Business Innovators Radio - Interview with Tim Dern, Retirement Income Certified Professional & Managing Partner w/Mana Financial Group Discussing Social Security

Episode Date: June 22, 2023

With decades of experience in the industry as a 65 securities licensed professional, he brings a wealth of expertise to his clients. Unlike traditional broker dealer models, his fee-based approach puts you first. He leads a private wealth team, offering top-notch asset management services with a focus on retirement strategies.As an RICP (Retirement Income Certified Professional), he is uniquely skilled in creating customized plans that maximize your income during retirement. His impressive portfolio includes AUM, Fixed Index Annuities, IUL, Medicare Supplements, Advantage & Drug Plans, and more.But what truly sets him apart is his dedication to education. As an NSSA (National Social Security Advisor), he offers educational seminars on social security, Medicare, proper asset allocation, Roth conversion, and tax-saving strategies. And for those unable to attend in person, he hosts online webinars nationally – using Facebook ads to reach a wider audience.With his unparalleled knowledge and commitment to your financial success, he is ready to help you plan for a secure future. Contact us today to schedule a consultation and experience the difference for yourself.Learn More: https://www.manafg.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-tim-dern-retirement-income-certified-professional-managing-partner-w-mana-financial-group-discussing-social-security

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with us Tim Dern, who's a retirement income certified professional and managing partner with Manna Financial Group. and we'll be talking about Social Security. Tim, welcome to the program. Hi, Mike. Glad to be here. Good to have you.

Hey, you know, Social Security is quite the broad topic. We might need a three-day seminar for that one thing alone, but I know we want to just hit on, you know, the highlights and the 30,000 foot view. But before we dive into that, give us a little bit of your background and your story. How did you get into financial services? Well, I was like a lot of people, had my own company. I was working for a corporation. actually had a really good job. My company got sold. I was there for quite a while,

and the new owners came in and let everybody that was 50 years and older go. I was one of those guys. It was kind of the higher paid people. So when my company got sold, we got a pink slip. I was out on the street looking for a job with people half my age, for half the money, that kind of stuff. But it really crushed my retirement plan. That's really kind of what got me interested.

My own retirement plan was, in jeopardy. And I had an advisor that I didn't think was really helping me in that kind of a situation. So I decided to take it into more to my own hands, went and got licensed, went and kind of learned the business. Really, my first goal was to just do it for myself. And then, of course, as I got more and more into it, I started really wanting to help people. And that's kind of how I've been doing this now for over 15 years now. You know, isn't that the way that it always seems to be, which, you know, you see this in, you know, a shark tank. You know, hey, how did you come up with this product?

Well, we had this problem. We looked around. There was no solution. So we created it. Well, you went through that same kind of a timeline. And you had that, you know, retirement blip come up like, oh, my retirement got out of whack. Let me see what I can do, fix, talk to people. And you're like, you know, it just something didn't, you know, set right with me.

It didn't resonate with me. So other people certainly are feeling the same way. And I think that that's so neat to be able to go, once I figure this out for myself and got the education and all of the certifications, well, other people certainly are going through the same thing. How can I blaze the trail, smooth the path out for them to, you know, not feel that fear and trepidation that I felt? Exactly. That was kind of how it went down, too, because once I started lurking at how advisors were allocating my funds, what they were charging and really looking closer at all the fees. what we were getting, really was more of an alarming thing. I said, wow, not everybody charges the same.

Nobody does the same. So we have to kind of look around, and that's kind of why I ended up as an independent financial advisor versus working for one of these big brokerage houses, because I felt like, you know, the brokerage house is going to put you in kind of manage your money. They're going to put you in Vanguard or American funds or, you know, more of a cookie cutter thing. most of the people there at these firms, they don't really understand everything about Social Security or Medicare or even income planning in retirement. So that's kind of where I decided to kind of find a specialty and get some certifications that would, you know, as an RICP, retirement income certified professional, in that training, you get a deep dive on Social Security, deep dive on Medicare. and then really a kind of how you're going to plan your income in retirement. So it's not just about

