Should I Collect Social Security Early? - Jill on Money with Jill Schlesinger

Summary

Podcast Summary: "Should I Collect Social Security Early?"

Podcast Information:

Title: Jill on Money with Jill Schlesinger
Host/Author: Audacy
Description: Host Jill Schlesinger, CFP®, addresses sometimes uncomfortable and controversial money and investing issues without the financial jargon. Each week, Jill takes listener calls and interviews informative guests to uncover surprising insights and provide actionable information to help you make the most of your money.
Episode: Should I Collect Social Security Early?
Release Date: June 24, 2025

Introduction

In this episode titled "Should I Collect Social Security Early?", Jill Schlesinger and her co-host Mark delve into a variety of financial questions from listeners. While the primary focus is on the optimal timing for claiming Social Security benefits, the discussion spans several related financial topics, providing comprehensive advice to their audience.

Listener Questions and Discussions

1. Home Ownership vs. Renting

Listener: Dan (04:15)

Dan's Perspective: Dan, a long-time homeowner in Connecticut, questions the financial benefits of owning a home versus renting. After 36 years, he wonders if renting and investing the funds elsewhere would have been more advantageous, especially given the recent 45% spike in real estate values over the past five years.

Jill's Response: Jill agrees with Dan's sentiment, highlighting two key calculations:
- Rent vs. Ownership Costs: Comparing the total expenses of owning versus renting over the same period.
- Investment Opportunity Cost: Evaluating what returns could have been generated if the money invested in the home was instead placed in a diversified portfolio.
Notable Quote:

“I do not think you should be able to deduct home mortgage interest on your taxes. I just don't.” – Jill Schlesinger (06:30)

Jill also criticizes the tax code's bias towards home ownership, advocating for a more level playing field between renters and homeowners.
Listener: Jerry (08:10)

Jerry's Scenario: Jerry inquires about a family member who, after being widowed, holds significant savings and is considering whether to buy a new home or continue renting. Given her high income from various savings and infrequent use of her current home due to her job as a flight attendant, Jill advises that renting is more sensible.

Notable Quote:

“Renting is a no brainer. I think what we would really look at in her case would be, hey, if she's happy and she's got cash flow and the rent is reasonable, which it sounds like it is. Stay where you are.” – Jill Schlesinger (09:50)

2. High Yield Dividends and Reinvestment

Listener: Rich (11:00)

Rich's Inquiry: Rich asks about investing in a mortgage REIT that offers a 15% dividend yield. He is contemplating whether to reinvest the dividends or withdraw them, considering the volatility of the REIT's share price.

Jill's Advice: Jill advises against daily monitoring of such investments. She recommends reinvesting the dividends to facilitate growth but warns about the tax implications of potential short-term capital gains if the shares are sold.

Notable Quote:

“Unless this is held in a retirement account, stop messing around with this. Just let it be. Make it part of your portfolio and that's it.” – Jill Schlesinger (13:20)

3. Should I Collect Social Security Early?

Listener: Gary (14:00)

Gary's Concern: Gary, aged 68, is contemplating whether to collect Social Security now or wait until 70, fearing potential shortfalls and means testing by the Social Security Administration.

Jill's Response: Jill reassures Gary that waiting an additional two years should not pose significant risks regarding impending changes to Social Security. She suggests that delaying benefits until 70 will likely result in higher monthly payments without immediate threats to the system's integrity.

Notable Quote:

“If it's two more years, I wouldn't worry about that because I don't think they're going to be any changes to Social Security in two years.” – Jill Schlesinger (15:10)

4. Emergency Funds and Investment Growth

Listener: Michael (16:00)

Michael's Situation: Michael and his wife have established an emergency fund of $70,000 in a Schwab investor account but are unsure how to make the money work better while keeping it liquid.

Jill's Recommendations:
- Swapping to Higher-Yield Accounts: Move funds from the standard brokerage account to Schwab's money market funds, which offer better yields (e.g., 4.12% on the Schwab Prime Advantage money fund).
- Building a Bond Ladder: Diversify with CDs of varying maturities to optimize interest earnings while maintaining liquidity.
Notable Quote:

“If you put one and a half percent of your total assets into this one mortgage REIT holding... I just can't believe it. This is such a scam for these funds.” – Jill Schlesinger (12:45)

5. Paying into Social Security While Living Abroad

Listener: Grace's Friend (17:50)

Grace's Question: Grace inquires on behalf of her 45-year-old friend who has lived abroad most of his life and never paid into Social Security. She seeks advice on whether it makes sense for him to start contributing now.

Jill's Insight: Jill explains that eligibility for Social Security benefits requires earning income through employment covered by Social Security. If Grace's friend works for a U.S. firm or earns income tied to U.S. employment, he can contribute and eventually qualify for benefits. Otherwise, living and working solely abroad for a non-U.S. firm limits his ability to benefit from the system.

