A Guide to Making Smarter Decisions When Claiming Social Security Benefits with Alina Osokhovska, CFP® – Ep 107

Many retirees assume the biggest Social Security decision is simply choosing the right age to claim benefits. But the reality is far more complex. Your Social Security strategy can affect your retirement income, taxes, spouse, survivor benefits, and long-term financial security, making it one of the most important decisions you’ll make during retirement.

In this episode, Matthew Peck is joined by SHP’s Head Certified Financial Planner, Alina Osokhovska to explain how Social Security really works and why the best claiming strategy depends on your unique financial situation. They discuss the different types of Social Security benefits, the key ages every retiree should understand, and how factors like taxes, market conditions, longevity, and spousal planning influence when claiming benefits makes the most sense.

They also discuss how SHP’s Retirement Road Map evaluates multiple claiming strategies, recent changes under the Social Security Fairness Act, how working in retirement can affect benefits, why Social Security remains an important part of a comprehensive retirement plan, and why making an informed decision is far more valuable than making a rushed one.

In this podcast interview, you’ll learn:

• Why the best Social Security claiming age depends on your complete financial plan.
• How spousal and survivor benefits can significantly affect retirement income.
• Why taxes should play a major role in your claiming strategy.
• How longevity and market conditions influence when to begin benefits.
• What recent Social Security law changes mean for retirees.
• How working before full retirement age may affect your benefits.
• Why personalized planning leads to better Social Security decisions.

Inspiring Quotes

• “When you think only about retirement benefits, you can miss out on spousal benefits as well as survivor benefits.” – Alina Osokhovska

• “The beauty of financial planning is that I can’t guarantee that clients are going to make the best decision, but I can guarantee that they’re going to make a well-informed decision.” – Matthew Peck

• “The government will pass things that will impact you, but it’s not their job to tell you that it’s going to impact you. It’s your job to find out and it’s your job to inquire and to ask.” – Matthew Peck

Interview Resources

• Social Security Administration
• COLA
• Social Security Fairness Act
• Windfall Elimination Provision
• Government Pension Offset

[INTERVIEW]

Matthew Peck: Welcome, everyone, to another edition of SHP Financial’s Retirement Roadmap podcast. I’m your host today, Matthew Peck. And in today’s episode, we’re going to be talking about Social Security, all the different aspects of Social Security. When to claim? How does it work? What does this acronym mean? What is WEP and GPO? And what’s the long-term outlook for Social Security? Because it’s going to be in the news, we’re going to hear more and more about it, and it’s such an important decision that factors income, taxes, spousal benefits, you name it. In other words, I couldn’t think of a different issue that really hits on all of the different five worlds of financial planning that we do here at SHP, and thanks for listening and joining in.

To discuss all of this, we’ve brought on Alina… I’m just going to say Alina O. She’ll properly pronounce it for me. I’m just going to, you know, rather than butcher it, I’m going to have her give me the proper pronunciation, but certified financial planner, recent, or recurring guest here on the podcast. So, back by popular demand, Alina is here to walk us through the Social Security system, all the different questions, all the different options, how it all kind of works. And, without much further ado, Alina, thanks so much for coming back on the show.

Alina Osokhovska: Thank you. It’s Alina Osokhovska. It’s such an easy last name.

Matthew Peck: Okay. Oh, sorry. All right. One more time.

Alina Osokhovska: Alina Osokhovska.

Matthew Peck: Osokhovska.

Alina Osokhovska: You got it.

Matthew Peck: All right. All right.

Alina Osokhovska: Okay. Now you nailed it.

Matthew Peck: All right. Next podcast, that’s the challenge, right? So, Alina, thanks so much for coming back on. Really appreciate it, because obviously, tons of questions when it comes to Social Security. If someone comes up to you and says, “What’s the first thing I need to learn?” where do you start?

Alina Osokhovska: So, I like to start with a brief overview of Social Security, right? So, most people think about Social Security as a retirement program. It was signed into law in 1935, and the Great Depression served as a catalyst to that program to help retirees with their income. And I think the misconception that most Americans have is just that Social Security covers only retirement benefits, right? But it actually has four types of benefits: retirement benefits, spousal benefits, survivor benefits, and disability income. And I think it’s important to know more about all these categories to make an informed decision when you claim your benefits. Because sometimes, when you think only about retirement benefits, you can miss out on spousal benefits as well as survivor benefits.

