charitable distribution

16:25
from an ira

16:27
that's also scheduled to increase under

16:30
this law

16:32
another factor is employer employers

16:34
would be allowed to automatically enroll

16:37
their employees in the 401k plans the

16:40
employees could

16:41
opt out but you know there's a feeling

16:44
among the researchers and people in

16:46
congress that

16:47
if people were if the default position

16:50
was people had to contribute

16:52
to 401ks most would do it they wouldn't

16:55
opt out for it but when you put a burden

16:57
on them

16:58
to elect to contribute and decide how

17:00
much to contribute

17:02
most just put that on the back burner

17:04
sure and they don't do it so they're

17:05
gonna

17:06
make it easier for employers to uh just

17:10
force employees into the plan and make

17:12
them opt out of it

17:13
if that's what they want to do but you

17:15
know these are like with the first

17:16
secure act

17:18
these are things that are good but

17:20
they're going to cost tax revenue

17:22
sure so congress has to find a way to

17:24
offset that

17:25
uh fortunately it looks like they're not

17:27
going to do one big thing

17:29
like eliminate the stretch ira as they

17:31
did before

17:32
but they're going to do a lot of little

17:34
things

17:35
for example when an employer

17:38
plan allows a catch-up contribution into

17:41
a 401k

17:42
plan that has to go into a roth type

17:45
account

17:46
after this law passes so you wouldn't be

17:48
able to exclude it from your gross

17:50
income

17:51
right taxed and would go into a roth

17:54
type account so eventually when you take

17:56
money out it's tax free

17:58
they're also going to be taking steps to

18:00
encourage

18:01
uh movements into roth type accounts

18:04
they're going to

18:06
allow simple and sep iras to have roth

18:09
features which they're not allowed to do

18:10
now

18:11
sure um they're also going to and this

18:14
is kind of a sneaky one

18:17
they're gonna for required minimum

18:19
distributions these these are a

18:21
big problem for a lot of people who have

18:23
higher incomes and substantial iras

18:26
they're required to take

18:27
money out of their traditional iras

18:29
currently after age 72

18:32
they're going to gradually increase that

18:34
starting age into

18:36
75 it's going to increase over 10 years

18:40
because you know the way the budget

18:43
counters do it is

18:44
if they just jumped it up to age 75 that

18:47
would

18:48
lose a lot of tax revenue in the short

18:50
term so they're gonna increase

18:51
gradually and anyone with a hundred

18:53
thousand dollars or less than total iras

18:56
would be exempt from the required

18:58
minimum distributions

19:00
now i say this is a sneaky thing because

19:02
if you take advantage of it

19:05
excuse me and delay those rmds for as

19:09
long as you can

19:11
it's going to be a higher amount coming

19:13
out of the plan because the percentage

19:15
of your ira you distribute each year

19:17
under the rmd

19:19
is higher excuse me

19:24
and so it's going to be a larger amount

19:25
plus your account balance is going to

19:27
increase

19:28
so you're going to increase your taxes

19:30
on the back end if you take advantage of

19:33
delaying

19:33
the rmd so what you still want to do is

19:36
what we've been recommending people do

19:38
now

19:40
and before you have to take rmds look at

19:42
ways

19:43
of decreasing those future rmds whether

19:47
that's

19:47
converting part of your ira to a roth

19:49
ira

19:51
or taking it out and buying a permanent

19:53
life insurance with the after tax amount

19:56
putting it into a charitable remainder

19:58
trust there's a lot of different options

20:01
you can do

20:02
but what you want to do if you have a

20:04
substantial ira

20:06
if you have income from sources outside

20:08
the ira

20:09
is you want to work early

20:12
to reduce what's in that traditional ira

20:15
or 401k

20:16
so those rmds in the later years are not

20:19
substantial

20:20
i talked to a lot of people who in their

20:22
late

20:23
70s or beyond and they said you know i

20:26
had no idea this was going to happen

20:28
these rmds keep increasing each year

20:30
right it's increasing my taxes it's

