1. Presented by: Michele Burkholder June 14, 2017
PREPARING FOR THE LONG HAUL
Social Security & Long-Term Care in Retirement
Presented by:
Michele Burkholder
June 14, 2017

2. WHAT'S YOUR RETIREMENT INCOME PICTURE?
Social Security
Financial Assets
RETIREMENT INCOME
IRA
Pension
What's your retirement income picture? For everyone in the room today, it's going to be different. Some of you may still have a pension from your employer or from a job years ago. Many of you likely have a 401(k) or an IRA. Some of you may keep on working or have rental property that will provide additional income.
All these sources factor into your income - what to take and when to take it. Today, let's take a closer look at the Social Security component.
403(b)/401(k)

3. AGENDA ⌾ How retirement benefits are calculated
⌾ Benefits for married couples and divorcees
⌾ Taxes and your retirement plan
⌾ Long Term Care
Today we are going to review the important components of Social Security benefits.
We'll begin with a discussion of how Social Security retirement benefits are calculated.
Then we'll discuss the options that may be available for anyone who has ever been married.
And we'll end with our favorite topic: the role of taxes and your retirement plan.

4. HOW RETIREMENT BENEFITS ARE CALCULATED
Let's begin by talking about how your Social Security benefits are calculated.

5. SOCIAL SECURITY BENEFITS ARE BASED ON YOUR FULL RETIREMENT AGE.
Year of Birth
Full Retirement Age (FRA)
SOCIAL SECURITY BENEFITS ARE BASED ON YOUR FULL RETIREMENT AGE.
66 years
66 years and 2 months
1955
66 years and 4 months
1956
1957
66 years and 6 months
1958
66 years and 8 months
1959
66 years and 10 months
67 years
1960
Source: Social Security Administration

6. REDUCTION #1: RETIREMENT BENEFITS
Full Retirement Age 66
Reduction #1: If you claim Social Security before age 66, your Social Security retirement benefits will be permanently reduced by up to 25%. If, however, you take your Social Security benefits after 66, your benefits grow by 8% per year* up until age 70. This is in addition to any annual cost-of-living adjustments.
*The SSA calls the 8% credit "the delayed retirement credit". However, saying "delayed" subconsciously encourages people to take Social Security as soon as possible. Thus, we talk about Social Security benefits growing.
The full retirement social security benefit age in 2017 is 66. The maximum Social Security benefit is available at age 70.
Source: Social Security Administration

7. REDUCTION #2: WORK & RECEIVE BENEFITS
Through year before turning age 66
In the year of turning age 66
Month you turn age 66 and older
Earnings Limit (2017)
$16,920
($1,410 per month)
$44,880
($3,740 per month)
No restrictions
$1 of benefits withheld for every $2 of earnings above limit
$1 of benefits withheld for every $3 of earnings above limit
Amount of Withholding
No restrictions
Earnings limit applies to any Social Security benefit (retirement, spousal, survivor, divorce)
Earnings limit looks at wages only. Unearned income (pensions, IRAs, rental income, etc.) does not cause Social Security benefits to be withheld
Next: If you are working, under age 66 and receiving ANY Social Security benefit, that benefit is withheld if you earn more than $16,920 ($44,880) in 2017.
This reduction applies to ANY Social Security benefit you receive – it reduces the retirement, the spousal, the survivor and the divorce benefits. Thus, if you are under age 66 and working … it's probably not worth applying for ANY Social Security benefit.
If you are married, the Social Security Administration (SSA) only looks at the earnings of the individual who is collecting Social Security before age 66. For example: wife is 62, retired and receives her Social Security retirement benefit. Her husband is age 65 working and earned $50,000. The SSA does not care how much her husband earns.
Earnings limit looks at wages only. Unearned income (pensions, IRAs, rental income, etc.) does not cause Social Security benefits to be withheld while working and under age 66.
If you are collecting Social Security before Full Retirement Age and then return to work, the SSA will recalculate your benefit as if you had applied x months later. For example: if you claimed your retirement benefit at age 62, and then later went back to work for twelve months, the SSA will recalculate your benefits as if you had applied at age 63 (twelve months later).
Sources for this page: SSA Publication No , SSA Publication No
Source: Social Security Administration

8. BENEFITS FOR MARRIED COUPLES & DIVORCEES
Let's talk about options that are available to anyone who has ever been married.

