1. Understanding Social Security and evaluating the best approach for you!
Grow, protect, and enjoy your Orange Money® for retirement.
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2. What is Social Security?
A U.S. Federal program of social insurance and benefits
About 167 million Americans pay Social Security taxes
59 million collected monthly benefits in 2014
Approximately one in four households receive income from Social Security
Social Security, Understanding the Benefits 2015

3. History of Social Security
1795
Thomas Paine in his writings proposed a social insurance program for the young American Republic.
1889
Germany became the first nation to adopt an old-age social insurance program.
1935
Social Security Act became law.
1940
Ida M. Fuller became the first person to receive an old-age monthly benefit check under new Social Security law.
Side Note: Thomas Paine was an English and American political activist who was the author of the two most influential pamphlets at the start of the American Revolution which inspired the rebels in 1776 to declare independence from Britain. Those two pamphlets were; Common Sense and The American Crisis. His pamphlet entitled, “Agrarian Justice” is where Thomas Paine proposed a social insurance program.
Resource:

4. Ida M. Fuller Ida M. Fuller She was born on September 6, 1874
She paid in a total of $24.75 between 1937 and 1939
At age 65, her first check dated January 31, 1940 was for $22.54
She lived to age 100
She received a total of $22,888 in benefits
Ida M. Fuller
Read the slide.
Resource:

5. Social Security provides a foundation
*Source: Social Security Administration, Office of research, evaluation, and statistics , Income of the Aged Chartbook, 2012, issued March 2014.
35%
10%
34%
17%
Social Security
Social Security provides a foundation
Social Security was never intended to cover 100% of a persons retirement income. Instead Social Security benefits represents a portion of retirement. It can be thought of as a foundation that is fixed, constant and automatically increases to help keep up with the cost of living (COLA adjustment). Depending on a persons income prior to retirement, their expenses, and their life style, Social Security could make up a small portion of their retirement income or it could make up a fair amount of what they will need in retirement income.
For example in 2016 for those that make over $118,500 Social Security will not calculate any earnings above that threshold. That means if they make $150,000 everything above $118,500 will not be taken into consideration when it comes to calculating their social security benefits. So for someone who earns a lot more than $118,500 Social Security will represent a lot less for them in retirement. For someone who makes $50,000 to $60,0000, social security benefits will make up a greater percentage of their retirement income.

6. Qualifying for retirement benefits
Eligibility
40 credits (10 years of work) 1 credit a quarter
Quarters do not need to be consecutive
In 2017, you receive one credit for each $1,300 of earnings, up to the maximum of four credits per year
Benefits are calculated based on average of the 35 highest years of earnings
$0 used in all years less than 35, which will result in a lower benefit
Reference: (How You Earn Credits brochure)
How do you qualify for retirement benefits and how are credits earned?
In 1978, employers started reporting your earnings just once a year. Credits are now based on your total wages and self-employment income during the year, no matter when you did the actual work. You might work all year to earn four credits, or you might earn enough for all four in a much shorter length of time. In 2017, you receive one credit for each $1,300 of earnings, up to the maximum of four credits per year.

7. What is your full retirement age
Year of Birth
Full Retirement Age
1937 or earlier 65
1938
65 and 2 months
1939
65 and 4 months
1940
65 and 6 months
1941
65 and 8 months
1942
65 and 10 months 66
1955
66 and 2 months
1956
66 and 4 months
1957
66 and 6 months
1958
66 and 8 months
1959
66 and 10 months
1960 and later 67
Source:
If you were born on January 1st of any year you should refer to the previous year. (If you were born on the 1st of the month, SSA will figure your benefit (and your full retirement age) as if your birthday was in the previous month.)

