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I Have a Question

I Have a Question. The Keys to Unlocking Social Security and Making Your Benefits Work for You.

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I Have a Question

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  1. I Have a Question The Keys to Unlocking Social Security and Making Your Benefits Work for You Annuities are issued by Transamerica Life Insurance Company in Cedar Rapids, Iowa and Transamerica Financial Life Insurance Company in Harrison, New York and Transamerica Funds are mutual funds advised by Transamerica Asset Management, Inc. Variable annuities and mutual funds are distributed by Transamerica Capital, Inc. References to Transamerica pertain either individually or collectively to these Transamerica companies. Transamerica Financial Life Insurance Company is licensed in New York. Annuities may lose value and are not insured by the FDIC or any federal government agency. They are not a deposit of or guaranteed by any bank, bank affiliate, or credit union. [FINRA Professional’s Name] [FINRA Professional’s Title] [FINRA Member Firm] APPSS0312-ST

  2. Important Disclosure This material is provided for educational purposes only and does not constitute investment advice. The information contained herein is based on current tax laws, which may change in the future. Transamerica cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided or from any other source mentioned. The information provided does not constitute any legal, tax or accounting advice. Please consult with a qualified professional for this type of advice.

  3. How it Began Ida May Fuller First monthly benefit check in 1940 for $22.54 Ernest Ackerman First lump-sum benefit check in 1937 for $0.17 Social Security Administration, “A Brief History of Social Security,” August 2000.

  4. How it Began • Early controversy • Notable critics released negative campaigns during inception • Most notorious was the claim in 1936 that every U.S. citizen would be forced to wear dog tags Social Security Administration, “The Infamous Dog-Tag,” SSA.gov

  5. How it Began • Early attempts to abuse • Secretary’s actual number included in widespread 1938 wallet promotion • More than 40,000 people have since filed for benefits using the number 078-05-1120 Hilda Schrader Whitcher Social Security Administration, “Social Security Cards Issued by Woolworth,” SSA.gov

  6. Social Security Today • More than 59 million people receive a payment • 88% of married couples 65 or older receive benefits • Approximately 2.6 million new retirement beneficiaries received checks in 2010, double the amount from 1970 Social Security Administration, “A Brief History of Social Security,” August 2000.

  7. Why It’s Important Social Security is still a major source of income to those 65 or older. Social Security Administration, "Fast Facts & Figures About Social Security, 2011"

  8. I Have a Question • We’ll address common concerns about: • Whether the program will still be there for you • When to file for benefits • Taxes and Medicare • You’ll learn: • How to determine your Full Retirement Age • How your benefits change depending on when you file • Simple strategies that may help maximize benefits

  9. A Complex Program Social Security is an intricate system. Its official handbook spans 27 chapters and several hundred pages. We will discuss the information that applies in most situations. For complete information, visit SSA.gov.

  10. Will Social Security Be There for Me? • Reserves projected to pay full benefits until 2036. • Tax income projected to cover 77% of benefits from 2036 to 2085, even if nothing is changed. • Bottom line: A 55-year-old today won’t likely have to worry about his or her benefits being affected until age 79 at the earliest. Social Security Administration, “2011 OASDI Trustees Report”

  11. Will Social Security Be There for Me? • Challenges facing the program • Retiring Baby Boomers will strain reserves • Life expectancy continues to increase • Ratio of workers to beneficiaries shrinking Social Security Administration, “2011 OASDI Trustees Report”

  12. Will Social Security Be There for Me? • Possible changes to expect • Increase of Social Security tax rates • Higher maximum of earnings subject to Social Security tax • Increase of the Full Retirement Age • Decrease of future retirement benefits • Reduction of future Cost of Living Adjustments (COLAs) Social Security Administration, “2011 OASDI Trustees Report”

  13. When Should I File for Benefits? • Basic concepts • Full Retirement Age (FRA) • Primary Insurance Amount (PIA) • You will reference these factors repeatedly going forward If born Jan. 1, the SSA figures your benefit as if you were born the previous year. Social Security Administration, “Retirement Planner − Retirement Benefits by Year of Birth, 2011," SSA.gov