Matthew Peck: But no, it’s a great point about how Social Security isn’t just a retirement program, just in regards to all the different changes in the ’60s, in making more on the disability end of things. And I think that’s also why it gets so confusing, because it is multifaceted. It’s not just this government pension program anymore. It really does impact all of those different areas. And that’s what I was saying too. I love the fact that it incorporates income planning, tax planning, legacy planning, i.e., again, and spousal at that point. And so, again, that’s why I think this podcast is so important. Okay. So, with all of that in mind, and certainly, let’s zero in a little bit on retirement and when to claim. I think that’s probably the biggest question we get is when to claim. So, when do I claim Social Security?

Alina Osokhovska: It depends. The answer that I always say, it really depends. It really depends on a specific situation. Here at SHP, when we do an analysis on when is the best age to claim, we’ll look at five worlds, right? We’ll look at income, like do you have any other sources of income? We’ll look at the spousal benefits, and we compare who will be receiving more. If it’s a couple, right, who will be receiving more benefits? Because sometimes, one of the strategies that we can implement is claiming Social Security benefits for a spouse that will be receiving, like, a lower amount now, and letting the other spouse grow their benefits because from full retirement age, and we’ll get to it, it grows by 8%.

It’s a guaranteed 8% growth of your benefits that you will receive for the rest of your life. So, sometimes it does make sense to delay one spouse’s benefits claim. Now, sometimes it makes sense to delay both of the benefits. Or for some couples or individuals, they can claim as early as age 62, but they need to bear in mind that those benefits will be reduced by 30%.

Matthew Peck: Well, and I do want to talk about the important ages that are there. Like, when to start consider? Outside of disability, of course, and really as I said, narrowing in on the traditional Social Security program, if we will. You know, again, because I think what’s also great is that, and for all of our listeners, it’s like you could be extremely high net worth or you could be on the poverty level, but this is going to impact you. And this is a decision that all us Americans or folks that have obviously paid into the system will make. So, I just think it’s really universal. It’s a universal topic in that way. Let’s go back to the ages, though, you mentioned. So, what ages do people need to be aware of when the decision gets to get made? I mean, at what ages do we need to start to consider in this?

Alina Osokhovska: Yeah. So, the earliest age you can claim your benefits is 62. At 62, you can claim benefits, but as I mentioned, they will be reduced by 30% permanently. The full retirement age depends on the date of birth. And usually for people born before 1960, it was like 66 and specific month of year. But for those born 1960 and after, it’s 67 years old. So, when you wait until 67 years old, you receive your full retirement benefits. If you wait beyond that age, you get an 8% increase annually until age 70. You cannot delay until age 70. It just doesn’t make any financial sense, and at age 70 is the highest amount that you can receive. And you can claim benefits in between, right?

So, you can claim before, like from 62 until 70, you can claim at any age. And then it depends just like before the full retirement age, it will be reduction. Like closer you get to that full retirement age, the lower reduction is, but after full retirement age, it’s an increase.

Matthew Peck: So, back to that 30%. So, that 30% isn’t a penalty that follows you the entire time until 67 or until your full retirement age, or how does that penalty, that 30% reduction if a client wants to take it earlier? Is it always 30%, or how does that work?

Alina Osokhovska: No. So, 30% when you claim your benefits at age 62, but then every month, like, I would say it depends on the monthly delay, right? Because every month will give you a little bit increase from that 30%, right? So, if you wait, for example, you are 62, you wait another month, so it’s going to be less than 30%. You wait like five more months, it’s going to be even, like a higher benefit amount. So, it really depends. And like when you get your Social Security statement, which is free, you can go and create an account at a Social Security administration website, and you can ask for your statement, you can see it, and you can actually see a breakdown of what is your benefits going to look like at a certain age. And like at 62, 65, 67, and then if you delay to like 70.

