1. Social Security Primer Matthew Schwerin CAPS Financial Group Office (630) 474-9088 Cell (630) 247-0033 mschwerin@nsinvest.com

2. 2 Retirement Plan Review Two kinds of retirement plans: 1) pensions (defined benefit), and 2) 401K type (defined contribution) Pension income is a promise to pay, usually a monthly amount at a certain period, for as long as you live Defined contribution plans is where you save money in an account with your name on it; you accumulate a balance and make the investment decisions SS is obviously a pension plan - type benefit With the demise of most pension plans, SS become that much more important (can’t outlive it!)

3. 3 Some Facts Social security never meant to be sole source of retirement income for people The more income you make, the less of a % of your income social security will provide Life expectancy for 65 year old today: 82 for men, 85 for women Currently there is a surplus of taxes being paid in to benefits taken out

4. 4 Basics You don’t have to “sign up”; mandatory! Contributions through FICA taxes or self employment taxes FICA taxes up to max of $117K of earnings Current payments to retirees come from current workers’ FICA taxes SS has a cost of living adjustment (COLA) 2014 COLA was 1.5% Medicare premiums deducted from SS check

5. 5 Eligibility Need to work in a SS covered job for 10 yrs & earn the minimum $ amt to earn 4 credits per year; need 40 total credits to qualify Benefits are calculated on your highest 35 years of earnings (indexed for inflation) You should apply about 3 months before you want benefits to begin

6. 6 Benefits Earnings and some complicated rules determine your PIA (primary ins. amount) PIA is, at age 62, what your benefit will be at full retirement age (FRA) PIA will be adjusted for: – When benefits are claimed – Annual COLA’s – Additional years of earnings Key objective of SS planning is to maximize your own benefits

7. 7 Benefits If you take SS at age 62, you would collect 75% of your PIA at full retirement age If you wait until 70, you can collect 132% of your PIA; each year you wait, benefit goes up 8% See handout on age eligibility See breakeven analysis handout

8. 8 Spousal Benefits Analysis of married couple benefits is more complicated than straight breakeven analysis Several strategies for spouses with many different permutations Example – file and suspend, spouse takes spousal benefit then takes own benefit I want higher earning spouse to wait until 70, it then becomes longevity insurance using survivor benefit rules

9. 9 Survivor Benefits Upon your death, your spouse is entitled to receive a survivor benefit The longer the worker waits, the higher the benefit amount the larger the survivor benefit will be Survivor benefits can be paid as early as age 60 or 50 if the person is disabled Unmarried children under 18 can receive survivor benefits Sit down with SS rep to go over your options

10. 10 Many other topics on SS Divorced benefits Working while receiving benefits Taxability of SS benefits Will SS be around when I retire? Should I count on SS in my retirement planning? How do we fix SS?

11. 11 CAPS Provides Three Services Investment Management Financial Planning Retirement Plan Management (401K’s) All provided on a 100% fee-only basis