Episode 35: How to Simplify Your Social Security with Devin Carroll

Episode: 35


Devin Carroll is a financial planner who is passionate about simplifying Social Security. In addition to his role as lead advisor at Carroll Advisory Group, he is the publisher of Social Security Intelligence, a retirement education platform that now reaches more than 1,000,000 monthly users through his YouTube channel and blog.

He’s been asked to contribute his Social Security expertise to numerous publications including CNBC, Forbes, The Wall Street Journal, Inc., and many others.

Ideas For Episode Titles / Main Focus

·      Spousal benefits

·      Taxation of benefits

·      Survivor benefits

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Transcript

EPISODE 35

[INTRODUCTION]

[0:00:03.4] ANNOUNCER: Hello and welcome to the Arista Wealth Podcast, where we focus on your finances, wellness, and lifestyle, so you can focus on living your dreams. We’ll help you navigate through important topics so you can elevate your life and financial health. Let’s get started with your host, Paul Moffat.

[INTERVIEW]

[0:00:21.9] PM: Hello and welcome to Arista Vice. We’re very, very excited to have it on our show with us today, Devin Carroll as our guest. Devin is the go-to guy for the social security world and just mentioning the word “social security”, many of you have either crashed your cars or rolled off the road already or you say, that’s sometime down the road call but we’ve got Devin on with us today. Devin, welcome to the Arista Wealth Podcast.

[0:00:48.0] DC: Paul, thank you so much for having me on.

[0:00:50.5] PM: Great to have you. Devin is joining us from the Northeast Texas part of the world and you’ll hear that Texas swing in his voice as we talk and visit but we’re super excited to have you with us today, Devin. Devin, take a few minutes and just tell us about yourself.

[0:01:07.6] DC: Well, so you know, I’m the typical financial advisor that turned the corner at some point, right? I got my start at one of the big brokerage firms like a lot of people did. I spend nearly a decade there before leaving to setup my own practice and it was at some point after that in a conversation with an attorney friend of mine that something got triggered in me and I realized that I had been offering people retirement planning services for now a decade and I didn’t know nearly enough about social security.

[0:01:40.6] PM: Yeah.

[0:01:41.3] DC: And for whatever reason, it set a hook deep in me and I started digging and the deeper I dug, the more I was entranced by the program and so then at some point, I started doing the typical local seminars on it and then I decided, “Well, I also need to blog” because for me, when I learn something, putting it into an article format as a way that I can really clarify and drive it down deeper and then, after that, I thought, well, if I’m writing articles, I might as well start a YouTube channel and talk about social security. 

At first I thought, “No one’s going to want to watch that but let’s see what happens.” Sure enough, I start a YouTube channel, I start making some videos on social security and they were awful. I mean, they were horrible videos. I’m recording them with my phone. At that time, I wasn’t even an iPhone user, it’s probably the Samsung Galaxy 3 or something like that. No mic, no audio and these videos were horrible and surprise, surprise, no one watched them. 

So probably recorded videos for six, eight, maybe nine months and I said, “Forget this. That’s not a good use of my time because no one’s watching these videos” and so I hung it up I just kept blogging. I just kept writing these articles about social security, running my little investment management practice that I had, doing the financial advisor stuff, until about a year later. I looked up one day and one of my videos had 34,000 views on it. 

Now at that time, that was massive and I thought, “Wait a minute, this video has 34,000 views and it’s about social security.” I think it was about the earnings limit or something like that and so I said, “Maybe I need to turn some more attention back to YouTube” and so, I did. I started recording again and for whatever reason then, it did get some traction that time and now, that’s my primary channel where I put stuff out.

So you know, I’m not a lot different from all the other advisors, except, I just really love to nerd out about social security.

[0:03:39.7] PM: I love it and because you're such a humble and great guy, for our listeners, I just want to let you know that Devin is the publisher of Social Security Intelligence, which is a retirement education platform and he reaches over a million monthly users through his YouTube channel and blog.

So you just don’t wake up one morning and say, “Hey, I got a million users” but he’s been asked to contribute all of his social security expertise and knowledge with CNBC, Forbes, Wall Street Journal and the list of accolades go on and on and on. Devin, grateful to have you on our show today and grateful for all the good that you do.

