1. Retirement Income Strategies: How Social Security Can Maximize a Client’s Lifestyle, Legacy and Livelihood
Speaker
Date
Thank you for attending today’s session on Retirement Income Strategies. Specifically, how Social Security can maximize a client’s lifestyle, legacy and livelihood. I’m (insert name) and I am the (insert title) at Pioneer Funds Distributor, Inc.
This material is not intended to replace the advice of a qualified attorney, tax advisor, investment professional, or insurance agent. Before making any financial commitment regarding the issues discussed here, consult with the appropriate professional advisor.

2. Social Security by the Numbers
Social Security Retirement Benefits Replacement Rates Based on Career Average Wages**
84% percent of couples age expect Social Security advice from a financial planner.*
61% of couples age would switch advisors if their current advisor couldn’t help them with Social Security.*
Why is it important to take time out of a your busy schedule to understand Social Security? Consider these points:
READ SLIDE
Explanation of third bullet. As you can see from the graph, if a client is a maximum Social Security earner (averaged indexed earnings over their lifetime of $108,570 in 2013), claiming Social Security at age 62 replaces about 22% of their income, claiming at age 66 replaces 29% of their income, and claiming at age 70 replaces nearly 40% of their income.
No matter whether a client is financially secure or concerned about outliving their income, ALL of them have questions about Social Security. They expect their advisor to provide answers, solutions and strategies to maximize their Social Security benefits and after-tax retirement income. By the end of today’s presentation, a client should be armed with the facts and strategies to help them make a meaningful decision.
Social Security is a major source of income for most households.**
*Social Security Timing and Market Tools: Social Security Planning: The Emerging Cornerstone of Your Financial Practice?” August **Social Security Administration Actuarial Note Number and Pioneer Investments

3. Agenda How Benefits are Calculated
Maximizing Income for Married Couples
Maximizing After-Tax Income with Social Security
Our presentation today will cover what has become the cornerstone of many retirees income. We will look at it in three parts:
How Social Security Benefits are Calculated: This section should be a review or refresher for many of you.
Maximizing Income for married couples: If a client is married, the decision as to when to collect Social Security becomes more complicated. We are going to look at two couples to examine the impact that collecting Social Security may have on a client’s income, the lifestyle of the surviving spouse and their legacy.
Then finish with a discussion on how to maximize after-tax income by strategically incorporating Social Security and other provisions. By being aware of the nuances of Social Security, a client may be able to reduce clients’ taxes and maximize their after tax incomes.
I want to also mention:
This presentation is not a comprehensive review of the Social Security System.
Instead, it focuses on maximizing retirement income.
Additionally, the presentation will not discuss the ideal break-even age. This is because studies have shown that when a client talk about break-even ages, clients elect Social Security at earlier ages (Source: “Framing and Claiming: How Information-Framing Affects Expected Social Security Claiming Behavior”, Jeffrey R. Brown, Arie Kapteyn, and Olivia S. Mitchell, November 23, 2011). Considering that over half of women ages 65 and older rely on Social Security for the majority of their income (source: Social Security Administration, “Income of the Population 55 or older”, Table 9.B.1, 2012) our focus is on maximizing annual income from Social Security.
Finally, the presentation is geared towards those who can make a decision as to when they can take Social Security. We can all agree that there may be circumstances where a client has no choice as to when they will start Social Security.

4. How are Social Security Benefits Calculated?
Calculation
Look at average of 35 highest earning years of work
Eligibility
40 quarters of work
In order to be eligible for any Social Security benefits, an individual needs to collect 40 quarters of work. The quarters do not need to be consecutive. In 2015, a quarter of work is defined as earning $1,220 during the quarter or $4,880 during the year.
After a client becomes eligible for Social Security, the Social Security Administration can start calculating the benefits. The benefits are based on the average of 35 highest earnings years of work. For employees, this is based on a client’s W-2 income. For self-employed business owners, this is based on their net earned income. If a client has any low or no earnings years, these may be counted in by adding in “zero years” to bring the total to 35 years.

5. Full Retirement Age is Dependent on Year of Birth
Full Retirement Age (FRA) 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
If a client was born in 1942 or earlier, they are already eligible for a their full Social Security benefit. If a client was born from 1943 to 1960, the age at which full retirement benefits are payable increases gradually to age 67. The following chart will guide a client in determining a client’s Full Retirement Age.
I would encourage all of you to take a look at the chart and find your Full Retirement Age. Throughout this presentation, we will talk about the Full Retirement Age.
Note: The Social Security Administration uses the terms “Full Retirement Age” and “Normal Retirement Age” interchangeably.
Source: Social Security Administration. “Social Security Retirement Benefits.” SSA Publication No April 2013.

6. Collecting Social Security before and after Full Retirement Age Reduction in Benefits is Permanent, Credit also Permanent
FRA
If a client collects Social Security (SS) benefits before the Full Retirement Age (FRA), their benefits will be permanently reduced. This chart shows how much the benefits will be reduced if the client’s FRA is 66.
If a client starts Social Security benefits after their Full Retirement Age, their benefits increase by 8% per year until age 70. This is simple compounding on top of any COLA adjustment. This is likely better than most annuity options currently available in the market.
Assumes a client was born between 1943 and 1954.
Source: Social Security Administration. “Full Retirement Age: If You Were Born between 1943 and 1954.”

