Click Here To Listen To The Retirement Tax Services Podcast
Are you trying to learn how to deliver massive tax value to your clients? Then look no further. Retirement Tax Services Podcast, Financial Professional’s Edition is a show hosted by Steven Jarvis, CPA. Steven aims to bridge the gap between tax professionals, financial advisors and their mutual clients in their quest for reducing tax expenses in retirement.
Social Security, how it works with taxes, and how to deliver value in that area are all things Devin Carroll knows all about. A financial advisor and the host of a YouTube channel with an emphasis on Social Security, Devin joins the show today to share key value items and important parts of Social Security where you can step in to clarify, correct, and help your clients plan better.
Listen in to hear how Social Security decisions are deeply interwoven with tax and retirement planning, as well as the importance of really taking the time to understand certain aspects of this topic. You’ll learn who tends to be concerned about Social Security (and why), special areas of interest to pay attention to that affect taxes, and more.
Steven and his guests share more tax-planning insights in today’s Retirement Tax Services Podcast. Feedback, unusual tax-planning stories, and suggestions for future guests can be sent to email@example.com.
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We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.
Steven Jarvis: Hello everyone, and welcome to the next episode of the Retirement Tax Services podcast, financial professionals’ edition. I am your host, Steven Jarvis, CPA. And on this show, I teach financial advisors how to deliver massive value through tax planning.
I have a great guest on the show with me today: Devin Carroll is a financial advisor. I love talking to people who are doing this stuff in practice, but Devin also hosts a YouTube channel with an emphasis on social security. And so, that’s what’s the theme of our talk here today is going to be. So, Devin, thanks for coming on the show.
Devin Carroll: Steven, thank you so much for having me on here. I’m excited. Can’t wait to get into this.
Steven Jarvis: Yeah, I’m excited to talk about this topic because I think — and you certainly are going to have more insight into this because you talk about social security all the time; I think people assume that this is a simpler topic than it is.
And there’s a lot of things under kind of this really big umbrella of what’s involved in my tax life that people will say, “Oh, I know about social security or I know about the tax impacts of social security, that’s a simple thing, I’ve got it covered, let’s move on. Why would anyone spend all of their time on a topic like that?”
But when we get down to, okay, how does this actually work in practice and how do we deliver value on this topic, it gets a little bit more nuanced.
Devin Carroll: Oh, it certainly does. I remember when I first started, I don’t want to say specializing in social security, because I think that’s something that’ll probably never be accomplished.
When I first started studying it in depth and that started becoming kind of my thing that I did, I got some pushback from some of my peers who said, “Devin, it’s social security, what are you doing?”
If someone’s worried about social security, that’s probably not a client you would want to attract to your practice anyway. And it’s completely wrong. So many of my clients who are high net worth came to me for social security advice.
So, it’s something that a lot of people are really, really concerned with. Even those people who have been fantastic savers or they’ve been fortunate enough to inherit large accounts, they’re very concerned about social security.
And it was something that when I first got started, I thought I’m going to run out of content. And here we are, now seven years later, and I’m still having more ideas than I have time to create content.
So, I know that you saw a guy running around behind me here right before we hit record. And I’ve been fortunate enough that the channel has grown to the point where I now have a content manager that comes on and helps me.
But even with that, I still can’t get the level of content out that I want because there’s just so much to talk about. And what you said, Steven, is right. It is deeper than just filing for social security because it’s so deeply interwoven and integrated with that full retirement planning conversation.
And you can’t just decide how to file for social security on its own, which is, I’d admit it, that’s one thing that irritates me. The social security maximization softwares that are out there, which work great for some people, no question. And I absolutely think that it should be a component of most people’s overall filing decision, but it should only be one of the data points that you use.
It should never be what makes the decision for you, that “Hey, I went out and I paid for this calculation 50/60 bucks, whatever it is. And it told me that to maximize my benefits, most of the time I need to wait till I’m 70.” That’s the results of the calculation 9 times out of 10, but it looks at it in its own little silo.
So, it doesn’t take into account anything that you have; whether you have pensions — how much of your income’s going to be coming from a pension” Do you already have some in Roths? Do you have the traditional IRAs? Do you have assets outside of traditional IRAs that you may be able to use to pay taxes on conversions?