  14. When Should I File for Benefits? • You may elect to receive: • Reduced benefits as early as the first full month you reach age 62 • Full benefits at FRA • Increased benefits, if benefits are delayed beyond FRA(up to age 70) Social Security Administration, “Retirement Benefits, 2010,” SSA.gov

  15. When Should I File for Benefits? You can claim Social Security benefits as early as age 62, but at a reduced rate. Social Security provides yearly increases for those who delay the start of benefits. Social Security Administration, “Retirement benefits by year of birth 2012,“ and “Retirement Planner:Delayed Retirement Credits, 2012,” SSA.gov

  16. When Should I File for Benefits? Delaying benefits from 62 until age 70 represents a 76% increase in monthly payments. The average annual return on waiting is better than most investments. *Return data based on 15-year average annualized returns of S&P 500 TR, Barcap US Treasury (USD) and US TREAS CD Sec Mt 6 Mon Social Security Administration, “When to Start Receiving Retirement Benefits, 2008,“ and “Retirement Planner: Delayed RetirementCredits, 2012,” SSA.gov

  17. When Should I File for Benefits? 82 1/2 Total Benefit Amount 78 80 1/2 Age Chosen to Start Receiving Benefits *Calculations assume a PIA of $1,000 and an FRA of 66; this is a hypothetical illustration and does not guarantee or predict actual performance; benefit totals do not include COLA adjustments **Source: American Society of Actuaries; data based on non-smoking individuals and couples Social Security Administration, "Benefit Amount if Retirement is Delayed 2012," and "Starting Benefits at Different Ages Will Change Your Amount 2011," SSA.gov

  18. When Should I File for Benefits? • Other considerations include: • Health • Marital status • Lifestyle expectations • Years in the workforce • Other retirement assets

  19. Can I Work and Still Receive Benefits? Working beyond FRA may actually increase your benefits. But, if you elect to begin benefits prior to reaching FRA, you mustbe aware of earnings limits. Surpassing these will result in a reduction of benefits. Table reflects earnings of the individual claiming benefits, not joint earnings Social Security Administration, “Exempt Amounts Under the Earnings Test 2012,” SSA.gov

  20. Can I Estimate What My Benefits Will be? • Effective April 2011, the Social Security Administration stopped mailing annual statements in an effort to save approximately $70 million.1 • The SSA stopped producing them altogether. Online version may be available in the future.2 • Some tools available by visiting www.socialsecurity.gov, but none are equivalent. • Currently the best way to determine what your benefits will be is to consult your financial professional. 1 Ambrose, Eileen. Social Security Suspends Annual Statements to Save Money. BaltimoreSun.com. [Online] April 7, 2011; http://www.baltimoresun.com/business/consuming-interests-blog/bal-consuming-social-security-suspends-statements-20110407,0,7995103.story 2 Hendricks. San Antonio Express-News. Social Security Statements Halted. MySanAntonio.com [Online] April 15, 2011; http://www.mysanantonio.com/business/article/ David-Hendricks-Annual-Social-Security-1338931.php

  21. What is the Maximum Available Benefit? • The maximum monthly Social Security benefit for a worker retiring at age 66 in 2012 is $2,513. • However, most retirees do not receive anything close to the maximum benefit, mostly because they begin receiving payments early. * After 3.6 % COLA Social Security Administration, "2012 Social Security Changes," SSA.gov

  22. How are My Benefits Calculated? Social Security Administration, “Your Retirement Benefit: How It Is Figured , 2010,” and“Understanding the Benefits, 2011,” SSA.gov • Based on 35 years in which you earned the most • Need 40 credits for full eligibility (usually 10 years in workforce) • Credits only determine eligibility – not the amount of payments • Only relates to individual benefits; you may still be eligible for spousal or survivor benefits regardless of credits earned

  23. How Can I Utilize Spousal Benefits? • Strategies we’ll discuss: • File and Suspend • Claim Now, Claim More Later • Strategy for two high-earning spouses • Divorced Spouse benefits

  24. How Can I Utilize Spousal Benefits? • General rules to keep in mind* • You must be age 62 or older to qualify • You cannot collect benefits on current spouse’s record until he or she files for their own benefit • If you file for spousal benefits at FRA, spousal benefit will be equal to 50% of your spouse’s PIA. Amount is reduced if taken before FRA, but won’t increase if delayed past FRA • These rules also apply for divorced-spouse benefits, as long as the marriage lasted at least 10 years and the beneficiary spouse is currently unmarried** *Some exceptions exist **Those who qualify for divorced-spouse benefits may collect before former spouse files Social Security Administration, “Retirement Benefits, 2010,” and “Retirement Planner – “Benefits for Spouses, 2008,” SSA.gov

