Social Security: When is the right time to start your benefits? Securities offered through LPL Financial Member FINRA/SIPC

Please Note All comments in this presentation regarding Social Security benefits are general in nature and for informational purposes only. Your specific benefit amount will depend on personal factors such as your employment history, marital history, health status, and age at which you begin benefits. You should discuss your benefit options with a representative of the Social Security Administration before making any final decisions. You should discuss matters of benefit taxation with your tax advisor.

When can you start benefits? Any time between Age 62 and 70 More than 50% of retirees begin collecting benefits at Age 62. Only 5% or so wait until after age 66. Your base benefit amount assumes you start at your Full Retirement Age (FRA). If you were born between 1943-1954, your FRA is Age 66

Why does it matter when you start your benefits? The later you start, the higher your monthly benefit will be. If you’re still working, your benefits may be reduced. If you have other income sources, your benefits may be taxable. Worried about outliving your retirement assets? Social Security benefits provide an inflation-adjusted income stream for the rest of your life.

How much does starting age impact your benefits? Reduced by 5%-7% per year before Full Retirement Age (FRA) Increased by 8% per year after FRA Source: Social Security Administration

Why do most people start benefits so early? Need the income for current expenses Want to “get out what they paid in” Worried about changes to Social Security Actuarial equivalence Example: Starting at age 62 with $750/month vs. Age 70 with $1,320/month  You will be 81 years old by the time the higher payments catch up to the earlier payments

If you’re still working… If you are still working and are not yet FRA for the entire year, your benefits will be reduced by $1 every $2 you earn above the annual limit. For 2011, that limit is $14,160. In the year you reach FRA, your benefits will be reduced $1 for every $3 you earn in the months prior to reaching FRA that are above a different limit ($37,680 for 2011). Once you reach FRA, there are no limitations on earnings. These reduced benefits are not lost forever! Your monthly benefit will be recalculated to a higher amount based on the reductions from prior years.

If you have income other than Social Security Benefits… As much as 85% of your benefits may be taxable. Combined Income (C.I.) = Half of S.S. benefits + Adjusted Gross Income + Non-taxable interest If you are married filing jointly, none of your benefits are taxable if your C.I. is less than $32,000. For every dollar over that, $0.50 of your benefits becomes taxable. At $44,000 and above, every dollar causes $0.85 of your benefits to become taxable. The C.I. levels for Single filers are $25,000 and $34,000 This can lead to an unpleasant tax surprise! What options can you consider to reduce taxes on benefits? It comes down to timing. Delay taking benefits until you stop working. Delay taking benefits and take distributions from tax-deferred retirement accounts or convert these assets to Roth accounts Lumping certain income items in one year instead of over multiple years

Spousal Benefits If you are/were married, you may qualify for benefits on your spouse’s employment record Spouse – You can receive one-half of your spouse’s benefit if your own benefit would be less, even if you don’t qualify for benefits on your own If you receive spousal benefits before your FRA, your benefit will be reduced for each month you collect early. However, you do not receive any increase in benefits for delaying payment after FRA. Thus, it makes sense to begin collecting benefits no later than FRA. Widow/widower – You can receive the full benefit of your deceased spouse at your FRA, or begin reduced benefits as early as age 60 If the spouse with the shorter life expectancy (usually but not always the husband) has a much higher benefit, it might make sense to have the lower benefit spouse start benefits earlier and have the higher benefit spouse delay. This allows the surviving spouse to collect a relatively high benefit. Divorced – If you were married more than 10 years and are not currently married, you can receive your ex-spouse’s benefit if it is higher than your own

Final Thoughts Too many retirees automatically collect benefits as early as possible. Think through how the various factors will impact your net benefit amount. Despite the potential for legislative changes, a high level of Social Security Benefits are one of the best ways to protect against longevity risk. Still confused? Modus Advisors is here to help you!

Securities offered through LPL Financial Member FINRA/SIPC Want to find out more on how to integrate your Social Security Benefits with investments and other income sources? Contact us today. 952-946-1000 Toll-free 877-946-1012 www.modusadvisors.com Securities offered through LPL Financial Member FINRA/SIPC