If you still have some runway between now and the age where I would consider you to be mandated to file for social security at age 70, really 70 in six months, because at that point there’s no reason to delay — but all of this is such an interwoven decision that it’s impossible to make that decision just using software.
And so, it does bother me a little bit to see the advisor versions of these software packages available and a lot of consumers, when they go to their advisor, they’re getting that simple information that goes in that says “Hey, here’s your earnings, here’s your date of birth. Here’s when you need to file for social security.” And that’s it. No other information.
Steven Jarvis: Obviously, there’s some clear overlap between social security and taxes because social security is in fact taxable income for most individuals. In my mind, there’s so many parallels here too, because I think there’s an emotional connection that advisors at times discount, as far as the taxpayers’ connection or the consumers’ connection to taxes and social security.
Because you mentioned people who will come to you who have been great savers who have been high earners and are still really concerned about getting social security just right.
And on the tax side, I have people all the time who again, they’re really high earners on a great track for retirement, but they’ll get hung up on what seem like really small dollar amounts, if they feel like they’re overpaying the IRS.
And we can’t just discount or dismiss these emotional connections that people have to these things. Because I love the point you made there that just because a calculator told you here’s the optimal number, one, it doesn’t necessarily mean it’s right.
And even if it’s true that that’s the mathematically optimal outcome, but that’s not always what we should do in real life. That’s not always going to consider all the different things that might be going on there. And so, we can’t just get lost in, “Well, my calculator says …” and try to force our clients to take that action every time.
Devin Carroll: Right. And really what those calculators are good at is not giving you the optimal time, but giving you the maximum strategy.
Steven Jarvis: Yeah, that’s a great way to put that.
Devin Carroll: And in many cases that is absolutely not optimal because then when you start laying it out on paper, there are cases where filing earlier is more optimal than filing later.
When we run our retirement roadmap plans for our clients, we can often find that by … and it really depends on the mixture that they have, and the pensions and the income sources and the savings. But there are cases when from a tax efficiency standpoint, it is better for them to file for social security earlier than it is later.
Because if they’re filing earlier … and this is often for people who don’t have large balances in their IRAs. And so, by filing earlier, they’re lessening the load on those IRA balances, which down the road, is going to drive up those required minimum distribution.
So, it sounds counterintuitive, but these are individuals who may possibly otherwise, run out of money if they were to wait to file and take those distributions from their retirement accounts early.
So, again, very intertwined and the tax side of it is how do we not only get you the retirement income you need, but how do we make it a tax efficient retirement can really only be seen when you look at it over retirement life expectancy.
And you figure out okay, if all things are equal and you file for benefits at 65 versus 70 (we’re not talking about Roth conversions or any of that), then we can look at your cumulative taxes that you’re going to pay in retirement, roughly.
We’re never getting into any specific tax forecast, but on a very rough basis, most of the software programs out there, the financial planning software programs will kick out a rough approximation of taxes based on what we know now.
And so, you can look at those and you can see that different filing ages will absolutely change the amount of taxes you’re going to pay in retirement. And so, then you have to start taking into account. Well, I know I can get the maximum amount of benefits by filing at 70, but how does that impact my taxes?
I know that that’s going to drive down potentially the amount of IRA balances that I have, that’ll be kicking out a required minimum distribution, which should in theory, lower the amount of taxable income, but it doesn’t always depending on what your other assets are.
So, it’s such an individualized planning step that has to be taken with each client. And so, those software programs I’d love to … I don’t know. They’re great. Again, they give one data point.
For years and years, Steven, I railed against break even calculators. Where you put your social security benefit in at full retirement age. And then you say, okay, what if I file early, say age 62 versus filing at age 70, at what point will those benefits intersect? And I hated them.
But it was just about two weeks ago we actually released our own social security break even calculator. And it’s not because I like them now, and I think that should be the deciding point because hey, if you just live till 80-years-old, you’re going to break even. So, therefore you need to file it, whatever.
It’s that I think individuals need all the data points they can get to make good decisions. And break-even calculators, these social security maximization calculators, that’s certainly part of it. But financial advisor needs a solid understanding of how those taxes on social security benefits are calculated so they can help make that optimal decision and not just focus on the maximum decision.