7. Can Clients Work and Receive Social Security Benefits
Can Clients Work and Receive Social Security Benefits? Benefits may be Reduced if Income Exceeds Certain Thresholds
Age
Benefit Reduction
2015 Earned
Income Limits
62 until year attaining FRA
Lose $1 in Social Security benefits for every $2 earned above limit
$15,720
($1,310/month first calendar year)
Year of attaining FRA
Lose $1 in Social Security benefits for every $3 earned above limit
$41,800
($3,490/month first calendar year)
After FRA
No benefit reduction
No limit on earnings
Another frequent question is “Can I work and receive Social Security Benefits”. The answer is Yes, but
If a client is under Full Retirement Age (between 66-67), collecting Social Security and working, they will receive a reduction in their benefit. This benefit reduction is usually $1 in Social Security Benefits for every $2 earned above $15,720. This reduction applies to any Social Security benefit a client receives (personal retirement benefit, spousal, survivor or divorcee).
If a client earned money during the year of, but before the month that they reached Full Retirement Age, the benefits are reduced by $1 for every $3 earned above $41,800 until the month that the client reaches Full Retirement Age.
Once a client reaches Full Retirement Age, their earnings in (or after) the month he/she reaches full retirement age will not reduce their Social Security benefits.
The way this works if you retire before FRA: You can earn as much money as you want up until the day you retire. If you retire sometime during the year and claim Social Security before you reach FRA, the SSA will ask you how much you have made up until the day you retire. You will tell the amount that you have earned. The SSA will then allow you to earn no more $1,310 per month for the rest of that calendar year. The following year (and the years up until you turn FRA), you will be restricted to earning only $15,720 per year (adjusted for index).
We don’t expect you to remember the benefit reduction amounts and the earned income limits. What we do hope you remember is that the Social Security Administration really wants a client to work full-time as long as possible. Therefore, they’ve created incentives to encourage a client to work.
Income from employment/self-employment earned in or after the month the individual turns FRA is NOT counted under the earnings test (source: SSA Handbook Question 1812).
A client must still pay Medicare and Social Security taxes if they are
working & receiving Social Security benefits.
Source: Social Security Administration. “How Work Affects Your Benefits.” SSA Publication No January 2014. 7

8. Benefit per Month is Based on Beginning Age
Assumes Monthly Benefit of $1,000 at Full Retirement Age of 66
Just how much are benefits reduced if a client receives Social Security benefits before Full Retirement Age?
According to the Social Security Administration, if a client’s Full Retirement Age is 66 and they are expected to receive $1,000 per month, that benefit would be reduced to $750 a month if a client began collecting Social Security at age 62. Imagine what a difference an extra $250 a month could make during retirement. If clients have the opportunity to continue working, it may improve their lifestyle during retirement.
And if a client decides to take Social Security after age 66, their benefits grow by 8% every year. As you can see, that $1,000 monthly benefit just increased to $1,320 at age 70.
Source: Social Security Administration. “When to Start Receiving Retirement Benefits.” SSA Publication No January 2014.

9. When a Client Claims could Impact Their Lifestyle
Where could You Live in Retirement?
Collect at 62
Mobile Home
Collect at 66
Older Refurbished Home
Collect at 70
New Home
What does this money translate to?
To give you a perspective, we decided to find out what $750 a month (age 62), $1000 per month (age 66) or $1,320 per month (age 70) could get a client in terms of monthly rent if they decided to retire in the most popular retirement community in the U.S. – Asheville, NC (as determined by topretirements.com, 2014)
From there, we looked at ashevillerent.com on 11/14/2014 to find the corresponding rents. A Social Security check will pay for the rent of these places:
If you begin collecting Social Security at age 62, $750 in rent will get you a nice mobile home
If you begin collecting Social Security at age 66, $1000 month will get you a nice refurbished, three bedroom, one bath home
If you claim at age 70, $1325 will get you a new home (as you can tell by the landscaping), three bedrooms, two bathroom and a private wooded backyard.
Just waiting a few years to retire or collect Social Security may give your clients more options during retirement. A study by David M Blanchett and Gregory W Kasten called “Improving Retirement Success by Managing the Target Date” (Journal of Pension Benefits, 2010) found that waiting one year to retire increases the chance of retirement success by 18%, waiting two years: 37%, waiting three years: 55%
Source: ashevillerent.com.

10. Agenda How Benefits are Calculated
Maximizing Income for Married Couples
Maximizing After-Tax Income with Social Security
Now on to the next section: Maximizing Income for Married Couples. In this section, we are going to talk about how the decision to claim Social Security impacts not one, but both spouses. We’ll also delve into a couple of advance spousal planning strategies that many clients may have never heard about.

11. What about the Spouse?
Payment Period
Maximum Benefit
Partial Benefit
Spousal Benefit
While primary worker is still alive and applied for Social Security
Spouse of primary worker must be FRA when first claiming
Maximum benefit is 50% of worker’s benefit at FRA
Spousal benefits don’t increase after FRA
Spouse of primary worker must be at least 62 to receive a partial benefit
Receives 32%-49.9% of worker’s full benefit at FRA
Reduction in benefit is permanent
Survivor Benefit
After primary worker passes away
Surviving spouse must be FRA
Maximum is 100% of worker’s benefit at death
Surviving spouse is between 60 and FRA
Receives 71%-99% of primary worker’s benefit
In addition to giving benefits for the time worked, Social Security is also designed to protect a client’s spouse. It does so via two ways:
The first is the spousal benefit: These payments are made when the primary worker is still alive. The spouse can receive up to 50% of the primary worker’s Social Security benefits, as long as they are Full Retirement Age when they collect the spousal benefit. This means that once both spouse are FRA, someone should be taking a spousal benefit. The spouse can also collect a spousal benefit when both the spouse and the worker are 62. However, if the Spouse collects benefits before Full Retirement Age, they will receive a partial benefit of 32-49%. This is a permanent reduction. In order to receive a spousal benefit, the other spouse must have already applied for Social Security.
There is also something known as the survivor benefit. This is collected after the worker passes away. The spouse can collect up to 100% of the primary worker’s benefit after the spouse passes away. Survivor benefits can begin at age 60. However, if survivor benefits start before FRA, the surviving spouse would receive 71-99% of the worker’s benefit.
Now if the spouse worked, they receive the greater of their Social Security benefit or the spousal/survivor benefit.
Note: The Spousal FRA is the same as the worker FRA shown on slide 6. The Survivor FRA is slightly lower. For more information, please go to socialsecurity.gov – “Widows, Widowers, and Survivor Benefits” or contact the Social Security Office)
NOTE: Individuals have to be married for at least one year before they can qualify for spousal benefits. Also:
If FRA is 65, a spouse can get 37.5 percent of the worker’s unreduced benefit at age 62;
If FRA is 66, a spouse can get 35 percent of the worker’s unreduced benefit at age 62;
If FRA is 67, a spouse can get 32.5 percent of the worker’s unreduced benefit at age 62.
If both spouses worked, receive greater of personal Social Security benefit or Spousal/Survivor benefit.
Source: Social Security Administration. “Retirement Planner: Benefits for You as a Spouse.”