Matthew Peck: Okay. So, here we are. Here we have our window, call it 62 until 70, knowing that between 62 and 67 there’ll be some type of reduction to your base benefit. And then from 67 until 70, there’s an increase to your base benefit if we haven’t selected or filed at any point in time. Okay? So, here is a window, 62 to 70, knowing that you have that window, and then your spouse will have her own window, his or her own window, in their own decision to make at that point. So, here we have that window. So, now, what’s the initial factor? I mean, are we talking budget? Like, how much they’re spending on a monthly or annual basis? Are we talking about their working? Are we talking about taxes? So, in other words, Alina, we have the window. What next?

Alina Osokhovska: The next… You nailed it. It depends on…

Matthew Peck: See, that’s why I’m the host, Alina. That’s why I’m here. I bring experts on, but then I become the expert, so it’s kind of cool.

Alina Osokhovska: You’re an expert.

Matthew Peck: Yeah, exactly. No, yeah, keep on talking.

Alina Osokhovska: It really depends on the cash flow and the resources that a client has, right? So, if they do have plenty of other resources that they can utilize, sometimes it does make sense, even from the tax standpoint. So, if they do have, for example, like after-tax resources, and taking money from that account will give less taxes, like less tax liability. It makes sense just to take from that account and keep delaying because, like, your Social Security benefits will continue growing. Sometimes for high-net-worth clients, they do have resources. They don’t really rely on Social Security right now, but they do want to implement other tax strategies, such as the Roth conversion.

So, during those years, it’s very important to lower their income, right? So, we can, like, have more room for Roth conversion, so that is the priority. So, sometimes we’ll look into that as well. So, if Social Security benefits are not really, like, you don’t rely on that income, but you rather convert money into the Roth account, so that is the priority. For some people, it actually makes sense claiming earlier because it will allow, especially if we think about market conditions, right? If the market is down and it’s the first year of their retirement, you don’t want to deplete that account when the market is down and sell at depreciated prices. So, it does make sense maybe to trigger the Social Security income if you don’t rely entirely on your portfolio.

And then also, the other thing that you can do, if you rush into your decision and you claimed your benefits earlier, right, and then you looked at your situation, it’s like, “Hey, I don’t really need to receive my income, like, Social Security benefits right now. I’d rather receive a full amount at 67,” you can actually change your mind, and it’s allowed once in your lifetime. Within 12 months of claiming, you can reach out to Social Security and say that you want to withdraw your application. The only catch in this strategy is that you have to repay any benefits that you have already received. So, if you do want to, like, take advantage of that option, I would just suggest do it sooner rather than later because you would need to repay it.

Matthew Peck: Yeah, absolutely, if you decide, kind of like a do-over, if you will.

Alina Osokhovska: Yeah.

Matthew Peck: So, here we have income considerations, budget, market conditions like you mentioned, obviously taxes too, as to when to select. And I think we’ll dive a little bit deeper into that, but I’m sorry, before we do, tell me about the spousal benefits, though, right? Because so now we have that window again, 62 to 70, with the penalties that might apply, plus increases that happen, just to repeat that part. But what are spousal benefits, and what role do they play?

Alina Osokhovska: It’s a really good question. So, spousal benefits basically what it means that if one spouse receives or qualifies for higher benefits on their record, the spouse that receives lower benefits can actually get up to 50% of the spouse’s primary insurance amount benefit. But it also depends when they claim it and depends if their spouse claimed it. So, the spouse, for example, if your wife wants to claim your like on your record, she has to wait until you claim your benefits. So, she cannot just go and say like, “I want to receive your benefits right now,” because she has to wait for you to trigger your benefits. And if, let’s say, you started your benefits earlier and she decided to wait to claim on your record, she can actually wait until her retirement age and claim on your record and get like 50% of your full retirement age benefits, even though you claimed early.

So, you would receive your benefits reduced, but she would receive your benefits 50% of your primary, the full retirement age benefits. So, it all depends, but I think for a spouse with a higher benefit amount, the main consideration will be the survivor benefits. Because the spousal benefits, if you keep delaying your benefits until age 70, when you get the highest amount possible based on your employment record, your spouse will not benefit from that additional growth from your full retirement age, let’s say 67 until 70. Her benefits, like spousal benefits, will be calculated based on your full retirement age. Not that’s like at 70.

