A Social Security Jedi Master
KRIS FLAMMANG
I see you are a recovering engineer. What field of engineering were you in?
MARTHA SHEDDEN
I was in civil engineering for 32 years.
KRIS FLAMMANG
Does that mean you worked for a government or a municipality?
MARTHA SHEDDEN
I worked for county government in the public works department, but I also worked for private firms for a number of years.
KRIS FLAMMANG
Which one was better?
MARTHA SHEDDEN
They both have their benefits. Working for a private firm is feast or famine, you have deadlines or you don't have enough work. Working for the government, you're doing such good with these public projects, but you're also dealing with bureaucracy.
KRIS FLAMMANG
That was a very diplomatic answer. Take me through what led to a career switch to finances, and opening your own business.
MARTHA SHEDDEN
I love telling this story. In 2011, I was introduced to the topic of Social Security by a local financial advisor I know, and I started reading books. Within one week I was just shocked at what I didn't know and didn’t understand, and I did not like that. I became passionate about learning about Social Security and telling all my friends and family.
Then, I saw the need for all soon-to-be retirees to have a really personalized analysis of their situation. I didn't think it should only be available to those who have financial planners or have the resources to have someone help them, so I became a CRPC. When I heard about the opportunity to teach a course for online provider Wolters Kluwer, I did that, which got me started creating courses, and obviously you have to know the stuff if you're teaching it. Then in 2015, I thought, “I'm just going to make a business card and start my own business.” I spread the word locally, but what was crazy was that people across the nation would find me.
It's very doable virtually and it's just so satisfying. It meets my engineering desire, my love of working with numbers, of solving problems, and it’s also rewarding to help people with this really large financial decision, where they can lose a lot of money if they don't understand their situation.
KRIS FLAMMANG
You're satisfying the left brain, that's the critical thinking, and the satisfaction part is the right brain, that's the art in it. If you could go back in time to when you first started your venture and give yourself advice, what do you think it would be?
MARTHA SHEDDEN
I would say it’s going to be a wild ride, you’re very fortunate, stick with it and keep going forward.
KRIS FLAMMANG
What do you like best about what you do right now? Is it working with the people?
MARTHA SHEDDEN
I love hearing their stories. I love meeting new people. People who reach out to me are afraid, they're emotional. They're reaching retirement and they don't want to have to make these hard decisions. They don't understand it. It's very satisfying to help them, and to show them, and they're just so grateful. It's a simple thing. I set up my business just charging a fee for singles and couples, so it's a one-time thing, but it's very transferable to financial and tax professionals who want to offer that within whatever fee structure context they have, and that's what we've done with the National Association of Registered Social Security Analysts. That was the next step after I started my own business. I just get such a satisfaction from it and I feel so fortunate that I find myself here at my age, I'm right in the middle of the baby boomers, with this wonderful thing to keep me busy. I'm just very lucky.
KRIS FLAMMANG
When you can help other people, that's a constant satisfaction thing, so who would get tired of that? What do you think the biggest misconception is that people have about Social Security in general, and then the claiming strategies or the claiming decision?
MARTHA SHEDDEN
With Social Security in general, I believe people do not realize how much money is at stake. They don't understand that monthly amount on their statement, what that means over 30 years. And as far as individual claiming decisions, they don't understand even the simplest decision can involve a number of different rules and different decisions about that. Just waiting to claim from 62 to 70, it goes up every month you wait. People are not educated or informed about that, but they want to be. They want to learn. It's a very personalized decision, and it's not necessarily about maximizing the lifetime amount, which all the calculators do, it's making that optimal decision within the context of their own financial situation.
KRIS FLAMMANG
What do you consider to be some of the main factors that go into the Social Security claiming decision? Are there some things that always need to be considered?
