How to Win Clients by talking about Social Security optimization Nov 2016

Agenda Why have discussions around Social Security? How to use RightCapital to illustrate Social Security decisions Illustrating the impact of Social Security decisions to prospects / clients

Reasons to discuss Social Security with prospects Advisors risk losing clients if they fail to include Social Security in their clients’ financial plans. Many clients are uninformed about Social Security; they need professional advice. Many clients take Social Security earlier than they should – 48% of men and 42% of women take benefits at age 62* Even after recent rule changes, Social Security discussions are still relevant * according to data from the Center for Retirement Research at Boston College.

Quick Review of Social Security Benefit Basics Retirement Spousal Survivor Eligibility Age 62 60 Full Retirement Age 65 to 67 Same as Retirement 66 Primary Insurance Amount PIA 50% of spouse’s PIA Max (82.5% of deceased PIA, monthly retirement income) Early Withdrawal penalty 5.0% to 6.7% per year 4% to 6% per year Delayed Retirement Credit 7.5% to 8% per year None

Client Facing Slides

What you need to know about Social Security Benefits Retirement benefit, Spousal benefit and Survival benefit Primary Insurance Amount (PIA) Early start penalty Delayed Retirement Credit Cost of Living Adjustment (COLA)

3 questions on when to begin Social Security How much income do you need in retirement? How long will you live? Because you can’t be sure how long you’ll live, what makes you feel more secure; a smaller benefit sooner or a bigger benefit later? #1 - Planners often say you need between 70-85% of your pre-retirement income to maintain your standard of living when your working days are over Use calculators and or software to help you understand your needs….by the way if you start a budgeting disclipine early on this makes it a whole lot easier when the time comes to figuring it out. #2 Most people claim benefits within the first few years of elidgbility – but in doing so they lock in a smaller monthyly payment for the rest of their lives. Claiming early also may lock in a smaller monthly payment for your spouse, if you die. What is the upside of waiting? #3 Married couples may have options that singles don’t. A breadwinner can file for benefits but suspend claiming them allowing the spouse to claim a spousal benefit while the breadwinner’s unclaimed benefit grows significantly. #4 - It’s a mystery for most people but you may have clues – how’s your health, what’s your family health history – check out on line longevity calculators such as livingto100.com and bluezones.com. #5 – if you wait to claim and die early, you end up with less in total than if you claim sooner – conversely if you claim early and live longer (generally into your 80s) you end up with less in total than if you claimed later #6 – a surviving spouse who

Case Study - Meet the Bradys Mike and Amanda: married Current ages: 56/54 Life expectancy: 90/90 Salary: $200,000/ $100,000 Social Security: ? Monthly expenses in retirement : $10,000 Invested assets: $ 1.5mm qualified $ 100k non-qualified

What are the Bradys’ options? – three simple strategies tested Take as early as possible at age 62 Start receiving benefits as early as possible, incurring early start penalties Wait until Full Retirement Age No penalty nor delay credit Wait until age 70 Delay as long as possible to maximize the delay credit

How big is the difference? Total benefit Difference Take as early as possible at age 62 $2,384,201 Wait until Full Retirement Age $2,718,649 +$334,448 Wait until age 70 $3,051,951 +$667,750 Assumes life expectancy of age 90 for both Bradys and 2.5% annual Social Security COLA.

Comparison between “wait to 70” and “Start early” “Wait to age 70” results in much higher payment in later years $667,750 total savings with a life expectancy of 90 years “Start early” results in more payments in earlier years

Life expectancy is an important variable to consider Delay strategy generates more payments if living longer than 79 Early strategy generates more overall payments before age 79 Two strategies cross over at age 79. If client expects to live longer than age 79, then the delay strategy generates more payments. Otherwise, the earlier strategy generates more payments.

Use a holistic approach when determining social security strategy If you delay social security, how do you fund retirement expenses before age 70? Take into account any spousal benefit and survivor benefit Take into account other income and financial goals. Define your optimal strategy by consulting a financial advisor

Appendix - Social Security Information

RETIREMENT BENEFIT BASICS Eligibility age 62 Normal retirement age 67 for 1960+; 65 for 1937 and earlier Preliminary benefit amount PIA, Full Retirement Benefit Early withdrawal penalty 5.0% to 6.7% per year Delay credit 8.00% per year for DOB after1943, 7.5% per year for DOB between1941 and 1943 ……… Delay credit is up to age 70

SPOUSAL BENEFIT BASICS Eligibility age 62 Normal retirement age Same as retirement benefit Preliminary benefit amount 50% of spouse’s PIA Early withdrawal penalty 5.0% to 8% per year (35% max) Delay credit none Government pension offset As much as 67% reduction of spousal benefit Windfall elimination Reduced benefit if you work for an employer who does not withhold Social Security taxes from your salary such as a government agency

SURVIVOR BENEFIT BASICS Eligibility age 60 Normal retirement age 66 Preliminary benefit amount Max( 82.5% * deceased spouse PIA, his monthly retirement benefit) Early withdrawal penalty 4% to 6% per year (28.5% max) Delay credit none