Carl Richards, the "Sketch Guy" released his new book, "The One-Page Financial Plan" in March 2015.  I had the opportunity to speak with him about his book.






Carl's first book, "The Behavior Gap" is one of our most recommended books to our clients and attendees at our workshops and classes.

Here is the link to the interview.


I had the opportunity to interview Elaine Floyd on January 30, 2015. Elaine is the Director of Retirement and Life Planning at Horsesmouth, LLC* and is the author of the Savvy Social Security presentation.  I hope that you enjoy her insights on Social Security.

Mike - Elaine, Thank you for the privilege to ask you some questions about Social Security.  Over the years, I have been educating myself about Social Security, Medicare and Individual Retirement accounts, I have reached a conclusion that while these programs were established to deal with straight-forward issues the rules have become so complex that is quite difficult for any individual to navigate the systems.

Mike - The strategy of not claiming Social Security benefits until 70 is seemingly everywhere - I have come across this strategy in AARP publications and in the personal finance section of various newspapers.  With all this information available, I find that many people feel this is a strategy that is only available to the wealthy.   What percentage of people claiming benefits claim at 70 and would you address why it is that the middle-class would benefit the most from waiting to claim benefits?

Elaine - Only about 4% of people claim Social Security benefits at age 70. But this is up from 2% a decade ago, so I guess we are making progress in getting the word out that it pays to delay. Here's how I look at it: far from being a strategy for the wealthy who have enough other money that they don't need to maximize their Social Security benefits - it's one of the best, risk-free ways for middle-income people who might be somewhat under-saved for retirement to catch up and assure themselves higher income in their later years. Many people claim benefits at 62 because they need the income. But really, if you're running short now, what are you going to do when you are 80 or 85 or 90, when that permanently lower benefit you took at 62 no longer meets your expenses? Baby boomers must start planning for longer lives. If you can't imagine living to age 90 or 100, at least consider the possibility that you could live that long and take out insurance to protect yourself in case you do. The best longevity insurance around is a higher Social Security benefit started at age 70.


Mike - If someone has reached his or her Normal Retirement Age and they are skeptical about earning deferred credits to increase future benefits, is it a good strategy to encourage the person to file and suspend as they will have the alternative of either building deferred credits at an annual rate of 8% or taking a retroactive lump sum and then taking an on-going benefit without deferred credits.  I believe as an advisor, it provides me the opportunity to coach a client.

Elaine - There are three reasons why a person may not want to file and suspend for the purpose of having the lump sum option available to them. 1) Once you file for your own benefit, you are prohibited from filing a restricted application for your spousal benefit. 2) Once you file for Social Security, even if you suspend your benefit, you are automatically enrolled in Medicare Part A. There's no downside to this unless you are contributing to a Health Savings Account; contributions must stop upon enrollment in Medicare. 3) The lure of the lump sum is always out there; it may be tempting to take it and forego the delayed credits thus undermining your future financial security. If none of these reasons apply – that is, there is no possibility of spousal benefits, no HSA, and no risk of succumbing to the temptation of the lump sum, then I'd say go for it. Go ahead and file and suspend. If, God forbid, you get diagnosed with a terminal illness in the next few years, you can grab that money and enjoy it.


Mike - We emphasize that the individual has control over when and how to claim Social Security benefits and that it likely to represent about 40% of cash flow resources in retirement.  Do you agree that the decision about Social Security is perhaps the most important financial decision that an individual or couple make about retirement?   What do you think is the best age to start a conversation about how Social Security fits with a retirement financial plan?

Elaine -I would say that the decision about when to claim Social Security is the second most important financial decision that an individual or a couple can make about retirement. The most important decision is when to stop working. The Social Security claiming decision can make a difference of $200,000 or $300,000 or more, depending on how long a person lives. But turning off that paycheck spigot too early can have an even larger effect. There's the foregone income (usually during a person's peak earning years) plus the need to draw down assets over a longer period of time. Social Security needs to be discussed within the broader scope of overall retirement planning. I would say these conversations can start as early as age 50.