managing money in a brokerage account. It's really helping people plan for retirement. That's what I'm specializing and focusing on. You know, I think that's a huge piece that you just brought up there, which is, you know, the air quotes, brokerage account. There's a time in place for everything. You know, there's a time of place for the having your money in the market or in a brokerage account. But at some point that R word comes up, risk. And I think that one risk that you touched on is, you know, hey, that captured agent with XYZ company, they're probably great people, but they're limited in what they can do for you and present to you because they work for this company and they only can sell and provide their

products. So when you just said that you're independent, you've got access to all the top things out there to go, okay, in my custom plan for a client, I know that. they need this, this, this, this and this, because we're doing a deep dive investigating what they need. And then, okay, I'm going to take a piece from this and a piece from that. And you're putting together a custom plan. Well, you've just overcome one risk that a lot of people have, which is, you know, having that, you know, captured agent versus an independent. Secondly, you know, let's talk a little bit about some more of the risks like that market volatility and having your

money in the market versus having some of that security. Well, market risk is always the big. one, especially recently we've had two negative years in the market, so everybody's feeling that. And even when I talk to people and they've got more than one account, they still are in stocks or bonds or something along those lines. And sometimes people walk in three or four accounts and they're all down, you know, because we're losing money in stocks. The equities today are down. So our bond portfolios are down. Interest rates are going up. That hurt.

So market risk is always a concern. and how do you kind of, you know, piece that together and protect against market risk. We do that. We also have to deal with health risk, you know, heart attack, stroke, can't work or running out of money, income risk. We always talk about tax risk. That's a big one. And then it's always this legislative risk, I call it. Washington can change the rules to any of this, which they have recently with Social Security, even with the new Secure Act 2.0.

So that's a risk that we all face in retirement too. So how do you navigate through all this is hopefully you have an advisor understands what all these risks are and can help you put a plan together and protect you. Yep. Well, you mentioned Social Security a couple times and let's kind of dive into some of the high level things. What are the typical first questions that people that come to you have about Social Security? And I'm certain that one of them is, what's the best age that I should claim?

And I know it's a different answer for everybody. Yeah, that's probably the first one. When's the best age to claim? And kind of what we always say to everybody is that this is a personal decision. I don't have a best age, single best age for every single person. Even between husband and wife, sometimes I have one go early and one might delay and go later. But usually the first question we'll ask is, when do you need the money? So you're eligible for Social Security at 62. And then you can have an eight-year window all the way till 70. when you can claim. But some people, when they turn 62, they might be out of work. They don't have any other money. They might have to go claim their Social Security benefit and turn it on. I think, you know, a lot of people I talk to, you know, they want to get their money early. And they'll kind of be saying, you know, I don't really need the money, but I want to invest it.

Or, you know, I want to, you know, get it before the system goes broke or they have all these ideas. And I have to caution them that if you do claim the benefit early and you're still working, working, there's a limit on how much you can get from Social Security. And if you go over that number, I mean, how much you can earn while you're taking Social Security. If you go over that number, you're going to get a penalty. And so I see a lot of people go into the penalty. So there's factors that we consider is, you know, when do you need the money? And then are you still working? So we talk about a few factors. And then there is usually a range of when people want to claim. But usually at full retirement age, that's the age when if you at least wait until your full retirement age,

and that's determined by the year you were born. If you can turn it on when your full retirement age, well, then you're not going to incur any earnings test or no penalty. There is nothing. You can make $200,000 a year, for instance. But if you claim early, let's say at 62, you can only make $21,000 a year right now in wages or earnings. So that's the biggest thing that people have to understand is if they want to go

get their money early and just because they want to invest it. I've seen a lot of people do that and then they get a penalty. And some people might not be aware of this, Mike. If you turn it on early and you go over this penalty too much, Social Security actually turns off or will stop your benefit. They'll stop and turn it off. They will not. You shouldn't have claimed to the first. In other words, they're sort of saying you claimed incorrectly or you should have waited and they're kind of, it's like a little stopgap for you and you don't want to turn it off because I'm sure turning it. back on could be a minute or two worth of hassle? Well, number one, they turned it off.

