1. Social Security: Seven keys to optimizing benefits
AA INSURANCE CENTRAL,LLC
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2. Before we begin
This presentation is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, their affiliated companies, and their representatives and employees do not give legal or tax advice. You are encouraged to consult with your tax advisor or attorney.
Allianz Life Insurance Company of North America (Allianz) and Allianz Life Insurance Company of New York (Allianz Life® of NY) are affiliated companies.
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3. Social Security provides options
Many believe it is cut and dried
However, it is a retirement income source with some control
Managing your Social Security benefit is part of your retirement income process
One of the most confusing but most important phases of your retirement strategies is understanding Social Security retirement benefits.
Many believe it is cut and dried and do not realize there are options.
However, it is a retirement income source with some control and a variety of elections you will need to make.
In addition, since Social Security may be the basis of all your retirement income decisions, it is important to fully understand the implications of the decisions you make.
Managing your Social Security income benefit is an important part of your retirement income process.

4. Agenda Social Security basics Medicare Income benefits
Tax implications
When to start benefits
Working in retirement
Spousal and survivor benefits
While many of you know the basics of Social Security, we are going to structure our session so that as you work with your financial professional you will feel more comfortable in making decisions affecting your 401(k), IRAs, etc.
Today we will cover 7 keys to optimizing your Social Security benefits
Let’s start with the basics.
General Social Security facts to know.
Cover Medicare basics
Income benefits
Tax implications
When to start benefits
Working in retirement
And finally, we will wrap it up with spousal and survivor benefits

5. 1
Social Security
Key 1: Social Security basics

6. Social Security basics1
Facts to know
4 most important sources of retirement income for seniors seniors (age 65 and older).1
Social Security
86%
$15,701
Median payment
Asset income
49%
$1,260
Median payment
Pensions
$12,700
Median payment
27%
Starting with key 1 or knowing some basic facts about Social Security:
As you can see, Social Security is still the basic foundation of most people’s retirement income with 86% of Seniors age 65 and older reporting that they are utilizing it as one of their most important sources of retirement income.
Followed by asset income, pensions, and employment.
[click] What is also interesting is the median payment received for each of those sources.
Employment
$28,000
Median payment
26%
1 “The 4 Most Important Sources of Retirement Income,” US NEWS, Emily Brandon, March 22, 2012

7. Social Security is more than just retirement
Social Security basics 1
Social Security is more than just retirement
Social Security is more than retirement.
Almost 58 million Americans will received benefits in 2013
Average monthly benefit (December 2012 data)
Survivors
$1,215
11%
Retired workers and their dependents
19%
$1,262
Disabled and their dependents
Social Security is more than just retirement.
Almost 58 million people will receive benefits in 2013
[click] 19% is disabled workers and their dependents
[click] and 11% survivors.
Average monthly benefit (based on December 2012 beneficiary data) is [click] $1,262 for retired workers, $1,215 for survivors, and $1,130 for disabled.
70%
$1,130
Social Security Fact Sheet, February, 2013

8. Social Security basics1
Will it be there?
By 2033, Social Security trust fund is expected to be depleted1
Revenue in system will be adequate to pay about 75% of accrued benefits, declining to 73% by 20861
Congress will have to make changes:
Reduction of future benefits?
Increase taxes?
Combination?
Many are concerned about the future of Social Security.
The gap between benefits and promised payment continues to grow.
Will it be there when I retire? This is a commonly heard question by many people.
By 2033, the Social Security Administration says the trust fund is expected to be depleted.
However, it appears today that projected tax revenues will be adequate to pay about 75% of scheduled benefits from 2033 to 2085 and 73% of scheduled benefits starting in 2086.
Congress will have to make changes to either reduce future benefits or increase taxes as a couple of examples of options.
1 The 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, April,2012

9. Statements now on-line
Social Security basics 1
Statements now on-line
Social Security statements are no longer automatically mailed to you but you can [click] go online and create an account.
Once you set up an account [click] you have several options including getting your Social Security statement.
Create your own “Social Security account”