20:33
giving me higher incomes so i pay higher

20:35
medicare premiums

20:37
it's a big problem for people so you

20:39
don't want to fall into this trap

20:41
of delaying your rmds until they're

20:43
required

20:45
you actually this is a situation where

20:47
many people want to pay taxes early

20:49
before they have to

20:51
so they're paying fewer lifetime taxes

20:54
than if they deferred as long as they

20:55
could so those are a few of the things

20:58
uh in the secure act 2 there's really

21:00
dozens of provisions in there

21:02
those i think are the key ones that are

21:04
going to affect most individuals and

21:06
small businesses

21:08
right now it's past the house ways and

21:10
means committee

21:12
it's not scheduled yet for a vote in the

21:14
full house but that'll happen there's a

21:16
version of it that's been

21:17
introduced in the senate finance

21:19
committee

21:20
they'll vote on that probably sometime

21:22
in the summer

21:24
and then late in the summer or fall the

21:26
two sides will get together and we'll

21:27
have the final bill it'll almost

21:29
certainly pass

21:30
uh by the end of 2021 well that's it's

21:34
good to hear and i

21:35
and when 2014 when qlikes were first

21:37
introduced qualified longevity annuity

21:39
contracts

21:40
i published the first book book on qlex

21:42
and i'm sitting here listening to you

21:43
and i've been waiting for it to go

21:45
through

21:46
once it goes through well then we'll

21:47
update the books with the uh

21:49
the book with the the minimums etc and

21:51
what they're going to allow but

21:52
not until they do not until it passes

21:54
but you

21:55
you feel like it's got a really good

21:57
chance

21:58
to pass i mean this this isn't really a

22:00
political football i guess

22:02
i guess they could politicize it they

22:04
politicize everything else up there but

22:06
i don't see how they can really

22:08
politicize because everybody

22:10
left right center republican democrat

22:12
you know they're they're trying to

22:14
retire and they're trying to live their

22:15
life and they're putting money away and

22:16
they have retirement plans

22:18
so you're feeling pretty confident about

22:19
this right yeah this came out of the

22:22
house ways and men's

22:23
means committee on a voice vote which

22:25
mean nobody objected to it

22:28
and the financial services industry the

22:32
tax-exempt organizations all these

22:34
lobbyists are behind it as well they're

22:36
pushing it

22:38
unlike with other legislation there's

22:39
really no one out there opposing it

22:42
but there's people on both sides pushing

22:45
it forward that want it to pass and it's

22:47
a

22:48
rare case of bipartisan legislation

22:51
that you know seems almost certain to

22:53
pass unless it gets

22:54
uh you know tied up with some other

22:56
legislation and gets dragged down by

22:58
that

23:00
it's hard to call that that bill the

23:01
evil rich bill

23:03
when everybody has you know everybody

23:05
working young

23:06
old have 401ks and iras and roth iras

23:09
and they're trying to

23:10
accumulate um for the future another

23:13
question that

23:14
and i know that you've some of your

23:16
books are on social security and i

23:18
i consider you probably in my mind and i

23:21
don't know

23:22
i mean i've been doing this for decades

23:24
one of the top

23:25
authorities on social security and just

23:26
fully understanding that i think a lot

23:28
of that has to do with your background

23:31
you're being a lawyer and the fact that

23:33
you can take this

23:34
this type of information and then um

23:37
you know rehash it and rewrite it so the

23:40
rest of us can understand it

23:42
what is the pandemic done um to social

23:44
security

23:46
and is there a reason for people to

23:48
consider modifying their plans

23:50
where where are you where are you at

23:52
right now with with social security and

23:54
what's happened with covid

23:56
yeah this is uh going to be an

23:58
interesting thing

23:59
because uh we're waiting for the annual

24:02
report from the trustees of social

24:04
security

24:05
uh the last one came out uh it was april

24:08
21 of 2020

24:10
and it included the data through 2019.