8. Cost of living adjustment
In 1973, legislation enacted a cost-of-living adjustment, also known as COLAs
Help keep pace with inflation
Have been in effect since1975
Any adjustments are announced in October
Increases are payable starting January of following year
Resource:
As we just mentioned Social Security can be thought of as a foundation that is fixed, constant and automatically increases to help keep up with the cost of living (COLA increase). This means that inflation no longer drains value from Social Security benefits. Let’s talk about how COLAs came to be a part of social security benefits. Read slide: (the four sub-bullet points help explain COLAs)

9. Inflation by percentage
History of COLAs
Inflation by percentage
Source:
The years and numbers on this chart represent a range of COLA increases over the last 40years. In 1980 when inflation was at an all-time high benefits had a COLA increase by 14.3%. In 2010, thirty years later inflation was at zero, so there was no COLA increase. In 2015 there was a 1.7% COLA increase and on October 15th of 2015 Social Security stated because there was no increase in the Consumer Price Index (CPI) from the third quarter of 2014 to the third quarter of 2015, there would be no COLA increase for In 2017 the COLA increase is 0.3%.

10. 84 86 Life Expectancy? Male age 65 Female age 65
Can expect to live on average until
Male age 65 84
Female age 65 86
The Social Security Administration website has a Life Expectancy Calculator that you can use to get a rough estimate of how long you may live. If you are interested the website link is:

11. Longevity challenge 2,300 80,000 600,000 1950 2010 Projected in 2050
100 years old
80,000
600,000
1950
2010
Projected in 2050
Source: U.S. Census Bureau February 2012
Those are just averages from the previous slide. As a result of our medical advances, we are, as a nation living longer. And more power to us. So long as we remember that with a longer life comes the responsibility to pay for it.
One out of every four 65-year-olds today will live past age 90. One out of every 10 will live past age 95. Chances of living to age 100 has gone up dramatically. (read slide).What are the chances you can afford to live to 100?
The Social Security Administration website has a Life Expectancy Calculator that you can use to get a rough estimate of how long you may live. If you are interested the website link is:

12. 100 years and still going strong
New Jersey Man Celebrates 101st Birthday at Job he’s had for 73 years
A long drive: 100-year-old still selling Chevys
100-year-old dressmaker finishes 1051st dress for African children
100-year-old woman plays piano on birthday
100-year-old woman sky-dives for birthday
All these articles headlines are around individuals who are 100 years old and still going strong. There is a misconception that once you retire life is over. Think again. The other misconception you hear people say all the time is that they won’t live beyond their 80’s. That’s simply not true. The stats indicate otherwise. A person needs to be responsible and plan their retirement as if they will live 100 years or longer.
Articles

13. When to start receiving benefits
When is the right time for you to receive Social Security benefits?
The answer: It depends.
Factors to Consider:
Timeline for retirement
Health status
Life expectancy
Other income sources
Timeline for retirement: When do you plan on retiring? How long do you need to work? How long do you want to work? Some people love what they are doing and plan to work until they no longer can. Others are fortunate to talk early retirement and others do not have the luxury to retire anytime soon.
Health Status: For someone they are healthy as can be. For others their prognosis isn’t so great. Sometimes a persons health plays a big part in their decision into when they talk their social security benefits.
Life expectancy: Does your family have a good track record of living into their 80’s, 90’s or longer? Does your family have a history of a shorter life expectancy?
Other Income Sources: Some people once they retire have other sources of income to tap into where they delay taking their social security benefits. Others have a spouse that makes enough to support both their living expenses.

14. Cost of collecting early
Age
Full Retirement 66
Full Retirement 67 62
25% Reduction
30% Reduction 63
20% Reduction 64
13.3% Reduction 65
6.7% Reduction 66
Full Benefits 67
Under Full Retirement Age (FRA)
Give up $1 in benefits for every $2 you earn above a $16,920 limit
In the year you reach Full
Retirement Age (FRA)
Give up $1 in benefits for every $3 you earn above a $44,880 limit
When determining if you should take Social Security Benefits before FRA you need to be aware of two factors when taking benefits before FRA. First, your benefits will be reduced. Let’s say your FRA benefit would be $1000 a month, if you decided to take benefits starting at age 62, you would only receive $750 a month. Secondly, if you decide to continue working and earn over $15,720 a year, you will give up $1 in benefits for every $2 you earn working. Then when you reach FRA, if you earn over $40,080, you will give up $1 in benefits for every $3 you earn.
Source: Age Age Collecting early and working

