The Truth About Filing Early and Investing Your Social Security Benefits

let's say you need social security to be a part of your income, you may want to consider

either filing it and retiring when you file it or delaying it for a partially higher benefit.

Welcome to the Retire On Time podcast. I'm Mike Decker with David Franson. We're going to

answer your retirement questions. Just submit them to 913-363-1234. Just text that number and we'll

feature them on the show. As always, remember this is not financial advice. David, what have we got

here? Hey, Mike, should I take social security early and invest it instead of waiting for a higher

benefit? It depends on your intention of those funds. Simply put, if you're looking for yourself

as income, like let's say you need social security to be a part of your income, you may want to

consider either filing it and retiring when you file it or delaying it for a partially higher

benefit. Social security, like for those who have 500,000 or less save for retirement,

there's a good chance social security is a large part of their retirement plan or income source.

Therefore, it might make sense to work until 70 years old and then file just because you need a higher

benefit to survive. Now, for those that have $235 million, for example, you might not even need

social security. But let's say you're working and you just enjoy your work. Well, you don't want to

file before full retirement age. Usually it's 67 years old for most people because if you're earning

W2 income or 1099 income and you file for social security, there's a reduction of your benefits.

It's just inefficient. So wait until 67 years old and you might say, well, I could have a higher

benefit. I could file for benefit early and invest it. What do I want? If you want your money to go

to legacy purposes and you say, well, I don't leave the money from 67 to 70 years old. I don't

need that much of a bump for my income stream. You can have multiple six figures. If you just

take your income from social security at 67, 68, 69 years old, just take it and reinvest it in the

market and never touch it. You get to pass those assets on basically tax-free assuming your

state is not $12 million or whatever the estate tax exemption is. But you can pass it over,

right? Tax-free because there will get the after tax or the brokerage account stock

with a step-up and basis. That's a fancy way of saying they inherit the stock and they don't pay

the capital gains tax. They're going to get a new entry level point. It starts as zero. That is

their basis, whatever the value of the portfolio is. If you're moving the Amazon stock over to them

at X-Rate or E-Bot SPY or VOO and whatever the prices upon date of death or they're about those

rules can change. That's roughly what their basis is or what they'll pay capital gains on.

That's a very tax-efficient way for legacy people. If you don't really need the extra income,

you have enough and you're like, my eyes will just give it. I want to give it to the kids. I want

to do something with it. You could take it and invest it and then gift it the way as you see fit

because brokerage funds are not subject to RMDs. You're not forced to be taxed on it. I mean,

you're going to get taxed on the dividends but the S&P 500 barely pays a dividend anyway.

Russell 2000 doesn't really pay a dividend much anyway and those are fancy terms of just these

indexes people like. They're popular indexes. You could do whatever index you want. You can pick

whatever ETF you want but the point is you have to define the purpose of your money. Do you want

Social Security? Be more focused on income for yourself and if so, then you're going to plan it

in one way. If you don't need the boost or the bump in Social Security or it's kind of just a

nice to have but you could retire on your own. Your intentions are for legacy purposes. You're

concerned about longevity. Any of those reasons might cause you to want to file earlier and just

put it in the market. Call it good. And when you do put Social Security income into the market,

it goes into a taxable brokerage account, right? Yeah, just don't ever sell it.

And then it's a non-tax issue because you can't put it in an IRA of any kind. No. Yes. Just to

clarify. I mean, I guess. So if you were working. Okay. If you were working and your income was

below a certain threshold, you could qualify to do like Roth contribution catch ups because you're

taking the money. Okay. Right. Right. Technically and you're earning W2 income and you're past 67

years old. So you're past full retirement age. All right. You could put in a Roth. Oh,

if you meet all of the different requirements. Right. Right. Right. So check on this. I've

already out there in YouTube land. Well, it just makes sure you've got your eyes dotted in T's

across. You're going to pay taxes on your Social Security benefit. Okay. You can put it into a Roth

if you qualify for it. Okay. I mean, it's a contribution. Yeah. But you have to be working.

Yes. And you can't work earner a thousand dollars and then put it all put seven thousand

dollars or whatever you want into a Roth. There are rules around this. But that is something that

some people will do. Okay. All right. All right. But so in general, aside from that situation,

it's probably mostly likely going to go in a brokerage. Yeah. It usually ends up in a brokerage account.

Okay. Which is fine. Yeah. Nothing wrong with that. So that yeah, I think that's the Social Security

bit. Just know everyone's different. Right. We've got retire on time.com. The Social Security

Optimizer is a great way that you can actually run these reports. You can go in there and click

around and invest option and click. If I do this or that or the other, what could it look like?

They're just hypotheticals. We're not promising anything here. We're just saying if this,

it could be this based on these averages. Yeah. It's good to have an awareness of the possibilities.

Nope. Try it out. Retire on time.com. Social Security planner, optimizer. It's right there in

the resources. Love it. I hope you enjoyed the video. If you enjoyed it, make sure to

tell a friend, leave it rating or subscribing to us wherever you get your podcast and or on YouTube.

For the best experience, it's on YouTube and you better believe it. We are going to be casting more

instructional videos, case studies and so much more on the on YouTube. So just I almost said the

YouTube on YouTube. Just go to youtube.com and look for the show how to retire on time. We'll pop

right up. Thank you for spending your time. Your most precious asset with us today. If you need

any help, just go to Retire on time, dot com and click talk with a planner at the top of the page

and we'll be able to help you. Take care. Take care. Take care. Take care. Take care. Take care.