24:13
okay and one of the things this annual

24:15
report does is estimate

24:17
when the retirement trust fund is going

24:19
to run out of money

24:21
now we talked earlier about how people

24:24
retired earlier

24:25
in 2020. well that does two things that

24:29
are harmful to the social security trust

24:31
fund one

24:32
is it reduces the payroll taxes going

24:34
into the fund

24:35
because these people that a year ago

24:37
social security thought were still going

24:39
to be working

24:40
there you go no longer they're not into

24:43
the system

24:44
and then on the other end of it they're

24:46
taking out benefits

24:47
years before social security thought

24:49
they were going to

24:51
so the social security trust fund got

24:54
hurt

24:54
on both ends in 2020

24:57
uh so last year they estimated the

25:00
retirement fund would run out of money

25:02
in about

25:03
the year 2034. and there have been some

25:06
private estimates about how that's going

25:09
to change and

25:10
they all assume it'll end at least 20

25:13
years earlier

25:14
or two years early excuse me uh but you

25:18
know the numbers coming in about

25:19
how many people retired earlier and how

25:22
many

25:23
going forward a plan to accelerate the

25:26
retirement plans uh

25:28
you know they could make this much more

25:30
than two years earlier that the trust

25:32
fund runs out of money

25:34
um so it's going to be interesting to

25:35
see and i think when that number comes

25:37
out which should be very soon they enter

25:40
they issue this report every spring

25:43
so when that report comes out it's going

25:45
to show that

25:46
social security is going to need

25:48
replenishment

25:49
uh years earlier than we thought only a

25:52
year ago

25:54
and when that happens you know it's

25:55
going to be hundreds of millions perhaps

25:57
trillions of dollars

25:59
over 30 years so these big spending

26:02
plans that congress has right now

26:04
might be put on the side because they

26:07
might find

26:07
out uh they have to shore up social

26:10
security

26:11
through either higher tax revenues or

26:14
lower benefits or a combination of the

26:16
two um and that's something

26:18
not many people have been looking at and

26:21
that's going to be i think a real

26:22
eye-opener for a lot of people

26:26
now that as i said it's going to affect

26:28
plans in congress

26:31
but i don't think for the most part it

26:33
should affect individual plans about

26:35
their retirement

26:37
particularly if you plan to retire in

26:38
the next five to ten years

26:41
that's because historically when

26:43
congress has revised the system

26:46
it has protected people who are entered

26:47
near retirement

26:49
you know i run into people regularly

26:51
you'll say well it's going to run out of

26:52
money so i'm going to take it while it's

26:54
there

26:55
but you know each year you delay taking

26:57
social security it increases eight

26:59
percent

27:00
that's tax-free eight percent return on

27:02
your money

27:03
and that's compounded over time plus

27:06
when you retire

27:07
you get inflation indexing on top of

27:09
that so you get that

27:11
compounding on top of the higher amount

27:14
and when you talk to people who've been

27:16
retired for a while

27:18
the one thing they say is is i wish we'd

27:20
waited

27:21
i i wish we'd uh you know let that

27:23
social security increase

27:25
more than it it is and that's

27:28
particularly important for a married

27:29
couple when one spouse passes away

27:32
because one of the social security

27:34
benefits disappears the general rule

27:36
is that whatever the higher benefit

27:38
coming into the household is

27:40
that one will continue but the other one

27:43
goes away

27:44
so the surviving spouse whether it's the

27:47
man or the woman or

27:48
husband or the wife has to fund the

27:51
household

27:52
on one benefit instead of two and they

27:55
might have other retirement benefits

27:57
that are based on

27:59
whether or not someone is still alive uh

28:01
some pensions you know they get cut in

28:03
half

28:04
if the wage earner who owned the pension

28:06
dies

28:08
so there could be other income that

28:10
decreases so

28:11
you know you have to look long-term uh

28:14
particularly with a married couple you

28:16
have to figure out what's going to

28:17
happen when one spouse passes away

28:19
whichever one it is so generally whoever

28:22
earned the higher lifetime income and is

28:24
going to get the higher

28:25
social security benefit should delay as

28:28
long as they can

28:30
and you know there's a chapter in my

28:31
book that cites several studies which

28:33
have found that

28:36
your retirement nest egg lasts longer

28:39
even if you take money out of that nest

28:41
