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

2. 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

3. 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.

4. 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

5. Client Facing Slides

6. 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)

7. 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

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

9. 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

10. 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.

11. 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

12. 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.

13. 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

14. Appendix - Social Security Information

15. 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

16. 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

17. 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