1. Social Security – The choice of a lifetime
Good [morning/afternoon/evening]. My name is [Wholesaler name] from Nationwide Financial.
Today’s presentation is focused on one of the most important decisions you’ll make for the rest of your life – filing for Social Security benefits.
Your decision will have a direct effect on how your essential and discretionary expenses are met throughout retirement
For the most part, the decision you make will be permanent.
Understanding when and how to file for Social Security benefits

2. Important things to keep in mind
• Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value
This is for informational purposes only and should not be construed as investment, tax, or legal advice or a solicitation to buy or sell any specific securities product. You should work closely with your financial professional to develop a plan that incorporates your investment objectives, goals, risk tolerance and time horizons based on your specific situation. The information provided is based on current laws which are subject to change at any time.
The data presented in this presentation are hypothetical and may not be used to project or predict actual performance. The income benefit base is calculated based on no withdrawals and does not include any fees assessed. Your clients’ experience may be different and investment results may be higher or lower, depending on the options chosen, fees and expenses. Does not include any up- market performance. These results are not reflective of any gains in the market and are assuming guaranteed interest amounts provided by the products used as examples in the case studies.
Nationwide, Nationwide Financial, the Nationwide framemark, Nationwide Institute and Retirement Institute are service marks of Nationwide Mutual Insurance Company
© 2013 Nationwide Financial Services, Inc. All rights reserved.
NFM-11701AO (12/13)

3. Today’s presentation Why your Social Security filing decision matters
What do you need to know about Social Security
How to make a decision that works best for you
The purpose of today’s presentation is to prepare you for making a Social Security filing decision that fits with your overall plan for retirement.
First, we’ll look at how important the filing decision is, and the impacts you should consider as you weigh the different options
Then, we’ll get into some of the basics you need to know about Social Security – the terms and acronyms you’ll come across, the rules for spouses, widows/widowers, divorcees, and more.
Finally, we’ll wrap up by showing how you can make a Social Security decision, with guidance from your advisor, that’s suitable for you and fits with a comprehensive retirement income plan.
NFM-11701AO (11/13)

4. When does the filing decision happen?
New Social Security claimants in a calendar year1
Less than one in three individuals filed for full benefits at FRA2 or later
Let’s start with a look at the importance of the Social Security filing decision on your retirement income plan.
Most Americans have a base level of understanding of how Social Security works – you pay into the system throughout your career. Then at 66 to 67 for today’s retirees, you can receive monthly income for the rest of your life.
Some people want to or have to retire early. Social Security allows you to tap your benefit as early as 62, with a reduction in benefits that’s largely permanent.
It’s also possible to delay your benefit beyond your full retirement age, up to age 70. In return for delaying, you earn credits that increase your monthly benefit when you do decide to take them.
What do most people do with their Social Security decision? This chart shows a snapshot of when new Social Security claimants took benefits during a calendar year. (This data is for 2012, the most current available from the Social Security Administration.)
As you can see, the majority of people (69%) filed earlier than full retirement age.
In fact, nearly half of the filers in this year (44%) started benefits at age 62 – the earliest possible age with the largest reduction in benefits
Multiple reasons for doing this – Many may simply need the money or are physically exhausted from a lifetime of work; others may be forced into retirement sooner than planned due to layoffs or health issues; more are doubtful about the future solvency of the Social Security program.
Less than 1 in 3 individuals filed to receive their full entitled benefit – at full retirement age or later.
It’s also important to remember that this is by and large a permanent decision.
Once you make your filing decision, there is a 12 month window in which you can change your mind.
For the most part, people don’t reverse this decision.
1 Source: LIMRA, using 2012 data from the Social Security Administration
2 FRA = Full retirement age. For this data, FRA is 66.
NFM-11701AO (11/13)