Notable Quote:

“If you can work for 10 years, accumulate 40 quarters of credits. Sure, why not?” – Jill Schlesinger (18:30)

6. Retirement Contributions vs. Cash Flow

Listener: Stephanie (19:10)

Stephanie's Dilemma: Stephanie, a stay-at-home parent, has an upcoming 12-month CD and is debating allocating funds between 529 plans for her children and taking a vacation. She seeks guidance on optimizing her retirement contributions against her current cash flow needs.

Jill's Guidance: Jill suggests assessing whether retirement accounts are being maximized. If retirement contributions are already optimized, she recommends using the CD proceeds to fund 529 plans and allocate a portion for discretionary spending like vacations, emphasizing a balanced approach without sacrificing children's future.

Notable Quote:

“Maybe you can do a little bit of everything. So get back in touch with us. We would be delighted to walk you through this.” – Jill Schlesinger (20:40)

Conclusion

In this episode, Jill Schlesinger provides nuanced advice on various financial decisions, emphasizing the importance of individualized strategies based on personal circumstances. While addressing the primary question about the optimal timing for claiming Social Security, she also offers insights into home ownership, investment strategies, emergency fund management, and retirement planning. Listeners are encouraged to reach out via jillonmoney.com for personalized advice.

Notable Closing Quote:

“Change your work, change your wealth, change your life.” – Jill Schlesinger (16:28)

Additional Resources:

Website: jillonmoney.com
Newsletter: Available on Substack by searching "Jill on Money"
Contact: Click the "Contact Us" button on the website to submit questions or join live on air.

This summary encapsulates the key discussions and insights from the "Should I Collect Social Security Early?" episode of "Jill on Money," providing valuable takeaways for both current listeners and those who haven't tuned in.

Transcript

Jill Schlesinger (0:00)