Mike - The Federal income taxation of Social Security benefits is complex.    Can you illustrate any strategies that are used to minimize taxation and discuss the double taxation as taxable (provisional) income increases because the amount of Social Security subject to taxation also increases.  My observation is that people who have most or all of their money in tax deferred accounts such as IRAs get clobbered when they need to cover a special expense. For people who will have the opportunity to minimize taxation of Social Security, does it make sense to withdraw a portion of their tax deferred accounts into taxable accounts prior to the year they start receiving Social Security benefits?

Elaine - Yes, I do agree that people who take full advantage of the tax deferral associated with IRAs and retirement plans are setting themselves up to get clobbered when they withdraw funds for a special expense or when they turn 70-1/2 and have to start taking required minimum distributions. These taxable distributions can affect the taxes paid on Social Security benefits and even Medicare Part B premiums, if income is high enough. Serious tax planning needs to start happening at age 60 if not before, so that assets can be moved to taxable accounts or Roth IRAs over time and in an orderly manner, using up the lower tax brackets and avoiding large tax hits after age 63, when Medicare premiums may be affected. This is your area of expertise, so I'll leave it to you to craft your clients' individual tax plans.


Mike - It is interesting that there are people who attend my public Savvy Social Security presentations, tell me that they learned valuable strategies and now understand the impact of deferring the claiming of benefits.   They then tell me that they are claiming benefits at 62 anyway.    When having lifetime income is usually the number one financial concern of retirees and pre-retirees, this is a great paradox.  Are there any studies that you are aware of that would explain this?

Elaine - Oh yes. The behavioral finance researchers are having a field day with this. It really comes down to the inability to delay gratification. Rationally, people see the calculations and understand the value in delaying benefits. But then they just want the money. We can't help comparing it to the Stanford preschool marshmallow experiment conducted in the 1960s. Four-year-old kids were placed in a room with a marshmallow in front of them. They were told that they could eat the marshmallow, but if they waited 10 to 15 minutes while the facilitator did an errand, they could have two marshmallows upon his return. Some of the kids couldn't wait. Others held out and got the two marshmallows. In follow-up evaluations, the children who were able to delay gratification had higher SAT scores, were more mature, more likely to plan ahead, more likely to use reason, and handled stress better. Recent neuroimaging data on these same kids (now in their 40s) showed that the individuals who chose larger delayed rewards over smaller immediate rewards (in hypothetical situations) had greater brain activation in the anterior prefrontal cortex. An area of intense study now is how to "frame" certain decisions to produce the desired outcome. For example, instead of saying you'll get more if you delay the start of Social Security benefits, it seems to work better if we say you'll get less if you claim early. The pain of loss seems to exceed the joy of gains, so when it's presented that way, people tend to delay.


Mike - In discussing Social Security, we address life expectancy at 65.  Life expectancy is higher for college educated nonsmokers.  Our typical attendee at our Savvy Social Security workshops is from this group.  In addressing this group, what do you think are reasonable life expectancies to present?

Elaine -There are two ways to incorporate life expectancies into financial planning. One is to use the life expectancy you think you'll have, considering your lifestyle, how long your grandparents lived, and so on. As you say, your college-educated nonsmokers are likely to live longer than the average and longer than they may think. The other is to assume worst case. For a single individual, worst case is a life expectancy of 100 or so years. For a married couple, worst case is the higher-earning spouse dying young and the lower-earning spouse living to 100. Here you ask: if the worst happened and I (or my surviving spouse) lived to 100, would there be enough income? And you run the hypothetical numbers out to see if you're covered. Baby boomers have a hard time imagining themselves very old. So it's better to make this a hypothetical financial exercise. That way, you don't have to think of yourself slumped over in your wheelchair at the nursing home. You just put into place a plan that will cover you (or your surviving spouse) in case you make it to 100 or 95 or whatever advanced age you'd like to use. It's like buying insurance.


Mike - Elaine, thank you for creating and designing Savvy Social Security.  Through your program, I have been able to successfully work with people to make educated choices about Social Security retirement benefits.


Elaine - My pleasure. This information really is changing people's lives.


*Horsesmouth, LLC is not affiliated with Woodbury Financial Services, Inc. or West Railroad Financial Partners, LLC.

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck