1. Social Security Maximizing Benefits Under The “New Rules”
Welcome everyone, and thank you for coming. Today we are going to talk about Savvy Social Security Planning: what baby boomers need to know to maximize retirement income. When your parents retired, they probably didn't think too much about Social Security. They just went down to their local office as soon as they turned 65, or maybe 62 if they retired early, and applied for benefits. They took their benefits for granted and didn't ask very many questions. But baby boomers are approaching the Social Security question in a very different way.

2. What we do: Social security income maximization planning only
Not involved in sales of any financial products
Advisor certifications:
National Social Security Advisor (NSSA)
Certified in Social Security Claiming Strategies (CSSCS)
Working with clients/customers of CPA firms, Law Firms, Banks, Associations and Corporations

3. Ash Ahluwalia, MBA, CFP, NSSA, CSSCS President National Social Security Partners, LLC
2016 National Social Security Advisor (NSSA) of the Year Award
MBA, Wharton Business School
CA, Chartered Accountant
CFP, Certified Financial Planner
Certified in Social Security Claiming Strategies (CSSCS)
25+ years in the financial services industry
Partner, Atlas Advisory Group, LLC

4. Will You Receive Your Maximum Social Security Benefits?
Over 90% of recipients get less money than they are entitled to
There are over 2,700 rules governing social security
Married couples have over 567 filing options
Social security agents are prohibited from offering advice
Don’t lock yourself into a permanently lower benefit!
Social Security personnel are very helpful when it comes to estimating benefits and helping people claim all the benefits they are entitled to right now. But it is not their job to do long-range Social Security planning, because they don’t know what’s going on with the rest of your personal finances. We, however, can help you analyze claiming strategies, show you your Social Security income stream under different claiming scenarios, and help you take advantage of innovative strategies designed to maximize your benefits.

5. Baby boomers want to know:
Will Social Security be there for me?
How much can I expect to receive?
When should I apply for Social Security?
How can I maximize my benefits?
Baby boomers want to know: Will Social Security be there for you? You've been told for years that the system is "going broke." But now that it's almost your turn to collect, is that really true?
You also want to know how much you can expect to receive. Before you can retire, you've got to know how you are going to support yourself. That means doing a budget, lining up all your income sources and knowing how much you can expect to receive from each. Social Security, because it is a relatively known quantity, represents the foundation of that plan.
You're also probably asking when you should apply for Social Security. You may have heard that if you apply early your benefit will be lower than if you apply later. But is it worth missing out on all those extra checks to have a higher benefit later on? We're going to shed some light on this important question today.
Something your parents probably never asked is how it is possible to maximize benefits. There is absolutely nothing wrong with using the Social Security rules to your advantage. Today we're going to talk about five ways you can maximize your Social Security benefits simply by knowing the rules and making smart decisions.
And finally, you're wondering if Social Security will be enough to live on in retirement. You probably already know the answer to this. Social Security represents about 40 percent of the average retiree's total income. But by coordinating Social Security with the rest of your retirement income plan, you can pursue the universal dream of a comfortable, worry-free retirement.

6. Social Security offers annual inflation adjustments
If monthly benefit is $2,000 and annual cost-of-living adjustments are 2.7% :
In 10 years
Your monthly benefit will be
$2,611
In 20 years
$3,408
In 30 years
$4,448
Second, Social Security offers annual inflation adjustments. So if your benefit starts out at $2,000 per month, and if annual COLAs are 2.7%, in 10 years you will be receiving $2,611 per month. In 20 years your benefit will be $3,408, and in 30 years your check will be $4,448.
There is no way of knowing exactly what future COLAs will be, but 2.7% seems to be a reasonable estimate. It's what the Social Security trustees use to project costs and benefits under their intermediate-cost scenario.
Assumes 2.7% annual cost-of-living adjustments