9. SPOUSAL BENEFITS Spousal Percent* Available even if you did not work
Your spouse must have applied for his or her retirement benefit**
Spousal benefit based on
your spouse's FRA retirement benefit
your age when you first apply for any Social Security benefit
If both spouses worked
receive greater of your retirement or spousal benefit
only one spouse at a time can receive a spousal benefit
The SSA also offers a spousal benefit. Even if you never worked, you may receive up to 50% of your spouse's age 66 benefit. You could receive a reduced spousal benefit at age 62 of 35% of your spouse's age 66 benefit. This is the third reduction to Social Security.
In order to receive a spousal benefit, your spouse must have applied for his or her retirement benefit. Some other important things to know are:
Only one spouse at a time can receive a spousal benefit. If you both worked, you generally receive the greater of your personal or spousal benefit.
The spousal benefits are always based on your spouse's age 66 benefits, regardless of when he or she claim Social Security.
Notice that the spousal benefits do not grow after age 66. Even though the retirement benefit grows past age 66, the spousal benefit is maxed at age 66.
By the way, if you are eligible for a divorced spousal benefit, it's calculated the same way. We'll get to the divorcee qualifications at the end of the section.
* Assumes Full Retirement Age (FRA) is 66. If FRA is not 66, the maximum spousal benefit is still 50%, but the spousal percent at each age may be different. ** If your spouse turned 66 by April 29, 2016, you may be eligible for spousal benefits if your spouse filed and suspended before April 29, 2016.
Source: Social Security Administration

10. CALCULATING SPOUSAL BENEFITS CASE STUDY: JACK & DIANE
Jack and Diane
Jack is the higher earner
Diane's retirement benefits are less than the spousal benefits
Jack's annual Social Security retirement benefits at
Age 62: $7,500
Age 66: $10,000
Age 70: $13,200
What will Diane receive as a spousal benefit if
Jack claims the retirement benefit at age 62, 66 or 70?
Diane claims the spousal at age 62 or 66?
Let's look at a case study.
Here we have Jack and Diane
(READ SLIDE)
Please note: $10,000 was chosen because it makes the math easy. It is not meant to be representative of the average annual Social Security benefit.
For Illustrative purposes only. Based on Full Retirement Age (FRA) of 66. Calculations will vary if your FRA is different. Divorced spousal benefits are calculated in the same manner.

11. CALCULATING SPOUSAL BENEFITS JACK CLAIMS RETIREMENT BENEFIT AT AGE 66?
If Jack claims the retirement benefit at age 66, the retirement benefit will be $10,000 per year. What will Jack receive as a spousal benefit if any Social Security benefit is first claimed at age 66? 50% of Jack's benefit? 35%?
For Illustrative purposes only. Based on Full Retirement Age (FRA) of 66. Calculations will vary if your FRA is different. Divorced spousal benefits are calculated in the same manner.

12. CALCULATING SPOUSAL BENEFITS MAXIMUM SPOUSAL BENEFITS AT AGE 66?
Very good. Diane receives $5000 per year, which is the maximum spousal benefit.
Now, let's assume Diane applies at 62. What is the maximum spousal benefit at 62? 50% of Jack's benefit? 35%?
For Illustrative purposes only. Based on Full Retirement Age (FRA) of 66. Calculations will vary if your FRA is different. Divorced spousal benefits are calculated in the same manner.

13. CALCULATING SPOUSAL BENEFITS MINIMUM SPOUSAL BENEFITS AT AGE 62
Yes, 35%. Diane receives $3,500. Remember, if you do anything before age 66, your Social Security benefit is reduced – including your spousal benefits.
For Illustrative purposes only. Based on Full Retirement Age (FRA) of 66. Calculations will vary if your FRA is different. Divorced spousal benefits are calculated in the same manner.

14. CALCULATING SPOUSAL BENEFITS IF JACK CLAIMS AT AGE 7066
AGE 70 ? ?
Now let's assume Jack claims the retirement benefit at age 70. What do you think the spousal benefit is for Diane?
For Illustrative purposes only. Based on Full Retirement Age (FRA) of 66. Calculations will vary if your FRA is different. Divorced spousal benefits are calculated in the same manner.