12. What if the Client is Divorced?
Eligible for Spousal/Survivor Benefits if:
Married for at least 10 years
Divorced for at least 2 years
Must be age 62 to receive a spousal benefit, age 60 (50 if disabled) to receive a survivor benefit
Ex-spouse must be at least age 62 and worked 40 quarters to receive a spousal benefit.
Did not remarry*
If remarried, client generally forfeits benefits from ex-spouse*
If ex-spouse remarries and client does not, they remain entitled to spousal and survivor benefits off of ex-spouse
A client can collect on their former spouse's Social Security benefits as long as the couple was married for at least 10 years, are 62 or older, divorced for at least 2 years, did not remarry (generally) and spousal benefits from the ex-spouse is greater than the benefit they would receive from their own work history.
The earliest you can receive a spousal benefit off of your ex-spouse is age 62. The earliest you can receive a survivor benefit off of your ex-spouse is age 60.
In order to receive a spousal benefit off of your ex-spouse, the ex-spouse must have worked at least 40 quarters and must be at least age 62. For example, if you are 66 and your ex-spouse is 60, you will not be entitled to an ex-spousal benefit because your ex-spouse is only 62. You will become entitled to a spousal benefit in two years when your ex-spouse is 62.
Remarriage:
If you re-marry, you generally forfeit any benefit from your ex-spouse. We’ll go through exceptions on the next slide.
- If your ex-spouse remarries (and you don’t), you can still collect a full spousal benefit from the ex-spouse. Your spousal benefit (and survivor benefits) from your ex-spouse will not be reduced. The Social Security Administration will continue to pay you the full amount that you are entitled to. They will also pay the full amount that your ex-spouse is entitled to as well as the current spouse.

13. Case Study: What if Only One Spouse Worked
Case Study: What if Only One Spouse Worked? Husband is Sole Provider for Family
James and Linda
James is 62.
He earned average wages over his lifetime.
His wife Linda never worked.
What will be the household benefits and the survivor benefit if retires at: 62 66 70
As you can see, if a client is married, the decision when to collect Social Security becomes even more important. When they start taking Social Security not only affects their income during retirement, but also affects the spousal and survivor benefits that their spouse receives. Let’s dive into this more closely by looking at our first case study:
Here we have James and Linda. James is 62 and his wife, Linda, never worked. They are wondering what their household Social Security benefits would be while both are alive as well as the survivor benefits when James dies. They are considering receiving Social Security benefits:
At 62
Once he reaches his full retirement age of 66
Or at age 70
This case study is a hypothetical illustration only. Assumptions: He is medium earner. Monthly benefits at: 62- $1,125, 66- $1,500, 70- $1,981. She is the same age.
Source: Social Security Administration. "Annual Statistical Supplement 2014.” Table 5.A1.1.

14. Cat Food or Caviar? Taking Social Security at 62 can Reduce Household Income by 65%
Poverty Line
(Married Couple)
While both are alive, Social Security will pay a household benefit of:
$20,000 if David retires and begins receiving Social Security benefits at age 62. If they run out of their own assets, this is barely enough to keep them out of poverty.
But, if he can collect Social Security at age 66, they receive $7,000 more each year. Does anyone know the average annual cost of healthcare in retirement? It’s estimated to be $8,600 per year for the average couple covered by Medicare. (Source: Health Care Expenses and Retirement Income, Insured Retirement Institute, January 2012). Could retiring at 66 or 70 help cover some of these costs?
And if they claim Social Security when he is age 70, the annual household income from Social Security retirement benefits increases to $33,000. This is nearly one and half times more than what they would have received if David started to collect Social Security at age 62.
This case study is a hypothetical illustration only. Assumptions: He is medium earner. Monthly benefits at: 62- $1,125, 66- $1,500, 70- $1,981. She is the same age and collects as soon as possible. When she is 62, receives 35% of his age 66 benefit. If she claims at age 66, she receives 50% of his age 66 benefit. Her spousal benefit is capped at 50% of his year 66 benefit. Poverty line for married couples in 2014 was $15,730. (Source: Federal Register)
Source: Social Security Administration. "Annual Statistical Supplement to the Social Security Bulletin, 2014.” Table 5.A1.1-Number and “Average Monthly Benefit for Retired Workers by Age.” 14

15. Cat Food or Caviar? Taking Social Security at 62 can Reduce Household Income by 65%
Poverty Line
(Married Couple)
Poverty Line (Single)
After he passes away, his wife is left with the higher of his benefit or the spousal benefit. Since Linda never worked, this means she receives his benefit.
If he starts Social Security at 62, his surviving spouse, Linda, will receive $14,850 per year when he passes away. (assuming no COLA adjustment to keep the concept simple). To put this in perspective, the average annual cost of owning and maintaining a house during retirement is $14,204 (source: Consumer Expenditures Survey, houses 65 years and older, 2014). If this is all the money she has to live off of, she will be relying on food stamps and Medicaid.
If he claims at age 66 – she receives $18,000 annually in survivor benefits from Social Security. She barely gets by. But if she runs into a healthcare need, will she be able to afford it?
And if he claims at age 70 – she receives $24,000 annually in survivor benefits.
Taking Social Security as soon as possible can reduce the survivor benefit by up to 50%. This could be the difference between the surviving spouse eating cat food or caviar.
To recap: What’s the difference in collecting Social Security at age 62 versus 70?
Nearly 1.5 times more during their lifetimes
This case study is a hypothetical illustration only. Assumptions: He is medium earner. Monthly benefits at: 62- $1,125, 66- $1,500, 70- $1,981. She is the same age and collects as soon as possible. When she is 62, receives 35% of his age 66 benefit, If she claims at age 66, she receives 50% of his age 66 benefit. Her spousal benefit is capped at 50% of his year 66 benefit. We assume he passes away after both reached FRA. This allows her to receive a widow benefit of 82.5% of his benefit if he claimed at age 62, 100% of his benefit if he claimed at FRA or later. Poverty line for single person in 2014 was $11,670 (Federal Register).
Source: Social Security Administration. "Annual Statistical Supplement to the Social Security Bulletin, 2014.” Table 5.A1.1-Number and “Average Monthly Benefit for Retired Workers by Age.” 15

16. Husband is Sole Provider Advanced Claiming Strategies with Spousal Benefits
James and Linda
James and Linda want to know if there are any additional options available to them.
Their advisor introduces them to File and Suspend:
Available at FRA
Allows spouse to apply for spousal benefits
Worker benefits still increase by 8% per year
Read slide 16

