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Welcome together, we're gonna explore our personal finances and figure out how to improve them. Whether you're just getting started in life on your finances, or you may already have a home and a car payment and you're struggling to get credit cards under control, are you getting a later start in life on saving for retirement, reduce debt, increase wealth.com is a podcast to educate those to improve personal finances, whether it's eliminating debt, or making smart investments. So let's now get started.

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This week, I'm going to be talking about the number two reasons why you are getting out of debt for that article I read last week, and that would be for retirement. Retirement is social security to a lot of people. And this is the main reason why you need to have your own retirement plan. Take care of yourself, because who knows what's going on in the future with social security. And then after that, I'm gonna give you some stats about my personal life, what I've done and to reduce my debt and how I did it and get started in a nutshell. So I like to start with a an article of talking about social security plan ahead and five tips so they gave you some basic information on Social Security to get started

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Plan ahead, five Social Security tips for 2020 and beyond. by Kelly Hagen The Motley Fool

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There's aren't a lot of guarantees in retirement which makes the idea of a monthly Social Security check all the more comforting. As long as you work for at least 10 years, you'll get some money from the program. But you're probably hoping for more than a couple hundred dollars a month. Maximize your Social Security benefits requires an understanding how it's calculated, and how your decisions affect it. Here are five tips if you're trying to get the most out of Social Security. Number one, work as long as you can. Your social security benefit is based on your average monthly earnings adjusted for inflation over your 35 highest earning years. You should aim to work at least that long because if you don't, you have zeros added to your benefit calculations. reducing the size of your check. Working even longer than 35 years is ideal because your lower earning years will be replaced by higher earning years and that will increase your benefit. If you're not sure how many years you report reported income

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You can check your earnings record more on that below to find out. Number two check your earnings record annually as social security administration tracks your annual income and your earnings record, which you can access by creating a my Social Security account. This is the income your benefits are based on. So you must verify that it's correct every year or could cost yourself benefits. Usually the information is accurate, but small errors like transposing digits and your social security number, or failing to report a name change to the government could result in the government not registering your income for a certain year. If this happens to you fill out a request for correction of earnings record form and submit this to the Social Security Administration. Along with any documentation you have like tax returns that prove your income for the year in question. Number three, seize every opportunity to increase your income. Anything you do to increase your income today.

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will help your Social Security benefits in the future. Because they're based on your average monthly income during your working years. You can try working overtime or starting an extra job. But be careful not to burn yourself out. It won't make that much difference to your Social Security benefits. If you're only able to keep it up for a few months. Look for ways to permanently boost your income like switching employers negotiating a raise or pursuing a promotion. These changes are likely to have more lasting effects on your income, and they won't necessarily require working yourself to the bone. Number four, choose your starting age carefully. The age you choose to begin benefits also affect the size of your checks. You must wait until your full retirement age FRA to get the full benefit you're eligible for. This is 66 or 67. For today's workers, you're able to start as early as 62 but when you get less per check, you only get 70%

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of the benefits you'll be entitled to at your FRA if you'd begin at 62 and you fra is 67. Those with an FRA of 66 gets 75% of their scheduled benefit for check if they start at 62. Every month you delay benefits increase your checks on to reach the maximum benefit at 70. This is 124% of your scheduled benefit per check if your FRA is 67 or 132%. If your FRA is 66 to delay make sense if you expect to live a long time and you want to get the largest checks possible. But if you have terminal illness starting early might be more make more sense. You might also have no choice but to start early. If you need your Social Security benefits to help you cover your basic expense. Look for a few scenarios to figure out which starting age works best for you. Number five, watch out for taxes. You know that so

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Security taxes that come out your paychecks. But not everyone is aware that the government can tax your Social Security benefits if your combined income exceeds certain thresholds, combined income is your adjusted gross income AGI plus any non taxable interest and half of your Social Security benefits. Individuals with combined income exceeding 25,000 and married couples whose combined income exceeding 32,000 could owe taxes on up to 50% of their benefits. Individuals with a combined income exceeding 34,000 and married couples with a combined income exceeding 44,000 could owe taxes on up to 85% of their benefits. Complete discussion of Social Security benefit tax is beyond the scope of this article. Here's a guide if you want to learn more, do your best to stay below these thresholds if you want to avoid benefit taxes. If you ever want