And I just had this happen to a client at 64, get their Social Security turned off. They turned it on at 62. They collected for two years, then it was turned off. They will not get it back turned on until their full retirement, 66 and 10 months. So they got two and a half years, really, to wait. They'll turn it back on, and they will kind of give them a new payment based on all these that the he missed, but for two years, you're not going to get that sole security. But it takes the flexibility out of your hands when you really should have thought ahead and gone,

okay, do I really need the money? And you know, you mentioned taxes and that's one of those risks that we all deal with. And that's a big old question mark in retirement. But isn't there an aspect of social security benefits that if you make a certain amount or over a certain amount, then your Social Security benefits can be taxed and there's a line there to consider as well, right? Yeah, so there's a lot of confusion out there. Social Security is subject to tax, especially federal tax, all over. But a lot of states do not tax social security benefits. So you're in one of the states that you're not going to pay a state tax, income tax. Well, that's great. But if you're on federal income tax, yeah, there is a limit on how much of your Social Security is taxable and how much is not. So it's kind of a tax preferred asset.

You can have a couple that can make technically up to $60,000 a year. Let's say I had a husband and wife, one making $30,000, Social Security, other one makes $30,000, $60,000. When we go to report for taxes, we're only going to count half or $30,000. So even though they made $6,000, they report $30. And if you're married filing joint, Social Security, as long as you're under $32,000 married, You don't have any Social Security tax on that. So you could actually make $60,000 if that was your only money and not pay any income tax on that.

Now, of course, if you have other income coming in, and this is the way you have to be careful on, you start pulling money from a 401k or an IRA. People forget that's taxable. That's income. And it could raise how much your Social Security is taxed. But Social Security goes all the way up to 85% of your benefit is taxable, not an 85% tax. So if I made $1,000 I might benefit $850 slides over into the taxable column, ordinary income, and I'll pay ordinary income. So a lot of confusion on taxes. But again, what we try to tell people is if you're just thinking this is real simple and you're just going to turn it on because your brother or your sister or the guy at the donut shop told you to do it and you don't think this through, we see a lot of people making a lot of mistakes.

And as we talked about before, Mike, you get one shot at this. If you turn your benefit on and you make a mistake, you're going to have to live with that benefit for the rest of your life. You can no longer switch once you start claiming a benefit. You can't do a start or a do-over. Give me a morgan. Right. You know, that's an interesting point there, Tim, because I think in this age that we're in, it's like, okay, give me this and I'm going to chase my mind and change my mind and change my mind and update and click edit and undo. not in this realm.

And once you claim you're in and it might not be the best for you for several reasons. Like you should have claimed under just the husband or just the wife or delayed, whatever of those factors are. That's a big thing that people must understand because I think that our tendency is to go to Google and go, when should I claim? Oh, I read two articles. And so now I'm now the expert, of course. So I'm going to claim, boom.

Well, maybe you find out too late. that, oh, I didn't consider this, that, and the other, and now I'm stuck. Yeah. And that's really the kind of common things. When I'm doing a class on this, either in a library, a lot of these meetings, I'll do educational events in libraries or colleges and things, and even online webinars, the common mistake is even financial advisors are giving the wrong advice on when to claim Social Security. And if you go in and claim early and you're in that penalty zone, you could have a problem there. Now, this is always on earned income.

So if somebody retires, turns their Social Security on early at 62 and collects Social Security along with collecting money from a 401K, the 401K or money they're getting from investments doesn't count in the earnings test. So it's really earnings that they would do as wages or net profits from a business or commission, something like it's all earned income. And one other common thing that's mistaken is if I'm talking about turning my benefit on early, then it's my earnings test. So if I have a wife, for instance, it makes $100,000 a year. Her income doesn't count on my earnings test.

So it's always the individual who's claiming. And that's a common mistake. But people should put more thought into this and really understand all their options before they just turn on Social Security because they read something online. That's a mistake. You know, and you even said, even some financial planners can give wrong advice. And I would suspect that that's because they, you know, called themselves a financial planner, professional, whatever the case is. And they just focus on a whole different realm of wealth and investing and financial planning. And they're not as adept in the intricacies of social security claiming and how that factors into retirement.