7. Social Security offers income you can't outlive
If monthly benefit is $2,000 and you live:
10 more years
you'll receive a total of
$302,689
in lifetime benefits
20 more years
$666,456
30 more years
$1,141,276
First, Social Security is one of the few sources of income you can't outlive. If you are worried about running out of personal assets in your old age, you need not have that fear with Social Security, because it continues until you die. And, of course, the longer you live, the more you will extract from the system.
If your benefit starts out at $2,000 per month, and if you live 10 more years, you will receive over $300,000 in lifetime benefits. If you live 20 more years you'll receive over $600,000 in lifetime benefits. And if you live 30 more years, you'll receive over $1 million over your lifetime. This assumes annual cost-of-living adjustments of 2.7%.
Assumes 2.7% annual cost-of-living adjustments

8. How Social Security benefits are calculated
Highest 35 years of indexed earnings are averaged (AIME)
AIME is divided by two “bend points” to determine your primary insurance amount (PIA). This is the amount you'll receive at FRA.
Benefit “may” be increased each year by cost-of-living adjustments (COLAs)
The formula for calculating Social Security is pretty complex. You may or may not want to follow along with this. Some people find the formula interesting. In a moment I will show you a couple of ways to estimate your own benefit.
The general process goes like this. First Social Security looks at your annual earnings over your entire lifetime, indexes them for inflation, and picks the 35 highest years' earnings to include in the formula. The indexed earnings are totaled and divided by 35 to come up with an average. If you don't have 35 years of earnings, the missing years will be filled in with zeroes. This has the effect of lowering Social Security benefits for women who have taken time out of the work force to raise children. However, they may be eligible for spousal benefits, which we'll cover in a moment.
Next, a formula is applied to your average indexed monthly earnings to determine your primary insurance amount. This is the amount you will receive when you reach full retirement age. As mentioned earlier, if you were born between 1943 and 1954, your full retirement age is 66.
Each year, annual COLAs are applied to your benefit to help you keep up with the cost of living.

9. Full Retirement Age (FRA)
Year of Birth Full Retirement Age
and 2 months
and 4 months
and 6 months
and 8 months
and 10 months
1960 and later 67
Full retirement age is the age at which you can claim full, unreduced benefits. It used to be 65 for everyone. But now we are seeing a higher full retirement age being phased in as a result of the 1983 amendments. For everyone born between 1943 and 1954, full retirement age is 66. For everyone born in 1960 and later, full retirement age is 67. For those born in 1955 through 1959, full retirement age is 66 plus some number of months.

10. What if you apply for early benefits?
You receive a percentage of your PIA
Apply at age
If FRA = 66
If FRA = 67 62
75.0%
70% 63
80.0%
75% 64
86.7%
80% 65
93.3% 66
100% 67
Now, remember that I said that your primary insurance amount, or PIA, is the benefit you will receive at full retirement age. So what happens if you apply for Social Security before full retirement age? Well, your benefit will reduced. You will receive a percentage of your PIA depending on when you apply. If your full retirement age is 66 and you apply at age 62, you will receive 75% of your PIA. At 63, 80% and so on. If your full retirement age is 67 and you apply at 62, you will receive 70% of your PIA. These amounts are actually prorated monthly, so you can apply anytime after the age of 62 and your benefit will be reduced by the appropriate amount.

11. What if you apply after FRA?
You earn 8% annual delayed credits
Apply at age
Benefit will be % of PIA
if FRA = 66
if FRA = 67 66
100%
93.3% 67
108% 68
116% 69
124% 70
132%
If you apply for Social Security after full retirement age, you will earn delayed credits of 8% for each year you delay. So if your full retirement age is 66 and you apply at 67, your benefit will be 108% of your PIA. At 68 it will be 116%, and so on. After age 70 you can't earn any more delayed credits, so it doesn't pay to wait until after age 70 to apply for Social Security.