10. 2
Social Security
Key 2: Medicare

11. 2 Medicare eligibility Eligible the first day of month turning age 65.
If you are receiving Social Security benefits in the month you attain age 65, you are automatically enrolled in Medicare.
There are four parts to Medicare.
You become eligible for Medicare on the first day of the month you turn 65.
If you are already receiving Social Security benefits, you are automatically enrolled. If you are not receiving Social Security benefits, you must enroll to receive benefits. When you enroll can affect your premiums so it’s important to enroll when you turn age 65 because if you delay, you may pay higher premiums.
There are four parts to Medicare [click to next slide]

12. Part A Part B 1 Medicare Hospital insurance Medical insurance
Part A pays some of the costs of hospitalization, limited skilled nursing home care, hospice care, and home health services. Usually premium free but there are copays and deductibles.
Part B
Medical insurance
Part B primarily covers physicians’ services, most outpatient hospital services, and certain related services. Long-term nursing home care is currently not covered. There is a premium for Part B coverage.
Part A is free but there are deductibles and copays. It pays for some of the cost of hospitalization, limited skilled nursing home care, hospice care, and home health services.
Part B primarily covers physicians’ services, most outpatient hospital services, and certain related services. Long-term nursing home care is currently not covered. There is a premium for Part B coverage.
Social Security Administration, Medicare Basics

13. Part A Part B Part C Part D 1 Medicare Hospital insurance
Part C includes managed care plans, Private Fee-for-Service plans, and Medical Savings Accounts. It may offer extra coverage such as vision, dental, and/or health and wellness programs.
Part B
Medical insurance
Part C
Medicare Advantage Plans
Part D is voluntary prescription drug coverage.
Part C includes managed care plans, Private Fee-for-Service plans, and Medical Savings Accounts. It may offer extra coverage such as vision, dental, and/or health and wellness programs.
Part D is a voluntary prescription drug coverage.
Note that Medicare does not cover everything.
Part D
Prescription drug coverage
Social Security Administration, Medicare Basics

14. Part A Part B Part C Part D Part D 1
Medicare 1
Decision 1: How do you want to get coverage?
Original Medicare OR
Medicare Advantage Plan
Like an HMO or PPO
Part A
Hospital insurance
Part B
Medical insurance
Part C
Combo A, B & usually D1
Decision 2: Do you need to add prescription drug coverage?
Part D
Prescription drugs
Part D
Prescription drugs1
There are a few decisions to make.
First decision is how you want to get coverage. [click]
There are two main ways to get your Medicare coverage: Original Medicare and Medicare Advantage Plan which is like an HMO or PPO. [click]
Second decision is do you need to add prescription drug coverage? Most Medicare Advantage Plans cover prescription drugs but it can be added to some plans if not already included. [click]
A third decision is do you need to add supplemental coverage like Medigap? If you join a Medicare Advantage Plan, you don’t need (and therefore can’t buy) a Medigap (Medicare Supplement Insurance) policy.
Decision 3: Do you need to add supplemental coverage?
End
Medigap
1Most plans cover but you may be able to add coverage in some plan types if not already included.
End
Medicare and You, Centers for Medicare and Medicaid Services, 2013

15. 3
Social Security
Key 3: Income benefits

16. How to qualify for benefits
Income benefits 3
How to qualify for benefits
Must be fully insured (earned required number of Social Security credits to qualify)
Most workers need 40 credits or about 10 years of work.
Through 1977, you earned one credit for each calendar quarter in which you had wages or salary of at least $50 in covered employment.
Since 1978, you earn credits on the basis of your annual earnings up to four credits in any year.
In 2013, one credit is recorded for every $1,160 you earn in a year.
How do you qualify for benefits?
You must be fully insured which means earned the required number of Social Security credits.
Most workers need 40 credits. That is about 10 years of work (at four quarters each year).
Through the years the way you earn credits has changed. In 2013, one credit is recorded for every $1,160 you earn in a year.
Social Security Administration, “How You Earn Credits,” 2013