MARTHA SHEDDEN
First is your working situation. How long are you planning to work? Because retiring from work does not necessarily mean collecting retirement benefits from Social Security. People may not realize that if they collect early and continue working or go back to work, they're going to be subject to the earnings test until they reach full retirement age. There are many people who are eligible to collect a non-covered pension, meaning they worked as a government or school employee for years, but they also have work covered by Social Security, so that's going to affect their Social Security and the statement doesn't show that. That's a big issue.
I'm very passionate about women and their Social Security decision because whether we’re single, married, divorced, or widowed, we still traditionally have lower lifetime earnings. Often married women outlive their husband because he’s older and women have a longer life expectancy. Survivor benefits are complicated. The benefit is you can start at earlier at 60, but you can also start and then switch to your own retirement benefits. Those are just a few of the things to consider.
KRIS FLAMMANG
You have a number of frequently asked questions on your website. I encourage everyone to go there to read the answers in full, but I’d also like to do some of them rapid fire and get some quick answers from you. Let’s begin with when is the best time to collect? It’s different for everyone, but how do you answer that question?
MARTHA SHEDDEN
The best time to collect is based on their health, their maximum age of life, their work history, their relationship status, whether they're married, single, divorced or widowed, and what other financial resources they have that would enable them to wait as long as possible, because by waiting, you’re always going to increase your benefit.
KRIS FLAMMANG
A lot of people don’t know that once they’re eligible, their benefit goes up every month they wait, till age 70. What’s the earliest someone can start?
MARTHA SHEDDEN
The earliest you're eligible for retirement and spousal benefits is 62. Just to add on to that last question, spousal benefits do not increase if you wait to collect them after your full retirement age and neither do survivor benefits, just your own retirement benefit. So, the earliest is 62, and there’s no sense waiting past 70 because it doesn’t keep going up after that. The earliest someone can collect survivor benefits is age 60.
KRIS FLAMMANG
What is the difference between the maximum benefit and the full retirement age amount? They’re not the same thing and that can confuse people.
MARTHA SHEDDEN
Social Security considers the benefit you get at your full retirement age as 100%, your full benefit. The maximum you would collect for retirement is at age 70. Our full retirement age is based purely on the year and month we were born, and it's pretty simple. Everyone born through 1954 had a full retirement age of 66. For those born in 1955 through '59, it goes up 2 months every year of birth, and for those born in 1960 and after, it is 67. Your benefits decrease if you collect before your full retirement age, and increase if you wait, so your maximum benefit could be three to four years later. Since it goes up 8% a year, your maximum benefit could be as much as 32% more than your full retirement. That’s a big increase.
KRIS FLAMMANG
That's important for people to know. Let's unlock the big mystery here. Let's open up the Social Security calculator. How is someone's benefit calculated? People ask me what years it’s based on, or if taking a part-time job will screw up their benefit because they’re making less money.
MARTHA SHEDDEN
Well, they make it as complicated as possible. They take your top 35 years, the top 35 of adjusted indexed earnings. When we look at our statement of earnings, we can't tell which are the top 35, because all your earnings from 59 and lower are adjusted for inflation, so money you made when you were 20 or 30 would be quite a bit higher compared to your age 59 average wage index. It's just a simple ratio and it's all done automatically. If you don't have 35 years of earnings, some zeroes are going to be included in there. For every year you work and you add on to those credits that you get every year, you can increase your benefit. Even if you’re still working while you’re already collecting, you can keep having your benefit go up.
KRIS FLAMMANG
How long does someone have to work to get it?
MARTHA SHEDDEN
It's pretty straightforward. You basically need 10 years, but it's counted in what are known as credits or quarters of coverage. That term comes from way back when people were paid based on their quarterly earnings. You can only earn four quarters per year, so you need 40 quarters, which is 10 years. But if that's all you worked, of course, you'd have 25 years of zeroes.
KRIS FLAMMANG
Which would drastically reduce what you would get.
MARTHA SHEDDEN
Also, a quarter is not a time period, it's a dollar amount. The current number is about $1,500. It goes up every year. Once you've earned four times that amount, you have your four credits for the year.