12. Annual earnings test
$1 withheld for every $2 earned over $15,720 from age 62-65
$1 withheld for every $3 earned over $41,880 in the year you turn 66
Benefits adjusted at FRA, if “clawed back”
One important consideration in deciding when to apply for benefits is whether or not you plan to work. If you apply before you turn full retirement age and you earn more than $15,720 in 2015, $1 in benefits will be withheld for every $2 you earn over $15,720.
Now, it's important to know that this money isn't truly taken away. Rather, your benefit will be adjusted upward when you turn full retirement age to make it as if you had applied later. This means that if some of your benefits are withheld due to the earnings test, your new benefit will be higher, as if you had started at 63 or 64 or 65, instead of 62.
Please don't let the annual earnings test discourage you from working. The more money you earn, the more money you will have. Social Security does not "penalize" you for working. Once the adjustment is made, you will end up with a higher benefit for the rest of your life. And, of course, the earnings themselves will contribute to your financial well-being. To avoid the earnings test entirely, just wait until you are full retirement age or later to apply for benefits.

13. Highlights: “New” Social Security Rules
4 Basic Categories of Filers:
Current recipients
Age 66 by May 1, 2016
Age 62 by January 1, 2016
Age 62 after January 1, 2016
Social Security was instituted in an earlier era, when most married women did not work. To give women a measure of financial security in their old age, the program offers spousal benefits. The spousal benefit is 50% of the worker's PIA if she applies for it at her full retirement age. So if John's PIA is $2,000 and Jane's PIA is $800, and if Jane applies for Social Security at her full retirement age, her benefit will equal 50% of John's PIA, or $1,000. This is $200 more than her benefit based on her own work record.
First we're going to talk about spousal benefits in the traditional sense. Then I'm going to show you some innovative ways baby boomers are taking advantage of spousal benefits.

14. Spousal benefits
Spousal benefit = 1/2 the primary worker's PIA if started at FRA
Example:
John's PIA is $2,000
Jane's PIA is $800
If Jane applies at FRA, her benefit will be $1,000 (50% of John’s PIA)
Social Security was instituted in an earlier era, when most married women did not work. To give women a measure of financial security in their old age, the program offers spousal benefits. The spousal benefit is 50% of the worker's PIA if she applies for it at her full retirement age. So if John's PIA is $2,000 and Jane's PIA is $800, and if Jane applies for Social Security at her full retirement age, her benefit will equal 50% of John's PIA, or $1,000. This is $200 more than her benefit based on her own work record.
First we're going to talk about spousal benefits in the traditional sense. Then I'm going to show you some innovative ways baby boomers are taking advantage of spousal benefits.

15. Spousal Benefits
Example:
Husband age 66
Wife age 63 has Alzheimers

16. “Maximum vs. Optimal” Is this is the “Optimal” Strategy? Example:
John, 63, PIA= $2,600, working
Mary, 60, PIA= $2,400, retire
“file and suspend” not an option
Maximum Lifetime Benefit Strategy:
Both defer to 70
Maximize Individual Benefits at 70
Is this is the “Optimal” Strategy?
Here is one strategy that has come out of the Center for Retirement Research at Boston College. It's called "claim and suspend," also known as "file and suspend."
As we discussed earlier, in order for a low-earning spouse to receive a spousal benefit, the high-earning spouse must have filed for benefits. But often the high-earning spouse wants to delay his benefit to age 70 in order to maximize income to the couple while both are alive, and income to the surviving spouse after one spouse dies. So as soon as the high-earning spouse turns full retirement age, he files for his benefit and then immediately suspends it. This allows his wife to start her spousal benefit while his benefit earns 8% annual delayed credits.
Here's how it works. Bob and Barbara are married. Both are 66. Bob's PIA is $2,000. Barbara's PIA is $800, which is less than her spousal benefit of $1,000. If Bob waits until age 70 to apply, Barbara would have to wait four years to start her spousal benefit. So Bob files and suspends at 66. This entitles Barbara to her spousal benefit, while Bob's own benefit continues to earn delayed credits.
Please note that this does not work if Bob is under full retirement age. It is only after full retirement age that a person may voluntarily suspend their benefit in order to earn delayed credits. The lower-earning spouse may, of course, apply for her spousal benefit anytime after the age of 62. If she applies before full retirement age, she will receive a lower amount. In order to receive the full 50% of her husband's PIA, she must apply at full retirement age.