17. How benefits are calculated
Income benefits 3
How benefits are calculated $ $
PIA (primary insurance amount)
FRA (full retirement age)
FRA (full retirement age)
Benefit is reduced if taken prior to FRA.
So, how are your benefits calculated?
Your retirement benefit is based on your Primary Insurance Amount (PIA).
[click] Your Primary Insurance Amount (PIA) is the amount you receive at your full retirement age (FRA). Your FRA is based upon the date you were born. I will show you a date chart later in the presentation.
Your average indexed monthly earnings (AIME) are used to calculate your PIA.
If you were born after 1929, you use your highest 35 years to calculate your benefits.
Your actual earnings are “indexed” to account for average wage changes since the year your earnings were received.
We will discuss later how your benefits are reduced if taken prior to your full retirement age in a bit.
Monthly benefit is adjusted up if your start is delayed.
Social Security Administration, Primary Insurance Amount

18. 4
Social Security
Key 4: Taxation of benefits

19. Benefits are subject to income tax
Taxation of benefits 4
Benefits are subject to income tax
Sum of your adjusted gross income + nontaxable interest + ½ of your Social Security benefits
= Your combined income
Combined income; Single or HOH1
$25,000
$34,000
85%
50% 0%
Note: These percentages are the amount of Social Security benefit included in income, not the tax rate on the Social Security benefit.
Social Security benefits are income-tax-free for the majority of beneficiaries however, many people with higher total incomes are surprised that their Social Security benefits may be subject to federal income tax.
Whether and how your Social Security retirement benefits are taxed is based on your combined income. That is defined as the sum of the adjusted gross income plus nontaxable interest plus one-half of Social Security benefits.
The percentages are the amount of Social Security benefit included in income, not the tax rate on the Social Security benefit.
If you are single or Head of Household (HOH) with a combined income less than $25,000 you may not have to include any of your Social Security benefits received as part of your taxable income for the year (under $32,000 for Married, filing Jointly (MFJ).
If you are single or HOH with a combined income between $25,000 and $34,000 you may have to include up to 50% of your Social Security benefits received as part of your taxable income for the year (between $32,000 and $44,000 for MFJ).
If you are single or HOH with a combined income over $34,000 you may have to include up to 85% of your Social Security benefits received as part of your taxable income for the year (over $44,000 for MFJ).
Combined income; Married, filing jointly
$32,000
$44,000
85%
50% 0%
1Head-of-household
Social Security Administration, Retirement Planner: Income Taxes And Your Social Security Benefits

20. 5
Social Security
Key 5: When to start benefits

21. When to start your benefits
When to start benefits 5
When to start your benefits
Year of birth
Full retirement age (FRA)
Age 62 benefit reduction
1937 or earlier 65
20.00%
1938
65 and 2 months
20.83%
1939
65 and 4 months
21.67%
1940
65 and 6 months
22.50%
1941
65 and 8 months
23.33%
1942
65 and 10 months
24.17% 66
25.00%
1955
66 and 2 months
25.83%
1956
66 and 4 months
26.67%
1957
66 and 6 months
27.50%
1958
66 and 8 months
28.33%
1959
66 and 10 months
29.17%%
1960 and later 67
30.00%
Full Retirement Age (FRA)
Can start benefits as early as age 62
If age 62, receive less than at full retirement age
Maximum benefits can be attained at age 70
You can start benefits as early as age 62. But, depending on your full retirement age, as shown in the chart, you will receive 20-30% less in benefits.
Selecting the right time for you to retire should be based on your health, life expectancy, how much you have in other retirement plans, etc.
Social Security Administration, Retirement Planner: Benefits By Year Of Birth