Steven Jarvis: I really like that distinction because I usually refer to it as the mathematically optimal outcome. But yeah, a lot of those calculators are pushing you to the maximum.
And we deal with the same thing all the time from a more kind of strictly tax planning perspective. You talk about Roth conversions or other things that well, okay, what’s the maximum? And I have advisors, that’ll ask me, I have taxpayers that ask me that what’s the maximum I can do.
But I would imagine that you find this as well, that part of that kind of evaluation of what is the optimal outcome is also evaluating what is the client going to take action on and follow through on.
Because as you’re describing doing that retirement plan, we’re not talking about just this one point in time where we’re going to make one decision and everything magically happens and nothing ever changes again. Because great, what if at 65 we make one decision and then two years later, a life event happens and we need to come back and reevaluate this as far as when we’re going to claim social security or whatever the situation might be.
We’ve got to include in there, okay, what’s the plan that we know the client is going to stick to, is going to follow through on and not just, “Well, my software told me the answer is X, so that must be the answer every time.”
Devin Carroll: Yeah, you’re absolutely right. One of the things that we know when we build a plan for a client is that it’s wrong. Something is going to upset that plan. And that’s why it needs that annual update. It’s really difficult just to build a one-time plan. And that’s your blueprint.
We’re in the middle of doing a basement build out in a home that we own right now. And the planners came in and they gave us this blueprint. Well, we could follow that blueprint mostly and build out the entire basement that way, because there’s not a lot of variables that happen.
Walls are in fixed places, things are fixed, but that’s not the way retirement works. Retirement is more like a long road trip. So, if you’re driving from Los Angeles to Boston, there’s a lot of variables that’s going to come up on that trip.
And so, what we focus on when we’re planning and I think is important, especially for things like social security, for tax law changes — because we know that in 2026 tax laws are going to change.
Right now, we’ve got all of the Trump tax cuts that are set to sunset, but will they? I don’t know. I can’t suspect they’ll all sunset. And so, we know that we’re going to have to make some adjustments along the way, but for building that initial plan, we’re going to have to plan as if that’s the case, unless someone else has a crystal ball that knows for sure.
And so, it’s kind of like that road trip. We know that there’s all of these checkpoints along the way; that here’s where we’re going to get gas, here’s where we’re going to stop to spend the night, here’s where we’re going to get gas the next day, and here’s where we’re going to eat, whatever.
Or you could take that road trip, that blue line on Google Maps. And you can really get it so convoluted by planning out every possible contingency, every gas station, every hotel, every tire repair shop along the way until eventually, you look at it, you can’t even see the blue line anymore.
And so, that simplification of retirement with that annual adjustment really gives you not only the opportunity to build a plan that has room to be flexible, but also, a plan that allows you to visit with your clients and find out about those changing objectives and drive those relationships even deeper.
Steven Jarvis: It’s one of my favorite things about being involved in tax planning is that I know there’s going to be opportunity to deliver value to clients every single year, whether that’s because they’ve got to pay their taxes again, or because tax law has changed or their life changed. Tax planning guarantees there will be value you can add to a client every single year.
Devin, let’s pivot just a little bit. You’re constantly working with people on social security, and I find sometimes from advisors that social security can be one of these topics where everyone knows social security exists. From the very first paycheck we all got, money’s being withheld for it. We’re told every other day that it’s all going to dry up and disappear before any of us retire, but that’s a whole different thing.
I think the fact that it’s so prevalent makes advisors sometimes give their clients too much benefit of the doubt of what they understand about social security. And I am constantly educating clients on what I think of as pretty basic things around social security.
So, in your experience, what are some of those things that you are consistently needing to educate clients on just on the basics of here’s how social security works and here’s how the tax piece of it works?
Devin Carroll: So, I think two pieces of that would be what full retirement age actually is. And how that relates to the overall reductions and increases that occur to your benefit. From the birth of social security all the way through, I believe, it was 1983 or 1984, full retirement age was set at 65.