17. “Maximum vs. Optimal” Maximum Lifetime Benefit Strategy:
- Both defer to 70
- Cumulative Lifetime Benefit = $2.1 million
Optimal Strategy:
- Mary files at 62 (minimum benefit)
- John takes spousal at 66; own at 70
- Cumulative Lifetime Benefit = $1.95 million
Here is one strategy that has come out of the Center for Retirement Research at Boston College. It's called "claim and suspend," also known as "file and suspend."
As we discussed earlier, in order for a low-earning spouse to receive a spousal benefit, the high-earning spouse must have filed for benefits. But often the high-earning spouse wants to delay his benefit to age 70 in order to maximize income to the couple while both are alive, and income to the surviving spouse after one spouse dies. So as soon as the high-earning spouse turns full retirement age, he files for his benefit and then immediately suspends it. This allows his wife to start her spousal benefit while his benefit earns 8% annual delayed credits.
Here's how it works. Bob and Barbara are married. Both are 66. Bob's PIA is $2,000. Barbara's PIA is $800, which is less than her spousal benefit of $1,000. If Bob waits until age 70 to apply, Barbara would have to wait four years to start her spousal benefit. So Bob files and suspends at 66. This entitles Barbara to her spousal benefit, while Bob's own benefit continues to earn delayed credits.
Please note that this does not work if Bob is under full retirement age. It is only after full retirement age that a person may voluntarily suspend their benefit in order to earn delayed credits. The lower-earning spouse may, of course, apply for her spousal benefit anytime after the age of 62. If she applies before full retirement age, she will receive a lower amount. In order to receive the full 50% of her husband's PIA, she must apply at full retirement age.

18. “Maximum vs. Optimal”
Maximum Strategy generates $150,000 of additional lifetime benefits BUT…
Optimal Strategy:
Starts payments earlier: Mary’s 62, John 66
Generates $230,000 before Max Strategy makes first payment at age 70
Still maximizes “survivor benefits”
Less risky…
Here is one strategy that has come out of the Center for Retirement Research at Boston College. It's called "claim and suspend," also known as "file and suspend."
As we discussed earlier, in order for a low-earning spouse to receive a spousal benefit, the high-earning spouse must have filed for benefits. But often the high-earning spouse wants to delay his benefit to age 70 in order to maximize income to the couple while both are alive, and income to the surviving spouse after one spouse dies. So as soon as the high-earning spouse turns full retirement age, he files for his benefit and then immediately suspends it. This allows his wife to start her spousal benefit while his benefit earns 8% annual delayed credits.
Here's how it works. Bob and Barbara are married. Both are 66. Bob's PIA is $2,000. Barbara's PIA is $800, which is less than her spousal benefit of $1,000. If Bob waits until age 70 to apply, Barbara would have to wait four years to start her spousal benefit. So Bob files and suspends at 66. This entitles Barbara to her spousal benefit, while Bob's own benefit continues to earn delayed credits.
Please note that this does not work if Bob is under full retirement age. It is only after full retirement age that a person may voluntarily suspend their benefit in order to earn delayed credits. The lower-earning spouse may, of course, apply for her spousal benefit anytime after the age of 62. If she applies before full retirement age, she will receive a lower amount. In order to receive the full 50% of her husband's PIA, she must apply at full retirement age.

19. Same-Sex Couples Supreme Court Ruling June 26, 2015
Same-sex marriage legalized nationwide
Afforded all the same spousal, divorce, survivor benefits as heterosexual couples

20. Divorced-spouse benefits
Divorce rate still high:
First marriage _______?
Second marriage _______?
Third marriage _______?
Government research on divorce…
A woman can receive Social Security based on her ex-husband's work record, providing the marriage lasted at least 10 years and she is currently unmarried. And vice versa. Men can receive divorced-spouse benefits too. If the divorce occurred more than two years ago, the ex-spouse doesn't need to have filed for his benefit. However, he must be at least 62.

21. Divorced-spouse benefits
Same as spousal benefits if:
Married 10 years or more
Currently unmarried
You and ex-spouse are at least age 62
Divorced more than two years
A woman can receive Social Security based on her ex-husband's work record, providing the marriage lasted at least 10 years and she is currently unmarried. And vice versa. Men can receive divorced-spouse benefits too. If the divorce occurred more than two years ago, the ex-spouse doesn't need to have filed for his benefit. However, he must be at least 62.