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Roth retirement savings those are great to fall back on as your approach to thresholds listed above, because these withdrawals don't count towards your taxable income for the year. If you're a long way from claiming Social Security, it's never too early start thinking about a weekly reminder. Do you know how much is in your checking account? Have you projected your expenses forward for at least one to two weeks in advance? or pay periods? whichever is greater? How's your budget coming along? Have you been updating your budget every month trying to get a better average so you have a better projection going forward? That's a key thing to do, and trying to reduce your debt. Also, have you reviewed what you're paying? Have you called your providers and try to get a better plan or lower amount? That's an ongoing thing. I mean, you got to do at least once a year for

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Everybody, some things you can adjust down some things you can't. If it's your heating and air in the house or your apartment, the only thing you do is set the thermostat up or down depending on the season, you set it down in a winter, so you use less. You set it up in the summer, so you use less. So just a reminder, you got to keep at it.

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So I want to give talk about the article that you heard just recently, the five tips on Social Security work as long as you can don't retire at 62. This is to increase your Social Security benefits. I'm going to talk about my personal situation because I have a complicated, social security

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benefit calculation because of multiple factors involved. So

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I worked for the government for 14 years and I never took myself

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cash payout when I quit, to start my own business. So I left the money in there because I figured, by the time I retire, that should be enough to pay for my medical costs when I'm in retirement, But lo and behold, it's not so. So but it still comes in to calculating my Social Security benefits, it still affects it because they have a windfall provision. So that people who work for the government and have a a private government pension in those years I did not pay into Social Security. So they reducing what I get from Social Security even though I paid in there for like 17 years.

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So that's what I'm going to talk about credit cut pretty much covers all those tips. So I worked for the government for 14 years. At age 60. I start receiving benefits.

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So I thought well, can I retire? So security at 62? Well, yes, I could two years later. But the one number one reason why I didn't is because of health insurance cost. Health insurance is expensive. So I continue to work until I'm 65. Okay, well, that's that's, that's good, but that's still not my FRA or my full retirement age. My full retirement age is 66 years. It used to be 65. But sometime in my working career, Congress came along social security's in you know, Dire Straits so they up the age you can start getting full benefits because they're trying to say money. Most of you listening if you're under age 60, or probably even 58.

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your full retirement age is going to be 67.

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So, which means if you retired at 62 you'll get

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A significant decrease in Social Security until you reach 67. So that's article mentions that

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don't retired at 62 if you're trying to maximize your Social Security benefits, because you're going to get reduced benefits for every month that you retire early from 67, my age is 66. So I hit 66. I'm looking at it and I was trying to retire now or not really necessary, retire, but keep working and start drawing Social Security benefits, because now I'm not subject paying. You know, the earnings limitations and all those rules and guidelines and stuff. I looked at it and well, my wife's 62 years, younger.

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If I retire at 66 she's deemed to be retired at 63 went the same time I retire if she

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gonna draw from my benefits.

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So that's number one you need to watch out for. If you retire early, your spouse is retired early also. And if they're younger than you, then they're really gonna get a whammo on their benefit their benefits, if they're claiming off of your earnings, if they're claiming off their own earnings, I don't know because my wife doesn't have earnings. So that's why I'm planning ahead.

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So now I'm looking Okay, I work one more year 67. Now the wife's 65. So we both on Medicare, which is going to save me some money. Us, I hope, a lot.

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I'm not there yet. So. So I hope a lot.

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And

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every year as I keep working, my benefits are going up because my windfall provision is going down the amount, they're deducted from my

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Monthly benefits because I got a government pension. So that keeps going down. The second whammo I'm looking at is the 35 years.

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They take your highest earnings for 35 year period. Most people work around 40 years. So they knock off your lowest five years, and I take your 35. Well, I have 14 years government, so I got 14 years of zero.