5. Meet Jim & Linda
$300,192
Cumulative benefit
lost by filing early
62-year-old married couple
$2,300
Jim’s SS benefit at full retirement age.
$1,200
Linda’s SS benefit at full retirement age.
Let’s look at how the Social Security filing decision can impact one hypothetical couple. (Please note that your scenarios will be different from the examples we’ll use during this presentation.)
Meet Jim and Linda
Both will turn 62 in 2014 (born in 1952).
Married for over 30 years
Their household has over $500K in household assets, putting them in the top 13% of US. Households and highest income quintile (Annual income $110,000 and up; 50% of people with over $500K in assets are in highest monthly income quintile)
Based on the distribution of Primary Insurance Amounts, we’ve estimated Jim’s lifetime income would put him in 90th percentile of PIA, which means his monthly SS benefit is $2.300.
If you work with mainly wealthy and affluent clients, this will likely be their situation as well.
Linda’s current monthly benefit is $1,200
On average, wives earn 50–60% of what their husbands earn. (2008 US Census Bureau, Current Population Survey)
Let’s look at the outcome that different Social Security filing decisions would have on this couple.
If both file early at 62 and take a permanent reduction in benefits of 25%, they would accumulate almost $1M over their retirement
Assuming average life expectancy at age 65 of 83 for Jim and 86 for Linda
Also assuming annual cost of living adjustments (COLA) of 2.5%, which is the average for projected future COLA increases as calculated by the Social Security Administration.
But if both wait until age 70 to start benefits and increase their monthly benefit amount as much as possible (due to credits for delaying and cost-of-living adjustments), they would accumulate almost $1.3M from Social Security during their retirement
Jim “files and suspends” at 66 to accumulate delayed Social Security benefits until age 70.
Linda files restricted (spousal only) at 66 to let her own benefit grow with delayed credits, until age 70
Filing benefits early cost the couple over $300,000 in benefits that they would have collected by optimizing their benefits.
$973,428
Cumulative benefit if both file for Social Security at 623
$1,273,620
Cumulative benefit if both optimize SS benefits3
3 Assumes average life expectancy of 83 for men and 86 for women and 2.5% annual cost-of-living adjustments (COLA).
NFM-11701AO (11/13)

6. Significant income for retiree households
Retirement income sources for the mass affluent4
Social Security: 32%
Employment & other: 14%
Personal assets & retirement plans: 16%
Social Security is a large part of the retirement income picture for retiree households.
This chart shows how much Social Security provides to the income of affluent retirees. (Mass affluent is defined as investable assets between $100,000 and $1M.)
Perhaps more importantly, many future retirees may see pension income shrink.
Today, only 18% of workers participate in a pension or defined benefit plan at work. (2012 study published by the Bureau of Labor Statistics.)
So future retirees may find this one leg of the traditional “three-legged stool” (Social Security, pensions and personal assets) much shorter in the future.
That means leaning more heavily on the other primary sources of retirement income – personal savings and Social Security – to cover essential and discretionary retirement expenses.
Social Security is a foundational component of your retirement income plan and helps to fulfill many basic retirement expenses.
Getting this decision right can help you establish a solid path for your entire journey in retirement.
Moreover, if you can grow this baseline – increasing your Social Security benefit through strategies around delaying and spousal filing – that can free up other assets that can be managed and used for other retirement needs.
While there are benefits to delaying your benefits, you may choose to elect early benefits. It's important to think about this decision and what you can do to supplement this income.
Pensions: 38%
4 LIMRA Retirement Income Reference Book, 2012; “Sources of Retirement Income study”, LIMRA, 2011.
NFM-11701AO (11/13)

7. More than a monthly check
Old Age, Survivors and Disability Insurance (OASDI)
Guaranteed lifetime income
Spousal and survivorship benefits
When many people think of Social Security, it’s in the form of a monthly check from the Federal government. But Social Security is more than a monthly check.
By itself, Social Security would be a powerful asset in a portfolio, by offering:
Offers guaranteed lifetime income
Benefit amounts are indexed to inflation to preserve your purchasing power
Offer survivorship benefits like a life insurance policy
Benefits receive preferential tax treatment compared with ordinary income
A portion of Social Security income will always be tax free, while income from employment, pensions, and retirement plan withdrawals are for the most part taxed fully at the ordinary income tax rate.
Indexed to inflation
Preferential tax treatment
NFM-11701AO (11/13)

8. Social Security Act of 1935
Designed to help older Americans living in poverty during the Great Depression
Never meant to be sole source of retirement income
Ida May Fuller:
First recipient of a monthly Social Security check (1940)
The Social Security Act was signed by Franklin Delano Roosevelt on August 14, 1935
Created to help older Americans during the Great Depression
In 1935, unemployment was over 25%.
The majority of elderly citizens were in poverty.
Social Security was designed to alleviate the financial hardships many older Americans were experiencing due to the Great Depression.
SS was never meant to be the sole source of retirement income
Ida May Fuller – Vermont resident, first recipient of monthly Social Security benefits
Her story shows the power of SS benefits can have on a
Ida May worked as a Legal Secretary until she retired in 1939
Started collecting benefits in 1940 at age 65 and lived to be 100 years old (died in 1975)
Only paid payroll taxes during her last three years of employment
Accumulated taxes on her salary for the 3 years was $24.75 (not adjusted for inflation)
Received 1st check of $22.54 in 1940 (or $ in 2013 dollars)
Collected a total of $22, in social security benefits (Over $99K in 2013 dollars)
NFM-11701AO (12/13)