15. CALCULATING SPOUSAL BENEFITS SPOUSAL BENEFITS BASED ON JACK'S AGE 66 RETIREMENT BENEFIT70
Yes, Diane will receive 50% or $5,000 is she claims at 66. But if she claims at 62 she will receive 35% or $3,500.
How many of you got this right? How many of you thought it would be higher?
The spousal benefit is always based on the other spouse's age 66 benefit regardless of when the spouse claims Social Security. Even though the retirement benefit increased after age 70, the spousal benefit stayed the same.
Presenters note: You'll notice that Diane's spousal benefit is based purely on her age when she claimed the benefit. The red bars represent Jack claiming at age 66 and the grey bars represent Jack claiming at 70.
For Illustrative purposes only. Based on Full Retirement Age (FRA) of 66. Calculations will vary if your FRA is different. Divorced spousal benefits are calculated in the same manner.

16. CALCULATING SPOUSAL BENEFITS IF JACK CLAIMS AT AGE 6266
AGE 70 ? ?
Let's do our final example. Assume Jack claims at age 62.
If Diane claims the spousal at age 66, will it be 50% of $7500 (Jack's age 62 benefit) or 50% of $10,000 (Jack's age 66 benefit)? What about if the spousal benefit is claimed at age 62?
For Illustrative purposes only. Based on Full Retirement Age (FRA) of 66. Calculations will vary if your FRA is different. Divorced spousal benefits are calculated in the same manner.

17. CALCULATING SPOUSAL BENEFITS SPOUSAL BENEFIT BASED ON JACK'S AGE 66 RETIREMENT BENEFIT62
AGE 66
AGE 70
The answer:
The spousal benefit is always based on the other spouses' age 66 benefit.
Presenters note: You will notice that Diane's spousal benefit at 62 remains the same regardless of Jack's age when he claimed his retirement. For example, Diane's spousal benefit at 62 is $3,500 regardless of whether Jack claimed at 62, age 66 or age 70.
For Illustrative purposes only. Based on Full Retirement Age (FRA) of 66. Calculations will vary if your FRA is different. Divorced spousal benefits are calculated in the same manner.

18. RESTRICTED APPLICATION
Requirements for Restricted Application
Born on or before 1/1/1954*
Apply at age 66 or older
Spouse applied for retirement benefit**
Switch to retirement benefit plus 8% annual accrual at any time between ages 66 and 70
Start with spousal benefit at age 66+
The Retirement Benefit will accrue in value by 8% per year from age 66 to age 70
Many of you heard that there were some changes that occurred to Social Security as a result of the Bipartisan Budget Act of How many of you know there’s still one strategy that is still available for married couples, but you have to born before 1/1/1954? It’s called restricted application. It allows you to start with the spousal benefit and then switch to your retirement benefit. Your retirement benefits continue to accrue by 8% each year from age 66 to age 70, even though you are receiving the spousal benefit. Using this strategy does not reduce your retirement benefit nor your spouse's retirement benefit. Here’s how to determine if you could be eligible for restricted application.
Born before Jan 1, 1954: eligible restricted application
Apply at 66 or older: If you apply before 66 can't do restricted application.
Spouse applied: You can only receive a spousal benefit if your spouse has applied for their retirement benefit. This also means that restricted application is only available if both spouses worked and paid into Social Security.
If you answer yes to all three questions, you could be a candidate for restricted application. Discuss this option with your advisor and analyze how this strategy fits in with your current plans for retirement income.
* If you were born after 1/1/1954, you will not be able to restrict application to spousal benefits only. When you apply, you will receive the greater of you retirement or spousal benefit.
* If you were born after 1/1/1954, you will not be able to restrict application to spousal benefits only. When you apply, you will receive the greater of your retirement or spousal benefit.
** Or filed and suspended by April 29, 2016
Source: Social Security Administration

19. REDUCTION #1: SURVIVOR BENEFITS
Maximum Percent of Deceased's Benefit: 100% at Survivor's Full Retirement Age
Minimum Percent of Deceased's Benefit: 71.5% at Survivor's age 60*
Claiming your retirement or spousal benefit before Full Retirement Age does not reduce your survivor benefit
Survivor dependent on when deceased claimed their retirement benefit
Earnings limit applies to any benefit received before Full Retirement Age.
After the highest earner passes away, Social Security can provide benefits to the surviving spouse. The surviving spouse could receive up to 100% of the deceased's benefit if the surviving spouse is Full Retirement Age or older when he or she claims the survivor benefit. Even if the surviving spouse is receiving a reduced retirement or spousal benefit, you can receive up to 100% of the deceased's benefit if you are Full Retirement Age or older when you apply for the survivor benefit.
The surviving spouse is eligible for a reduced survivor benefit as early as age 60 (50 if the surviving spouse is disabled). The minimum benefit is 71.5% of the deceased's benefit.
The survivor benefit is dependent on when the highest earner claims his/her retirement benefit. The higher the deceased's retirement benefit, the higher the survivor's benefit.
* 50 if surviving spouse is disabled
Source: Social Security Administration