15. Benefits of collecting after
Full Retirement at 66
Full Retirement at 67
Age
Income Amount 66
100% 67
108% 68
116% 69
124% 70
132%
Age
Income Amount 67
100% 68
108% 69
116% 70
124%
If a person were born in 1943 or later and they decide to wait to collect benefits until age 70. They will get an increase to their benefits of 8% per year beyond full retirement age (FRA) up to age 70. For those who have a FRA of 66 this could be an increase of 32% by age 70.
For someone with a FRA of 67, if they wait until age 70, they would also get an 8% increase up to age 70, but for them the increase would be an additional 24% up to age 70.
Source:

16. Benefit payments will differ
Age 62
$750
Age 66
$1,000
Age 70
$1,320
The following chart provides an example of how your monthly benefit amount can differ based on the age at which you decide to start receiving benefits. Based on FRA at age 66, you can see the difference and impact on your social security benefits if you decided to take them earlier than your FRA or if you decided to wait and start taking your social security benefits at age 70. (
You can estimate benefit amounts and find more information to help you decide when to start receiving retirement benefits by going online to

17. Bipartisan Budget Act of 2015
Signed by President Obama on November 2, 2015
Changes to Social Security claiming strategies:
Certain spousal strategies.
Elimination of file & suspend strategy.
Effective May 1, 2016
Some of you may have heard that on November 2nd, President Obama signed the Bipartisan Budget Act of 2015 to keep the government from shutting down. Within that act were some changes to Social Security around spousal benefits and the strategy known as “file and suspend.”
We are going to talk about these strategies and how they were/are used and how this will impact claiming benefits after May 1, It is very very important to note that the core benefits of Social Security will stay the same. Let’s look at restricted spousal benefits and the file and suspend strategy for just a few moments: (click to next slide)

18. File & suspend strategy
One spouse reaches full retirement age (FRA) and files for their own benefit.
Immediately they suspend their benefit, continue to work and let it grow until they retired or turned age 70.
This allows the other spouse to file for spousal benefits.
Second spouse would receive half of their spouse’s full retirement age benefit.
The file and suspend strategy has/had been utilized in utilized two ways:
One for couples in which one spouse makes a substantial more amount of money compared to the other spouse.
Secondly, the other way the strategy was used is for married couple where one spouse worked full time for an employer and the other spouse would stay home and take care of the kids or the house. This strategy allowed the spouse who stayed home to earn something in retirement since they gave up their career to stay home and take care of the home front. Typically because they were not collecting a pay check, they were unable to pay into Social Security and earn enough credits to qualify for Social Security benefits. Here is how file & suspend would work in this example: (read slide).

19. Claim now, claim later
One spouse reaches FRA files a restricted application for their own benefit.
This allows their benefit to grow until they retire or to age 70.
The other spouse files for spousal benefits at FRA and lets their own benefit grow until they retire or to age 70.
When they retire or at age 70 they stop collecting spousal benefits and switch to their own benefit to receive a greater payout.
In this second example there is a strategy known as claim now, claim later that uses the restricted spousal benefit and file and suspend strategy to increase both spouses Social Security benefits. How does this work? (Read slide):
Now this is very important. Because of the changes to Social Security under the Bipartisan Budget Act of 2015, anyone who turned 62 by the end of 2015 will retain the right to collect just spousal benefits starting at their full retirement age of 66, assuming their spouse has already claimed retirement benefits or had requested to file and suspend their benefits prior to May 1, If no spouse was of FRA and had filed and suspended their benefit prior to May 1, 2016, a spouse cannot collect spousal benefits on the other spouse until that spouse starts to collect benefits. Because of the changes to Social Security benefits and how this may impact your benefits I am available to better help you understand what your options may be.