17. File and Suspend Available When Worker is Age 66 (But Not Before)70
At 70
James
Claims Social Security
Receives 132% of original FRA amount 69
Benefits grow by 8% each year 68 67 66
Because James filed, Linda can apply for spousal benefits
James is FRA
Files for Social Security benefits
Immediately suspends 66
Here’s how file and suspend works:
When James reaches Full Retirement Age (FRA) (which is 66 or 67), he is eligible to file for Social Security. Once he reaches FRA, he also has the ability to restrict the application to spousal benefits only. This option is not available if the client is under FRA.
Just because he filed for Social Security, doesn’t mean he has to take it for himself. Instead, he can suspend his payments.
The great thing … because he filed forSocial Security benefits, he paved the way for Linda to collect spousal benefits (assuming she is at least age 62). Which she does.
Because James isn’t collecting his own benefits, his benefits continue to increase by 8% per year (up until age 70). His wife, Linda, continues to receive her benefits. Keep in mind that spousal benefits do not increase past the age of 66.
Finally, when James turns 70, he claims Social Security and receives the highest possible benefit.
There are many benefits of using file and suspend:
It provides for extra income at 66: If a client plans to work after 66, this gives the client extra money to travel or do things while the client is still healthy.
Chance to increase savings for retirement (if the money is invested).
Spousal benefits do not increase
File and suspend can only be implemented if the working spouse has attained Full Retirement Age. If application for Social Security is before FRA, the client must take Social Security. If the spouse claiming the spousal benefit is under FRA, their spousal benefit and personal Social Security retirement benefit (if applicable) is permanently reduced.  

18. What if Both Spouses Worked
What if Both Spouses Worked? Comparing Social Security Options Based Only on Work Histories
David and Susan
David is 66.
His wife Susan is 64 and worked most of her life.
What will be their Social Security retirement benefits if:
Both claim Social Security as soon as David retires
Each claim at their respective FRA
Each claim at 70
As we all know, more and more women are working and qualify for Social Security on their own work history. This translates to both spouses having the option to (generally) receive Social Security benefits based on the greater of their spousal benefit or their work history benefit.
As you can imagine, the decision to collect Social Security when both spouses worked creates a multitude of new retirement income opportunities. Some estimate that there are up to 81 options to consider (source: Social Security Timing) Let’s take baby steps to analyze some of the options.
In this first example we meet David. He is 66 and reached his Full Retirement Age (FRA).
His wife Susan is 64 (thus under her FRA). She worked most of her life.
They are wondering how much their individual Social Security benefits will be if:
Both claim Social Security as soon as David retires
Each claim at their respective FRA
Each claim at 70.
This case study is a hypothetical illustration only. Assumptions: He has monthly benefits equivalent to the average male. Monthly benefits at: 66- $1,500, 70- $1,981. She has monthly benefits equivalent to the average female worker. Monthly benefits at: 64 = $982, 66- $1,133, 70- $1,495
Source: Social Security Administration. "Annual Statistical Supplement to the Social Security Bulletin, 2014." Table 5.A1.1-Number and Average Monthly Benefit for Retired Workers by Age.” 18

19. Conventional Wisdom Claim at Age 70 to Maximize Social Security Benefits
Annual Social Security Benefits Based Only on Earnings
Household Social Security: $42,000
Household Social Security: $31,500
Household Social Security: $30,000
If they collected Social Security when he reaches Full Retirement Age (he is 66, she is 64):
HE receives his full Primary Insurance Amount (the Social Security benefit based on his Full Retirement Age). This amount is $18,000.
Because she is collecting Social Security before her Full Retirement Age (FRA), she receives the greater of her reduced personal benefit or reduced spousal benefit. In this scenario, the reduced personal benefit ($12,000) is greater than her reduced spousal ($7,500).
Their total income is $30,000
If they collect when each attains their Full Retirement Age (FRA) (he collects at 66, she collects at 66)
He still collects $18,000 when he turned 66 (his FRA)
She decides to collect her personal benefit ($13,500)
This gives them an annual income of $31,500 from Social Security
If they first collect Social Security when they both reach 70, their benefits increase. Together, they receive $42,000 from Social Security
Speaker’s Note: Stress this following point!
Now here’s something I would like all of you to notice (because we’ll come back to it later). If you look at the first two bars, there’s only a $1,500 annual difference in benefits. The natural inclination for most people might be to take Social Security at the earlier age. After all (so they might think), $1,500 might not make a big difference – especially if the desire to retire right now is strong.
This case study is a hypothetical illustration only. All assumptions assume they keep working until they collect Social Security. Both claim at his FRA: He receives full benefit of $18,000. Since she is under FRA, she receives higher of her reduced benefit or her reduced spousal benefit (she cannot pick and choose benefits if under FRA). In this case, reduced personal benefit is greater than reduced spousal. Both claim at FRA: he receives his full benefit of $18,000. She chooses her full benefit of $13,500, which is greater than spousal benefit of $9,000 (0.5*$18,000=$9,000). Both claim at 70: Both take their maximum personal benefit.
Source: Social Security Administration. "Annual Statistical Supplement, 2014.” Table 5.A1.1. 19

20. Social Security Timing and a Client’s Legacy
David and Susan
For each strategy, David and Susan want to know the:
Lifetime Social Security income
Amount in her IRA at death
Now that they know their annual benefits, they want to know how this will impact:
Their lifetime Social Security income
Their legacy. (We’re going to assume he passes away at the Social Security Life Expectancy rates for a 66 year old which is 82 for a man and 85 for a woman).
Assumptions: He starts off with $260,00 in his Traditional IRA and she has $140,000 in her Traditional IRA (c.f. EBRI Issue Brief May, 2014); Assume both pass away at life expectancy of a 66 year old per SSA (82 for him, 85 for her). Assets increase by 5% per year. Assume Social Security benefits and cost of living increases by 2% per year. Withdrawal is greater of amount needed to fund retirement income needs or RMD. 20