Let’s jump right into this because you know, social security is such a big, big, hot topic. We’re going to start out with the hard question. Many people are talking about social security will not be there in the future. Can you give us your input?

[0:04:34.6] DC: Man, all right. So I think it will, let’s get that out of the way. I absolutely think it will be there in the future but what is it going to look like? That’s what we don’t quite know. Now, Paul, I know you like to keep your podcast very neutral politically and I don’t intend to disrupt that and change that at all, right?

That’s not – this is not the format for discussing that. However, social security is known as the third rail in politics for a reason. You can’t hardly talk about it without someone getting their feathers ruffled and so it’s not my intention to be either on the conservative side or the liberal side but I do want to talk about the program and what we may be facing in the future.

So let me lay out first what I think we can expect. Number one, if you are receiving benefits or eligible to receive benefits, currently I don’t think you're going to see any changes at all. I know that the trust fund is scheduled to be depleted in 2035 or 2033, if you look at the congressional budget office but, I still don’t think there’s going to be any changes. 

I think those individuals who are receiving benefits or eligible to receive the benefits right now are going to continue to get uninterrupted benefits.

[0:05:46.6] PM: Great to know.

[0:05:47.3] DC: And the reason I say that is that there are people occasionally who will say, “Okay, if this trust fund is about to run out, I’m filing while I can still get full benefits and I’m going to file early and get these full benefits” and that’s often not optimal. Sometimes it is, right? But it’s not always the best option. So I don’t think there’s going to be any threat there.

I do think that if you are more than 10 years away from eligibility, so if you’re 55 and younger, I think it’s probably time to start applying a discount factor to the social security benefit you’re going to receive in the future because I do think that the system is going to change and it’s not going to be a very close resemblance of what Franklin Roosevelt signed in the law back in the 1930s.

So there’s a few things that could happen. Number one is, we’re probably looking at an increase of the maximum taxable wage cap, right? Because there has to be two things happen to fix the system. We’ve got to increase revenue, we got to cut benefits. There really are no other real options. One of those two things will have to happen, which means that someone, somewhere is going to feel some pain. 

So one of the proposals that we see that continues to come up is to increase the maximum taxable wage cap. As you know and probably most your listeners know, you pay the social security portion of your FICA taxes on the first $147,000 of your earnings.

Now, that’s 2022 limit. That’s actually indexed every year for wages, so it increases on an annual basis but in 2022, if you make $200,000, you’re going to pay the social security portion of the FICA tax on 147,000 and the other 53,000 you make is not going to be subject to that 12.4% tax of which if you’re an employee, you pay 6.2 and your employer will pay 6.2.

That in the eyes of some politicians is grossly unfair. In fact, you can put that word, “grossly unfair” in quotation marks because when you use that recently and they believe that if the system is having an issue with the funding, then the wealthy ought to pay their fair share in wealthy, being defined as those people who make more than the maximum taxable cap, I suppose.

So I do think that the maximum taxable cap is going to increase, that’s probably one of the things that’s going to happen. Now, there’s a whole argument that we can make pro and con on that but I’ll leave that. So I think that people are going to pay in more in taxes. Then the question becomes, what do you do with those extra taxes? How do you let those flow through the benefits calculation to a future benefit, right? 

So let’s say that you make $400,000 a year and now, all of a sudden, all of your income is subject to the maximum taxable wages. You know, there is no maximum taxable wage cap. It’s all subject to the FICA tax. Ordinarily, you would only pay up on the first 147,000. So now, you have this big lump on the other side of that that you’re having to pay as well. So do they take that and count it in to your future benefit? 

If you do, we’re going to have people that have $10,000 social security benefits down the road, so I don’t think that’s going to happen. So I think effectively the direction we’re going is as center to Lindsey Graham said the other day in one of the senate hearings is, there’s going to be people that pay in more and get less. That’s all there is to it.

[0:09:27.2] PM: Yeah and you got to tack for who those rich people are and what that definition was and so yeah.

[0:09:33.8] DC: Without a doubt, yeah. 

[0:09:37.7] PM: Devin, that’s great. So what you’re saying is that yes, there is going to be some changes down the road just because there’s more people that are now using it and you're saying, for those who are 55 years and younger, they may want to consider filing for a discounted future benefit but for those that are currently receiving or within a few years of receiving, those people are maybe in the safe harbor, safe area and they won’t see a lot there.