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Even though I got 17,18 years under, social security time they take the highest, you know, the 35 years, I got a lot of zeros in there. So now only I'm getting whammo on the reduction because of the windfall provision on getting whammo because my average earnings is low because I got a lot of zeros in there. So, every year that worked longer, I can get rid of another zero. That's a benefit to me.

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Well, okay, 67 is looking good.

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But my wife is still not at full retirement age because she's only 65. And her full retirement age is 66 and four months.

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Another thing I got to think about, do I continue working until 68 and three months, so that she'll be at full retirement age and I've done spreadsheets I figured and how I figured all this out was I download social security has a full calculator you can download from their website. It takes a while to figure out how to use it and put numbers in there and get it to work somewhat accurate, whether or not it's accurate. I really don't know but I've done the best I could. So I got a bunch of numbers, you know, at different ages that 66,67,68,68 and four months how much difference can I make and at age 70, which is the maximum even if you're

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Continue to work in at age 70 to start drawing your Social Security benefit, because it's not going to go up. So just keep on working your age 70, you know, have your social security benefits coming in. So I hopefully I don't have to work that long. I don't want to work that long. When I was in my 20s I wanted to retire by the time I was 50.

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So as you can hear, that's not happening.

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So you're probably wondering, why is he talking about social security? And why what's that have to do with reducing my debt? Well, you want to reduce your debt, this is a reason to reduce your debt. Because if you have to rely 100% of your income in retirement is Social Security, you're most likely going to be hurting. Even if you sell a house and downsize and put that money in. The sooner you start saving, the more you're gonna have because the more it's gonna grow. That's the point

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We're planning ahead the younger you are, the better off you're gonna be. I know you're gonna have to get debt, good debt bad debt.

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So

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it's this, you know tool we need to think about even when we're in our 30s. Someday you're going to retire I didn't think I ever would. And then they got ever be old enough, but here I am. So it'll come just a matter of time.

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Even if you have a 401k or work related retirement plan, you still need to get your debt under control. So don't think Oh, I got my 401k I'm putting in my 3% employer is matching it I'd be fine.

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Well, you might be that the less debt you have, if you have zero debt, when you retire, you're going to be much better off because not only will your savings last longer, your emergency fund could be lower

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So you could have more invested in the market for a longer period of time. So that would result in a greater yield. Because history is shown, the longer you can stay in the market, the more you're going to end up having.

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So now I'd like to talk about my

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march to freedom, financial freedom.

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I started about more than four years ago, more or more, about four years ago, but I really didn't get serious until three years ago. In fact, it was April of 2017.

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And that's when I thought, well, you know, I'm projecting forward a couple pace or one pay because I was lazy. So that what would happen if I projected that for three months,

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and by looking for three months is like, wow, that's gonna be short here. It could be shorter.

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There I need, you know, I got to be careful. Because I had some annual expenses such as real estate taxes to do twice a year. I had my insurance car insurance that was do twice a year I had homeowners insurance or do once a year. So you know, different times a year I was really getting hammered and I wasn't realizing it. So when I started projecting for three months, that really made a difference. And I also changed jobs about

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three months after that. So I got serious I started projected for fall. I thought, Well, I'm not making enough money.

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The employer I was working for was fine, but they were changing what they were doing and they were turning into more of a seasonal job. And I didn't want a seasonal job. I couldn't afford a seasonal job. You know, it's nice to have the winter off. Couldn't afford to go nowhere.

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You don't have any income coming in at you can't double up

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your expenses might band rent somewhere else to if you want to be in a warmer client, which would be my case. So I changed jobs and that not quite doubled my income but definitely helped because of my I got a sign on bonus that I started getting quarterly safety bonuses and I was just making more money to start with.

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And that really jump started my March. So here's my stats I've been. I know in the past I've been saying I've been doing it for four years, I was but I really wasn't serious until the last three years. And these numbers are in the last three years.

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I started out with about the average total debt $131,767 and 137,000 is the average debt but if you're younger and that is probably closer to 250,000

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so that just a note I've

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paid into

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Principle $104,605 which is a yearly per year reduction of $34,868.