21. Lifetime Social Security and IRA Legacy Based Only on Work History Claiming Social Security before FRA may Dramatically Reduce Legacy
What they found out was that the Lifetime Social Security remained fairly constant regardless of what age David and Susan first claimed Social Security. But, let’s look at the impact on their legacy.
If they both claim when he retires at age 66, there’s a greater chance they will run out of assets during their lifetime. In this case study, they acutally ran out of assets.
There’s a difference of over $300,000 in the IRA assets if both take Social Security when he retires at 66 or both claim at age 70.
The most striking difference is between the first two scenarios (both claim at FRA and both claim at their FRA). Remember how there was only a $1,500 difference in their annual Social Security deposits? Look at the effect it has on their IRA legacy:
While it’s true that their lifetime Social Security benefits isn’t that different.
The impact on their legacy is substantial. Just waiting a couple of years (until she is at least FRA for her to claim Social Security) increased the amount left in the IRA at her death by nearly $200,000 (IRA assets if both claim when he retires is -$25,000, IRA assets if they both claim at their FRA (66) is $170,000).
By looking at the effects that the Social Security claiming decision has on the longevity of their personal assets, a client may be able to maximize their personal assets or have a greater retirement cushion to meet the unexpected costs of retirement.
This case study is a hypothetical illustration only. Assumptions: David starts off with $260,000 in his Traditional IRA and she has $140,000 in her Traditional IRA (c.f. EBRI Issue Brief May 2014); they want $53,500 in annual income (c.f. Consumer Expenditure Survey, U.S. Bureau of Labor Statistics. September, 2014). Assume both pass away at life expectancy of a 66 year old per SSA (82 for him, 85 for her). 1) Both claim when he is 66 and immediately start withdrawing from personal assets; 2) Both claim at their FRA: They live off her earnings + his Social Security until she retires; withdraw from IRA after she retires; 3) Both claim at 70: Both work until 70, then retire and claim maximum Social Security benefit. Assets increase by 5% per year. Assume Social Security benefits and cost of living increases by 2% per year. Withdrawal is greater of amount needed to fund retirement income needs or RMD. 21

22. Are There Other Options if Both Spouses Worked
Are There Other Options if Both Spouses Worked? Advanced Claiming Strategies with Spousal Benefits
David and Susan
David and Susan decide to take Social Security when they are both 66.
They are wondering:
Are there other Social Security claiming options?
If so, what are the restrictions?
What is the IRA balance after both pass away?
Read slide 22

23. Claiming at Age 66 Offers More Options to Married Couples62 63 64 65 66 67 68 69 70
Options if Claiming Before 66
Must take benefit (cannot file and suspend)
Can not choose spousal or personal benefit
If spouse already claiming: receive greater of reduced personal benefit or reduced spousal benefit
If spouse not claiming: receive reduced personal; reduced spousal available when other spouse applies
Options if Claiming After Age 66
Can elect to file and suspend
Allows other spouse to apply for spousal benefits
Worker benefits still accrue delayed retirement credits
Can choose to start off with spousal or personal
Can switch benefits (personal or spousal)
Claiming one benefit will not reduce the other benefit
If David and Susan can claim at age 66 , they will have more options. Age 66 is the first time you can notify the SS Administration how you want to receive the benefits.
Applying for Social Security BEFORE Age 66
You must take the benefit and you cannot suspend the payments. The government will force you to take the Social Security benefit.
You can not pick or choose between the spousal or personal benefit.
If your spouse is already receiving Social Security: You will receive the greater of your reduced personal benefit or your reduced spousal benefit - you have no choice.
If your spouse is not receiving Social Security: You will start off with your reduced personal benefit. (Remember, you cannot receive a spousal benefit unless your spouse is already receiving Social Security.) Thus, when your spouse applies for Social Security, you may see a slight step up if your spousal benefit would have been greater. Because you took your personal benefit before 66 (this decision is within your control), it means that your spousal benefit will also be reduced.
Claim Social Security at age 66
You can decide if you want to suspend your payments. The benefit of suspending is that your personal benefits will grow. And, if your spouse is at least age 62, you just opened the door for her to collect the spousal benefit. The option to collect a spousal benefit before age 66 is most valuable if the wife doesn’t have any Social Security benefits of her own
You can also pick which benefit you will take.
You can also decide to switch benefits at a later date. For example, you could start with 50% of your husband’s benefit and then switch to your personal benefit later on.
The other great thing about claiming at age 66, is that claiming one benefit will not reduce the other benefit.
Let’s look at some examples to see this in actions
In order to receive a spousal benefit, the other spouse must have filed for their own personal Social Security retirement benefits. Can suspend any time after age 66. However, can only choose between spousal and personal if you are Full Retirement when first applying for any benefit.

24. Both Spouses Worked Option 1 - Both Take at 66
Household Social Security Income
Susan retires at 66, starts her benefit
Let’s go through a few options for the couple. What is best for them will be based on their own circumstances.
One option is that they could both take their own Social Security benefit when they retire. In this case, David retires at 66 and decides to take Social Security. Susan retires at 66 and also takes her benefit.
David retires at 66, starts his benefit
David passes away
This case study is a hypothetical illustration only.

25. Both Spouses Worked Option 2 - One Takes Personal Benefit at 66
Monthly Social Security Benefits
Let’s take it one step further: As mentioned earlier, if you wait apply for any Social Security benefits at age 66, you have more options available to you. For example, one spouse could start off with a spousal benefit and then switch over to their personal benefit later.
In this case, Susan claims Social Security at 66 (she didn’t want to claim before 66 because she was working and earning more than $15,720). Because she applied, it allows her husband David to restrict his application to spousal benefits only (remember, the ability to choose to start off with spousal is only available if you apply for Social Security at or after age 66 and your spouse has already applied for benefits). Then, when David is 70, he can switch over to his personal benefit. By claiming his personal benefit at age 70, he is assuring that his wife receives the highest possible widow benefit he can give her after he passes away.
Assumptions (does not need to be spoken to, given for clarification if anyone asks): When Both are Full Retirement Age (FRA): She files for Social Security and collects her full benefit of $13,500. He receives his spousal benefit. Because he is FRA, the spousal is 0.5x her Social Security benefit = 0.5*$13,500= $6,750. Total Household Social Security Income = $20,250. When he turns 70, he switches to his Social Security plus the delayed retirement credits ($24,000). Total Household Social Security amount is $37,500. When she turns 70, she continues with her benefit. She did not receive delayed retirement credit because she claimed her personal benefit at FRA.
David turns 70, switches to his benefit;
Susan’s benefit stays the same
Susan is 66, applies for her benefit; opens door for David to receive spousal
David passes away
This case study is a hypothetical illustration only.