egg before age

28:42
70 so that you can fund your retirement

28:46
while letting that social security

28:47
benefit increase wait till age 70

28:50
when it's maximized that's much more

28:53
valuable

28:54
for most people than taking that benefit

28:58
early so they're not drawing down their

28:59
nest egg as much you really need a high

29:02
after-tax investment returned on your

29:04
nest egg

29:05
in order for it to make sense to take

29:07
that social security benefit early in

29:09
order to

29:10
reduce the amount you're taking from

29:12
from your retirement funds it's better

29:14
to take

29:15
money out of your retirement funds to

29:16
let that social security

29:18
get that eight percent annual tax-free

29:21
compounding so

29:22
my basic advice to most people is that

29:25
even though social security is probably

29:27
going to run out of money faster

29:29
than it would have uh first thing you

29:32
need to know is that doesn't mean

29:33
there's not going to be a social

29:34
security fund

29:35
or a social security program because

29:39
the taxes that come in each year from

29:41
people working

29:42
pay 75 to 80 percent of current benefits

29:46
so the trust fund is only paying 20 to

29:48
25 percent of benefits that's the gap

29:51
that congress has to make up so even if

29:54
that trust fund disappears

29:57
benefits are still going to be paid if

29:59
congress doesn't

30:00
act they'll be an across the board cut

30:03
of 20 to 25

30:05
now if my benefits are cut i'd rather

30:07
they'd be cut from that higher level

30:10
from delaying benefits than from that

30:12
lower benefit

30:13
level from taking benefits early but as

30:16
i said i don't think

30:18
when congress acts it'll affect people

30:20
who are already retired

30:22
or within five to ten years over time

30:24
and i think it's the younger people

30:26
who are going to pay higher lifetime

30:28
taxes and probably get a lower benefit

30:30
maybe have their retirement age

30:32
increased but anyone who's in the

30:35
retirement planning stage

30:36
now is very close to retirement i don't

30:38
think that should change their plans

30:41
i think they should still follow the

30:43
traditional advice

30:45
of waiting as long as you can to

30:46
maximize that social security benefit

30:50
and by the way for people just once

30:52
again the you know bob's latest book is

30:54
called

30:55
where's my money secrets to getting the

30:57
most out of your social security

31:00
while the link on that to that book on

31:02
our site you can go to amazon and get it

31:03
as well just type in bob carlson or

31:06
where's my money you know secrets to

31:08
getting the most out of your social

31:09
security

31:10
um and i always kid people bob that you

31:12
know when people say i hate all

31:13
annuities i'm like you can't hate them

31:14
all because you already own the best

31:15
inflation annuity on the planet and it's

31:18
called social security

31:19
one more question about social security

31:21
well there's a ton but

31:22
you know where time is limited um

31:26
do you think there will be means testing

31:28
for social security in the future

31:30
the evil will the evil rich get get

31:32
pushed

31:33
out of this what's your opinion yeah

31:36
well there's already substantial means

31:38
testing

31:39
right right now the amount of benefit

31:41
you get

31:43
depends on your lifetime income but it's

31:45
not pro rata

31:48
lower wage earners get a higher

31:50
percentage of their

31:51
wages in social security benefits people

31:54
at the bottom of the income scale they

31:56
get about 90 percent of their

31:58
last wages replaced with social security

32:01
but the average worker gets about 40

32:04
of their final wages and social security

32:06
benefits

32:08
people who are earned above the social

32:10
security earnings limit you know which

32:12
is indexed

32:13
for inflation each year sure you know

32:15
they only get credit

32:16
for the wages they put earned up to the

32:19
social security tax base

32:22
which is around i think 120 130 000

32:25
now so and they get you know 10

32:28
or less of their annual income and

32:31
social security benefits so it's already

32:33
indexed for inflation

32:35
or i mean for income you know in

32:37
addition

32:38
uh there's income taxes on social

32:40
security benefits but only as your

32:42
income goes up so if you're low-income

32:44
retiree you don't pay taxes on your

32:46
social security benefits but

32:48
higher income do they can include up to

32:51
85 percent

32:52
of their benefits and income having said

32:55
that

32:56
i still think it's likely congress will

32:58
opt to

32:59
put additional means testing on it

33:02
the uh the easiest thing that many

33:05
people recommend is that

33:07