22. Optimizing benefits by delaying start date
When to start benefits 5
Optimizing benefits by delaying start date
Starting benefits at various ages and living to different ages
Delaying your start past FRA will result in “delayed retirement credits” (DRC)
Start age 70 75 80 85 90 62
$144,000
$234,000
$324,000
$414,000
$504,000 64
$124,776
$228,756
$332,736
$436,716
$540,696 66
$96,000
$216,000
$336,000
$456,000
$576,000 68
$55,680
$194,880
$334,080
$473,280
$612,480 $0
$158,400
$316,800
$475,200
$633,600
Accumulated benefits age
Let’s examine briefly how you can optimize your benefits by delaying your start date.
[Note, these calculations are based on a FRA of 66 and a benefit of 8% per each year delayed retirement benefits, no COLA, no discounting]
In the accumulated benefits age 70 column, the chart shows what you would receive in benefits starting at different ages. So, if you start benefits at age 62 and live to age 70, you will have received $144,000. If you delayed your benefits until age 68 and only lived to age 70, you can see how the amount you would have accumulated decreases.
This is why it is important to consider when you want to start benefits as well as consider your projected longevity. Depending on your health and life expectancy (which is often in your family genes) you might opt to delay benefits. Obviously, if you are in ill health, starting at age 62 makes sense. But you must also look at life expectancy. If you start at age 62 and are expected to live to only age 70, that maximized your Social Security benefit. However, if you are in good health and choose to work to age 68 before beginning Social Security and are expected to live to 80 or 85 years of age, your benefits are significantly better.
This is why life expectancy is important to consider when deciding to start your benefits.
As noted, this chart is simplified for illustrative purposes only and does not take into account projected Cost of Living Adjustments (COLAs) or adjust for expected interest rates.
Full retirement age of 66, full retirement benefit $2,000/month, no Cost of Living Adjustment (COLA,) no discounting. For illustration purposes only.
Social Security Administration, Retirement Planner: Delayed Retirement Credits

23. 6
Social Security
Key 6: Working in retirement

24. 6 In 2013, if you work… FRA up to birthday month Age 62 FRA FRA
Working in retirement 6
In 2013, if you work…
FRA up to birthday month
After
FRA
Age 62
FRA
Reduced $1 for every $2 above $15,120
Reduced $1 for every $3 above $40,080
No reduction
Because of a number of reasons; market down turns, loss of job earlier in career than expected, not saving enough, etc. many people are now “phasing” into retirement and choose to take Social Security benefits at the same time. This brings us to key 6 which is working in retirement.
[click] In 2013, if you work into your retirement and are between age 62 and your full retirement age, there is a reduction of $1 in benefits for every $2 you earn above $15,120.
[click] If you work into retirement in the year of your full retirement age up to your birthday, there is a reduction of $1 in benefits for every $3 you earn above $40,080 in 2013.
[click] And finally, if you work after your full retirement age there is no reduction.
Therefore, some benefits are reduced if you make too much while working and receiving Social Security benefits so make sure your strategies take that into account as well.
[click] Any Social Security income reduced in early retirement (due to working) will result in positive adjustment to your monthly benefit when you reach your full retirement age.
Any reduction in Social Security income in early retirement (due to working) will result in positive adjustment to your monthly benefit when you reach your full retirement age.
Social Security Administration, Fact Sheet, 2013 Social Security Changes

25. My benefits 6 Hypothetical example Susan, born 1951
Working in retirement 6
Hypothetical example
Susan, born 1951
Eligible for maximum benefits
Retired in 2013 on 62nd birthday and returned to work less than one year later
Annual Social Security benefit $16,800
(75% of FRA benefits)
Current year earnings $40,000
Social Security earning limit $15,120
Excess earnings $24,880
Reduction in Social Security benefits $12,440
Net Social Security benefits $ 4,360
My benefits
Let’s see how this might work. Using a hypothetical example, we have Susan who was born in She is eligible for the maximum amount of Social Security benefits. She will/was retire(d) in 2013 on her 62nd birthday and returned to work less than one year later.
[click] Her annual Social Security benefit (75% of benefit at FRA since she is 62) would be $16,800.
Current earnings of $40,000
SS earning limit is $15,120.
Which leaves excess earnings of $24,880.
There would be a reduction in her benefits by $12,440 which nets $4,360
This hypothetical example is for illustrative purposes only and does not represent an actual client.