26. Both Spouses Career Worked Option 3 – Both Take Personal at 70, Susan Starts with Spousal at 66
Susan is 70, switches to her personal benefit
Monthly Social Security Benefits
And now, let’s give you the option with the most moving parts: In this option, both claim their personal Social Security benefits at age 70. However, when the youngest is 66, someone should claim a spousal benefit. Claiming the spousal benefit will not reduce anyone’s personal benefit. So, if they don’t claim the spousal benefit when they are 66, they are giving up free money.
It’s up to the couple to decide who should start off with the spousal. In this case, we have Susan claiming the spousal when she is 66. When David turns 70, he turns on his benefit. When Susan is 70, she switches over to her benefit.
Having both spouses claim their personal maximum benefit at 70 is ideal for couples where one of them is expected to have longer than average life expectancies (82 for a male, 85 for a female), and they have sufficient assets to cover their cost of living until 70.
Note: The ability to start off with the spousal and switch to the personal benefit is only available if are age 66 (FRA) when you first apply for any Social Security benefit. There is no such thing as starting off with a reduced spousal and switching to full personal at 66.
Assumptions (does not need to be spoken to; included in notes in case someone asks): When Both are FRA: He files for and suspends his benefits. This allows her to claim spousal benefits. Plus, he receives delayed retirement credit. She receives spousal benefits based on his record. Because she is FRA, the spousal is 0.5* his benefit at 66= 0.5*$18,000 = $9,000 When He turns 70, he claims his Social Security benefit plus the delayed retirement credits. She continues with the spousal benefit in order to maximize the Social Security benefit based on her earnings. Total household Social Security income is $33,000 ($24,000 for him plus her $9,000 spousal). When She turns 70, she switches to her Social Security benefit plus the credit. Total household Social Security income is $42,000 ($24,000 for him plus $18,000 for her).
David turns 70, turns on his benefit and Susan’s spousal benefit stays the same
Susan is 66, restricts application to spousal benefits only (David filed and suspended)
David passes away
This case study is a hypothetical illustration only.

27. Lifetime Social Security and Legacy: Advanced Spousal Strategies May Increase Lifetime Social Security Income and Legacy
Now let’s compare how the different claiming strategies impacted a couple’s Social Security benefits over their lifetime as well as how it affected the balance in their IRA account when she passed away.
Over their joint lifetimes, the spousal switch-up strategies offered more Social Security benefits than if both had claimed at age 66. Whether she claimed at age 66 so he could start with half of hers, or whether he file and suspended (which allowed her to start off with half of his, and they both received the max benefit), both options gave them a higher Social Security benefit over their lifetime than if they had both claimed their personal benefit at age 66.
In this case, using the spousal strategies also increased the IRA account balance on the day she passed away ($260,000 and $250,000).
As for which spousal strategy is best for the client, it really depends on their circumstances. In this case, either strategy would yield about the same lifetime Social Security benefits and IRA account balance. This may or may not be the case with your clients.
Things to consider when determining which strategy to use:
What is the age difference? If there is an 8+ year difference, it may be best for the oldest spouse (if he or she is also the highest earner) to claim as close to 70 as possible to maximize the survivor benefit
Do they have longevity on their side? If so, the highest earner (and both if both have longevity) may want to consider claiming at 70 to really maximize their benefits at the end of their life
Where is the clients more worried about money? If it’s now, she claiming at 66 and he starting off with half of hers may be the right solution. If it’s later on in life, then file and suspend may be the right solution.
There may be no wrong or right strategy for your client. The important thing is that clients understand how their claiming decision impacts their spouse and the longevity of their assets.
This case study is a hypothetical illustration only. Assumptions: He starts off with $260,00 in his Traditional and Roth IRA and she has $140,000 in her Traditional and Roth IRA (c.f. EBRI Issue Brief May,2014); Assume both pass away at life expectancy of a 66 year old per SSA (82 for him, 85 for her). Both claim at 66: Both work until their respective age of 66 and then retire. She claims at 66, he starts with 50% of hers: He retires at 66; they live off of her earnings until his 68 (her age 66) . When she is 66, she retires and claims Social Security on her benefits ($13,500). He files for spousal benefits ($6,750) and switches to his benefit at 70. They withdraw from their IRAs. File and Suspend: He retires at 66; they live off of her earnings until his age 68 (her age 66). When she is 66, she retires. He files for benefits and suspends. She starts off with spousal. When each is 70, they claim their own benefits. They withdraw from the IRA to supplement income. Assets increase by 5% per year. Assume Social Security benefits and cost of living increases by 2% per year. Withdrawal is greater of amount needed to fund retirement income needs or RMD. 27

28. Collecting Social Security before FRA – Both Spouses Worked
Can a client pick and choose between spousal or personal benefit before FRA?
No. Choosing between personal benefit and spousal benefit is only available if both are 66 (FRA)
What if both spouses claim before FRA?
Both receive higher of:
Reduced personal benefit
Reduced spousal benefit
What if one spouse claims before FRA?
Receives reduced benefit based on his/her earnings record
When second spouse claims Social Security, the first spouse automatically receives higher of:
Reduced Personal Benefit
Adjusted Spousal Benefit
A nuance of Social Security that will separate an advisor from the competition is understanding the difference in spousal options if at least one spouse collected before Full Retirement Age (FRA which is 66 if born between 1943 and 1959).
READ SLIDE
Note on “What if both spouses claim before FRA?” Technically the Social Security Administration gives a client’s benefit first and then they true it up (if the spousal benefit is higher). In order to make the presentation easier to understand, we phrased it as “Both receive the higher of their reduced benefit or their reduced spousal benefit.”
FRA is Full Retirement Age. See slide 8 for details.
“Adjusted” spousal benefit only applies if a client claims Social Security before FRA, and then their spouse claims at a later date. The adjustment is: Spousal Benefit – Personal Benefit. This amount (if positive) is added to the client’s current benefit. 28

29. File and Suspend versus Restrict Application
Strategy
Description
File and Suspend
Worker files application so that spouse can receive a spousal benefit; worker then suspends personal benefit; spouse receives spousal benefit, worker’s personal benefit continues to grow
Restrict Application
Restrict application to spousal benefits only; receive spousal benefits; personal benefits continue to grow (spouse must have filed for their personal benefits in order to receive a spousal benefit)
There is technically a difference between “file and suspend” and “restrict application”. While to us, it may seem the same. But, if you say the wrong terms at the Social Security office, they may tell you that you can’t do the strategy. Knowing the proper terms may help your clients avoid some headaches at the Social Security office.
Read slide
Worker must be Full Retirement Age in order to suspend; applicant must be FRA in order to restrict application to spousal benefits only

30. Agenda How Benefits are Calculated
Maximizing Income for Married Couples
Maximizing After-Tax Income with Social Security
Let’s finish up the presentation with a look at how to maximize after-tax income with Social Security. By being aware of the nuances of Social Security, a client may be able to reduce their taxes and maximize their after tax incomes.