KRIS FLAMMANG
It's not having to work in four quarters of the year, it's the earnings over that time. You mentioned spousal benefits earlier. Clarify what that is.
MARTHA SHEDDEN
The spousal benefit is really important for married and divorced people to understand. It is a benefit that a spouse can collect based on the other spouse's earnings record. A simple example is a person who hasn’t worked, such as a stay-at-home mom. Say the husband has significant earnings, and his amount at his full retirement age is $2,600 a month. Once he starts collecting retirement benefits, the wife would be eligible to file for spousal benefits. If she waited to collect until her full retirement age, she would receive 50% of those, which is $1,300.
KRIS FLAMMANG
What about couples who divorce? Can someone collect on their ex-spouse’s benefits?
MARTHA SHEDDEN
It's very possible. There are three simple requirements. First of all, you had to have been married at least 10 years. You have to be 62, and you have to be single, not remarried. If you’ve been divorced over two years, which basically covers most people I've ever worked with, you're considered independently entitled. So, unlike married people, your ex-spouse does not have to be collecting their retirement benefit. You can collect an ex-spousal benefit and the amount is based on the age at which you collect, and of course, your ex-spouse’s amount.
KRIS FLAMMANG
That's an interesting caveat. Let's talk about something I run into a lot with clients. You do the analysis and show them how much they would benefit from waiting to collect, and they say, “I see what you’re saying, but I’m going to go ahead and start at 62 anyway.” How do you get them to see it in a different way?
MARTHA SHEDDEN
There are a couple things that go with that. It depends if it's a single person or a married couple. It depends on their health and their ability to work. For many people, collecting is the best solution, but they should be well informed about what they're missing out on, what's at stake and make sure that that's the best decision. Just claiming at 62 because you've heard in the media that Social Security's bankrupt, that they’re not going to pay full benefits, is not a good reason. It depends on your life expectancy.
The hardest thing for me is working with couples where I know from their earnings history and their details that if the husband goes ahead with his intent to start collecting at 62, it could do a huge disservice to the wife. Because if he passes away first, survivor benefits are going to be huge for her, and they should do everything possible to maximize his benefit as the higher earner.
KRIS FLAMMANG
I run into that, too. Sometimes even knowing that the survivor benefit will be a higher amount isn’t enough of a motivator. I often think about how people just want everything right now, and we’re all about instant gratification.
MARTHA SHEDDEN
That's why at NARSSA, our analysts are trained. We go through the software analyses and it's not just one analysis, we look at multiple options, different claiming ages, and present it in a user-friendly table format that shows you the difference in money, both lifetime and especially annually and monthly. We do the best we can to convince them of their best option.
KRIS FLAMMANG
You had a lot of informative answers to common questions. Let’s shift gears now. What would you say is your biggest life accomplishment so far?
MARTHA SHEDDEN
I'd have to say my two children, first of all. That's certainly my biggest personal accomplishment. As for professionally, l think I’m actually in the middle of it right now. After I began teaching online courses, I was contacted by Michael Rosedale, and he and I formed the National Association of Registered Social Security Analysts in 2017. We launched that program in 2018 and it is really taking off. It's so exciting for me to spread the word that all pre-retirees should be looking for someone with this designation to help them, whether that is their financial advisor or someone like me. I want everyone to get help, to be informed about their decision. It's an awesome opportunity for any financial or tax professional to go through our program and learn to do that. It’s such a necessity for retirees, and I see our company growing, and it's super exciting.
KRIS FLAMMANG
That's fantastic. Outside of business, tell me something that you're really passionate about personally.
MARTHA SHEDDEN
I am passionate about a lot of things. I love to travel, I'm active, I like to hike and ski and do things with my son and his girlfriend. I love to read and garden. I like to go to Hawaii and go to national parks. My husband and I bought an Airstream last year and we use every opportunity we can to go off in our trailer with our dog. I could keep myself busy easily if I wasn't working.