Nothing wrong with that financial planner. they just didn't realize and they just didn't know. And it's probably, and you can correct me if I'm wrong, but it's the difference, it's like going to a general practitioner versus a podiatrist if you have a foot problem. Well, you know, the general practitioner took a semester in, you know, all things feed. And that was 20 years ago. But a podiatrist, they're staying up on it all the time. Yeah, that's exactly the point that we make.

It's as your advisor understands. We don't make money as advisors for doing. Social Security. So that's why a lot of advisors don't get certified or pay attention because we don't make money. I happen to be somebody who specializes in retirement. Most of my clients are within four or five years out from retiring. And I already have a lot of clients that have already retired.

So I'm in this space, you know, five, six days a week. So I went out and got all these certifications, got all these training and everything because I really want to know to help clients. but the average person that's an advisor doesn't spend two minutes on this. They don't even do the homework. Yeah. You know, and one thing that also popped into my mind when you were talking about, you know, the limit of certain income and then taxes kicks in and things like that.

And, you know, oh, they can turn off Social Security. I think that one of the questions that needs to be asked when, like you said, the first thing is when do you need the money? But also, what does retirement look like for you? Because it's almost like Tim becomes a life coach of sorts. to go, well, hey, if you retire at X age, what really is the next 20, 25 years looking like? Because we're taking better care of ourselves. We're living longer.

Healthcare system is better. And are you really going to retire, punch the clock and sit on the beach the rest of your life? Probably not because people tend to be kind of bored of that. And what I've seen is statistics saying that people are like semi-retiring. And they're doing a little consulting, a couple, three days a week. And that's not my opinion, not the time to go claims of security because you're going to bring in some money. So maybe you can then afford to put it off, put it off because so A, comment on that and B, when you can decide safely to put off your claiming, what's the benefit by putting it off to 68, 70, that kind of thing? Well, obviously it starts at 62.

That's when you're eligible. It goes all the way to 70 and get more money. but kind of the things that you just mentioned, number one, as we say, and a common advice I would give, you know, obviously everybody's specific situation different, but I would always tell people if you're working and you're still working at 62, 63, whatever, you try to wait till your full retirement age. That's what the, because once you claim a benefit at your full retirement age, there is no earnings test so you can make whatever you want. But that's kind of the first thing we tell people is if you're going to retire early, make sure you don't earn wages more than 21,000 a year. But once they do it, then that doesn't matter. If I'm 66, that's my full retirement age.

Mine is 66 in four months. I'm actually past my full retirement age. I still have not turned on my Social Security because I'm still working. I don't need that money right now. I'm trying to delay all the way till 70 where it maxes. And interesting point, Mike, a lot of people think this. maxes at 72. It does not. It stops growing at 70. So when people think, you know, they're going to delay longer, there's no reason to delay longer. But taxes is the other thing that happens. You know, when you're

claiming Social Security in the beginning, you might not be paying tax on your Social Security benefit because you don't really have any other outside income or maybe you're not drawing from these IRAs or 401Ks. But I see people now starting to go into 401K or IRA. They start withdrawing these money. and start living on these dollars. This is when it gets crazy. A common mistake I see is people get to the end here. They turn on their sole security at 65 or whenever they retire. They say, I'm going to leave work, which is great, but they take a big chunk of money from their 401K.

Let's say they take $140,000 out of their 401k, pay the tax, but they pay off their mortgage. They go, look, we want to be debt-free. Sounds really great, except what happens is now you've got a little bit bigger tax burden on your Social Security by doing that. And another thing, it will affect your Medicare Part B. Medicare Part B is tied into how much money you make. So again, this is where coaching comes in. If you pull this lever, this could happen.

Now you've added, you know, $200 or $300 extra to your Medicare Part B. And that's a two-year look back. So you're going to lock that payment. You're going to pay Medicare Part B, but you're going to pay a penalty on top of that. So these are different things. There's something called an Irma tax for Medicare. So we have to coach people on all this. When do you pull?

Where do you go? And this is where I would recommend, especially anybody listening, this is where you want to start finding advisors that know how to do planning or are more into the distribution phase of your life versus just give me your money. And I'll put you in a buy and hold strategy here to invest your money. People today are looking for more planning and more coaching into retirement, not just take my money and put it somewhere on a passive investment. And it makes me think of asset allocation.