you know right now you only pay the

33:08
social security payroll tax on

33:10
income up to a certain level and they've

33:13
already repealed that for medicare

33:16
it used to be a limit on medicare tax as

33:18
well

33:19
they repealed that a few years back so

33:21
it's more than likely they'll appeal

33:23
that

33:24
tax limit on the social security taxes

33:27
as well so that no matter how much you

33:29
earn

33:29
you'll still pay that 6.2 social

33:32
security tax on your wages

33:34
uh also i think it's likely that

33:38
they'll establish some high level of

33:40
income maybe half a million dollars or a

33:42
million dollars

33:44
whether just say if you've got that much

33:46
income from other sources we're not

33:47
going to pay you any social security

33:49
benefits

33:50
so i think those are the two most likely

33:53
uh

33:53
ways they'll increase the means testing

33:55
in other ways they might increase the

33:57
income

33:58
taxes on social security benefits for

34:01
your uh

34:01
upper middle class retirees so yeah i

34:04
think that they'll

34:05
increase the means testing um but also

34:08
i've looked at

34:09
you know studies where economists have

34:11
run the numbers

34:12
and that's not going to be enough to

34:14
solve the problem they're going to have

34:16
to do

34:16
other actions as well there's not enough

34:19
evil rich

34:20
this is the evil rich claws and there's

34:22
oh you always kid people there's not

34:24
enough evil rich people out there you

34:26
want to call them evil but

34:28
um i i want to pick your brain

34:31
a little bit on because we're in blue

34:34
water right now what i call blue water

34:36
we've never seen what's happening we

34:37
printed

34:38
trillions and seven trillion or whatever

34:40
however you want to count it

34:41
um you know inflation is the grill in

34:44
the room and i love when politicians at

34:46
the time of this taping or saying i

34:47
don't really see inflation i'm like well

34:49
i guess you're not buying gas or

34:50
lumber or food um can you

34:54
dovetail in and kind of talk about both

34:56
the printing of the money which i'm sure

34:58
you're not a huge fan of

35:00
and then secondly um inflation

35:03
because that's a big that's a topic i

35:06
get asked about

35:07
every single day and as i tell people

35:09
annuity companies have the big buildings

35:11
for a reason

35:12
they don't give away anything including

35:14
inflation increases and you already own

35:15
the best inflation annuity on the planet

35:17
social security

35:18
with that being said what's your

35:20
thoughts on the printing and inflation

35:23
yeah i've been uh warning people about

35:25
higher inflation for

35:27
last two or three years now

35:31
you know my feeling for a while now is

35:34
we're going to end up doing what we're

35:36
doing now

35:38
basically what what we've done is we've

35:42
adopted these same policies that

35:44
congress and the fed used in world war

35:46
ii

35:47
you know we had to fund world war ii

35:49
there weren't enough

35:51
taxes that could be imposed to pay for

35:53
that so what happened was

35:55
congress would spend whatever it needed

35:57
to as it's doing now

36:00
and the fed would buy as many bonds as

36:02
it needed to

36:04
to keep interest rates low and that's

36:07
what we're doing now so

36:08
congress is spending whatever it thinks

36:10
needs to be spent and the fed has said

36:12
it's going to

36:13
stand by and buy these bonds

36:16
to the extent the market doesn't buy

36:18
them and that's going to put additional

36:20
money in circulation

36:23
and unlike with quantitative easing

36:26
after the financial crisis

36:28
in this scenario we have now congress

36:32
determines where the money goes

36:33
under quantitative easing the fed would

36:36
just buy

36:36
bonds and mortgages in the markets and

36:38
whoever sold them

36:40
got the cash and decided what happened

36:42
to it now the

36:43
the congress is you know setting up

36:45
these various programs deciding who's

36:48
getting the benefits of these programs

36:50
so that's where the money is being

36:52
directed instead of whoever happens to

36:54
sell the bonds

36:55
to the fed the fed's now buying them

36:57
pretty much directly

36:59
from the treasury as they're issued and

37:02
you know this is some people call this

37:03
modern

37:04
monetary theory and this is uh you know

37:08
it's not quite unheard of but it's it's

37:11
been

37:11
pretty much unheard of outside of

37:13
wartime

37:14
and you know previously you knew the

37:18
policy was going to end when the war

37:20
ended

37:21
now we don't know when it's going to end

37:23
it might end when the fed

37:25
decides the economy can go forward

37:28
without support

37:30
but at the same time congress has to