31. Social Security may be Taxable at Federal Level Income Determines Whether or Not Social Security Benefits are Taxable
Social Security Benefits Not Taxable
Up to 50% of Social Security Benefits Taxable
Up to 85% of Social Security Benefits Taxable
Single
< $25,000 in income
$25, $34,000
$34,001 +
Married, Filing Jointly
< $32,000 in income
$32, $44,000
$44,001 +
A client’s Social Security benefits may be taxable if their income exceeds certain limits.
For example, if a client is married and filing jointly, up to 50% of their Social Security benefits may be taxable as income if their income is between $32,000 and $44,000. If their income is over $44,000, up to 85% of a client’s Social Security income could be taxable.
Note: These thresholds were set in 1983 and not indexed for inflation. Thus, many more retirees will find themselves paying taxes on their Social Security Benefits.
These thresholds were set in 1983 and are not indexed for inflation.
Sources: IRS Publication 915, Social Security Handbook question 2501, IRS Info and

32. Calculating Taxable Portion of Social Security
See IRS Form 1040 to determine if Social Security benefits are taxable
How to calculate the taxable portion of Social Security is a complicated, multi-step process. To your right, you will see the worksheet from the Instructions booklet of the 1040 that determine whether or not a client’s Social Security benefit will be taxable. For the purposes of this presentation, we thought it was important to have a snapshot of the steps involved. However, it’s not essential to know the details of how to calculate whether or not the benefits are taxable. A client’s CPA can easily assist a client with this part.
Pioneer does not offer tax advice. The information on this slide serves as a guide and does not replace the advice of a qualified tax advisor. Please contact a qualified tax advisor for specifics on a client’s individual circumstance.

33. 50% of Social Security Income
What is Combined Income? Determines Taxable Portion of Social Security; Only 50% of Social Security Included
Combined Income
(Used to determine taxable portion of Social Security benefits) + +
AGI
Tax Exempt Income*
50% of Social Security Income =
To determine the portion of a client’s Social Security benefit that may be subject to taxation, the IRS uses something it calls “Combined Income”, which also referred to as Combined Income. To calculate this amount:
The IRS starts off with a client’s AGI
Adds in Tax-Exempt Income such as income from municipal bonds. Other items that may also be added in include exclusions such as deductions for interest on qualified educational loans and exclusions for savings bonds used for higher education. See IRS Info for further details. Roth IRA and Life Insurance proceeds are excluded from this calculation.
Finally, they add in only 50% of the Social Security income a client received that year.
By lowering Combined income, a client could possibly lower the percentage of taxable Social Security benefits or even avoid taxation on Social Security benefits altogether. What’s also interesting is that
Increasing a client’s AGI (which includes things such as Traditional IRA withdrawals) by $1 will increase a client’s Combined income by $1
Tax exempt income is excluded from Federal Taxes, but it is included in determining which portion of a client’s Social Security Benefits may be taxable
Increasing a client’sSocial Security benefits by $1 will only increase a client’s Combined Income by 50 cents.
What’s really interesting to see is that the lower a client’s adjusted gross income is, the lower the portion of Social Security benefits, if any, that will be taxed. So, the more a client can rely on Social Security for retirement income, the less they have to withdraw from personal savings.
AGI (Adjusted Gross Income) is the last line of page 1 of the IRS Form 1040 (U.S. Individual Income Tax Return).
*May have to add in other exclusions such as deductions for interest on qualified educational loans and exclusions for savings bonds used for higher education. See IRS Publication 915, Social Security Handbook question 2501 and IRS Info IRS Info for further details.
Pioneer does not offer tax advice. The information on this slide serves as a guide and does not replace the advice of a qualified tax advisor. Please contact a qualified tax advisor for specifics on a client’s individual circumstance. 33

34. Case Study: Comparing Taxes Based on Social Security Income
John and Barbara
Claiming Age 62
Social Security Income
$20,000
Traditional IRA Withdrawal
$35,000
Total Income
$55,000
Robert and Mary 66
$27,000
$28,000
$55,000
Let’s look how Social Security benefits could impact a client’s taxes.
Here we have John and Barbara. They decided to start Social Security when he is 62 and they are receiving $20,000 in combined Social Security Benefits plus $35,000 from a Traditional IRA. This gives them a total income of $55,000.
Their neighbors, Robert and Mary, retired at age 66. They receive $27,000 from Social Security and $28,000 from Traditional IRA withdrawal. For a grand total of $55,000.
Will their taxes be the same?
Will their taxes be the same?

35. Increasing Social Security May Decrease Taxes Only 1/2 of Social Security included in Combined Income
Total Income
Taxes
John and Barbara
Social Security
$20,000
Traditional
IRA
$35,000
Taxes = $2,300
Robert and Mary
Social Security
$27,000
John and Barbara pay $2,300 in taxes (rounded).
But Robert and Mary pay $1,225 in taxes.
Why is this? Remember when we talked about Combined Income?
We showed that only ½ of a client’s Social Security benefits are included in Combined Income to determine whether or not Social Security benefits are taxable (For Robert and Mary, that meant that only $13,500 of their Social Security benefits was added to that calculation).
Add that to the Traditional IRA, and Robert and Mary have total Combined income of about $41,500.
When you do run the numbers, you find out that only $4,750 of their Social Security benefits is taxable.
So, add $4,750 to the Traditional IRA distribution… Robert and Mary have total taxable income of $32,750. After you take out the deductions and exemptions … all of a sudden Robert and Mary only owe $1,225 in taxes.
This is a great way for the average client to minimize their taxes. Whether or not this holds true for other clients, they would need to talk to a CPA. But, at least now, they know to ask the question.
For a high-net-worth clients, we may need to explore other options.
Traditional IRA
$28,000
Taxes = $1,225
Assumes couple is married, filling jointly. Standard deduction of $12,600, exemptions of $8,000. Assumes Traditional IRA is entirely pre-tax. Additional age 65 deduction of $1,250 for married taxpayers was not applied in this situation to keep the comparison more accurate.
This case study is a hypothetical illustration only. Pioneer does not offer tax advice. The information on this slide serves as a guide and does not replace the advice of a qualified tax advisor. Please contact a qualified tax advisor for specifics on a client’s individual circumstance. 35