22. Divorced-Spouse Benefits
Clients #1 and #2:
My dentist, age 63; divorced and still unmarried
My doctor, age 61; divorced and still unmarried
(affected by “New Rules”)
Client #3:
Divorced after 9 years and 9 months of marriage

23. Entitled vs Eligible Ex-wife, 66, collecting ex-spousal benefits
Boyfriend, 64, divorced, still working
Could they get married without losing ex-spousal benefits?
Here are the rules for divorced-spouse benefits. More than one ex-spouse can receive benefits on the same worker's record. So if your ex-husband has remarried a couple of times, all three ex-wives can claim divorced-spouse benefits, as long as the marriages lasted at least 10 years.
The benefits paid to one ex-spouse do not affect those paid to the worker, the current spouse, or the other ex-spouses.
The worker will not be notified that the ex-spouse has applied for benefits. So you need not worry that your long-lost ex-husband will find out that you applied for benefits based on his work record. You do not need to know his whereabouts, only enough identifying information that the Social Security people can look up his records. You'll also need to provide documentation showing the dates of the marriage and divorce.
If you are receiving divorced-spouse benefits and you remarry, your divorced-spouse benefits will stop. However, you may then be eligible for spousal benefits based on your new husband's work record. Or you can switch to your own benefit, of course, if you also qualify for Social Security.

24. Survivor benefits Example:
Joe and Julie are married. Both are over FRA.
Joe's benefit is $2,000
Julie's benefit is $1,200.
Joe dies.
Julie’s $1,200 benefit is replaced by her $2,000 survivor benefit.
If both spouses are receiving benefits and one spouse dies, the other spouse may switch to the higher benefit.
Here's a hypothetical example. Let's say Joe and Julie are married. Both are over full retirement age and currently receiving Social Security benefits. Joe's benefit is $2,000 and Julie's benefit is $1,200. If Joe dies, Julie's $1,200 benefit will stop and she will start receiving $2,000.
One important note about survivor planning is the loss of one benefit. Most widows and widowers need at least two-thirds of the amount of income they were receiving as a couple, so it is important to plan for the loss of one spouse's Social Security benefit. Even though it is often the higher benefit that will be retained, the death of a spouse means the loss of one Social Security check.

25. Survivor Benefits Client Scenario: Joe, age 63, widower
Girlfriend, Laurie, age 59, widow
Decide to get married now….

26. Self-Employed Business Owners
Client Scenario:
Husband, 66, Income= $300
Wife, 64, Income= $100K
Q. Should the husband file now (at FRA)?

27. College Funding? Client Scenario: Husband, 66, PIA= $2,600
Wife, 56, Earned Income= 0
Child, 14
Q. Should husband file now to fund a 529 plan?

28. Child & Child-In-Care Benefits
Client Scenario:
Ex-husband dies, age 58
Ex-wife, 30, no earned income
Marriage lasted 6 years
Their child age 5
Q. Any eligible survivor benefits?

29. Estate Planning/Charitable Giving
Client Scenario:
Husband, 66, PIA= $2,600
Wife, 66, PIA= $1,600
Net Worth= $80 Million
3 Children, 5 Grandchildren
Q. When should they file for benefits?

30. Factors to consider when deciding when to apply
Health status
Life expectancy
Need for income
Whether or not you plan to work
Survivor needs
The decision of when to apply for benefits is one of the most important and most complicated questions. It can literally make the difference of thousands of dollars over your lifetime.
Before we get into the number crunching, it's important to realize that the decision of when to apply for Social Security depends on many factors unique to your situation. These include your health status, your life expectancy, your need for income, whether or not you plan to work, and, if you are a surviving spouse, whether you have other personal resources.