  25. How Can I Utilize Spousal Benefits? Case study: The Roosevelts • Frank • Married to Ellen • Higher wage earner • FRA is 66 • PIA is $2,200 • Ellen • Married to Frank • Lower wage earner • FRA is 66 • PIA is $600 • Jimmy • Frank and Ellen’s son • Age 17 • High school student • Unmarried • Lucy • Frank’s ex-wife • FRA is 66 • PIA is $700 • Unmarried • Previously married to Frank for 11 years This is a hypothetical illustration and does not guarantee or predict actual performance

  26. How Can I Utilize Spousal Benefits? • “File and Suspend” strategy: • How it works: Frank, the higher-earning spouse, files at FRA and immediately suspends his benefits. Once he files, Ellen is entitled to $1,100 (50% of his PIA) at her FRA. She can also receive a reduced spousal benefit as early as age 62. • Note: Frank can not do this prior to his FRA. This is a hypothetical illustration and does not guarantee or predict actual performance Educated Investor Featured Article, “File and Suspend,” July 2009

  27. How Can I Utilize Spousal Benefits? “File and Suspend” benefits analysis This strategy increases Ellen’s monthly benefits by $500 now without preventing Frank from maximizing his individual benefit. Ellen also receives maximum survivor benefit if Frank dies first. This is a hypothetical illustration and does not guarantee or predict actual performance; totals do not include COLA adjustments Educated Investor Featured Article, “File and Suspend,” July 2009 ; Social Security Administration, "Benefit Amount if Retirement is Delayed 2012," and “Retirement Benefits by Year of Birth 2012," SSA.gov

  28. How Can I Utilize Spousal Benefits? • “Claim Now, Claim More Later” strategy: • How it works: Ellen files at 62, and begins receiving her own reduced benefit of $450. Frank then files (at his FRA) for his spousal benefit of $300. When Frank reaches 70, he switches to his own benefit of $2,904. • Note: Both spouses can’t receive spousal benefits on each other’s record at the same time. Frank may not do this before FRA. This is a hypothetical illustration and does not guarantee or predict actual performance Center for Retirement Research, “Strange But True: Claim Social Security Now, Claim More Later,” April 2009

  29. How Can I Utilize Spousal Benefits? “Claim Now, Claim More Later” benefits analysis Ellen starts receiving benefits as early as possible, and Frank collects an additional $300 per month between 66-70 without reducing his own benefit. Ellen also receives maximum survivor benefit if Frank dies first. This is a hypothetical illustration and does not guarantee or predict actual performance ; totals do not include COLA adjustments Center for Retirement Research, “Strange But True: Claim Social Security Now, Claim More Later,” April 2009; Social Security Administration, "Benefit Amount if Retirement is Delayed 2012," and "Starting Benefits at Different Ages Will Change Your Amount 2011," SSA.gov

  30. How Can I Utilize Spousal Benefits? • Strategy for two high-earning spouses • (For this example, assume Ellen’s PIA is $1,400 instead of $600) • How it works: Ellen files for only her spousal benefit at FRA, and receives $1,100 per month. At 70, she switches to her own benefit of $1,848. Frank files at FRA, and he begins collecting at 70. • Note: This will not work if Ellen begins receiving benefits before FRA. This is a hypothetical illustration and does not guarantee or predict actual performance BlackRock Investments, “Securing Your Retirement,” 2012

  31. How Can I Utilize Spousal Benefits? Two high-earning spouses benefits analysis (For this example, assume Ellen’s PIA is $1,400 instead of $600) This allows Ellen to receive benefits at FRA and still maximize her own benefit. She sacrifices $300 per month between the ages of 66-70 to earn $448 more per month from age 70 until Frank’s death at age 85. This is a hypothetical illustration and does not guarantee or predict actual performance ; totals do not include COLA adjustments BlackRock Investments, “Securing Your Retirement,” 2012; Social Security Administration, "Benefit Amount if Retirement is Delayed 2012," and "Starting Benefits at Different Ages Will Change Your Amount 2011," SSA.gov