But certainly, people have to pay more into it and also need to cut the benefits on the way out. So that’s great, I really appreciate that. You know, you shared a lot with us on that Devin, walk us through the spousal benefits and you know filing, the spouse filing also at the same time and taking half, walk us through the spousal benefits of the social security program.

[0:10:27.2] DC: Certainly and you know, so spousal benefits, survival benefits, disability benefits, children’s benefits, all of these are reasons that the social security system has grown into this massive program where it takes up almost a quarter of the federal budget now. So spousal benefits are in my opinion one of the most generous government benefits that exists. 

So the way that the broad rule works is that at full retirement, a lower earning spouse is entitled to a benefit equal to their own benefit or a benefit up to one half of the higher earning spouse. So for example, if your benefit is $2,000 and you have a lower earning spouse at home and let’s say that her benefit from her own work she’s done is 800, right? At full retirement age, she is entitled to that $800 benefit from her work but she’s also entitled to a $200 spousal benefit to get her up to a total of $1,000. 

So that’s the broad rule about the spousal benefit. A lot of people just use the rough 50% rule and that’s generally okay to use that. 

[0:11:46.7] PM: Or to agree as to currently. 

[0:11:48.6] DC: 50% it is, it is because then you get into filing age differences and you know, what happens if one spouse files before the other and one of the big differences there is that I don’t want to get too deep into the weeds on this but one of the rules that has to trigger a spousal benefit is that the higher earning spouse has to file first. So going back to that $2,000 benefit for the higher earner, the $800 benefit for the lower earner. 

Well, the lower earner can file and get their benefit but they cannot get that spousal benefit until the higher earner files, except in the case of a divorce and then if the divorce has been final for two years and they divorce spouses at least 62, they can but that’s again, getting into the weeds. 

[0:12:32.7] PM: Yeah, then walk us through Devin, you know, you shared with us that a quarter of the government expenses, so the government’s biggest expense is social security. Walk us through some of the numbers, how many people are on it? How much goes into it, how much comes out of it? Share with us some of that, that 10,000 foot level to give us a perception of how big the social security department is and how much money is in there. 

[0:13:00.0] DC: Well, I don’t have those numbers directly in front of me, those are easily accessible. The social security administration has their, I believe they call it their facts at a glance page that have – it has all kinds of data and statistics on it and it will show you but I can tell you that the numbers are staggering how much it takes to run the program and so the program is actually funded by more than one revenue source. 

So you’ve got your payroll taxes, right? The FICA taxes or SICA in the case of the self-employed person that come into the program but then you also have the interest on the trust fund balance, that’s part of the income and you also have the taxes collected on social security benefits that’s also part of that income and so when you take those three sources of income and then you minus out the outgoing money, that’s where right now we’re still doing the filing. 

But that’s where in 2035, there’s not going to be enough there to fund the full amount, not enough coming in, the fund what needs to go out. 

[0:14:04.6] PM: What do you think about the idea Devin that was just two practitioners trying to solve the world’s problem on a podcast but what about raising that FICA number, you know, three or four percent? I know that Lindsay Graham has said that. I mean, do you think there’s some traction out there in making the employer pay a little bit more and adding potentially another five or ten years onto that or do you think that is just kicking the can and they need to address the revenue and cutting the benefits? 

[0:14:32.5] DC: No, if they do it right, that would be the simplest fix to social security. 

[0:14:36.6] PM: There we go. 

[0:14:37.6] DC: Very simple. Raise the FICA tax by three and a half percent and it’s done, 100% fixed. The employer would have to pay 1.75, the employee would have to pay 1.75 and it’s done. Instead, a lot of our politicians are opting for scenarios that are much, much more complex. 

[0:14:58.2] PM: Draconian. 

[0:14:59.4] DC: Yeah and I mean, you know, complexity is good for me, right? Because I have a YouTube channel where I break apart these complexities and people watch so that they can understand what’s going on. So simple solutions just don’t happen very often and that would be a very, very simple solution but here’s the problem: There is some willingness to do that to just say, “Hey, let’s raise taxes.” 