And so, there’s a lot of people that are getting ready to retire today that still see 65 as the full retirement age, but it’s not. It started moving over an 11-year period and it took a break and then it started moving up again to where now everyone born after 1960, their full retirement age is 67. And that’s likely going to change again.
But that’s one thing that a lot of individuals coming into the office, they don’t fully understand, is when that four retirement age is. So, that’s critical because the reductions or increases happen on a monthly basis based on your full retirement age.
So, if your full retirement age is 66, then you’ve got 48 months between your full retirement age and age 70. If your full retirement age is 67, you only have 36 months between full retirement age and age 70.
So, your benefit, obviously, isn’t going to increase as much. But on the other side, your decreases will be steeper or filing at that initial eligibility age, which is 62. So, instead of a 75% benefit, if your full retirement age is 67, it’s actually going to be 70%.
And that reduction gets even steeper if you’re dealing with a dually entitled spouse who gets their own benefit and a part of a spousal payment. So, those full retirement age, that’s one of the things.
The other thing is just taxes in general. I still run into a lot of people who did not know that their social security benefit is going to be taxable.
Steven Jarvis: Yeah, all the time.
Devin Carroll: I guess, if you’re 10,000 feet up looking at it, here’s the way it’s thought about; wait a minute, that is a tax that funded that, and now, you’re telling me you’re going to tax it again.
So, I get it. And I understand why some people think it’s double taxation, but it’s really not once you boil down into it. They simply decided to follow the format of the taxation of pensions, where the amount you contribute is not taxable, but the amount that’s given to you by the company, which is the government in this case, is taxable.
And they figured that for most people, that’s somewhere between 50 and 85%, which is given to you by the government. And so, the remaining portions, what you put in and therefore shouldn’t be taxable.
But that’s a big surprise, and it’s a retirement shock that a lot of people aren’t planning for. They’re just thinking that, hey, that’s my net benefit that’s coming in. And it may be if their income is below certain levels, but it’s not for most people.
Those income brackets that were put into place back in the early eighties were not set to index with inflation intentionally. They understood as the social security administration, the legislators that change social security policy often do, they don’t change them overnight. There’s been very few rule changes that have happened overnight. Most of them are phased in very gradually.
And so, the intention with setting those and not indexing those for inflation was to get to the point where eventually, most individuals would have to pay tax on 85% of their social security benefits.
And as wages increase, as savings levels increase, that’s eventually where we’re getting to. You can look at the dollars collected on social security benefits in the trustees reports and just on the social security website in general, and you can see how the revenue from taxes on benefits has increased. It’s been dramatic and it’s going to continue to increase.
So, taxes will happen for most people that are seeking out the services of an advisor.
Steven Jarvis: Some great points in there about those client education pieces. And I definitely come across the same things from a tax perspective. And again, at times, advisors will be a little bit dismissive of taking the time to educate their clients on this because they assume, oh, well, they have to understand that social security’s going to be taxable or that they’re already at a … the other one that comes up a lot is, well, my clients already, so far, over that threshold for 85% of social security be taxable, then nothing else we do is going to impact how much of that is taxable.
And that might technically be true, but I still get taxpayers who will kind of take a step back or have some concern of, “Oh, I’m not sure if we should do that because it’s going to affect how much of my social security is taxable.”
And so, rather than have these underlying concerns, like doing that little bit of client education of that, especially as they’re approaching social security age and understanding that full retirement age for their situation of helping them kind of pull back the curtain a little bit and saying, “Here’s what the important pieces are, and here’s how these different things work.”
The other one that I come across quite often and seems like a little thing, but clients take as a huge win when I can help them with it, is realizing that one, your social security is taxable, which means we somehow now have to pay the IRS those taxes. But that you actually can have at least some of those taxes withheld from your social security.
This is baffling to me that it’s not more clear from the social security administration, but the number of people I run across who had no idea who have a tax preparer, who’s helping them make estimated payments to pay their taxes on social security — there’s all these different variations of kind of chaos around social security withholdings, but just taking the simple of step of, hey, can we work together to have taxes withheld from your social security so that we don’t have to worry about that come tax time?
Devin Carroll: Yeah, that’s an easy win and a conversation to have with them because at the end of the year, they’re always so thankful that they did that withholding. And to that point, Steven, I’ll say that we’ll give some good marks to the social security administration here.