KRIS FLAMMANG
You’ve provided a lot of facts. Now I’m going to ask for your opinion on a couple things. First, the deficit. You talked earlier about people taking Social Security early because they think it’s going to run out of money. So, how do we fix the Social Security deficit? It keeps getting kicked down the road. No one wants to make the hard decision now to try to shore it up. What’s your opinion on what the fix is?
MARTHA SHEDDEN
I'm actually pretty encouraged right now because there are a couple bills. One of them, which was first introduced years ago was just reintroduced a few weeks ago. I like most of what’s in the bill, but I don’t think it strengthens it enough. The one strengthening strategy is that maximum taxable earnings, which only cover our earnings up to about $140,000 this year, would start again at $400,000. I think that donut hole should be closed. I think just like for Medicare, all income should be covered and taxed. The bill also includes some other changes, like doing away with the non-covered pension deals rules, which I support. Knowing the history of the program, which is one of the first things we teach people in our course, you see how it has evolved and the impact of the 1983 bipartisan budget act changes. That was phenomenal. They extended the longevity of the program for 40-plus years.
It's all possible. There's a huge support for Social Security across all ages, all political beliefs. I would think that the politicians that pass this would want to celebrate that they were the ones that got this done. If I was in their shoes, I would be working like crazy to get it secured because it's unnerving for people. Even though it's always going to be there because people who are working are going to be paying into it, that can’t cover all the retirees, because there aren’t enough workers per retiree at this time.
KRIS FLAMMANG
There used to be four people paying in and one receiving, now there are two paying in and one getting it, and that’s what they’re concerned about. Let's pretend it doesn't get fixed. They can’t come to an agreement and they keep kicking the can down the road. If they reach crisis stage, what would they do? Would they push back the eligibility age? Would they reduce benefits? What would they change?
MARTHA SHEDDEN
They would reduce benefits. As of now, the year that is predicted to happen is 2033. It used to be 2035, then '34, and now it's '33. I think at that time they would be able to pay between 75% and 80% of benefits, so everyone across the board would get cut if nothing was done, and I can't see that happening.
KRIS FLAMMANG
Yes, let’s hope not. When I ask my clients if they know what they’re going to get for Social Security, they tell me, “I used to get statements in the mail every year but they just stopped. I know I have to go online, but are they ever going to start sending me the paper ones again?” So, do they send paper ones now? At what age do they start doing that? And why did they change?
MARTHA SHEDDEN
That's such a good question, I'm so glad you asked that. I still have some of my statements. But they're moving toward everything online, which is great. Everyone, whenever they start working, should set up a My Social Security account. It's very easy. And then they should check their earnings every year and make sure their record reflects their true earnings, because it's very hard to fix those down the road if they get messed up. Just within the last month, Social Security released the new statements, and they also will start sending statements to those 25 years and older who have not signed up for a My Social Security account. I think that's wonderful. I have a big passion about educating the younger generation, because Social Security is going to be really important for them. There won’t be any defined benefit pension plans, so I want them to be aware. Also, it's an intergenerational program, it doesn't just affect old people. It’s the disabled, it's minor children. By sending the statements out to someone who hasn't signed up, maybe they'll become more aware.
KRIS FLAMMANG
You talked earlier about the most exciting part of your business. What about the flip side of that? What do you see as your biggest challenge or obstacle?
MARTHA SHEDDEN
It’s that I can't help everyone. Through NARSSA and through my other business, I have the potential to do that by educating people to do what I have done and training them to help others. It's frustrating, I don't have the time. I'm busy creating content, and giving presentations. Another frustrating thing is the negative media coverage.
KRIS FLAMMANG
What do you mean by that?
MARTHA SHEDDEN
Negative doomsday type statements in the news, and clearly inaccurate reporting. They keep spreading all these myths and misunderstandings. That is very hard to deal with.
KRIS FLAMMANG
Thank you for clearing up so many misunderstandings and providing such valuable information about this very important topic.