Matthew Peck: Not the delayed amount when that would’ve been.

Alina Osokhovska: Exactly. But the spousal benefits depend on the highest amount that you received. So, let’s say we have a couple and a spouse with a higher Social Security benefit delayed until age 70, and then he prematurely died. So, his spouse can receive survivor benefits and those based on the highest benefit that the deceased spouse received. So, that delaying for this, in the context of survivor benefits, makes sense.

Matthew Peck: I mean, and that’s what’s crazy because you brought up survivor benefits, which is a whole other facet to this decision, right? Because clearly, we don’t know when we’re going to die, but at the same point, factoring in your health, your spouse’s health is also a factor. Because if we’re in terrible health or on death’s door, well, when you take your benefit and then what that benefit’s going to be to your spouse is going to have an impact, where if you’re fit as a fiddle and both of your parents lived to 110 years old, you have longevity and you have those genes, and that has to be considered as to when you’re going to take it because you might want to delay for a whole lot longer let’s say until 70 because you’re going to live for another 30 years, again, based on longevity or the expected longevity.

Alina Osokhovska: Yes, and longevity of your spouse as well, right, because your decision can affect both lives. So, that’s a really good point because we always ask our clients about what is the expected longevity? Because, as you said, if they’re in great health, and based on their genetics, like their parents lived a long life, sometimes it does make sense to delay benefits if they are not fully relying on that income now, like they need that income now.

Matthew Peck: No, absolutely. And I think, too, and when you mentioned about the markets, I think that’s a really, really important part because you certainly don’t want to sell in the middle of a bear market, and whatnot. So, I will come back to the different kind of all these different sort of examples, right, as to when to take and how that works. But if you don’t mind, Alina, tell us a little bit about the analysis itself, because as a term that I use with our clients is called the break-even age, where it’s like, okay, hey, if you take it here, it’s better off depending on when you pass away. And there’s a great analysis and bar graph, and they are very nerdy, I know, but it does, it’s illustrative, and it kind of really helps make the decision.

Quick little sidebar, I love telling people about how the beauty of financial planning is that I can’t guarantee that clients are going to make the best decision, but I can guarantee that they’re going to make a well-informed decision.

Alina Osokhovska: Exactly.

Matthew Peck: Right? So, what type of analysis do you do if a client comes in? How do you help them make that decision?

Alina Osokhovska: It’s a really good question, and we do have great software. We use like a financial planning software. We also use a tax planning software. So, when we do like a Social Security claiming analysis, like what best age, we’ll look at everything. We’ll look at their income right now. Do they have like a gap that needs to be filled? And we’ll look at their accounts, what accounts they have. Do they have only pre-tax accounts? Do they have like a combination, like more diversified portfolio from the tax standpoint, like they have Roth, they have pre-tax, they have after-tax? We also look at both like spousal benefits, and what is the amount, and what is the reduction.

And then we run different scenarios. Like, imagine claiming at as early as 62. What about 65? What about 67, like full retirement age? What about 68, 69, or 70? And then we’ll look at the break-even age. So, basically, it tells you you have to live until this age for delaying to make sense, because you will get a higher benefit amount over your lifetime. So, of course, if you expect, and everyone probably would like that, to live longer, like a long, healthy life, claiming later makes more sense because you will receive a higher benefit amount. But also, we’ll look at the plan for both spouses if we have a couple. And sometimes what we do, we can kill one spouse early, and like…

Matthew Peck: I’m sorry, what? Sorry. I was just taking notes. Did you say we’re just going to murder somebody?

Alina Osokhovska: I’m sorry. I have to. A disclaimer, not in real life. Never in real life.

Matthew Peck: Oh, just a hypothetical murder.

Alina Osokhovska: Just hypothetical.

Matthew Peck: Okay. All right. All right. Keep on going. Sorry. Premature death. We’ll just leave it at that.

Alina Osokhovska: Actually, you know, like the clients like it in some sense, like, “Oh, who will be the first one to?” So, when we do that, we just want to make sure that the surviving spouse will be good, because the expense is probably not going to be that much lower, but the income can decrease, right? So, making that, like, of course, it’s not the best thing to look at, like dying earlier, but it’s nice to be well-informed and making the decision knowing all pros and cons. Like, so you delaying is better for you, for example, or like claiming early is better for you now, but because your wife is younger and in our plan she can live longer, so when we look at the plan for your household, it makes sense to delay benefits.