31. Taxation of Social Security benefits
Filing status
Provisional income*
Amount of SS subject to tax
Married filing jointly
Under $32,000
$32,000 - $44,000
Over $44,000
Up to 50%
Up to 85%
Single, head of household, qualifying widow(er), married filing separately & living apart from spouse
Under $25,000
$25,000 - $34,000
Over $34,000
Married filing separately and living with spouse
Over 0
85%
This table shows the taxation of Social Security benefits based on the various income levels. "Income" in this case means provisional income, which includes adjusted gross income, plus one-half of the Social Security benefit plus any tax-exempt interest. If provisional income is under $32,000 for a married couple no benefits are subject to tax. If provisional income is between $32,000 and $44,000, up to 50% of a married couple's benefits are subject to tax. If provisional income is over $44,000, up to 85% of benefits are subject to tax. The thresholds for a single individual are $25,000 and $34,000. In the case of married filing separately and living with spouse, 85% of Social Security is taxable regardless of income level.
The important thing to remember here is that up to 85% of your Social Security benefits may be subject to tax, depending on how much other income you have.
*Provisional income = AGI + one-half of SS benefit + tax-exempt interest

32. Maximize Benefits/Minimize Tax
Income Goal = $70K @ 62 @70
Social Security $38 $67
Other Income
Provisional Income
Total Taxable SS
Net AGI
It is important to consider Social Security in the context of your other retirement resources, including pensions, IRAs and 401(k)s, the required minimum distributions you'll be needing to take at age 70-1/2, your overall investment portfolio, and your plans for working in retirement. All of these resources should be coordinated to give you the income you need for the rest of your life.
Please don't be afraid to ask for help. Retirement planning is easy when it's a matter of stashing part of your salary into a 401(k) or IRA. But when the time comes for you to convert your nest egg into an income stream, you want to make sure it doesn't run out. Social Security may be the bedrock of your retirement income plan, but it must be coordinated with your other resources to give you the stability and security you deserve.

33. Maximize Benefits/Minimize Tax
Note:
Defer SS to 70: higher taxes but lower taxes in retirement (20+ years?)
SS tax planning: should be part of overall retirement income planning
Risks in delaying: SS rule changes, pre-mature death, tax law changes etc.)
It is important to consider Social Security in the context of your other retirement resources, including pensions, IRAs and 401(k)s, the required minimum distributions you'll be needing to take at age 70-1/2, your overall investment portfolio, and your plans for working in retirement. All of these resources should be coordinated to give you the income you need for the rest of your life.
Please don't be afraid to ask for help. Retirement planning is easy when it's a matter of stashing part of your salary into a 401(k) or IRA. But when the time comes for you to convert your nest egg into an income stream, you want to make sure it doesn't run out. Social Security may be the bedrock of your retirement income plan, but it must be coordinated with your other resources to give you the stability and security you deserve.

34. Consider Social Security in the context of:
Pensions
IRAs and 401(k)s
Required minimum distributions at age 70-1/2
Investment portfolio
Work
It is important to consider Social Security in the context of your other retirement resources, including pensions, IRAs and 401(k)s, the required minimum distributions you'll be needing to take at age 70-1/2, your overall investment portfolio, and your plans for working in retirement. All of these resources should be coordinated to give you the income you need for the rest of your life.
Please don't be afraid to ask for help. Retirement planning is easy when it's a matter of stashing part of your salary into a 401(k) or IRA. But when the time comes for you to convert your nest egg into an income stream, you want to make sure it doesn't run out. Social Security may be the bedrock of your retirement income plan, but it must be coordinated with your other resources to give you the stability and security you deserve.

35. You have questions… We can help!
NEW RULES: What am I now eligible for?
DEADLINES: Which ones affect me?
When should I apply for Social Security?
What if I've already applied?
How can I coordinate spousal/divorce benefits?
What do I do next?
You have questions. We can help. We've covered a lot of ground today, but you probably still have questions.
When should you apply for Social Security?
What if you want to keep working?
What if you've already applied?
How much will your benefits be?
How can you coordinate spousal benefits?
What's the best long-term strategy for your situation?
What should you do next?
We would be glad to help you consider each of these questions individually and help you come up with a plan for your personal situation.

36. Social Security: too important for guesswork!
Social Security is too important for guesswork.
Let us help you protect your nest egg and maximize your income in retirement.
Thank you.
Let us help you protect your nest egg and maximize your income in retirement.