26. 7
Social Security
Key 7: Spouse and survivor benefits

27. Benefits available for spouses
Spouse and survivor 7
Benefits available for spouses
When a spouse does not qualify for his or her own retirement benefits
Nonqualifying spouse can collect on the record of the spouse who is qualified to receive benefits
To qualify, the nonqualifying spouse must have been married at least one year to the qualifying spouse or be the parent of their child.
If nonqualifying spouse is at FRA or later, receives an amount equal to 50% of the PIA of the qualifying spouse (not necessarily their benefit amount).
If nonqualifying spouse is age 62, they may receive permanently reduced benefits.
If a retiree is married, there is another set of considerations you need to understand. This brings us to the final key number 7 or spousal benefits.
There are calculations and considerations for optimizing benefits for your spouse as well as yourself.
The non-qualifying spouse can collect on the record of the spouse who is qualified to receive benefits. If non-qualifying spouse is at FRA, they will receive 50% of the PIA of the qualifying spouse (not necessarily their benefit amount). If non-qualifying spouse is age 62, they may receive permanently reduced benefits.
The rules are complicated and vary depending on your situation so talk to a Social Security representative about the options available to you.
Social Security Administration, Retirement Planner: Benefits For Your Spouse

28. Benefits available for spouses
Spouse and survivor 7
Benefits available for spouses
When both spouses qualify for his or her own benefits, then each spouse has two options:
Take benefits generated by own earnings history OR
Take half of their spouse’s retirement benefit (made up of personal benefit plus the difference to make up half of the primary wage earners benefit)
When both spouses qualify, there is a choice.
First, if you have reached your FRA and are eligible for your spouse’s benefit and your own retirement benefit, you have a choice.
The individual can choose to receive their own benefit now.
Or, they can choose to receive half of their spouse’s benefit (made up of personal benefit plus the difference to make up half of the primary wage earners benefit). Let’s take a closer look at that advanced option.
The rules are complicated and vary depending on your situation so talk to a Social Security representative about the options available to you.
Social Security Administration, Retirement Planner: Benefits For Your Spouse

29. Benefits available for spouses
Spouse and survivor 7
Benefits available for spouses
Advanced option:
An advanced strategy is to delay receiving own retirement benefit and start a spousal benefit which is half of their spouse’s benefit.
If retirement benefits are delayed, a higher benefit may be received at a later date based on the effect of delayed retirement credits.
Monthly spousal benefit is reduced if taken prior to full retirement age (FRA).
Must wait until spouse begins benefits or spouse reaches FRA.
The advanced option of delaying one’s own benefit and starting a spousal benefit.
With this option, they would receive half of their spouse’s benefit now and delay receiving their own retirement benefits until a later date.
If they choose to delay, a higher benefit may be received at a later date based on the effect of delayed retirement credits.
Monthly spousal benefit is reduced if taken prior to full retirement age (FRA).
Must wait until spouse begins benefits or spouse reaches FRA.
The rules are complicated and vary depending on your situation so talk to a Social Security representative about the options available to you.
The rules are complicated and vary depending on your situation so talk to a Social Security representative about the options available to you.
Social Security Administration, Retirement Planner: Benefits For Your Spouse