36. Items Excluded from Combined Income
Items Excluded from Combined Income Maximizing Excluded Items may Minimize Taxes
Roth IRA Distributions
Qualified Charitable Deductions
Non-taxable Pensions and Annuities
Child Support
Inheritance/Gifts
Life Insurance Proceeds
Qualified medical distributions from HSA
There are some items that are not included as income for determining Social Security taxes. They include:
- Roth IRA Distributions
- Qualified Charitable Deductions
- Non-taxable Pensions and Annuities
- Child Support
- Inheritance/ Gifts
Life Insurance Proceeds
Qualified medical distributions from HSA
As some of you may have noticed, withdrawals from a Roth IRA are not counted towards the Social Security income, but withdrawals from a Traditional IRA or pre-tax 401(k)/403(b) are included in Social Security Income calculations.
Also, interest from Muni-bonds sometimes may not be taxable at the federal level. However, it is included in the calculations for determining whether or not a client will be paying taxes on their Social Security benefits.
When it comes to retirement and saving for retirement, there’s a lot of things that are out of a client’s control. However, by properly managing and implementing some of these excludable items, a client’s may be able to gain some control of their after-tax income. Let’s take a look.
Speaker’s note: It is always advisable to talk with a qualified tax advisor to determine how to maximize a client’s retirement income and reduce their overall taxes.
Pioneer does not offer tax advice. The information on this slide serves as a guide and does not replace the advice of a qualified tax advisor. Please contact a qualified tax advisor for specifics on a client’s individual circumstance. 36

37. Case Study: After-Tax Income With and Without Roth
John and Barbara
Social Security Income
$20,000
Traditional IRA Withdrawal
$35,000
Roth IRA Withdrawal
Total Income
$55,000
Michael and Patricia
$20,000
$15,000
$55,000
Here’s a case study that illustrates the impact that “Excludable Items” have in controlling a client’s taxes.
Let’s go back to our dear friends John and Barbara. Remember that their retirement income consists of $20,000 from Social Security and $35,000 from a Traditional IRA withdrawal.
Now, their other neighbors (Michael and Patricia) also receive $20,000 in Social Security. However, their withdrawals are $20,000 from a Traditional IRA and $15,000 from a Roth IRA.
Will their taxes be the same?
Will their taxes be the same?

38. Strategically Using Roth IRA May Control Taxes during Retirement
Total Income
Taxes
John and Barbara
Social Security
$20,000
Traditional
IRA
$35,000
Taxes = $2,300
Michael and Patricia
Traditional IRA
$20,000
Social Security
$20,000
As many of you remember, John and Barbara owe $2,300 (rounded) in taxes.
However, their good neighbors (Michael and Patricia) owe nothing in taxes. Why is this? It’s because the Roth IRA withdrawal is excluded from the Combined Income calculation, but the Traditional IRA is included.
(Note for presenter: In this scenario, Michael and Patricia’s Combined Income would be $20,000 from the Traditional IRA plus ½ of the Social Security ($10,000). This leads to a grand total of $30,000. For married couples, Social Security benefits aren’t taxable if Combined Income is < $32,000.
Discussing how Roth may reduce a client’s taxes is especially important if their Social Security benefits will cover less than a third of their retirement income. The higher the amount of a client’s retirement income goal, the more important it is to understand how different sources of income may affect the taxation of Social Security benefits. Understanding how Social Security fits into the picture (and how other income sources could impact whether or not Social Security benefits will be taxable) is one way to help client control their after-tax income during retirement.
Taxes = $0
Roth IRA
$15,000
Assumes couple is married, filling jointly. Standard deduction of $12,600, exemptions of $8,000. Assumes Traditional IRA is entirely pre-tax.
This case study is a hypothetical illustration only. Pioneer does not offer tax advice. The information on this slide serves as a guide and does not replace the advice of a qualified tax advisor. Please contact a qualified tax advisor for specifics on a client’s individual circumstance. 38

39. Recap: Social Security is the Foundation of Many Clients’ Income During Retirement
84% percent of couples age expect Social Security advice from a financial planner.*
Create strategies that maximize retirement income and reduce taxes on Social Security benefits.
61% of couples aged would switch advisors if their current advisor could not help them with Social Security.*
Focus on the couple’s benefits, not the individual’s.
Social Security is a major
source of income for most households.**
Look beyond the numbers; small differences could have a large impact on the longevity of their assets.
Create strategies that maximize retirement income and reduce taxes on Social Security benefits.
Focus on the couple’s benefits, not the individual benefits. Refer to the highest earner’s benefit as the couple’s benefit because this is the benefit that will sustain both lives.
Look beyond the numbers; small differences could have a large impact on the longevity of their assets. As we saw in the case study of the working couple, retiring at age 66 instead of 64 made a difference in the projected amount of assets that a client had at the end of their life.
Finally, discuss Social Security with all of your clients.
Clients of all income levels want to learn about Social Security.
Ask clients to bring a copy of their statements to the next meeting and discuss all the options that are available to them.
Finally, if you aren’t talking to your clients, someone else is.
*Social Security Timing and Market Tools: “Social Security Planning: The Emerging Cornerstone of Your Financial Practice?” August ** Social Security Administration. “Income of the Aged 2014.” 39

40. Neither Pioneer, nor its representatives are legal or tax advisors
Neither Pioneer, nor its representatives are legal or tax advisors.  In addition, Pioneer does not provide advice or recommendations. The investments a client chooses should correspond to a client’s financial needs, goals, and risk tolerance. For assistance in determining a client’s financial situation, please consult an investment professional.
Finally, please remember that investment suitability is important – always read the prospectus before you invest.
Securities offered through Pioneer Funds Distributor, Inc. Underwriter of Pioneer mutual funds, Member SIPC 60 State Street Boston, Massachusetts us.pioneerinvestments.com 2015 Pioneer Investments 40

41. As you can tell, navigating the waters of Social Security can be difficult and confusing. I hope this presentation has lifted some of the confusion for a client. If I, or any of my partners, can be of any assistance, please do not hesitate to ask.
Thank you for your time and this opportunity to speak in front of you. 41