  32. How Can I Utilize Spousal Benefits? • Divorced Spouse Benefits • Example: Needing the money, Lucy begins taking her own reduced benefit of $525 at age 62. She then discovers she is entitled to the same spousal benefits as Ellen. At FRA, Lucy claims Frank’s spousal benefit, and begins receiving an additional $400 per month for a total of $925. • Why it’s important: Many who divorced long ago do not realize they are entitled to a spousal benefit if the marriage lasted more than 10 years and the beneficiary spouse is currently unmarried. • Other strategies: Lucy may also use “File and Suspend” and “Claim Now, Claim More Later” using Frank’s record. This is a hypothetical illustration and does not guarantee or predict actual performance Social Security Administration, “Benefits for Your Divorced Spouse 2012,” SSA.gov

  33. How do Survivor Benefits Work? • General rules to keep in mind • Deceased worker must have earned enough credits • Except in the case of an accident, a couple must have been married at least nine months at time of death • Survivor gets full benefit at FRA, and must be at least 60 (50 if disabled) for reduced benefit • Benefit is not available if surviving spouse remarries before age 60 • Divorced spouse can claim survivor benefit on ex-spouse’s record if marriage lasted at least 10 years. Social Security Administration, “Survivors Planner 2012,” SSA.gov

  34. How do Survivor Benefits Work? • When Frank dies: • Ellen is entitled to • Frank’s full benefit at FRA • Reduced benefit if age 60 (50 if disabled), but no less than 71.5% of full benefit. • Jimmy is entitled to • 75% of Frank’s benefit up to age 18 (19 if in high school full time) or at any age if disabled before age 22 • Lucy is entitled to • Same benefits as Ellen, as long as Frank and Lucy’s marriage lasted at least 10 years and Lucy is not currently married This is a hypothetical illustration and does not guarantee or predict actual performance Social Security Administration, “Requirements for Survivor Benefits 2012,” SSA.gov

  35. Who is Entitled to Benefits? This is a hypothetical illustration and does not guarantee or predict actual performance *Earnings limits, family limits and WEP provisions apply Social Security Administration, “Retirement Planner 2012,” and, “Requirements for Survivor Benefits 2012,” SSA.gov

  36. What about Taxes? Uncle Sam will not cut you a break in retirement *The Social Security Administration defines “combined income” as adjusted gross income + nontaxable interest + ½ of Social Security benefits. Social Security Administration, “Taxes and Your Social Security Benefits, 2011,” SSA.gov

  37. What about Taxes? • Tax strategies to consider: • Delay benefits (and potential taxes on the benefits) while generating income from other assets • Convert Traditional IRAs to Roth IRAs so that the income generated is not calculated as provisional income • Move some assets into an annuity so that the income generated is tax deferred and not calculated as provisional income • Consult a tax-qualified professional to customize a strategy based on your individual needs

  38. When Will I Be Eligible for Medicare? • Most qualify for Medicare on the first day of the first month they turn age 65. Those with certain disabilities qualify for Medicare regardless of age • Enrollment in Part A and Part B is automatic for those 65 and older who receive Social Security benefits. However, those who are not receiving benefits must apply on their own* • Late enrollment may result in delayed coverage or costly penalties.Visit Medicare.gov to learn more * Contact the SSA (800) 772-1213) to enroll Centers for Medicare & Medicaid Services, “Medicare & You, 2011,” Medicare.gov

  39. How Much Will I Pay for Medicare? • Important information concerning Part B coverage: • While most do not pay a monthly premium for Part A coverage, Part B coverage is not free • Part B coverage is voluntary. To opt out, follow the instructions that come with your Medicare card Centers for Medicare & Medicaid Services, “Medicare Premiums and Deductables for 2012,” Medicare.gov

  40. Unlocking Social Security • What we’ve learned: • What you need to consider when deciding when to file • How you can work with your spouse to optimize benefits • What to expect with taxes and Medicare • Visit SSA.gov to learn more

  41. Transamerica’s “I Have a Question” Client Guide The “I Have A Question” Client Guide will provide additional insight into the topics covered today.

  42. Transamerica’s Unlocking Social Security Kit Comprehensive kit that your financial professional can share with you.

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