37:32
decide the economy can go forward

37:34
without all these new spending programs

37:37
if congress keeps spending the money and

37:39
the fed decides it's not going to buy

37:41
the bonds

37:42
then interest rates will go up and the

37:44
economy will go down

37:46
on the other hand as we're starting to

37:48
see in the data at some point

37:51
this bond buying and spending by

37:53
congress

37:54
results in higher inflation and the fed

37:58
officials say that what we've seen now

38:00
is just a temporary thing uh reaction to

38:04
the

38:04
supply chain disruptions that occur

38:06
during the pandemic once the supply

38:08
chains are restored most of these

38:11
imbalances will be back into balance and

38:13
prices will be back down to normal

38:17
on the other hand the economy is already

38:19
pretty robust in most areas there's just

38:22
a few

38:22
now where because of covet restrictions

38:25
they're still in sad

38:27
shape but large portions of the economy

38:30
are

38:31
the highest levels they've been gdp

38:34
has already gone back to where it was

38:36
before the pandemic

38:38
and so we're keeping funding these

38:40
emergency programs when the emergency is

38:43
passed except for among a few

38:45
sectors and this has to i think at some

38:49
point push

38:50
inflation even higher than it's gone up

38:52
in the last few months it might

38:54
drop down because some of these

38:56
imbalances are restored but i think

38:58
that'll be a temporary drop

39:00
i think we've got all this money

39:02
sloshing around now

39:04
and it's just going to keep circulating

39:07
and pushing up prices of goods and

39:09
services especially

39:10
services goods are more sensitive to the

39:14
economic cycle

39:15
services usually don't decline as much

39:18
because these are things people have to

39:20
buy for the most part

39:22
no matter what their income's doing so

39:24
these services prices have not

39:26
been very uh sensitive

39:29
uh they've pretty much gone steadily up

39:32
no matter what the economy is doing for

39:33
some time

39:35
so if we keep dumping fuel onto the

39:37
economy and demand for these services

39:39
increases then i think those prices are

39:42
going to keep going up and

39:44
as the economy grows the goods prices

39:46
are going to keep going up

39:48
so i i think inflation's a significant

39:51
concern

39:52
and as i said that's why the last couple

39:54
years

39:55
i've been advising my subscribers to add

39:58
inflation hedges to their portfolios

40:01
so that they won't be heard as much by

40:02
this such as

40:04
what are you recommending well the uh

40:07
it's a little it's a basket basically

40:10
because none of these uh

40:11
traditional inflation hedges are a

40:13
hundred percent

40:15
responsive all the time but you know the

40:17
the prime one the main one is gold

40:19
uh which i recommend people buy through

40:21
exchange traded funds uh ira

40:24
i recommend the ishares gold trust uh

40:27
there's also the spyder

40:28
gold fund either one of those is a very

40:31
liquid

40:32
low-cost way to own gold and the profit

40:35
as inflation pushes its price higher

40:38
there's also a broad basket of

40:40
commodities you can get and there's

40:42
various

40:43
etfs and mutual funds uh that will own

40:46
those as well and that's

40:48
that's good as well because if the

40:51
economy grows and that's part of the

40:53
reason inflation is rising then these

40:54
commodity prices will increase as well

40:57
i also recommend treasury inflation

41:00
protected securities or tips

41:03
which again you can buy very

41:05
economically

41:07
through an etf or a mutual fund

41:10
and then the final ingredient is real

41:13
estate investment trusts

41:15
real estate traditionally has done well

41:18
during inflationary times particularly

41:21
if that inflation is accompanied by

41:23
strong economic growth which is what we

41:25
have now

41:26
and the real estate investment trusts or

41:29
the reits

41:30
you know they didn't do well the first

41:32
half of 2020 because

41:33
people were concerned about hotels and

41:36
commercial office buildings not

41:38
bouncing back but reits are broader

41:42
now they include things like cell towers

41:45
and

41:46
data warehouses and and other things

41:49
that

41:49
uh are going to do well in the uh

41:51
technology economy and

41:54
uh regardless of what happens with the

41:55
hotels and the office buildings and that

41:57
sort of thing

41:58
so uh and the reits have done uh well

42:01
really since late

42:02
2020 and they've actually been leading

42:05
the market most of this year doing

42:07
better

42:08
than the hot technology stocks in recent

42:10
months

42:11
so that's that's what i recommend is

42:13