However and I think there is a lot of willingness on individual’s parts to say, “Hey, I’ll kick in another 1.75% if it means fixing this stupid program so we don’t have to mess with it anymore” but part of the problem with it is, is that some politicians say, “We cannot raise taxes on lower and middle income people, period. To fix the program, only the wealthy people need to pay more. We cannot make low and middle income people pay now.” 

So thus, it gets kicked down the road, nothing gets done. Now, if we keep waiting, what’s three and a half percent now is going to go up substantially higher down the road. It is not going to be three and a half percent anymore. That is going to continue to increase for every year that we delay this problem but again, a very easy fix. 

[0:16:19.0] PM: Yep. 

[0:16:19.7] DC: So instead, what they want to do is increase the maximum taxable wage cap, which by the way, even if you completely eliminated the maximum taxable wage cap and you give no credit for future benefits, which would be a complete violation of the intent and spirit of the social security act, it would still only fix 68% of the problem. It wouldn’t even fix the problem. There is not enough people earning enough to where those additional taxes would fix that and so you’re still going to be left with the benefit cut of some sort. 

[0:16:52.8] PM: Yeah, well Devin, you know I would love to say the two practitioners, one in Texas and one in Vegas have the easy fix but nothing easy in Washington, is there? 

[0:17:02.8] DC: No, there’s not unfortunately. 

[0:17:05.2] PM: Yeah and Devin, walk us through how our listeners can follow you and gather more information and stay connected with you? 

[0:17:12.9] DC: The easy way is you know, my blog, socialsecurityintelligence.com. You can go there and see some of the articles that I’ve written, use the search bar on the side if there is something specific you’re looking for like spousal benefits or survivor benefits and also on YouTube. You can just search Devin Carroll on YouTube and I’ll generally pop up with my channel there. 

There are some imitators there but I think my channel is pretty recognizable, you’d be able to find it. Also you may want to check out Big Picture Retirement, which is a podcast that I cohost along with John Ross, an at-law attorney where we talk about investment management, we talk about taxes, we talk about estate planning, all of the things that comes into a big picture retirement. 

That project, we started that in 2017 and then things got really busy in my world and busy in his world and in 2020, we put that show on hiatus but we’re just bringing it back and so I don’t know when this episode is going to air but we’ve already recorded some new episodes. So who knows, by the time your show airs, I’m not sure if our new shows will be published yet. So if they’re not and people go over there and say, “Hey, it’s an old podcast” don’t worry, new shows are coming.

[0:18:21.1] PM: Yeah. Well, thank you Devin for joining us and listeners, please don’t forget next week on our episode, we’re excited to have another special guest equally qualified as Devin but please remember to go to aristawealth.com. You get other tools and tips and videos and resources to help you live a life of significance. 

Well Devin, thank you. Great to get connected with you. I really, really appreciate how you do on LinkedIn and your YouTube channel and the clarity that you bring to investors of all sizes. Your work is so appreciated and your knowledge is amazing. So thank you so much and you know, I’d love to have you back out on the show because we have a lot of people here in Vegas that are always scratching their heads when it comes to social security. 

[0:19:06.7] DC: Yeah, anytime. I would be happy to come on. You know, it used to be where I have to set everything up and now, we have a dedicated studio where I can just walk in and turn the computer on and I am ready to go. 

[0:19:16.3] PM: Yeah and I love your studio. I love those with the window panes behind you. 

[0:19:19.9] DC: Oh thank you, yeah. Well, it actually doesn’t show, the webcam shows an alternate view as oppose to what my other studio camera does but it’s good enough. 

[0:19:30.4] PM: Good enough. Hey, thank you so much Devin, we look forward to talking with you soon. 

[0:19:34.1] DC: All right sir, take care. 

[0:19:35.2] PM: Hey, thank you. 

[0:19:36.0] DC: All right, bye-bye.

[0:19:36.8] PM: I appreciate it, bye-bye. 

[END OF INTERVIEW]

[0:19:38.9] ANNOUNCER: This episode of Arista Wealth Podcast has ended but be sure to subscribe for more advice on your finances, wellness and lifestyle so you can focus on living your dreams. Don’t forget to rate and review so we can continue to bring you the best content. See you on the next episode. 

[END]