30. Benefits available for survivors
Spouse and survivor 7
Benefits available for survivors
The earliest a widow(er) can start receiving Social Security benefits is age 60.
If you receive survivor benefits early:
Benefits based on your age can begin any time between age 60 and your FRA. Starting early, however, your survivor benefits are reduced a fraction of a percentage for each month before your FRA.
If you receive benefits AND you qualify for retirement benefits that are more than your survivor benefits you can switch to your own benefit as early as age 62.
And, what about survivor benefits?
A surviving spouse is eligible to receive survivor benefits as early as age 60.
If you receive benefits early:
You can receive widows or widower’s benefits based on your age at any time between age 60 and your full retirement age (FRA) as a survivor. However, if you start at an earlier age, your survivors benefits are reduced a fraction of a percentage for each month before your full retirement age.
If you receive widow’s or widower’s benefits, AND you will qualify for a retirement benefit that’s more than your survivors benefit, you can switch to your own retirement benefit as early as age 62.
The rules are complicated and vary depending on your situation so talk to a Social Security representative about the options available to you.
The rules are complicated and vary depending on your situation so talk to a Social Security representative about the options available to you.
Social Security Administration, Survivors Planner: If You Are The Worker’s Widow or Widower

31. Benefits available for divorced spouse
Spouse and survivor 7
Benefits available for divorced spouse
If married for at least 10 years, ex-spouse can get Social Security benefits based on other ex-spouse’s record.
The person receiving benefits must be age 62 or older and unmarried.
The benefit that the receiving person is entitled to receive based on his or her own work is less than the benefit based on the divorce.
The amount of benefit has no effect on other ex- spouse or their current spouse.
If divorced for at least 2 years, and if both ex-spouses are at least age 62, divorced spouse can get benefits even if other ex-spouse is not retired.
Ex-spouse can get Social Security benefits based on other ex-spouse’s record if the marriage lasted at least 10 years.
The ex-spouse (the person receiving benefits) must be 62 years of age or older and unmarried.
The benefit that the receiving person is entitled to receive based on his or her own work is less than the benefit based on the divorce.
The amount of benefit has no effect on other ex-spouse or their current spouse.
Also, if divorced for at least 2 years and both ex-spouses are at least age 62, divorced spouse can get benefits even if other ex-spouse is not retired.
The rules are complicated and vary depending on your situation so talk to a Social Security representative about the options available to you.
The rules are complicated and vary depending on your situation so talk to a Social Security representative about the options available to you.
Social Security Administration, Retirement Planner: Benefits For Your Divorced Spouse

32. Summary Social Security basics Medicare Income benefits
Tax implications
When to start benefits
Working in retirement
Spousal and survivor benefits
So, Social Security is an extremely important part of your overall retirement sources of income. It is the base on which you and your financial professional will make other decisions.
Today we covered 7 keys to optimizing your Social Security benefits
We started with seven of the basics for knowing the numbers behind the benefits.
Basic facts to know
Medicare
Benefit basics
Tax implications
When to start benefits
Working in retirement
And finally, we wrapped it up with spousal and survivor benefits for 7 keys.
Hopefully, you can now feel more comfortable in looking at your retirement strategies with help from your financial professional, attorney and tax professional.

33. Next steps
Fill out the Rethinking Retirement workbook worksheets
Evaluate if your basic income needs in retirement are likely to be covered by your retirement income sources.
Let’s meet to review your specific situation.
It’s important to consider Social Security in your retirement strategies.
So, we covered a lot of things to think about. What should we do next?
Let’s start with the Rethinking Retirement workbook worksheets.
Are your basic retirement income needs likely to be covered by your retirement income sources?
Then, let’s meet to review your specific situation.

34. Disclosures
This presentation is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, their affiliated companies, and their representatives and employees do not give legal or tax advice.
Guarantees are backed by the financial strength and claims-paying ability of the issuing company and do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.
• Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF
Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN In New York, products are issued by Allianz Life Insurance Company of New York, One Chase Manhattan Plaza, 38th Floor, New York, NY Variable products are distributed by their affiliate Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN Only Allianz Life Insurance Company of New York is authorized to offer annuities and life insurance in the state of New York.

35. Thank you!
Questions?