rather than trying to make one big bet

42:16
on an inflation hedge that you put

42:17
together a basket of gold

42:19
tips broad-based commodities and reits

42:23
and just hold that diversification until

42:26
you think

42:27
the inflation era is ending or the

42:29
economy is about to stall out

42:32
and that sage advice is just a just a

42:35
tiny piece

42:36
and a tiny taste of if you go to a site

42:39
at retirementwatch.com

42:41
and subscribe to this newsletter which i

42:42
do recommend that you you do subscribe

42:45
because

42:45
he's giving this type of specific

42:48
thoughts

42:49
on where we're at and it's timely um

42:52
one last question because we i mean this

42:54
has been fantastic and and i know my

42:56
listeners

42:56
love it and we want to bring you on

42:58
again as things change and definitely if

43:01
the secure act goes through we want to

43:04
bring you on to talk about that

43:06
but it all of my listeners are dying to

43:08
know what you think about cryptocurrency

43:10
not specific

43:12
ones but just just the two

43:15
bulb type craze that has taken over

43:19
um the country and the volatility

43:23
where do you land with that bob because

43:25
you're the most pragmatic

43:26
financial thinker out there i mean

43:29
there's you and a handful of other

43:30
people that i just truly trust

43:33
not to bring their emotions to the table

43:35
they're bringing their brains to the

43:36
table

43:37
what do you think about this crypto

43:39
stuff that's happening

43:41
yeah i've been watching it closely um

43:44
and there's different types of the

43:47
cryptocurrencies

43:48
and really they have different uh

43:51
qualities to them you know the the first

43:54
thing

43:55
to know about them is they're very

43:57
volatile

43:59
and there's no fundamental

44:02
factors in them there's no way you can

44:05
value them the way you can do a stock or

44:07
a bond or a piece of real estate

44:09
they're they're basically just based on

44:12
supply and demand and

44:16
there's such small thinly traded markets

44:18
at this point that

44:20
a small number of people suddenly acting

44:24
either buying or selling

44:25
can move the price significantly you

44:28
know 10

44:28
30 in a day uh so i don't think they're

44:33
you know part of a portfolio at this

44:35
time

44:36
also some of these uh cryptocurrencies

44:40
they were never

44:41
designed to be investments they're

44:43
really methods of

44:46
making payment more efficient making

44:48
transactions more efficient

44:50
uh in fact some of the people in the

44:51
business they don't they

44:53
refer to them as stable coin because the

44:56
supply

44:57
is either fixed or it's backed by

45:00
dollars or something else

45:02
and they were set up just to be a mode

45:05
of payment

45:07
so it's a very diverse sector

45:10
uh but if you want to make money on it

45:12
probably

45:14
you know like a lot of other types of

45:16
investments there's two ways to go about

45:18
it you could try to find a way

45:20
uh to successfully speculate in the

45:23
currencies themselves trying to figure

45:25
out a system for buying and selling

45:27
or you can look at the infrastructure uh

45:30
the companies that are

45:32
facilitating the transactions

45:35
uh or the the just the whole industry as

45:37
a whole

45:38
uh the big one of course recently is the

45:41
exchange coin based it went public

45:44
recently

45:44
sure um i've talked to people who say uh

45:49
number one it's probably overvalued and

45:52
number two that there are other

45:55
exchanges

45:56
coming on board that are going to be

45:58
more efficient and charge

46:00
lower prices and gradually eat away at

46:02
coinbase's

46:04
uh you know base their their customer

46:07
base

46:08
um so you know it's a very new

46:10
speculative industry it's a lot like the

46:12
early days of the personal computer

46:14
sure there were hundreds of personal

46:16
computer companies going public

46:19
at one time some people became

46:22
millionaires in a short period of time

46:25
most of them lost the money as the

46:26
companies went bankrupt or were

46:28
dissolved into other companies

46:31
and there were only a few survivors dell

46:34
uh

46:34
ibm and ibm sold off its pc business too

46:38
sure uh so we're kind of like that where

46:41
it's the early stage

46:42
of personal computers they're going to

46:43
be very few survivors of the people who

46:46
are out there now

46:47
they're going to be a lot of new

46:48
companies and new technologies coming on

46:51
board and it's

46:52
you know it's really tough to to make

46:54
money on it uh

46:56
you know if you made money on it uh you

46:58
can

46:59
shouldn't consider yourself smart you

47:01
consider yourself lucky and

47:03
kind of get out with your profits

47:06