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Now you can get more when you start your business with Northwest Registered Agent, your entire business Identity in just 10 clicks and 10 minutes. Northwest registered agent provides more privacy, more guidance, and more freedom to run your business from anywhere. If you want to build your business while keeping your personal information secure, Northwest is the partner you need. In just 10 clicks and 10 minutes, they'll form your business, create a customer custom website and set up your local presence wherever you need it. Don't wait, protect your privacy, build your brand and set up your business in just 10 clicks in 10 minutes. Visit northwestregisteredagent.com Jill and start building something amazing. Get more with Northwest registered agent@northwestregisteredagent.com Jill welcome to the Jill on Money show. It's Tuesday, June 24th and we are here trying to help you make better, more considered financial decisions. If there is something going on in your life that even touches a dollar, then maybe you don't have to carry the burden of making a decision about that by yourself. Mark and I are both certified financial planners and we love hearing from you. So if you've got a question, just go to jillonmoney.com and click the Contact Us button that's in the upper right hand corner. Now when you're on the website, a couple of things to note. First of all, just bookmark it. You're coming back. The second thing to note is that across the top we have a whole bunch of different sections. You'll see podcasts, video, radio, blog, newsletter. Now when you see that newsletter, the coolest thing is when you click on that newsletter, it's going to take you to our substack. Now, if you're already on substack, and I am, I read a bunch of stuff from Substack. Some wonky stuff, some fun stuff. Jill on Money is now on substack. So many of you who are already newsletter subscribers are already there. It's kind of cool. And Mark moved everything over there, so I'm very happy about that. In fact, we just got a note from substack from Dan, and he writes, it probably makes me some sort of real estate heretic to say this, but I have long questioned the value in home ownership. Dan, I love this question already. Okay. Dan says, I've been in my house for 36 years, and I still say that if I had rented all this time and worked someplace part time for eight to 10 hours a week, you work on your house, I might be financially ahead at this point. Fortunately for us, after a decade of being relatively plateaued, real estate values have spiked in the last several years in Connecticut. So we may be able to get some cash out when we sell to retire. Your thoughts, Dan? I totally agree with you. You know, it used to be, you look at real estate over a long period of time, and I'm not talking about the last five years. Last five years have been insane with housing prices up, like essentially about 45% over five years. If you look at homeownership over your 36 years, I think there's two calculations to consider. One is, hey, what would your rent have been? Right? And also what would have happened to the money that you put into your home as a down payment, as maintenance, as your property taxes, all that stuff? What would have happened to that if it were in a, you know, 60, 40 or 70, 30 portfolio? Right. So that's, that's one thing. And then of course, you're absolutely right, which is the amount of work that you put in on your home is also like, that's the sweat equity. Would you have been better off somewhere else? So I don't think owning is for everybody. And I also think one of the greatest Uncle Sam giveaways in the entire tax code is this bias towards home ownership, which I think, frankly, Dan, if I'm a heretic, I'm going to say it out loud. I've said it before. I think it's ridiculous. I do not think you should be able to deduct home mortgage interest on your taxes. I just don't. And I don't think that you should get any sort of advantage over someone who is a renter just because that's the choice you've made. So I'm kind of with you. Heretics unite. Thanks for your note. Really appreciate it. Okay, next up, Jerry writes, I have a family member who lost her husband about five years ago. She lives in California. She did not want to lose the $250,000 in the tax advantage, so sold their house. She didn't like the neighborhood anyway, right at the two year anniversary mark of the death, she has approximately $3 million in various savings accounts. Lots of cash on hand, plenty of month to month income with approximately $7,000 a month in expenses. She is in high risk investments. At age 70, she's renting a nice home and she desperately wants to buy another home. But she's only in her home about 15 days a month because she's still a flight attendant. Wow, that's amazing. 15 days a month. She travels a lot for work and family, so she's rarely at home in the house. I'm not privy to the details of her investments, but I'd love your opinion about whether or not she should buy a home or. Or continue to rent. She has a lot of quote unquote things that require a big house with no intention of downsizing, would prefer to stay in southern California. What are your thoughts on the big picture? Buy or continue to rent. Thank you. Love your show, Jerry. This is so funny because this is just like the previous note from Dan, which is, I think in this situation, renting is a no brainer. I don't know why you would want to take over all this money that you have, 3 million bucks and plunk it into a house where you're only in that house half, half a month. Anyway, it makes no sense to me. So I think renting is great. I think that she may also want to even think about her riskiness when you say she's in high risk investments. Not sure that's the smartest thing either. So I think what we would really look at in her case would be, hey, if she's happy and she's got cash flow and the rent is reasonable, which it sounds like it is. Stay where you are, Jerry's friend. Do that. Okay, this is from Rich, who writes, I've got a question about high yield dividends and reinvestment. Hi, Jill and Mark. I have invested in a mortgage REIT that pays an attractive 15% dividend yield. Okay, guys, just one quick thing. When you're a reit, a real estate investment trust, they have to distribute a whole bunch of money to you that's kind of the rules of being a reit. It's pretty huge. It's paid monthly, not quarterly. And he says, I've put one and a half percent of my total assets into this one mortgage REIT holding. I watch it daily. That's a lot. Daily is a lot, man. And so far the share price has risen by 8%. I figure if it falls back and starts to go below my purchase price, I can decide to ride it out or sell. If I sell, then I will have gained the dividends. Until that point, I am now thinking about whether to do dividend reinvestment. Originally I thought of taking the dividend and either withdrawing it or adding it to our cash reserves or maybe using it to buy something else every month, even though the number of shares might be small each time. Do you have a perspective on reinvesting dividends while I watch the share price? To me it seems like a great way to keep accumulating and growing, but I'm not an expert in this area. Last thing, I'm only investing an amount of money that if it went to zero, wouldn't change my life drastically. Thanks as always. You know what I think? In this case, REITs move around and the dividend yield changes based on. It's not. You're not getting 15% all the time. You're getting 15% based on what the price was when you purchased it. I think if you're going to do it, why not reinvest the dividends and make it easy and stop