9. Primary Insurance Amount (PIA)
Amount received each month if benefits start at full retirement age
Based on lifetime SS earnings adjusted for inflation
Avg. monthly earnings over highest 35 years of earnings
Benefit reflects a percentage of avg. monthly earnings
Higher earners receive a smaller % than low-wage earners
Social Security statements available on mySocialSecurity (Sign ssa.gov)
There are a few acronyms that are important to know. The first is PIA – or Primary Insurance Amount. This is the amount you get monthly from Social Security if you file at your full retirement age.
Maximum monthly SS benefit (PIA) in 2013 is $2,642
PIA is also subject to cost-of-living adjustments (or COLA)
Know where to find your current PIA – mySocialSecurity web site
The Social Security Administration used to mail out statements every year to every person eligible to receive Social Security benefits in the future.
The statement summarized their earning history, and gave you a picture of what your monthly benefit is likely to be when you reach the different decision points of 62, FRA and 70.
The SSA no longer mails these statements. Instead, clients should create an account at mySocialSecurity web site (accessible through to get their current benefit statement.
NFM-11701AO (11/13)

10. Full Retirement Age (FRA)
EARLY
FRA
DELAY
Eligible for 100% of benefits
Birth year
FRA
1943 – 1954 66
1955
mos.
1956
mos.
1957
mos.
1958
mos.
1959
mos.
1960 – later 67
The next important acronym to know is FRA – or full retirement age.
Used to be 65, and many people still believe 65 is full retirement age
FRA is gradually increasing to 67, starting with people born in 1943 or later
People born in 1948 will reach 66 in 2014.
FRA is 67 for anyone born after 1960
Early filing can occur starting at age 62 up to FRA
For anyone born in 1960 or later, age 66 is considered early
You can also delay filing up to age 70. Filing early or later than FRA will change your monthly benefit amount.
NFM-11701AO (11/13)

11. Early & delayed filing affects PIA
% of full Social Security benefit received
132%
124%
116%
108%
100%
93%
86%
80%
75%
How does filing earlier or later than FRA affect PIA?
This example is for an individual with an FRA of 66; in other words, born between 1943 and 1954
Filing as early as possible at age 62 results in a permanent reduction in benefits of 25%
For example, if you’re PIA at FRA is $2,000, then filing at 62 reduces your monthly benefit to 75% of that – or $1,500
Benefit reduction decreases the closer you get to FRA
Delaying benefits increases PIA 8% each year, up to age 70. So someone with an FRA of 66 can increase their monthly benefit by 32% just by delaying benefits as late as possible.
Back to the example, someone with a PIA of $2,000 at FRA would see their delayed filing benefits increase to $2,640.
Start SS benefits @ age…
In 2014, people born in 1948 will reach 66
No benefit in delaying past 70
NFM-11701AO (11/13)

12. Social Security filing options
Deemed filing
File for all eligible benefits
Benefits discounted if filing before FRA
More options if you wait….
Standard filing
File for all eligible benefits
File & suspend
Allows spouse to collect spousal benefits
You’ll often hear these terms when we’re talking about Social Security filing methods:
Deemed Filing
Filing at or before FRA
File for all benefits you are eligible for
Full benefits at FRA, credits for delaying
Standard filing – file at or after FRA for all of the benefits you are eligible for
File and Suspend
While benefits are suspended, PIA continues to grow
Allows spouse to collect spousal benefits
Restricted Filing
Filing restricted allows you to begin spousal benefits or survivor benefits only
Collecting based on spouse while allowing individual PIA to grow
File restricted
Allows you to begin spousal or survivor benefits only PIA
NFM-11701AO (11/13)

13. Social Security basics: Filing rules for different situations
Spouses
Surviving spouses
Divorced spouses
Dependent children
Disabled individuals

14. Spousal filing rules Eligible at 62 Married for at least one year
Eligibility
Benefits
Eligible at 62
Married for at least one year
One spouse must file for the other to claim benefits
Up to 50% of spouse’s PIA
The timing of when you decide to take benefits is just one choice you have that impacts your benefit amount. There are also rules for different situations that may apply to you.
Spousal benefits are probably the most important and least understood of these rules. Filing rules for spouses can be complex, but knowing how to apply these rules effectively can help a married couple optimize their benefits, especially for providing income to the surviving spouse.
Spousal benefits can represent significant dollars for a non-working, low benefit spouse
Spouses are eligible for benefits based on their working spouses record
To be eligible for spousal benefits, the spouse must be 62 and married for more than a year
Filing for spousal benefits early also reduces benefits
Primary worker has to have filed for benefits
Benefit
Spouse can receive up to 50% of workers PIA
If claiming both individually and as a spouse, spousal benefit will be subject to the spousal adjustment (individual benefit-50% of spouses PIA)
Filing for benefits as a spouse at or before FRA allows you to delay your own benefit and earn credits to increase your monthly SS amount.
Subject to maximum family benefit for 150 – 180% of higher income earner’s PIA
Survivorship benefits are also powerful for married couples.
Survivor receives the greater of deceased spouses benefits or 82.5% of deceased’s PIA (if the deceased spouse took early benefits)
Credits are included
One time death benefit of $255
NFM-11701AO (11/13)