but if you haven't gone in yet and

47:07
you're looking at it

47:09
i would say try to find a diversified

47:11
way to get into it don't try to pick the

47:13
one big winner

47:14
sure and also look at the infrastructure

47:17
like the exchanges

47:18
rather than the currencies themselves i

47:21
think i think that's very good advice

47:23
and and

47:24
i don't think we've seen the winners you

47:26
know who the

47:27
the people that are going to be standing

47:28
at the very end of cryptocurrency i

47:30
think the governments will be involved

47:32
in some

47:32
form or fashion the large banks will be

47:34
involved in some form or fashion i've

47:36
been saying that forever i think they're

47:38
just watching the chaos

47:40
and they're just you know picking their

47:42
moment of when to step in

47:43
and and you know be the dominant part of

47:46
the cryptocurrency market but i do think

47:49
it's here to stay i just think it and i

47:52
concur what what you were saying just be

47:53
careful

47:55
i tell people just be very careful uh

47:57
and i think your

47:58
your personal computer correlation is

48:01
the best i've heard

48:03
because we can all remember those times

48:05
and we can all remember

48:07
some of the brands that had retail

48:09
stores that are no longer

48:11
and they just came and went and then

48:13
there's a few here at the end that

48:15
that that survived so you know it has

48:18
been

48:18
an absolute pleasure for you to be on

48:20
the fun with annuities podcast

48:22
once again i want to encourage my

48:24
listeners and viewers because once again

48:26
we're on all major podcast platforms all

48:28
the ones you've heard of

48:30
um so welcome to all those people riding

48:32
in your car and running on the treadmill

48:33
and also this is on the fun with

48:35
annuities youtube channel where you can

48:36
see

48:37
bob and i looking at the camera and you

48:39
know bob hasn't aged i have somehow bob

48:42
has not aged i'm not sure how that works

48:44
but

48:45
go to his site just like it sounds one

48:48
word

48:49
he has arguably the best financial

48:52
advice

48:54
newsletter i'm not even sure that

48:55
doesn't do it justice okay

48:57
um but it's just it's something you need

49:00
to have if you're serious about your

49:02
money and making good decisions

49:04
and having a legitimate rock star

49:07
third party advice that would be bob

49:10
carlson and also

49:11
make sure to pick up his latest book it

49:13
just came out and it's called where's my

49:15
money secrets to getting the most out of

49:17
your social security

49:19
which i think is a is a must-have

49:21
especially in these times

49:23
that bob was laying out just what's

49:24
happening with social security so

49:27
with that being said bob thank you so

49:29
much any last word before we

49:32
end this fun today well i just uh

49:36
emphasized the point i met earlier that

49:38
uh all these financial matters change

49:41
uh even when you when you think you know

49:43
it it's about to change so

49:46
you'll never think you're locked in that

49:48
everything's said always be looking uh

49:50
you know for what's going to change and

49:51
how you need to respond to it

49:54
and ladies and gentlemen ladies and

49:56
gentlemen that is bob carlson of

49:58
retirementwatch.com and he

49:59
is a rock star we're going to have him

50:01
on again but i really appreciate you

50:03
joining us

50:04
on the number one annuity podcast on the

50:06
planet

50:07
and i'm your host stanley nudeman and

50:09
that podcast is called

50:10
fun with annuities

50:17
thanks for listening to fun with

50:19
annuities please hit the subscribe

50:20
button and make sure to go to my site

50:23
at the annuityman.com where you can run

50:26
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50:26
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50:29
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50:31
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50:33
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50:36
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50:39
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50:41
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50:42
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50:44
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50:47
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50:49
full discussion

50:50
of your specific situation it will be

50:53
the best

50:54
brutally factual and truthful advice you

50:57
will ever get and that's one guarantee

50:59
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51:01
so join me next time for the number one

51:03
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51:04
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51:10
[Music]