20. IMPACT OF CLAIMING DECISION ON SURVIVOR
Hypothetical Survivor Benefits Based on Deceased's Claiming Age
So, how does the deceased's claiming decision impact the survivor's benefit? It's easier to illustrate by looking at a hypothetical.
In 2016, the average male would receive $20,000 in annual Social Security retirement benefits if he claimed at age 66. The difference in the survivor benefit if he took at age 62 versus age 70 is almost $10,000. Could an extra $10,000 a year make a difference for some of you?
For the highest earner in the couple, the Social Security retirement benefit is no longer "your" benefit. It is the "couple's" benefit. This is because the highest earner's benefit becomes the survivor's benefit after the highest earner passes away.
NOTE: The smart people will recognize that the retirement benefit at age 62 would have been $15,000, but the survivor's benefit is $16,500. This is due to the "Widow Limit" that the Social Security uses if the highest earning spouse claims before their Full Retirement. Under the widow limit, the surviving spouse receives the lesser of:
A: the survivor percent (71.5%-100%) of the deceased's benefit at the deceased's Full Retirement Age OR
B: the greater of 1) what the deceased was receiving at death or 2) 82.5% of the deceased's FRA benefit.
Based on average PIA for males at age 66 (Social Security Statistical Supplement, 5b, 2016)
Source: Social Security Administration

21. SOCIAL SECURITY BENEFITS FOR DIVORCEES
Spousal Benefits
Survivor Benefits
Must be married for 10+ years
Available at age 60
Unmarried or remarried after age 60
If your former spouse remarries, it does not affect your benefits
Earnings limit applies to any benefit received before Full Retirement Age
Must be married for 10+ years
Both are age 62
Unmarried
Divorced for two years
Former spouse does not need to apply for his/her retirement in order for you to receive a spousal benefit
If both spouses worked
Generally receive greater of retirement or spousal benefit
If you are born before January 1, 1954, and apply at age 66+: Can restrict application to divorced spousal benefit
If you are divorced, but your marriage lasted 10 years or longer., you may qualify for benefits off your ex-spouse.
You can receive a spousal benefit off your ex-spouse's record (even if he/she has remarried) if:
You are unmarried
You and your former spouse are age 62 or older
Your ex-spouse is entitled to Social Security retirement or disability benefits
Unlike married couples (where your spouse needs to apply in order for you to receive a spousal benefit), if you are divorced, your former spouse does not need to apply for their retirement benefits in order for you to receive a divorced spousal benefit. If you can provide the Social Security office with your former spouse's name and SSN, a copy of the marriage license and divorce decree, the SSA will check to see if you qualify for a benefit off of your former spouse.
If both divorced spouses worked, each spouse generally receive the greater of their retirement or spousal benefit. However, if you were born before January 1, 1954 and you are age 66 or older when you apply, you may be eligible for restricted application (start with spousal at 66, switch to your retirement benefit at a later age)
If your former spouse has passed away, you are entitled to a survivor benefit as long as you
Are age 60
Are unmarried or remarried after age 60.
If you are working and under the age of 66, the earnings limit applies to your divorce spousal benefits.  
Source: Social Security Administration

22. REMARRIAGE AND SOCIAL SECURITY
If your second marriage ends (either through divorce, annulment or death), you may become re-entitled to benefits off of the first marriage.
As a general rule, if you remarry, you forfeit the benefits off your former spouse.
There are two exceptions
1) If you remarry after age 60: you can hold onto the survivor benefit off of your former spouse even though you remarried to your current spouse. Social Security Administration will pay you the highest benefit to you which you are entitled: either your retirement benefit, the spousal/survivor benefit off your current spouse, or the survivor benefit off your ex-spouse.
** Example; If you are 58 and thinking of getting remarried: If your soon-to-be new husband makes less than your 1st husband you may want to wait until age 60 to remarry so you can retain the survivor benefit off your ex-spouse.
2) If the second marriage ends (either through divorce, annulment or death): you can become re-entitled to benefits off of first marriage
Note: If you claim a divorced spousal benefit off of your former spouse, the amount of the divorced benefits you receive will not reduce the benefits of your ex-spouse or his/her current spouse may receive.
*If you remarry at or after age 60, you may receive greater of 1) spousal/survivor benefit of current spouse, 2) your retirement benefit, or 3) survivor benefit of former spouse
Source: Social Security Administration