20. Spousal benefits
Spouse is entitled to a greater of the benefit based upon their own benefits or 50% of the spouse’s benefit.
Example #1: Dawn and Adam both have reached FRA. Adam’s benefit is $1,200 and Dawn’s benefit is $1,400. Both would receive their own benefit amount.
Example #2: Steve and Sue both have reached FRA and have been married for 35 years. Steve never worked and does not qualify for Social Security. Sue’s benefit at FRA is $1,800. At FRA, Steve’s spousal benefit would be $900.
Example #3: Jerry and Mary both have reached FRA. Jerry’s benefit is $800 and Mary’s is $1,800. Since half of Mary’s benefits equals $900 that is greater than Jerry’s benefit of $800. In this example Jerry would be entitled to $900 instead of his own benefit of $800.
Although I just shared with you one way spousal benefits were impacted by the Bipartisan Budget Act of 2015, here are some ways in which spousal benefits were not impacted. It is very important to note effective May 1, 2016 that until one spouse reaches FRA and starts claiming benefits, the other spouse cannot claim spousal benefits. Read slide:
As a side note when it comes to Spousal benefits. Assume Jerry at age 66 had a benefit of $2000 and decides to wait until 70 to take his benefit to get a 32% increase which would make his benefit $2640. How much would Mary’s benefit be? $1320? Nope. It would still be $1000. Delayed retirement credits do not apply to spousal benefits. However, they do apply to survivor benefits. So if Jerry died at age 70 with a benefit amount $2640, Mary would get the full 2640.

21. Jerry and Mary’s benefit options
Mary could take her benefit of $1800
Mary could increase her benefit amount by deferring up to age 70. At age 70 her benefit amount would be $2448
Half of Mary’s Benefit $900
$1800 divided by 50% = $900
If your like me I like to be able to visualize things. So here is a simplistic visual using example 2 from the previous slide to help understand just one strategy when it comes to spousal benefits. Mary’s Benefit at FRA of 66 is worth $1800. She can either take her benefit of $1800 or if she wanted to continue to work until age 70, she could defer her benefit and let it increase to $ Jerry decides he is retiring at age 66 and wants to start receiving benefits. Jerry has two options available to him.
If Mary and Jerry decide to collect benefits at their FRA, Jerry can either take his full benefit amount of $800 or because half of Mary’s benefit is greater than Jerry’s full benefit, Jerry would be available for spousal benefits and could receive $900 instead of his own $800 in benefits
Jerry’s Benefit $800
Jerry can either take his benefit of $800
Jerry can take half of Mary’s benefit which is $900 once Mary files for her own benefit.

22. To qualify an ex-spouse must:
Divorced spouse
To qualify an ex-spouse must:
Have been married for at least 10 years.
Be at least 62 years old to file.
Be unmarried.
Not eligible for an equal or higher benefit on his or her own record.
Read slide:
Two important side notes when it comes to divorcee’s filing spousal benefits:
First what they collect has no impact on what the other spouse collects.
Divorced spouses younger than 62 by the end of 2015 will no longer be able to collect only spousal benefits and then claim their benefit later on. When they file benefits, they will get the greater of their benefit or half of their ex-spouses benefit based on when they file.

23. Survivor benefits
Widows and widowers can begin taking benefits based on their own earnings history and later switch to survivors benefits or vice versa.
Survivor benefits can be taken even if the surviving spouse files before full retirement age.
This allows the survivor to take a benefit at age 60 based on the deceased’s earning history and allow their own benefit to grow until age 70.
Survivor benefits are equal to full retirement benefit the deceased would have received.
In order to take advantage of survivor benefits, the survivor must be age 60 or over, have not remarried prior to age 60, the deceased died fully insured (40 quarters of coverage) and you were married to the deceased for at least the nine months just before the deceased passed away.

24. Survivor benefits Widow or Widowers Earliest to Begin (Reduced)
Widow or Widowers
Earliest to Begin (Reduced)
Benefits
60 50, if disabled
Maximum Benefit
100% of deceased worker’s Benefit
If Spouse Has Not Reached Full
Retirement Age, Takes Benefits
And Continues Working
Benefits will reduce by $1 for every $2 you earn over that year's limit
If Deceased Worker Started Benefits Prior To Full Retirement Age
The maximum benefit is limited to what the deceased was receiving if they were alive
The survivor benefits will depend on your average lifetime earnings. The higher your earnings were, the higher their benefits would be. Social Security calculates a basic amount as if you had reached full retirement age at the time you die.