15. For surviving spouses Married for at least 9 months
Eligibility
Benefits
Married for at least 9 months
Benefits can be taken as early as age 60
Spouse’s PIA including delayed retirement credits earned
Survivor benefits can be received independent of individual benefits
Married couples also receive benefits for surviving spouses in the event of one spouse passing away.
Important benefit for wives, as 40% of women 65 and older are widowed
Making use of the benefits available can significantly affect lifetime earnings from Social Security
The survivor benefit is at least PIA but can also earn credits. So it’s important for clients to think about survivors when beginning Social Security
A widow or widower is eligible based on deceased spouse’s record:
Benefits available as early as age 60
Married for at least 9 months
Children under 18 are eligible as well
Benefit:
Maximum benefit a survivor receives is the greater of deceased spouse’s benefits, including delayed retirement credits, or 82.5% of deceased PIA.
This is because the SSA limits benefits depending on if and when the deceased began benefits.
Depending on when the survivor elects to receive they will receive between 71.5% and 100% of the survivor benefits.
One time death benefit
Survivor benefits can be used to allow individual insurance amount to grow
Survivor benefits can be received independently of individual benefits
NFM-11701AO (11/13)

16. For divorced spouses Married for at least 10 years
Eligibility
Benefits
Married for at least 10 years
Currently unmarried or remarried after age 60
Ex-spouse does not have to file
Spousal and survivor benefits
No impact on ex-spouse’s benefit
Not subject to the family maximum
If you are divorced, you may also be eligible for SS benefits based on your ex-spouses record. But certain rules apply:
Your former marriage must have lasted at least 10 years
You are currently unmarried or have re-married after 60
Benefits can begin at 62 and your ex-spouse does not have to apply to enable eligibility
Rules for divorced spouses can provide opportunities for increased Social Security benefits
Many people fall under these eligibility requirements, yet are unfamiliar with the rules
18% of US population between are divorced (Source: U.S census bureau, 2012 American Community Survey)
Especially important to female clients since 20% of women aged are divorced (Source: U.S census bureau, 2012 American Community Survey)
Benefits
Spousal benefits
Survivors benefits
Not subject to the family maximum
NFM-11701AO (11/13)

17. For dependent children
Eligibility
Benefits
Dependent under age 18
Disabled dependents if disability occurred before age 22
50% of parent’s PIA
75% of survivor’s benefit
It’s also important to consider any other family members who may be eligible to receive benefits from SSA. For example, children who are under 18 and unmarried may also be eligible for Social Security benefits on their parents’ records.
• 40% of pre-retiree U.S households have children in their household (LIMRA Analysis of 2010 Survey of Consumer Finances, Federal Reserve, 2012)
• 25% of pre-retiree mass affluent and affluent households have children 18 and under (LIMRA Analysis of 2010 Survey of Consumer Finances, Federal Reserve, 2012)
Collect based on retired parent
Parent must have filed for benefits, be 62 or older and fully insured (meaning already earned 40 credits to qualify for SS benefits)
Collect survivor benefits from deceased parents
Children can collect if the parent dies before 62. There are two conditions to be met in order for a child to collect benefits from a deceased parent.:
One credit of coverage for every year between 21 and death
6 credits in the 3 years before death.
Benefit
50% of retired parents PIA
75% of deceased parents PIA
Also note, if you provide care to a dependent parent, the parent may be able to collect benefits based on your record.
You must file for individual benefits at 62 or older.
A dependent parent is a parent over the age of 62 receiving over 50% of support from you.
This has the biggest impact if you as the primary support provider were to pass away.
NFM-11701AO (11/13)

18. For disabled individuals
Eligibility
Benefits
Qualifying medical condition
Recent work test (individual)
Duration of work test (individual)
Individual benefit
Spousal benefit
Survivor benefit
Family members who are disabled may also qualify for benefits from Social Security.
If an income earner is disabled, benefits may be available prior at age 50.
Spousal and survivorship benefits
Dependent children are allowed to collect as long as disability occurred before 22.
Eligibility:
Must have a qualifying medical condition – The Social Security web site includes an extensive listing of impairments that covers a wide range of medical conditions
Recent work test – Has the individual worked recently enough when disability occurred?
Duration of work – Has the individual worked long enough to be fully covered by Social Security benefits?
Note that the Social Security disability income program (SSDI) is scheduled to run out of funds in 2016.
Combining SSDI with OASI will allow funds to continue until 2033, however this reduces the longevity of the OSAI.
NFM-11701AO (11/13)