Right now, they have a beta site out that’s going to replace the current version of the, my SSA account, which by the way, I think is critical for anyone to have. Even for people in their twenties, thirties, and forties.
You don’t have to be at retirement age. You need to be checking your earnings every year on your my SSA account, that needs to happen.
But the, my SSA account is getting ready to change to a new system. And I like what they’ve done with it. They are making it just more user-friendly, where the user experience is going to be different from what it is now.
And one of the things on that website is going to be the ability to change your withholding.
Steven Jarvis: Wow.
Devin Carroll: Yeah. So, right now you kind of have to hunt and peck for the form, the W-4V or whatever it’s called.
Steven Jarvis: Yep, W-4V.
Devin Carroll: And now, you’re going to be able to go onto the website and make that change directly in your benefits portal.
Steven Jarvis: Interesting. I was not aware of that. That’s going to be a really exciting change. Are they giving any indication of when that might be a reality?
Devin Carroll: Well, they’re saying fall. They have the beta site out now, you can get on there and take it for a test drive and see how you like the way it looks. I actually covered that in one of my videos. And when I saw that link on there, I was happy to see that.
Steven Jarvis: Yeah. Because again, it might seem like a simple thing, but it’s a huge value add for clients when you can help them with those seemingly simple things. It takes worry out of it, it reduces the chance of under payment penalties.
A lot of times, I’ll work with clients to potentially even withhold more from social security than they actually need to cover their social security tax, because it gives us flexibility in how we pay taxes in other areas. But there’s definitely planning opportunities there.
Devin Carroll: Absolutely. Yeah. So, Steven, as you know too … I know we’re getting up close to our time limit here, but there is one thing I think is important for us to talk about. I help mostly those people who are transitioning into retirement. So, 55 and up, but I know there’s a lot of advisors out there who are helping other people who are younger.
So, how do we properly advise those younger people on social security, what do we tell them?
And this is something that I’ve wrestled with for a while. Do I want to in include this in my own plan. I’m 46, so I do I think it’s going to be there for me?
And I think this is one of those things where I have to put myself up for future ridicule, but I’m not really scared to do that anymore. So, I’ll tell you exactly what I think for those advisors who are helping younger clients. I don’t think you need to include it.
Over the last couple of days, I’ve been doing research for a video where we’re going to be talking about the new cost of living index. And as part of that, I’ve been listening to the Senate testimony with … it’ll be a number of different people, but usually, you’ll see Senator Graham, Senator Sanders. In the most recent we had Senator Scott, Senator Romney and a whole host of other people.
In addition, they had a panel that was discussing their ideas about the change. So, not only is the talk about making the wealthy pay their fair share, which they mean increasing the social security payroll tax. But now, we have people on both sides of the aisle, whatever your political persuasion is, there’s a senator on your side that believes that if you don’t need it, should you really be getting it?
And so, for those individuals who are diligent savers, who are visiting with an advisor in their twenties, thirties, and forties who are really serious about getting this retirement thing done correctly, I think there’s a good chance that they may fall into the bucket of people who don’t “need it.”
So, that’s a difficult needle to thread when you talk about that. Because there are people that said, why in the world is Warren Buffet getting a social security check, and we could go into that for a while.
But I think what’s important here is that we do need to prepare for some changes ahead. We need to prepare for increasing full retirement ages. We do need to prepare for increasing social security tax rates. We need to prepare for a formula that’s not as generous.
All of these changes are most likely to happen within the next few years, hopefully. So, we can get this social security trust fall issue resolved by 2035 or 34 or 33 or whatever they revise it to. And I think with these high inflation rates, it’s likely that we’re going to see that date move back.
But when I’m planning my own retirement and for the clients that I do have that are younger, I’m not planning for it to be there. Not because the system won’t be there, but because for those individuals who have a higher net worth and higher retirement income, I just don’t think it’s going to exist in the form that it is today.
But it goes back to, I don’t think current or near retirees have anything to be worried about. I certainly don’t think they need to file for benefits because they think the system may go broke. That’s nonsense. They’re going to be fine.