Matthew Peck: Well, and I think too it’s amazing, especially when we run that software, sometimes engineers specifically will come in, right? And they’ll have like, “Well, I ran my own spreadsheets just to compare it.” And it’s amazing how off they are, not because their numbers are wrong, but more because of all of these other factors that come into play because one thing you mentioned about the spousal benefits and knowing that, okay, if someone were to predecease the younger spouse, not only again does their Social Security benefit or is their income less, but budgets are, well, their spending is usually the same, but their tax situation changes.

Alina Osokhovska: Yes, more complex, yeah.

Matthew Peck: Yeah. They go from married filing jointly to single, which has a big impact. So, if they want to have the same exact spending, well, their taxes have just gone up because the surviving spouse is now filing as a single individual versus married filing jointly, right? So, it’s like a lot of these spreadsheets which are just great because they run on a mathematical level, and the numbers are accurate, but when you start to add in, like, what about taxes, what about inflation, what about, yeah, living to this age or that age, you kind of really need that full comprehensive plan or at least analysis that takes a look at all these different things.

Alina Osokhovska: And I’m glad you brought up the inflation, right? Because Social Security benefits, they have this great feature called COLA, and it basically means that it adjusts benefits to inflation every single year. And do you remember when we had like a really high inflation 2022?

Matthew Peck: Yeah.

Alina Osokhovska: Like, 9% it reached in June, I think, 9.2 or something. The Social Security benefits went up by that amount, I mean, not by that specific percentage, but the higher that CPI index. So, it’s great because it provides that inflation adjustment, and also that guaranteed increase beyond the full retirement age. So, when we discuss with clients, like looking at different buckets that they have, and like, so this is 8% guaranteed increase of your benefits, so like another investment decision that they can make. And like if they do have, for example, like a savings account and a huge balance of that savings account, and that savings account pays them 3%, doesn’t it make sense to take money from that account maybe now, like, to bridge that age until they can claim a higher benefit amount?

Matthew Peck: Absolutely. No, I mean, and that’s that income gap in that individual situation, whereas is it pre-tax dollars or the IRA dollars or non-IRA dollars? Do we have a whole lot in savings, checking and savings? And have we built up this cash cushion that we could then draw down while we delay Social Security? I mean, at the very beginning, it all depends because everyone’s situation is unique, obviously. Let’s cover two areas before I do, because I do want to talk about the long-term, just your opinion on long-term impact or the long-term trajectory of Social Security. Filing on taxes, or to go back to taxes, how are Social Security taxes treated? Like, how does that work?

Alina Osokhovska: So, it cannot be taxed more than 85% of the benefit amount, right?

Matthew Peck: Okay, 85%.

Alina Osokhovska: 85% is the highest.

Matthew Peck: So, if I get a check for $2,000 from Social Security, the highest of that 2,000 would be taxed, so only 85% of it…

Alina Osokhovska: Percent of that check can be taxed, but it also depends on your income. So, the higher income you have, it pushes you, like, into the higher percentage of, like, how much your check will be taxed. For some low-income retirees, and also with the new enhanced senior deduction that is good until 2028, some of them don’t pay, like not going to pay any taxes on their Social Security. But it really depends on the total income, like household income.

Matthew Peck: Yeah, and actually, look, let me just pause just there, Alina, because we’re still dealing with this year, or the OBBA was passed last year that became effective this year. How were Social Security? Because I know there are extra deductibles and things along those lines. So, first off, to repeat, if you’re receiving Social Security checks, 85% of the check that you receive is taxable, and then it goes on to your taxable income.

Alina Osokhovska: It’s like up to 85%.

Matthew Peck: Up to. Sorry. Up to 85% of that Social Security check is a taxable event. But then they instituted, as part of the OBBA, a number of extra deductions for people of certain ages.

Alina Osokhovska: Yeah, 65 and above.

Matthew Peck: Okay. So, walk our listeners through that as well. So, not only you have your standard system, again, the 85% max taxable nature of it, but now there is an extra deduction if you’re over the age of 65 due to that act.

Alina Osokhovska: Yes. So, remember when that, like last year, a lot of people talked about this extra deduction as like no Social Security tax, which is like it’s not correct.

Matthew Peck: Yeah. Because it’s a little misleading to a certain extent, yeah.

Alina Osokhovska: It’s misleading, actually, because it’s not connected to the Social Security benefits in any way, because like at 65, some people don’t claim as early, right? So, they might wait until 67 or later. And they still qualify for that deduction even if they don’t receive any benefits at all. But basically, what the deduction does, based on the filer’s income, because it also phases out at a certain income level, it’s a below-the-line deduction, meaning that after the adjusted gross income is calculated, it lowers that amount for a taxable income. So, it’s $6,000 at the max that you can get per person. If it’s an eligible couple, like 65 and above, they can get up to $12,000.

So, what it means that it can bring that taxable income to the level that maybe it’s not going to be even taxable anymore. Like, there will be no income to tax. But it has nothing really to do with Social Security, but what an indirect connection is that it can bring your income to that level that your Social Security will not be taxable anymore.

Matthew Peck: Yeah. But I also want to point out, which I get a kick out of that, it phases out in 2028, right? So, we’ll see. A little goodie that we have right now, a nice little treat that if we’re 65 and older, within a certain amount of income level, we’ll get this extra deduction, if you will. But it’s not permanent as of now, and we’ll see where that all goes.

But as you mentioned, it’s completely separate from the Social Security program, not part of it. Interestingly enough, as you can see, Social Security does change on a pretty rapid basis. There was also another big change two years ago with the Fair Reporting Act, or what was the name of that you mentioned?

Alina Osokhovska: So, the Social Security Fairness Act, it was signed into law in January 2025. And basically, what it did, it repealed two last, longstanding provisions, the Windfall Elimination Provision and the Government Pension Offset. So, it really affected those people who worked in a public sector. So, basically, we’re talking about firefighters, teachers, police officers, and government employees. And those people, they usually qualify for a pension that is not covered by Social Security taxes.

So, the Windfall Elimination Provision affected the retirement benefits for those people, because, for example, like, we have a teacher who might work in a different sector before becoming a teacher, and she paid into the Social Security program, so she qualified for the benefits. But because she also receives a pension, her benefits were reduced because of the Windfall Elimination Provision. So, that provision was repealed. And now, she can actually get the full benefit that she paid into the program.

The Government Pension Offset, it affected, spousal and survivor benefits. So, if you have a couple, and one spouse, let’s say, never paid into Social Security, so she didn’t qualify based on her record for Social Security benefits, but her spouse did, that provision, the Government Pension Offset provision restricted, limited, or even eliminated the benefit that she would qualify. So, now, it’s gone.

Matthew Peck: Okay, so now, people are getting their benefits, whether it’s their benefits or the spousal benefits, whether they were…

Alina Osokhovska: Survivor benefits.

Matthew Peck: Whether a firefighter or a teacher or not, they are getting their benefits.

Alina Osokhovska: Yes. Most people who were already enrolled into Social Security, their benefits were automatically adjusted, and also, they received some retroactive payments if they qualified. However, for those people who never applied, let’s say they didn’t qualify in the past, so they never applied for survivor or spousal benefits, they have to go and apply, because it didn’t just automatically enroll them into the system. So, those who are listening and who, like, if this situation pertains to you, I would suggest going to the Social Security Administration website and check and apply because you might be missing out on some additional income.

Matthew Peck: Yeah. No, absolutely. It’s a fine point because I think at very times, the government will pass things that will impact you, but it’s not their job to tell you that it’s going to impact you. It’s your job to find out and it’s your job to inquire and to ask. All right, and then one other factor that we didn’t really talk about that I’d like to is the impact on working, working while claiming benefits Social Security, because certainly, during my discovery meetings with clients and prospective clients, I’ll ask them, say, “Hey, when you leave the career over here, do you want to continue to work? Do you want to plan on working? Do you not want to plan on working? Are we looking to be a consultant? What are we trying to do in the next stage, in the next chapter of your life?” But working and Social Security interact in a certain way. So, what are those rules?

Alina Osokhovska: Yes, it’s actually a good question because for those people who don’t want to fully retire, they always want to work, they do enjoy work, and that’s great, and they do work part-time. There is a limitation that applies to Social Security benefits if they apply prior to their full retirement age. So, if you apply prior to your full retirement age, let’s say 67, and you continue to work, your benefits can be reduced. If you receive, I don’t want to give you the wrong number, but it’s close to $25,000 a year, if you receive that amount…

Matthew Peck: By the way, I really just– I can’t stand how they have all of these odd numbers. It’s like 19,574. I mean, like, could you just flatten it out? But okay, keep on going. Sorry, I interrupted. That was very rude.

Alina Osokhovska: No, that’s totally fine. So, if you make above that specific amount that is listed on the Social Security Administration website, your benefits will be reduced, and it also has like, depending on the amount and depending on your age, it will be reduced, but they’re not going to be lost. You’re going to get them back at your full retirement age. But if that is a concern, I would say, if you’re going to receive reduced benefits now, and also you get a reduction in benefits because you’re claiming earlier before your full retirement age and you continue to receive income from employment, in most cases, it just makes sense to wait.

Matthew Peck: Well, it would, and to that point, right, it’s the fact that this only applies, this limit and this sort of like haircap, but then you get the benefits back, only applies from 62 to 67 or only applies from early retirement until your full retirement age. After that, you can work for as long or as little or as a lot as you would like, and then not have to worry about this sort of, I don’t know, calculation that goes into it.

Alina Osokhovska: Yeah, exactly. Exactly. So, like, at full retirement age, go back to work if you want to. Like, I wouldn’t want to, but who knows? People are different. You can go back to work and make as much as you want and you will be getting your full retirement benefits. Not reduction.

Matthew Peck: Excellent. I mean, and I love all this stuff, Alina, because the fact of, back to all of us being unique, right, it’s like, do you want to work? Do you not want to work? How much do you have saved? How much tax planning are we looking to do? What’s your spousal situation? All of these factors are obviously unique to and specific to each one of us as individuals, right? And so, then you see each individual makes their own individual decision on Social Security once you weigh and kind of balance all these things out.

But now, okay, so now, we’ve kind of walked a little bit through the system. I mean, it’s still a lot to process because there is so much that goes into it. You can turn it on, you can turn it off, and you can– as you mentioned a little bit earlier. But let’s also peer a little bit into the future because I do think that’s in the news, about the long-term strength of Social Security. Because in 1940, there was 42 workers per retiree supporting it. So, 42 people were pooling into the system to help support one retiree.

Now, there’s only three people that are pouring into the pool to support one. And you get an idea that it’s sort of underfunded or the long-term trajectory is not positive based on the demographic shift that have been happening. Not to mention, some of the goodies that the government has been paying has sort of lavishing out on voters. So, what do you think about the long-term sort of outlook for Social Security? And how would that factor in if you’re advising clients on when to take it?

Alina Osokhovska: That’s a really good question. And we do get some concerns from the clients about the– so as you may know, I just want to mention, like, the Social Security is funded, pay as you go, meaning that we are paying taxes right now supporting current retirees, right? So, our FICA, Social Security tax goes directly to support their benefits. The other source of income is derived from the Social Security trust that is projected to be depleted pretty soon. So, that what scares retirees or future retirees that, “Oh, we’re going to run out of funding, so I’m not going to get any benefits, so I’d rather claim my benefits early to get something out of the system.”

I would say when we advise on claiming strategy, we try not to speculate because these are, of course, valid concerns, but they’re not set in stone, something that we’re just projecting, right? This might happen. This might not happen. It’s a bipartisan problem, meaning that Congress and everyone, like Democrats, Republicans, Independents, they are interested in keeping this program alive just because people depend on it, people like it, people paid into it, right? So, we’re all paying into it, so we do expect some return.

So, I think that they’re going to work it out. I do believe they’re going to work it out. They’re going to find a way how to keep it afloat and how to fund it. And with that trust, the Social Security trust, perhaps, there are some other options that they can do. But if you do take your benefits, like based on the fears, right, based on this uncertain future, you claim your benefits earlier and you get the reduction of your benefits, let’s say, by like 30, that is actual reduction that you’re receiving. That is not, like, you’re making a decision based on future speculation, but you are actually reducing your benefits in real time.