23. TAXES & YOUR RETIREMENT PLAN
On to the next section (and everyone's favorite topic)…taxes.

24. TAXES AND SOCIAL SECURITY
Social Security benefits are not taxable
Up to 50% of Social Security Benefits May Be Taxable
Up to 85% of Social Security Benefits May Be Taxable
Individuals
< $25,000
$25,000-$34,000
$34,001+
Married Couples Filing Jointly
< $32,000
$32,000-$44,000
$44,001+
Regardless of your age, once you start taking Social Security, your benefits may be taxable if your income exceeds $25,000 if you are single or $32,000 if you are married and filing jointly.
Source: IRS INFO

25. COMBINED INCOME DETERMINES IF SOCIAL SECURITY BENEFITS ARE TAXABLE
AGI
Tax- Exempt Income
Half of Social Security + = +
Source: Social Security Administration
* This is not all - encompassing. May include income from savings bonds to pay for higher education and deductions for qualified educational loans. Contact a qualified tax advisor for more information. MFS does not provide tax advice. For informational purposes only.
To determine how much of your Social Security benefits could be added to your income and thus become taxable, the IRS uses something called combined income (formerly called provisional income).
Combined income is your adjusted gross income (generally lines 1–37 of your 1040), plus tax-exempt income plus only half of your Social Security benefits. So the higher your Social Security benefits, the less chance that your Social Security benefits may be included in your combined income.
FROM IRS INFO BULLETINS:
By lowering provisional income, a taxpayer could possibly lower the percentage of taxable Social Security benefits or even avoid taxation on Social Security benefits altogether. (IRS INFO , released 06/26/2009).

26. WHAT TO DO Decide how long you plan to work Consider your assets
Consider your longevity and that of your spouse
Focus on your benefits as a couple, not your individual benefits
Understand the impact of the Social Security claiming decision on your plans for retirement
As you can see Social Security claiming strategies can be complex and have many considerations. Working with a financial advisor and tax professional may help put it all in perspective.
Here are some guidelines: (READ SLIDE)

27. LONG-TERM CARE

28. WHAT IS LONG-TERM CARE?
Defined: ongoing services & support needed by people who have chronic health conditions or disabilities
3 Levels of Long-Term Care:
Skilled Care - general around-the-clock care given by professional’s (nurses, therapists, or aides) under doctor’s supervision
Intermediate Care - provided by professionals, but less frequent basis
Custodial Care - personal care often given by family caregivers, nurses’ aides, or home health workers who provide assistance with “activities of daily living” such as bathing, eating, & dressing.
Source:

29. WHY IS IT IMPORTANT PLAN FOR LONG-TERM CARE?
No one expect to need LTC, but it’s important to plan for it nonetheless. Here are 2 important reasons why:
The odds of needing LTC are high
70% of people will need LTC at some point during their lifetimes after reaching age 65
8% of people between ages will have a disability that may require LTC services
The cost of LTC can be expensive
Some of the average costs in the US for LTC include:
$6,235 a month ($74,820 per year) for a semi-private room in a nursing home
$6,965 a month ($83,580 per year) for a private room in a nursing home
$3,293 per month for a 1-bedroom unit in an assisted living facility
$21 / hour for a home health aide
Source:

30. HOW TO PROTECT YOURSELF
Coverage Options for long term care:
“Be nice to your kids because they will pick your nursing home”
Source:

31. WHAT DOES MEDICARE COVER?
Medicare is a federal health insurance program for people ages 65 and older and those with certain disabilities.
SOURCE:

32. THANK YOU

33. Disclosure
Registered Representative of, and Securities and Investment Advisory services offered through Hornor, Townsend & Kent, Inc. (HTK),  Registered Investment Advisor,  Member FINRA/SIPC - Eight Tower Bridge, 161 Washington Street,  Suite Conshohocken,  PA 19428    1847Financial, The Burkholder Team and HTK are independent and unaffiliated with each other RM-May19