19. Optimizing spousal and survivor benefits
File & Suspend with File Restricted
At 66…
Jim files and suspends
Linda files restricted for spousal benefits
Linda mo. benefit:
$1,269
At 70…
Both spouses switch to their own benefits with credits for delaying
Linda mo. benefit:
$1,929
Jim mo. benefit:
$3,698
At 83…
Jim passes away
Linda starts survivor benefits at Jim’s PIA
Linda mo. benefit:
$5,097
Cumulative SS benefits: $1,273,620
Let’s look at how spousal and survivor benefits work with our hypothetical couple Jim and Linda. Their goal is to optimize their SS benefits, which includes ensuring that Linda has enough financial resources for support when Jim passes away.
To recap who Jim and Linda are:
They are both 62 in 2014 (born in 1952) so their FRA is 66
Jim’s life expectancy is 83; Linda’s is 86 – the current averages for a 65-year-old couple
On their 2014 SS benefit statement, Jim’s FRA is $2,300, Linda’s is $1,200.
We assume a 2.5% annual cost-of-living adjustment, so Jim’s 66 is $2,539 and Linda’s is $1,325
Let’s examine how a file & suspend filing option coupled with a file restricted option can help Jim and Linda achieve their goal:
[CLICK] Jim files and suspends at 66, allowing Linda to file restricted to claim spousal benefits and delay her own benefit.
Linda’s spousal benefit is one-half of Jim’s 66, or $1,269
[CLICK] At 70, both spouses switch to their own individual benefits, which have grown because they chose to delay and earn credits, plus received COLAs on their PIA
[CLICK] After Jim passes at 83, Linda can claim survivor benefits.
She is eligible for 100% of Jim’s PIA, including the credits he earned through delaying
Those spousal benefits are higher than her own delayed benefit (which is $2,658 when Jim passes), so it makes sense to switch to the higher amount.
This is where the power of delaying pays off for this couple – by optimizing the survivorship benefit available for the longer-living spouse
[CLICK] For both individuals over their full retirement, their cumulative SS benefits would be near $1.3M.
NFM-11701AO (11/13)

20. Social Security basics: Comparing options
Jim files & suspends; Linda files restricted
Cumulative SS benefits: $1,273,620
Jim files restricted; Linda files & suspends
Cumulative SS benefits: $1,243,368 2%
less in benefits
Standard filing for both at FRA
Cumulative SS benefits: $1,109,400
13%
less in benefits
These options work for this couple because of the difference in PIA between the two spouses.
If we flip the options between Jim and Linda – where Jim files for his spousal benefit first, while Linda file and suspends – the couple does well but not as well because the spousal benefits Jim files for are not as much as the spousal benefits Linda would get.
If both Jim and Linda just file for their own benefits at FRA – instead of taking advantage of the file & suspend rules to allow Jane’s own benefit to grow – their cumulative benefit throughout retirement would be just over $1.1M.
If both spouses filed as early as possible at 62, the difference in accumulated benefits would be over $300,000.
Both file early at 62 (deemed filing)
Cumulative SS benefits: $973,428
23.5%
less in benefits

21. Will Social Security be there for you?
Full benefits payable to at least 20334
With no legislative changes, Social Security would pay 75% of benefits afterward4
You may share with other people one of the common concerns about Social Security– that the program will run out of money in the near future and future retirees won’t receive benefits.
This concern is not unfounded -- In 2010, the Social Security Administration paid more in benefits than contributions
Because we’re not here today to debate the future of the Social Security program, let’s focus on what the Social Security Administration has said about the funding situation.
Based on current assumptions and no future changes to existing legislation:
Full benefits are payable to at least 2033
75% of benefits payable afterward
Legislation is likely to change going forward, with the goal of extending the solvency of Social Security.
Most likely change: CPI to Chained CPI for calculating annual COLAs – this policy proposal has the broadest legislative support.
This change, if enacted, would result in a slight reduction in future Social Security benefit increases compared with the annual increases today’s Social Security beneficiaries receive.
Chained CPI is expected to be 0.3% lower than CPI.
A minor change such as this would extend the solvency of Social Security with only a minimal impact to the benefits individuals and family members receive.
4 Source: Social Security Administration, “Summary of 2013 Annual Reports”, Social Security and Medicare Boards of Trustees.
NFM-11701AO (11/13)

