Tammy Flanagan It’s called Social Security - Are You Counting On It?

June 22, 2016 Trustees Report ● 169 million people pay FICA Tax ● $920 billion = Total contributions ● 60 million beneficiaries ● $886 billion paid in benefits ● 18 years to avert a shortfall

Even if it doesn’t change… Higher Earnings Lower Social Security Replacement

The “Tilted” Nature of Social Security Retirement If you have average earnings, your Social Security retirement benefits will replace only about 40 percent. The percentage is lower for people in the upper income brackets and higher for people with low incomes. You'll need to supplement your benefits with a pension, savings or investments.

Possible changes for the future Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government 10,000 Americans turning 65 every day Adjust the COLA (currently CPI-W) Increase the tax rate (currently 6.2%) Increase the maximum taxable wages (currently $118,500) Modify the formula (currently averages 40% replacement) Increase the full retirement age (currently increasing to 67)

At your current earnings rate, if you continue working until... CSRS Retirees and others who receive a pension from work not covered by Social Security: ●Windfall Elimination Provision ●Government Pension Offset Your Social Security Statement

What is Your Retirement Timeline? Eligible for Social Security FERS Retirement Full Social Security Retirement Age Maximum Delayed Social Security Credits End Date

True or False: 1. I plan to continue to work past age I can afford to retire without Social Security benefits 3. There is longevity in my family 4. I am in good health 5. I’m good at solving math problems 6. I am married

Mostly true… or false? True False It might make sense to delay applying for Social Security past age 62. You may be a candidate for claiming Social Security when you stop working or at age 62, whichever is later.

Test Your Knowledge: The FERS supplement will continue until you apply for Social Security retirement benefits. A. True B. False

Test Your Knowledge: The FERS supplement will continue until you apply for Social Security retirement benefits. A. True B. False The supplement ends at age 62, regardless of when you decide to file for Social Security retirement. The supplement is also subject to an earnings test in the same manner as Social Security retirement.

Year of BirthFull Retirement AgeYear of BirthFull Retirement Age 1937 or earlier and 2 months and 2 months and 4 months and 4 months and 6 months and 6 months and 8 months and 8 months and 10 months and 10 months 1960 and later67 Age to Receive Full Social Security Benefits

Reduction for filing early Here's how it works if your full retirement age is 67: At age 62, monthly benefit is 70% 63 monthly benefit is 75% 64 monthly benefit is 80% 65 monthly benefit is 86.7% 66 monthly benefit is 93.3% 67 monthly benefit is 100%

Reduction for filing early Spousal benefits at age 67 are 50% of your spouse’s full benefit Age 62: 32.5% Age 63: 35% Age 64: 37.5% Age 65: 41.7% Age 66: 45.8% Age 67: 50 % (the maximum benefit amount)

Example: Higher of the two Your Full Benefit Amount at 67: $2,000 62: $1,400 63: $1,500 64: $1,600 65: $1,734 66: $1,866 67: $2,000 Spouse's Full Benefit Amount $2,800; spousal amount is: 62: $910 63: $980 64: $1,050 65: $1, : $1, : $1,400

Example: Higher of the two Spouse's Full Benefit Amount $2,800, your spousal amount is: 62: $910 63: $980 64: $1,050 65: $1, : $1, : $1,400 Your Full Benefit Amount at 67: $1,200 62: $840 63: $900 64: $960 65: $1,040 66: $1,119 67: $1,200

Claiming strategies Age 62? Age 70?

Example: Claim widow’s at 60 delay own to 70 Your Full Benefit Amount at 67: $2,000 Age 62: $1,400 Age 63: $1,500 Age 64: $1,600 Age 65: $1,734 Age 66: $1,866 Age 67: $2,000 Age 68: $2,160 Age 69: $2,320 Age 70: $2,480 Deceased Spouse's Full Benefit Amount $2,800; your widow’s amount is: Age 60: 71.5% $2,002 Age 62: 79.6% $2, Age 64: 87.8% $2, Age 66: 95.9% $2, Age 67: 100% $2,800

Pros and Cons Start Early Collect longer, but smaller benefit Possible larger widow’s benefit later If early widow, then switch to your benefit later Less from retirement savings Invest if not needed Delay Application Collect shorter, but larger benefit Avoid % early reduction Receive % increase at age 70 One spouse claim early and one delay

Pay me now, or pay me later? Start Age:Live to age: Age 62 ($1,305)$46,980$203,580$360,180$516,780 Age 66 ($1,740)$0$187,920$396,720$605,520 Age 70 ($2,300)$0$138,000$414,000$690,000

2016 Change in the law: If you were born before January 2, 1954 Reached full retirement age,full retirement age You can choose to receive only the current or divorced spouse’s benefit And delay receiving your retirement benefit until a later date. If your birthday is January 2, 1954 or later, the option to take only one benefit at full retirement age no longer exists. I f you file for one benefit, you will be effectively filing for all retirement or spousal benefits

Don’t forget the Earnings Limit! Earnings test to full retirement age ($15,720) – $1 reduction for $2 earned above limit At full retirement age, earnings test ends CSRS employees not affected by WEP or GPO Benefit continues to grow

Former Spouse: Living Marriage lasted 10 years+ (even if he or she has remarried) if: You are unmarried; You are age 62 or older; Your own benefit is less than the benefit you would receive based on your ex- spouse's work. Joe: $2,000 Joan: (Current Spouse) $1,000 (50% of Joe’s) Janice: (Former Spouse) $1,000 (50% of Joe’s)

Former Spouse: Deceased Marriage lasted 10 years+ (even if he or she has remarried) if: You are unmarried or remarried after age 60; You are age 60 or older; Your own benefit is less than the benefit you would receive based on your ex-spouse's work. Joe: Deceased Joan: (Current) $2,000 (100% of Joe’s) Janice: (Former) $2,000 (100% of Joe’s)

So, Are You Counting On Social Security?