Joe Cowling, Managing Director of Partnerships

Agenda Social Security Basics Social Security benefit Primary Insurance Amount Social Security benefit Retirement benefit Spousal benefit Survival benefit Child benefit Other social security components Annual earning test Family Max adjustment Government Pension Offset Windfall Elimination Case study

SOCIAL SECURITY BASICS

Primary Insurance Amount Indexed earning Historical earning adjusted by inflation index Maximum earning $127,200 for 2017 AIME (Averaged Indexed Monthly Earning) 35 highest earning year up to age 60 Bend Point Three bend points applying on AIME: 90% of first $885 32% of $885 to $5,336 15% of $,5336 + PIA is an monthly amount Inflation adjustment on PIA Annual inflation adjustment to increase PIA Automatic PIA recomputation Work after age 60 may increase PIA

Understand Social Security Log Onto Social Security Website L40 credits be eligible for retirement benefit. Earn max of 4 credit per year Minimum 40 Credits 35 highest earning year up to age 60 Review Historical Earnings Get an estimated PIA from SSA

SOCIAL SECURITY BENEFIT TYPES

Review a few important benefit types Retirement Benefit Spousal Benefit Survivor Benefit Child Benefit

RETIREMENT BENEFIT BASICS Eligibility Age 62 Normal Retirement Age 67 for 1960+; 65 for 1937 and earlier 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 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 Benefit Amount Max (82.5% deceased spouse PIA, his/her monthly retirement benefit) Early Withdrawal Penalty 4% to 6% per year (28.5% max) Delay Credit None

CHILD BENEFIT BASICS Eligibility Age Child age under 18 and you are receiving retirement benefit Child age under 18 and you are receiving survival benefit Benefit Amount 50% of your PIA 75% of deceased person’s PIA

Summary of Social Security Benefit Basics Retirement Spousal Survivor Eligibility Age 62 60 Full Retirement Age 65 to 67 Same as Retirement 66 Benefit amount 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

OTHER SOCIAL SECURITY COMPONENTS

Windfall Elimination and Government Pension Offset Trigger You work for an employer who doesn’t withhold Social Security taxes from your salary, such as a government agency You receive a pension from a government job in which you did not pay Social Security taxes Benefit Impact 65 to 67 Spousal Benefit Reduction Amount Primary Insurance Amount (PIA) 2/3 of pension amount

Benefits Withheld Amount Annual Earning Test Social Security withholds benefits if your earnings exceed a certain level if you are under NRA. Exemption Amount A lower amount in years before the year you attain NRA $16,920 for 2017 A higher amount in the year you attain NRA —  $44,880 for 2017) Benefits Withheld Amount Withhold $1 for every $2 of earnings in excess of the lower exempt amount. Withhold $1 in benefits for every $3 of earnings in excess of the higher exempt amount

CASE STUDY

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?

Meet the Bradys Mike and Amanda — married Current Ages — 56/54 Life Expectancy — 90/90 Salary — $200K/$100K Social Security — ?? Monthly Expenses in Retirement — $10K Invested Assets — $1.5MM qualified $100K non-qualified

What are the Bradys’ options? Take As Early As Possible At Age 62. Start receiving benefits as early as possible, incurring early start penalties 62 Wait until Full Retirement Age No penalty nor delay credit 67 Wait Until Age 70 Delay as long as possible to maximize the delay credit 70 What are the Bradys’ options? – three simple strategies tested

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 “Start early” results in more payments in earlier years $667,750 total savings with a life expectancy of 90 years

Take-Aways Social Security planning represents great opportunity to deliver more value to clients and prospects Understand the type of benefit and various adjustment items is the important first step. RightCapital’s social security optimization helps advisors to do planning efficiently.