25. Survivor benefits Widow or Widowers Typical Situations
Widow or Widowers
Typical Situations
A widow or widower, at full retirement age or older, generally receives 100 percent of deceased worker’s basic benefit amount
A widow or widower, age 60 or older, but under full retirement age, receives about percent of the deceased worker's basic benefit amount
If You Re-Marry
Must be unmarried when you file for (widow or widower's
benefits or your new marriage must be one that Social
Security can disregard
Can continue to receive benefit if re-married after age 60 or age 50 if disabled

26. Break even point Total benefits received Age
One of the biggest questions people ask is what is my break even point? Really what they are asking is it really worth me waiting until full retirement age (FRA) or age 70 to collect my benefits. As we have already talked about when you start collecting Social Security benefits depends on a lot of factors. But to keep things extremely simple for a moment lets look at a hypothetical example. Suppose a persons FRA is 66 and they would collect $1290 per month at FRA. If they waited until age 70 their benefit would be worth $1755 a month. If they decided to take their benefit early at age 62 it would be about $967 a month.
In this example the breakeven point between collecting benefits at age 62 compared to age 66 is at age 77
Then if you were to compare taking benefits at 62 or 70, the break even point would be late into year78.
Finally if you compared taking benefits at age 66 to age 70, the break even point would be early on in age 80.
This example gives you something to think about and it is this. If your family has a history of living into their 90’s and you can afford to wait until 70 to start receiving your benefits, then over the long term it would have the highest payout. If you’re FRA is 66 and you were diagnosed to live to age 72, it might make sense to start taking benefits at 66. If someone had a spouse and was diagnosed to live to age 72, they might want to let their benefit roll up to increase the amount of money their spouse would get when you pass away (survivor benefits).
Considering Social Security is one of the most important financial decisions are person will make in their lifetime it is a valid question around a persons breakeven point, but there is so much more that goes into making the decision of when you should start receiving Social Security than putting a few numbers into a calculator and then using those numbers to determine your decision can be misleading. So misleading that the Social Security Administration removed their break even calculator from their website around It really goes back to what we talked about earlier around the different factors to consider when making the decision around when to take Social Security benefits.
Age
For illustration purposes only. Does not account for any other adjustments to monthly benefits.

27. How are benefits taxed?*
File a federal tax return as an “individual” and your combined income is
Between 25K and 34K, you may have to pay income tax on up to 50 percent of your benefits.
More than 34K, up to 85 percent of your benefits may be taxable.
File a joint return, and you and your spouse have a combined income that is
Between 32K and 44K, you may have to pay income tax on up to 50 percent of your benefits.
More than 44K, up to 85 percent of your benefits may be taxable.
Are married and file a separate tax return, you probably will pay taxes on your benefits.
Note:
Your adjusted gross income:
+ Nontaxable interest
+ ½ of your Social Security benefits
= Your “combined income”
One of the biggest questions people want to know in regards to Social Security benefits is how will they be taxed. The answer is it will depend. Some individuals will have to pay federal income taxes on their Social Security benefits, but typically this occurs when the individual has other income sources for year besides Social Security benefits: such as wages, interest, dividends, and distributions.
Here is some general information that can be found on the Social Security Administrations website. No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on IRS rules. If you (read slide):
*This does not constitute as tax advice and you should talk with your CPA regarding any tax implications.
Source: Social Security Official Social Security Website; Benefits Planner: Income Taxes and Your Social Security Benefits