22. Will you be there for Social Security?
65-year-old
male
65-year-old
female
65-year-old
spouse
50% 83
chance of
reaching age… 86 90
On the flip side of the question “Will Social Security be there for you”, you may also be asking “Will you be around long enough to collect Social Security benefits?” especially if you make the choice to delay benefits in order to collect a higher amount.
This will depend on your life expectancy, which can be strongly influenced by your lifestyle, your health profile and the health history of your family members.
But it’s important to keep average life expectancy in mind because you’re likely to reach and/or exceed them.
Plus, the consequences of not planning long enough – running out of money late in retirement – can be dire from a financial standpoint.
Set reasonable expectations for how long you expect to live.
At age 65, average life expectancy is 83 for a man and 86 for a woman
For a married couple, there’s a 50/50 chance of one spouse reaching age 90
There’s a 25% chance a 65-year-old man will live to 89 and a 65-year-old woman will live to 92.
For a married couple, there’s a 25% chance one spouse lives to 94.
So it’s true that married people tend to live longer. There are also other demographic factors that are relevant.
For example, a man with a bachelor’s degree statistically will live 5 years longer than one with a high school diploma. (Centers for Disease Control, Health, US. 2011)
For women, the longevity gap between those with college degrees and those with a high school diploma is 3 years.
25% 89 92 94
chance of
reaching age…
NFM-11701AO (11/13)

23. Other things you should know
NFM-11701AO (11/13)

24. Working in retirement No limit on earnings
Before FRA
At FRA
After FRA
$1 withheld for every $2 above annual limit
($15,480)
$1 withheld for every $3 above annual limit
($41,400)
No limit on earnings
Withheld earnings are returned
If you’re considering continuing to work while receiving Social Security benefits, your SS benefits may be reduced depending on your age.
These benefits are not lost – rather, they are withheld until you reach full retirement age. At that point, SS benefits are increased to account for the amount of earned income that was withheld.
From 62 to FRA, $1 of SS benefits are withheld for every $2 of earned income above the annual limit
In the FRA year, $1 of SS benefits are withheld $1 for every $3 in earned income
After FRA, SS benefits will not be reduced.
NFM-11701AO (11/13)

25. For same-sex couples
June 26, 2013 – Defense of Marriage Act (DOMA) ruled unconstitutional
SSA currently developing and implementing policy and processing instructions
SSA encourages same-sex couples to apply for benefits, even for residents of states that do not recognize same-sex marriage
More information at
Information as of October 30, 2012
You may wonder how these rules apply for same-sex couples, especially for those who live and were married in states where same-sex marriage is recognized.
The IRS recently declared that couples would be considered based on their “State of Celebration” not state of filing. So if you were married in state that recognizes same- sex marriage, you could file taxes as a couple.
The SSA is working with the Department of Justice to define the benefits for same- sex couples and is expected to follow similarly to the IRS ruling.
So what can you do?
SSA is currently developing and implementing policy and processing instructions
SSA encouraging individuals in same-sex marriages or other relationships to apply for benefits, even for residents for states currently prohibiting same-sex marriage
More
NFM-11701AO (11/13)

26. For government employees
Windfall elimination provision (WEP)
Reduces individual benefit to prevent higher benefits on top of pension income
Changes formula used to calculate PIA
40% of first $816 instead of 90%10
Reduction cannot be more than ½ of pension amount
Will your SS benefit be impacted by the Windfall Elimination Provision (WEP)?
Generally affects people who earned a pension in a job where they did not pay SS taxes (May be government, non-profits, international companies, etc.)
Also worked other jobs long enough to qualify for SS benefits
If you have 30 years of earnings that are subject to FICA taxes, this provision does not apply.
WEP reduces individual benefit to prevent higher benefits on top of pension income
Changes formula used to calculate PIA
40% of first $816 instead of 90%
Reduction cannot be more than ½ of pension amount
10 Source: Social Security Administration. Based on 2013 formula
NFM-11701AO (12/13)

27. Other benefits may be impacted
Government Pension Offset (GPO)
Reduces a government employee’s Social Security spousal and survivor benefits
Benefits are reduced by ⅔ of their government pension
If government pension is large enough, spousal or survivor benefit may be eliminated
A government employee’s spousal and survivor benefits from Social Security may also be impacted from a different provision -- the Government Pension Offset (GPO).
Reduces a government employee’s Social Security spousal and survivor benefits
Benefits are reduced by 2/3 of their government pension
If government pension is large enough, spousal or survivor benefit may be eliminated
NFM-11701AO (12/13)