We always hear that. And it's like, oh, how important is that when you get closer to retirement? Well, we need to move it out of volatility into safe. But the thing that I would suspect is a good observation is if you do asset allocation moves before you shore up the security slash Medicare that you were just talking about, it could be like pouring water into a bucket with holes because, oh, I should have thought about this first. So getting those things in place. because, you know, I didn't realize that, oh, making a Social Security decision could impact Medicare. And then there's a two-year look back. Well, that needs to be in place as a foundation.

But then what are some of those things that you then begin looking at regarding asset allocation, which that alone could be a three-day, you know, seminar right there. But what are some of the main things that people need to keep in mind? Well, we do try to look at what kind of assets people have. So, you know, Social Security might be one income stream that you have in retirement. Some people have IRA 401K. Some people have a Roth IRA, which is tax different. Some people have TOD accounts, again, tax different.

Some of these are capital gains. Some of them are no tax. Some are ordinary income. So when we start to talk to clients, we start to line up different buckets of money. And we look at how they're going to be taxed. And that also matters on how we invest the money. Should that be in a growth fund generating income from either dividends or even interest from bonds.

If it's TOD, you're going to get a 1099 on that every year. If it's an IRA, well, then it's going to be tax deferred. So we have to kind of look at these different accounts. What we like to do is split them up. I don't like all the eggs in one basket. Sometimes I see people that retire, they have a million dollars in their 401K. They've done a beautiful job saving. And they'll walk in and they'll say to me, I've got a million dollars here.

And I say, congratulations, how much of it is yours? And they know what you mean? and I go, well, the government's going to tax some of this. Yep. And how much is going to depend where you pull it. And usually your 401K is invested different. You have limited options in a 401k. If you roll that money into an IRA, now you've got a lot of different investment options

and we can diversify you a lot more. We're in a time right now where I'm seeing a lot of people that are very worried. They're 62, 63 years old, and they've lost 25% of their 5% of their, 401k or 403B money, they're down right when they're getting ready to retire. And this is scary now. This is not 5 or 10 percent normal market moves up. This is 25, sometimes even as high as 28%. Now we've got to talk to them about asset allocations.

You've got all your eggs in one basket. We need to split this apart and we start showing people how we can diversify. And not all of the money we tell them needs to go in the market. today we have insurance products that have no risk and no fees. So we look at insurance products. We look at barrier ETFs or structured notes or even these indexed annuities. There's a lot of investments today that don't, they have principal protection. So what we try to do is say, look, let's as you mentioned before.

We're trying to get your money to last for 25 years. If you come in with $500,000 in retirement, nest egg, we're going to set up a couple of buckets and you're going to live on these buckets for maybe 10 years. And then after 10 years, we're going to start drawn on these buckets to try to make this money last. And we spend a lot of time talking about how are we going to invest these different buckets. Some of them, we want to have them out of the market. We don't want all your money in insurance products. We don't want all your money in the stock market. But there is no Swiss Army knife today. People want the one investment that does everything. Give them protection, doesn't have any

fees, and I want to make all the gains when the market's up. It doesn't happen that way, but you can accomplish that by splitting your money into several buckets, and then we show people how we can accomplish that. Yep, that makes sense. Well, Tim, I tell you, it's been a pleasure talking with you, and I know that that just raises a lot of questions in people's mind to go, wow, I need to make sure of my security decisions on the front end so that all of the other things fall into place. So if someone is interested in learning more and reaching out and connecting with you, what's the best way that they can do that? Well, I always tell them that my website, my company is called Mana Financial Group.

It's Mana, M-A-N-A-F-G.com. ManaF-G.com is my website. And my email and my cell phone and all that information is right on my website. that's the best way to contact me. And I'm licensed in 40 states. So I'm working all across the U.S. So even if you're here in this and you're not in Illinois, which is where I'm from,

I'm in the Chicagoland area, but I work all across the country. Excellent. Well, Tim, thank you so much for coming on and teaching us some of these topics. I really appreciate your time. Thanks, Mike. Talk to you soon.

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