The social security administration and the legislators that make the policy changes, there is no way they’re going to tinker with people who are in retirement or close to retirement. But they have a long track record of making these phase in changes, and I think that’s going to happen to basic benefit eligibility in the future.
Steven Jarvis: Well, I certainly appreciate you sharing your thoughts on that, because that is a question that a lot of people have on their minds. Unfortunately, I haven’t found someone to repair my crystal ball yet. So, I’m definitely in the camp with you on some of that of just having to wonder of what’s coming.
But wanting to be able to plan for going back to our conversation earlier, the optimal outcome, not necessarily the maximum outcome. And so, as I look at myself or other younger individuals, I don’t plan for it to be there, not because I’m making a prediction on whether or not it will be. But to me, that sets me up for if it’s there, great, that gives me opportunities to pursue and further other goals. And if it’s not there, I’ve prepared accordingly.
Because that definitely is a question that you’re going to get from clients. We can sit here and talk about the tax rates and withholdings, but that’s still going to be a question you get from clients as to hey whether it’s going to be there or not. So, appreciate you sharing your thoughts on that.
Devin Carroll: Oh, you’re welcome. I know it does sound pessimistic, but what’s the talk of legislators today when it’s not isolated to just one or two. When you start hearing it across the aisle and you start hearing a lot of them saying the same thing, what that talk is today becomes a law tomorrow. And I’ve seen that happen over and over and over. So, I’m fairly confident that that’s going to be coming down the road.
Steven Jarvis: Well, and we all know that tax laws are written in pencil, so they certainly can and will continue to change.
Devin Carroll: That’s right.
Steven Jarvis: Devin, before we pivot to action items, we’ll get some things linked in the show notes, so people can follow up and learn more about the content that you put out. But just give the audience members a quick way that they can follow up on your content if they’re interested in learning more about what you do around social security.
Devin Carroll: Perfect, yep. So, there’s two places. I am at socialsecurityintelligence.com. That’s a website, it’s a consumer facing website, but I do have a lot of advisors who read that website. That’s where we publish articles about social security.
And then secondly, you can find me on YouTube. If you just search Devin Carroll, you’ll see the channel that’ll come up there. And a lot of the content that we have in the blog, we also cover on the YouTube channel, but there’s a lot of content on the YouTube channel that’s never put into the blog as well.
So, there, we try to get a little bit more visual. We try to explain it, lay it out. And you hear a lot of my thoughts on YouTube.
Steven Jarvis: Perfect. Thank you. So, if you want to follow up and learn more of what Devin’s doing and hear more of his thoughts on this, there’s your avenue for it and we’ll link it in the show notes.
As far as action items, we want to make sure that this information is valuable for you. The things that stuck out to me one, that I’ve definitely hit on before, I love that you called it out; everyone should have a my SSA account. Doesn’t matter how old you are. This is a great step from a fraud prevention standpoint as well. Not that it’s necessarily likely, but if you’ve created your account, someone else can’t create it on your behalf. They can’t change your information without you knowing.
So, regardless of your age, regardless of your motivation, everyone should have a my SSA account. This is a great value add that advisors can do for their clients of providing the information to get that set up.
Other things that stood out to me from this conversation, and Devin highlighted some great areas of common misconceptions or common gaps in consumer knowledge. Make sure you have an intentional approach to educating your clients around social security of these common terms and things they’ve heard of that they might not have the right idea on because they constantly change. Things like full retirement age and how much of social security is actually taxable.
And then the last action item I would throw out there related to social security, is make sure you are reviewing with your clients and helping them have a tax withholding from their social security if they are to that point.
It’ll be great to see the new site come out where we can do that online. That’s something you want to be looking at in your annual tax return review to see if that’s happening.
So, Devin, thank you so much for coming on the show and sharing your thoughts. Really love what you’re doing around social security. It’s been great chatting with you.
Devin Carroll: Yeah, thank you, Steven so much for having me on.
Steven Jarvis: And to all our listeners, take a minute to go give us a five-star review and leave a comment wherever you listen to podcasts so our audience can keep growing and we can keep sharing all this great information. Until next time, good luck out there. And remember to tip your server, not the IRS.
We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.
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