Matthew Peck: Yeah, absolutely. If out of concern because a couple things to add to that, number one is that not only is it a bipartisan issue, it is also, as you said, it’s a very popular program, which means, and people that are on Social Security generally vote, and the people that will be in there will be held accountable if they do allow the benefits to sort of be reduced, right?

And I think the other thing, too, what’s amazing about it, I mean, number one is that it was fixed back in the ‘80s, that really set it on a stronger path. And there’s also a number of different bipartisan, fixes, right? Because you mentioned FICA tax, right? FICA tax only goes up to like the first 180,000 or something along those lines. There’s a limit to how much the FICA tax goes. Well, they could just bump that up a little bit. They can increase that a little bit. For healthy, robust 48-year-olds, we can be, rather than age 70, I can be 72, right, in regards to my full retirement or moving back up the full retirement age, as well.

So, there’s a number of different paths that are there. Ironically enough, to show you kind of how quickly time flies, is that right now, projected of the shortfall is in 2032, 2033, the senators that are being elected in this election, in 2028 November election, will be in power when the rubber hits the road, like, when the crisis or whatever you want to call it needs to get addressed. And so, that kind of shows you a little bit how close we are to that day happening, but I do think that, personally thinking, that they will eventually fix it.

But I would put it into another one of the conditions that you should think about, right, where it’s what’s your health? What’s your opinion? Because you could have a different opinion than us about whether or not it’s going to get fixed. And if we think there is a reduction in the future, then absolutely, you want to try to claim or get as much as you can before that deadline is hit. All right, Alina, any final thoughts on Social Security, before I wrap up? Or anything else that you, you think that’s important people to know?

Alina Osokhovska: Yeah, I know. We need to do another episode on Social Security because there is so much more that we can talk about in like ex-spouse’s benefits or even like survivor…

Matthew Peck: Oh, right, yeah, like divorces.

Alina Osokhovska: Divorces, yeah.

Matthew Peck: Like, divorced spouse, absolutely.

Alina Osokhovska: It’s very interesting as well, because there are different rules in how you can claim, as well as survivor benefits or disability benefits, or those who have dependent children under 16, how they– like, so many rules and so many strategies. I don’t want to overwhelm our audience because we talked so much and so many different numbers and different rules. I guess I would just suggest to people who are deciding on when to claim, don’t rush into the decision, make an informative choice. and also, don’t make a decision based only on the future fears, right?

Like, we’re not going to get any Social Security benefits. Don’t make decision just fully based on the fears. And if you need help, come to us. We’re here, happy to help.

Matthew Peck: Shameless plug there, but she’s absolutely right. Thank you, Alina, by the way. But I just love the fact that here is a program that’s universal, right? Here’s a government program that covers all American citizens that have paid into the program and their spouses, and different things along those lines. So, here’s this broad, massive program with all of these different facets and all of these different options and whatnot, but we’re all covered under the same exact system. However, how you eventually make that decision is just yours, right? It is so unique to you and to your family situation and to your working situation, your tax– I mean, and I get such a kick out of it because it’s so symbolic for me of when I’m getting to know somebody for the first time, whether it’s in Plymouth or Woburn or we have an office in Braintree we use from time to time, and Hyannis. Absolutely, right?

And so, as I’m asking these questions that cover things from, “Hey, how’s your health? Hey, what’s your spousal situation, kid situation, spending, savings, taxes, legacy?” all of that goes into [this eventual decision on when to take Social Security, when to claim. So, as I said, it’s kind of symbolic of the financial planning process, all boiled down into one decision. So, yeah, thanks so much for obviously coming on board and kind of really illustrating what that is. As you said, we’ll definitely have you back on because we can talk about like the…

Alina Osokhovska: We can do another one, right?

Matthew Peck: The next level of Social Security planning. I think that would be great. I think our audience would really appreciate that, to say the least. So, thank you all for listening. Thank you for lending us your ears for the time being, and stay tuned.

Alina Osokhovska: Thank you.

[END]