28. How GPO reduces benefits
Spouse 1:
Worked in government throughout career
Receiving $2,100 monthly pension
GPO = $1,400 (2/3 of $2,100)
Spouse 2:
Worked in private sector
Paid FICA taxes
PIA: $2,000/month
Spouse 1 benefit before GPO
(If GPO didn’t apply)
Spouse 1 benefit after GPO
(Reduction of $1,400)
Spousal benefit
$1,000 per month $0
Survivor benefit
$2,000 per month
$600
As an example, let’s consider a couple where one spouse worked for the government and did not pay FICA taxes on earnings.
She qualifies for a $2100 monthly pension.
Her government pension offset would be two0thirds of this amount, or $1400 per month.
The other spouse worked in the private sector and paid FICA taxes on earnings.
His Social Security PIA is $2,000 per month
Under normal circumstances – meaning if the GPO didn’t apply to the first spouse – she would qualify for spousal benefits of $1,000 per month and survivor benefits of $2,000
Because GPO does apply in this situation, both her spousal and survivor benefits are reduced by $1,400 per month.
This results in the complete elimination of her spousal benefits
Survivor benefits are only $600 per month.
NFM-11701AO (12/13)

29. Social Security concern: Taxation
Taxable retirement income
Partially taxable retirement income
Tax-free
retirement income
Pension Income
Traditional Retirement accounts (401(k), IRA)
Interest and dividend income
Social Security –
Up to 85% taxed
Immediate annuity income
Cash-value life insurance
Roth IRAs and 401(k)s
Interest from municipal bonds
Loans from life insurance policies
You may also be concerned with how SS benefits will influence how much tax you pay on all of your income.
Social Security isn’t taxed like other retirement income because a portion of it – at least 15% for everyone – is tax-free.
Primary Retirement assets, Pensions and 401(k), are taxed much higher than Social Security
Social Security income has advantages compared to traditional retirement income since it’s only partially taxed
Other sources of retirement income, Roth accounts and municipal bonds, are tax free with tax-free withdrawals of all earnings and principal.
It’s important to consider how retirement assets are taxed when making decisions in retirement
NFM-11701AO (11/13)

30. How delaying may reduce tax burden
Early SS filing
Delayed SS
Target Pre-Tax Income
$100,000
SS Income
$38,000
$68,000
Traditional retirement account income*
$62,000
$32,000
Social Security income increases 79%
Taxable income decreases40%
Taxable SS Benefit
$32,300
$24,700
Taxable Income
(AGI + SS Income test)
$94,300
$56,700
When filing early, in order to reach your desired income, you would likely have to rely on other taxable assets like 401k and pensions. Relying on those sources of income results in higher taxable income. Having more income come from Social Security or other tax advantageous assets may reduce your tax burden.
In our Jim and Linda example, we have a married couple whose annual income goal in retirement is $100K.
Filing early results in a lower annual Social Security benefit of $38K, forcing the client to draw down $62K from their IRA accounts.
Relying more on fully taxable asset increases your Marginal Adjusted Gross Income
If a client were to delay benefits and receive $68K a year, they would only draw $32k from an IRA account to reach their desired annual income.
This lowers their MAGI as well.
Social Security is taxed at a maximum of 85% of the benefit. Amount of Social Security Taxed is subject to three tests. It is the smallest of:
1) 85% of the benefits; or
2) 50% of the combined income plus 85% of any excess combined income over the second threshold ($34,000 if single; $44,000 if married, filing jointly); or
3) 50% of the excess combined income over the first threshold ($25,000 if single; $32,000 if married, filing jointly) , plus 35% of the excess combined income over the second threshold ($34,000 if single; $44,000 if married, filing jointly).
The lowest amount is then added to the AGI to determine taxable income.
In our married couple example the test went as follows
SS Test 1 $32,300 $57,800
SS Test 2 $50,450 $52,700
SS Test 3 $37,450 $24,700
In our example filing early results in a higher taxable income due to a higher AGI which increases the amount of SS Taxed
Delaying filing reduces AGI and the amount of SS taxed. By $37,600 in our example.
Their Social Security income increased by 79% and their taxable income decreased by 40%
Filing Early 85% of the $38,000 were taxed compared to 36% of $68,000 delayed SS benefit
It is important to consider how SS filing will affect their taxable income. The filing decision can have significant implication in your taxable income in retirement.
* Adjusted Gross Income
NFM-11701AO (12/13)

31. Making your filing decision easier
NFM-11701AO (11/13)

32. Simplifying Social Security decisions
Nationwide® Social Security tool
Identifies optimal filing strategies and allows you to adjust parameters to compare different strategies
Provides instructions on how to file
All of these filing options, rules and concerns you have can make your decision on when and how to file for Social Security benefits a difficult one.
I can help make this decision easier for you by helping you analyze your options so you can compare and choose a strategy that fits with your plan for retirement.
Your options will come presented in a report to help you…
Identify optimal strategies, plus take into account other options for filing you may want to consider
View your projected Social Security income in context with your overall retirement income needs
Know exactly how to put a preferred strategy in place with specific filing instructions
Helps you integrate Social Security into your comprehensive retirement income plan
NFM-11701AO (11/13)