28. Myths about Social Security
Social Security is going bankrupt.
Social Security is a Ponzi Scheme.
I should collect Social Security benefits as soon as I am eligible.
Social Security Administration will tell you what to do.
We’ve already talked about a lot today, but I want to cover some of the more common myths around Social Security for just a moment:
Social Security is going bankrupt: Congress over the years have been looking at ways to make sure this does not happen. Everything from creating new full retirement ages to makes changes to COLA adjustments. Just recently Congress made changes to the file and suspend strategy to close the gap on a loophole that was causing Social Security to payout more benefits than it attended too. Even if congress did nothing between now and 2034 when the trust funds are projected to run dry, there would still be enough to from FICA taxes to payout about 75% of benefits.
Social Security is a Ponzi Scheme: This is not true! Social Security does not need an increasing base of people to function were as Ponzi Scheme does. Rather, it needs a balance between the number of workers and beneficiaries. Some of the reasons for the projected shortfall are due to lower birthrates starting in the 1960’s and along with longer life expectancies. Remember Social Security was originally designed to help people for a few short years after retirement before they were expected to pass away, not for three to four decades. Secondly Social Security is transparent were Ponzi Schemes are not. Social Security each year releases a very detailed report about it’s financial state and its future year projections. One last thing to mention is Ponzi Schemes are created to get rich at the expense of others. Social Security was created to help people financially in retirement.
I should collect Social Security benefits as soon as I am eligible: There are two thoughts when it comes to this statement. People believe that Social Security benefits will not be around when they go to collect, which we discussed as not being true. The second thought is people believe that even at a reduced rate they will make more money by investing the reduce benefit and collecting later while they continue to work. There are a few issues with this second thought. One, if you make over a certain amount while working and collecting early, you could end up with no early benefit. Secondly, by waiting longer to collect you get an 8% guaranteed increase up to age 70. The average investor because of their emotional bias are not able to year over year earn 8% on their investment. More importantly, they could lose money on their investment forcing them to earn more the next year to make up for the loss.
Social Security Administration will tell you what to do: They actually will not. The SSA agent will tell you about the rules which may be mistaken for advice, but SSA agents are restricted from providing guidance.

29. Social Security online resources
Social Security Administration Website:
SSA Website Resources/Calculators
Earnings Test Calculator
Retirement Age Calculator
Estimate Your Retirement Benefits
Estimate Your Life Expectancy
Other Benefit Calculators
If you would like to go out to the social security website and look at the information, the resources and the calculators that are available for you to look over, the Social Security Administration website link is
When you go to SSA website there is a wealth of information for individuals. It also provides a lot of different calculators to help you know if you have earned enough credits, when is your full retirement age, help you estimate your retirement benefits and provide you with a statistical idea of your life expectancy as well as other calculators you may find useful if you go online to the SSA website.

30. Social Security online resources
Here is an example of one of the calculators/tools that is available for you as a resource to estimate your monthly benefit. Based on the information provided by the benefits calculator if your birth date was on 06/15/1950 and currently you were earning $40,000. Your estimated benefit amount, beginning at age 66 would be $1, Remember this is just an estimate.

31. Timeline for retirement planning
No more tax penalties on early withdrawals from employer-provided retirement savings plans such as 401(k) plans and other individual retirement accounts, but leaving money in means more time for it to grow. Also, withdrawals will be taxed as regular income.
Receive Social Security full benefits, depending on your birth year.
Sign up for Medicare and Medicare Part D.
Start taking minimum withdrawals from most retirement accounts by this age; otherwise, you may be charged penalties in the future. 50
70 1/2 65 66 67 70
59 1/2 62
Begin making catch-up contributions, an extra amount that those over age 50 can add to 401(k) and other retirement accounts. Check your Social Security Statement online every year for earnings accuracy and to learn what your estimated benefits will be.
Earliest age to collect Social Security retirement benefits; however, claiming before the full retirement age results in reduced monthly benefits.
Earn Social Security Delayed Retirement Credits, which increase monthly benefits for each month claiming is delayed between the full retirement age and age 70.
Social security is synonymous with retirement. With retirement comes preparation and careful planning. Here is a retirement timeline from the Department of Labor with some important dates that are worth mentioning. (Read the Slide)
Source:

32. What is the best approach for me?
It really depends on your situation:
When do you plan to retire?
How much income do you need in retirement?
What other sources of income are available to you in retirement?
Can you afford to delay taking benefits?
There is a lot to know about social security benefits and there are many strategies when it comes to utilizing your social security benefits. Today we just went through an overview of social security benefits and touched on some of the basic information you should know and some different strategies that are available to you. One of the last things you should take away from this presentation today is that you have earned those benefits so do not leave dollars on the table that you are eligible to receive.
(Optional Comments for Producers)
What is the best strategy/approach for you? Social Security is a part of your retirement and it is a portion of your retirement. If you would like to learn more about the rules and strategies around social security benefits, how they can help you during retirement, I am can help answer those questions and help design the approach that works best for you when it comes to your social security benefits and retirement benefits.

33. Thank you.
Grow, protect and enjoy your Orange Money® for retirement. Please talk to your financial professional to find out how.
Thank you for joining us. Talk to your financial professional.
/03/2017