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Like, that's like almost half my income in time you take out income taxes and health insurance. That's a big chunk.

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I start thinking, How did I do that? I was done bonuses that really helped out a lot.

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And by doing that, I reduced my interest

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$30,140 that's around it. So I paid $30,140 less interest.

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That's almost the $34,000 a year that I paid additional principal. So that interest was over three years so what up 10,000 a year. That helped a lot. That really

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speeded up my principal reduction.

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So

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I do it about once a quarter every two, three months, I, you know, I got my emergency fund when I build up emergency fund in that time period too.

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And I keep that separate because I have it in a high yield savings account, which is a different savings account than what I use for building up my debt reduction fund. That's what I call it. So every three, four months,

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I build up enough money. And it's been faster because, you know, I paid off for credit cards that had a balance, you know, that never got paid off. I paid off my line of credit and it was like 20,000 I've paid off a couple auto loans. So I've got more discretionary income now. So I'm being able to set aside more every pay and I get paid every week.

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So I only wish I could get more interest on interest income on that, you know, you know, Penny a quarter is not really helping a whole lot as well. What I get maybe 1020 cents a year from that savings account. That's why I moved my emergency fund to a high yield saving, which is online bank and I get about six $7 a month now. Let you know, six $7 a month versus a couple cents a quarter. Big difference.

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So that's what I've done. And

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I'm just telling you how that's my numbers. And I've done it exactly the way I'm telling you. I haven't done anything else. I just keep an eye on what I'm spending money on. I try to keep it under control, but I'd never cut back anything. I mean, I know I'm getting I'm getting closer to retirement so I need to come up with a hobby because

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You know truck drivers, I work 65 hours a week. I'm not home. Well, this job a home like every other day, but we just come home, you take a shower, you sleep eat and you go to work. So you're not really have time to do anything. So, like I need, I need a hobby. So one of my hobbies was smoking meat,

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which I'm actually doing right this minute. As I talk.

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I thought well, that's good because one I need something to eat when I retired and I like smoked meat. So

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it gives me something to do like one day a week. And my second thought was, wow, what else can I do when I'm retired?

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And I finally realized, Oh, I could do a podcast every idiot I mean, everybody's doing podcasts. And I thought, What am I going to talk about? You know, doing a podcast What do I know most about? accounting? You know, accounting related

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stuff and that's kind of boring.

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I can tell on my journey on how I reduce debt, I can just talk about that and help other people. And I didn't really think I have sponsors I didn't, you know, I just had no clue of what it would cost. So I start looking in how you do a podcast, what do I need turned out Oh, you need a microphone headset. I already had a computer and editing software. So all that was relatively inexpensive. I'm not gonna give you any numbers because it's, it's it wasn't much and no problem paying for that then what you do with it. I mean, once you make your podcasts, you got to put it out there on internet. So you need a hosting site to host your podcast because you can't just do any old website. And because of the downloads and the data and all the other factors, they would cut you off in a hurry. So you need a specialized

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web hosting podcasts which say God, then you need to promote it and on and on and we go, then I thought, well, you know, I'm doing all this if I can. My wife has a couple wet ecommerce sites that she doesn't do much with a, you know, they make a little bit of money here and there, but I can just use her as my sponsor, and we can go from there. Here we are, I'm doing podcast and I got about 25 minutes racked up this week. And that's all I have to talk about. This

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does Hang in there, keep at it, and you'll achieve the same results have I have maybe better? Yeah, I really hadn't been really working on it. That hard. I mean, I really could cut way back. One of my biggest expenses I cut back on is cable TV, and I stream it all now. And that's a big saving. So if you haven't done that you need to look into it. That's the end

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Have another episode. I hope you found it useful. And a if you'd like to share this episode with your friends, please do so. I'm open for any suggestions for improvement or for information that you'd like to talk about in future episodes. You can go to my Facebook page and leave me a message more than glad to comply. To find my Facebook page go to reducedebtincreasewealth.com and click on the Facebook icon to go to my Facebook website. Transcribed by https://otter.ai