33. Compare filing strategies
The client’s Social Security report shows cumulative benefits of an optimization strategy vs. early filing and alternative filing strategies
Based on client-specific inputs, the tool will provide an optimal and earliest filing strategy.
In the bar chart, you and your client to compare strategies in terms of cumulative benefits, with royal blue representing the optimal filing strategy.
Cumulative benefits shown in this chart are present value.
You can also compare results of a different strategy based on personalized inputs (shown in the grey and orange bars).
Choosing a personalized strategy for this comparison is optional, and you can remove it from this analysis (click on the “x” in the circle)
The dark blue bar shows cumulative benefits of the earliest filing strategy.
NFM-11743AO.1 (1/14)

34. Analyze break-even points
Illustrates which of the outlined strategies provides the best outcome at any given set of whole year death age combinations.
The tool will also show you what your break-even point is. For those unfamiliar with the term, the break-even point is the age at which the cumulative amount of your Social Security benefits is the same between two filing ages. Knowing the break-even point, as well as your longevity, is an important part of making an informed filing decision.
For married filers, you can also analyze your break-even points by optimal, earliest and personalized strategy, based on estimated life expectancy.
The royal blue area in this analysis shows how the optimal strategy would provide the highest cumulative income if the couple lives past 85.
The orange area represents where the personalized strategy would provide the highest cumulative benefits
The dark blue area highlights how filing early can be the best strategy, but only if they live to a shorter life expectancy
NFM-11743AO.1 (1/14)

35. Identify income gaps
The report illustrates annual Social Security cash flow for the suggested filing strategy vs. projected retirement income needs.
The tool will also graph how expected Social Security income will cover desired retirement expenses.
NFM-11743AO.1 (1/14)

36. Gathering inputs for your analysis
Helps gather relevant information to prepare a filing strategy comparison
Marital status
Expected benefit amount
Life expectancy
Planned retirement date
Desired retirement income
Retirement goals, concerns, etc.
Where and how should you begin? Our Social Security questionnaire can help you gather all of the relevant information you’ll need to create your Social Security analysis.
How much you expect to receive from Social Security
Your plans for retirement – when you want to retire, and what you want your desired income to be
Life expectancy – knowing how long you and your spouse expect to live in retirement will be an important component of this analysis
Specific questions for individuals who are widowed or divorced
And special case questions that may help you discover additional benefits you can claim.
NFM-11701AO (11/13)

37. The choice of a lifetime
When and how you file for Social Security is an important decision.
Learn how to claim benefits for other family members and how to put the filing rules to work
Consider your filing decision in the big picture of your overall retirement income plan
Your Social Security decision is an important one, and how you choose to file matters.
No matter what your income level is, Social Security benefits are a significant source of retirement income
And the choices you make about how to file can have a lasting impact on your financial situation in retirement
As your financial advisor, I can help you make a Social Security decision that fits within your overall retirement income plan.
Know how to use the power of delaying and how to put the spousal and other rules to work in order to optimize benefits and provide some income protection for a surviving spouse.
NFM-11701AO (11/13)

38. Three steps in Social Security planning
Get a good understanding of the basics of Social Security
Make an appointment to discuss your Social Security options
Complete a Social Security questionnaire in advance of the meeting
Three steps for planning your Social Security decision.
First, get a good understanding of the basics of Social Security and how you may be able to use the filing rules – your attendance today completes this step.
Next, make an appointment for a one-on-one discussion with me about your Social Security options.
Complete a Social Security fact finder in advance of the meeting and bring it with you to help in the discussion with your advisor.
Thank you for your time today.
NFM-11701AO (11/13)

39. Personal Retirement Consultant Nationwide Retirement Solutions
For more information and to receive a personalized Social Security assessment
Contact: Mark Knudson
Personal Retirement Consultant
Nationwide Retirement Solutions
Work Ext 2 Fax
Will your SS benefit be impacted by the Windfall Elimination Provision (WEP)?
Generally affects people who earned a pension in a job where they did not pay SS taxes (May be government, non-profits, international companies, etc.)
Also worked other jobs long enough to qualify for SS benefits
If you have 30 years of earnings that are subject to FICA taxes, this provision does not apply.
WEP reduces individual benefit to prevent higher benefits on top of pension income
Changes formula used to calculate PIA
40% of first $816 instead of 90%
Reduction cannot be more than ½ of pension amount
NFM-11701AO (12/13)