looking at it daily? That's nutty. The one thing I will say is if you want it like the share price has risen by 8%, great. But if you sold it, you'd have to pay capital gains, short term capital gains on it. So I think unless this is held in a, in a retirement account, stop messing around with this. Just let it be. Make it part of your portfolio and that's it. Leave it alone. I don't understand people who look at stuff every day. Like, don't you have better things to do? Okay, Gary says, should I collect Social Security now even though I don't need it? Gary says, I'm 68. I was planning to wait until 70, but I am concerned about the shortfall, meaning Social Security Administration shortfall, and the potential for means testing specifically for people not yet receiving benefits. Okay, well, if it's two more years, I wouldn't worry about that because I don't think they're going to be any changes to Social Security in two years. So I think you can wait till 70 and you'll be fine. Because the changes that have to happen to Social Security are probably going to happen like in six years. And I'm not sure they're going to do means testing or not. But you get two year period, no sweat. The only changes to the tax code are the ones being contemplated in Congress right now. And there are no implications for Social Security that impact you. So, Gary, wait your two years. That's my two cents. Michael says I'm following advice that I hear about all the time, which is make sure you have an emergency fund with about six months of living expenses. That's good advice and I give it all the time myself. Okay, so Michael and his wife have done so. They've got $70,000. It's in a Schwab investor account. But not quite sure how to make the money work for us to keep it liquid. It is gaining minimal interest. I feel like we should be doing something smarter with it, but. But I also feel like we need to be able to access it when or if needed. Recommendation on the type of fund that will help make it grow, but also keep it liquid. Let's look up at that Schwab Investor Account Money market. Let me just look up Schwab Investor Account Money market yield. Let's see what you got. So at Schwab, if you're just like in sort of a plain old account, you might be getting trash in terms of your interest. Like it says here, uninvested cash in your Schwab brokerage account. This is how Schwab makes money from you, gang. Uninvested cash is paying 5 basis points. Got that? 0.05%. However, at Schwab, guess what they have. They've got Schwab money funds and you can earn somewhere between 2 and 4%. Let's see what they got here. I'm just looking here. You can buy the Schwab Prime Advantage money fund for 4.12%. So you can keep your money where it is getting basically zero or move it. And you have to do this. They're not doing it automatically for you. This is such a scam for these funds. I just can't even believe it. I do, but I mean, honestly. So silly. If you also are interested, you can buy CDs from Schwab. And this is by FDIC Banks. Let's say for you. You want to say, I want to keep some money liquid. You could maybe build a little bond ladder, right? So maybe you'll do like 18 months and you can Stagger it. Maybe do like a one year CD for 4.35%. Maybe a little in a nine month and a little bit money in a six month. And then it's locked in and you can re up. But you must proactively do something with this. Otherwise you are not going to earn any interest. Okay, Michael? So I hope that helps. All right, this next question is from Grace who writes. Hi Jill. I'm a big fan of your show. I am asking a question on behalf of my relative. I love this. This is the classic asking for a friend. Okay, so Grace's friend is a US citizen who lives abroad and has done so for most of his life. And so he's never paid into Social Security. So he's 45 years old. Does it make sense to pay into Social Security now? Appreciate any pros and cons and other thoughts. Thank you. Okay, well, Grace, first of all, he's got to have a job that would count. So I don't know if he's getting paid from a US firm or not. Let's just pretend Grace's friend lives in the uk Then you're getting paid by a UK firm. You can't even pay into Social Security. So you have to be working for a firm where there or get earning income where you claim some part of it where you can pay into Social Security. That's number one. But yeah, I mean if you're 45 and you can work for 10 years, accumulate 40 quarters of credits. Sure, why not? The downside is that you. You gotta pay. You know, you gotta pay your chunk of money into the system. But you know, I like Social Security. Even if it's gonna be smaller or different. I think that would make sense. But we'd have to know more about your friend. Stephanie says hi. Jill and Mark, I've listened to your show for quite a while. I made the leap to be a stay at home parent two years ago when my partner got a promotion. We're doing okay financially. I'd love some guidance on our retirement contributions in comparison to our cash flow. Before I started listening and learning about personal finance, I shoved all of our savings beyond our emergency reserve fund into a 12 month CD. Okay. It's coming due at the end of the month and we are debating how much to tuck into 529s for our two kids and if we can take a nice Hawaiian vacation for our 15 year anniversary. Please know I'm so grateful for your show and that you've helped me know that there are better things I can do than Shove everything into a cd. You guys rock. I love listening to both of your shows. Oh, thank you, Stephanie. Because both shows mean she's also listening to Money Watch. Okay, so Stephanie, now that you know you've got your emergency reserve and now you've got this extra money, my next question would be, are you putting money into retirement? Because maybe you could use that 12 month CD and the proceeds from that to fund say, a spousal Roth IRA for you. Again, I don't know what other stuff you're doing, but if you're looking to tuck money into a 529 and you're looking to blow the money on a Hawaiian vacation, I leave that to you. I don't know what else is going on, what your cash flow looks like, what your partner's income is. If you've got that emergency reserve and you don't have any consumer debt, are you maxing out your retirement accounts? If the answer is yes, you're doing that already, then maybe I would use that 12 month CD to help fund the 529s and maybe you can split the difference. I mean, look, if you are willing to forego your children's future for your vacation, I'm all in. Is that a mean way to look at it? But it's kind of the truth. So it's not like just you have one or the other. Maybe you can do a little bit of everything. So get back in touch with us. We would be delighted to walk you through this. Okay, so that is it. That is the program. And if you've got a question yourself, then all you need to do is go to jillonmoney.com, click the contact us button button and write us a note. If you'd like to join us live on the air, just check the box. Mark will do everything else. Don't forget, as I said, we've changed our newsletter around a little bit. So if you go to scroll right at the top and it says newsletter at the top, the podcast, video radio, blog newsletter. Click on newsletter. It will take you to Substack and you can subscribe. If you're on Substack already, just search for Jill on Money. Okay, excellent. Great. Thank you much. So, so much. It's been lovely to chat with you today. You can subscribe to this program on the Odyssey app or wherever you find your favorite podcasts. Please leave us a rating and review. Wherever you listen and lift someone up. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.