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Social Security Maximizing Benefits Under The “New Rules”

Social Security Maximizing Benefits Under The “New Rules”. What we do: Social security income maximization planning only Not involved in sales of any financial products Advisor certifications: National Social Security Advisor (NSSA)

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Social Security Maximizing Benefits Under The “New Rules”

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  1. Social Security Maximizing Benefits Under The “New Rules”

  2. What we do: • Social security income maximization planning only • Not involved in sales of any financial products • Advisor certifications: • National Social Security Advisor (NSSA) • Certified in Social Security Claiming Strategies (CSSCS) • Working with clients/customers of CPA firms, Law Firms, Banks, Associations and Corporations

  3. Ash Ahluwalia, MBA, CFP, NSSA, CSSCSPresidentNational Social Security Partners, LLC • 2016 National Social Security Advisor (NSSA) of the Year Award • MBA, Wharton Business School • CA, Chartered Accountant • CFP, Certified Financial Planner • Certified in Social Security Claiming Strategies (CSSCS) • 25+ years in the financial services industry • Partner, Atlas Advisory Group, LLC

  4. Will You Receive Your Maximum Social Security Benefits? • Over 90% of recipients get less money than they are entitled to • There are over 2,700 rules governing social security • Married couples have over 567 filing options • Social security agents are prohibited from offering advice • Don’t lock yourself into a permanently lower benefit!

  5. Baby boomers want to know: • Will Social Security be there for me? • How much can I expect to receive? • When should I apply for Social Security? • How can I maximize my benefits?

  6. Social Security offers annual inflation adjustments If monthly benefit is $2,000 and annual cost-of-living adjustments are 2.7% : Assumes 2.7% annual cost-of-living adjustments

  7. Social Security offers income you can't outlive If monthly benefit is $2,000 and you live: Assumes 2.7% annual cost-of-living adjustments

  8. How Social Security benefits are calculated • Highest 35 years of indexed earnings are averaged (AIME) • AIME is divided by two “bend points” to determine your primary insurance amount (PIA). This is the amount you'll receive at FRA. • Benefit “may” be increased each year by cost-of-living adjustments (COLAs)

  9. Full Retirement Age (FRA) Year of BirthFull Retirement Age • 1943-5466 • 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 later67

  10. What if you apply for early benefits? You receive a percentage of your PIA

  11. What if you apply after FRA? You earn 8% annualdelayed credits

  12. Annual earnings test • $1 withheld for every $2 earned over $15,720 from age 62-65 • $1 withheld for every $3 earned over $41,880 in the year you turn 66 • Benefits adjusted at FRA, if “clawed back”

  13. Highlights: “New” Social Security Rules 4 Basic Categories of Filers: • Current recipients • Age 66 by May 1, 2016 • Age 62 by January 1, 2016 • Age 62 after January 1, 2016

  14. Spousal benefits Spousal benefit = 1/2 the primary worker's PIA if started at FRA Example: • John's PIA is $2,000 • Jane's PIA is $800 • If Jane applies at FRA, her benefit will be $1,000 (50% of John’s PIA)

  15. Spousal Benefits • Example: • Husband age 66 • Wife age 63 has Alzheimers

  16. “Maximum vs. Optimal” Example: • John, 63, PIA= $2,600, working • Mary, 60, PIA= $2,400, retire • “file and suspend” not an option • Maximum Lifetime Benefit Strategy: • Both defer to 70 • Maximize Individual Benefits at 70 • Is this is the “Optimal” Strategy?

  17. “Maximum vs. Optimal” Maximum Lifetime Benefit Strategy: - Both defer to 70 - Cumulative Lifetime Benefit = $2.1 million Optimal Strategy: - Mary files at 62 (minimum benefit) - John takes spousal at 66; own at 70 - Cumulative Lifetime Benefit = $1.95 million

  18. “Maximum vs. Optimal” Maximum Strategy generates $150,000 of additional lifetime benefits BUT… Optimal Strategy: • Starts payments earlier: Mary’s 62, John 66 • Generates $230,000 before Max Strategy makes first payment at age 70 • Still maximizes “survivor benefits” • Less risky…

  19. Same-Sex Couples • Supreme Court Ruling June 26, 2015 • Same-sex marriage legalized nationwide • Afforded all the same spousal, divorce, survivor benefits as heterosexual couples

  20. Divorced-spouse benefits Divorce rate still high: • First marriage _______? • Second marriage _______? • Third marriage _______? • Government research on divorce…

  21. Divorced-spouse benefits Same as spousal benefits if: • Married 10 years or more • Currently unmarried • You and ex-spouse are at least age 62 • Divorced more than two years

  22. Divorced-Spouse Benefits • Clients #1 and #2: • My dentist, age 63; divorced and still unmarried • My doctor, age 61; divorced and still unmarried (affected by “New Rules”) • Client #3: • Divorced after 9 years and 9 months of marriage

  23. Entitled vs Eligible • Ex-wife, 66, collecting ex-spousal benefits • Boyfriend, 64, divorced, still working • Could they get married without losing ex-spousal benefits?

  24. Survivor benefits Example: • Joe and Julie are married. Both are over FRA. • Joe's benefit is $2,000 • Julie's benefit is $1,200. • Joe dies. • Julie’s $1,200 benefit is replaced by her $2,000 survivor benefit.

  25. Survivor Benefits • Client Scenario: • Joe, age 63, widower • Girlfriend, Laurie, age 59, widow • Decide to get married now….

  26. Self-Employed Business Owners Client Scenario: • Husband, 66, Income= $300 • Wife, 64, Income= $100K • Q. Should the husband file now (at FRA)?

  27. College Funding? Client Scenario: • Husband, 66, PIA= $2,600 • Wife, 56, Earned Income= 0 • Child, 14 • Q. Should husband file now to fund a 529 plan?

  28. Child & Child-In-Care Benefits Client Scenario: • Ex-husband dies, age 58 • Ex-wife, 30, no earned income • Marriage lasted 6 years • Their child age 5 • Q. Any eligible survivor benefits?

  29. Estate Planning/Charitable Giving Client Scenario: • Husband, 66, PIA= $2,600 • Wife, 66, PIA= $1,600 • Net Worth= $80 Million • 3 Children, 5 Grandchildren • Q. When should they file for benefits?

  30. Factors to consider when deciding when to apply • Health status • Life expectancy • Need for income • Whether or not you plan to work • Survivor needs

  31. Taxation of Social Security benefits *Provisional income = AGI + one-half of SS benefit + tax-exempt interest

  32. Maximize Benefits/Minimize Tax Income Goal = $70K @ 62 @70 Social Security $38 $67 Other Income 32 3 Provisional Income 51 36.5 Total Taxable SS 12 2.3 Net AGI 44 5.4

  33. Maximize Benefits/Minimize Tax Note: • Defer SS to 70: higher taxes 62-70 but lower taxes in retirement (20+ years?) • SS tax planning: should be part of overall retirement income planning • Risks in delaying: SS rule changes, pre-mature death, tax law changes etc.)

  34. Consider Social Security in the context of: • Pensions • IRAs and 401(k)s • Required minimum distributions at age 70-1/2 • Investment portfolio • Work

  35. You have questions… We can help! • NEW RULES: What am I now eligible for? • DEADLINES: Which ones affect me? • When should I apply for Social Security? • What if I've already applied? • How can I coordinate spousal/divorce benefits? • What do I do next?

  36. Social Security: too important for guesswork! Let us help you protect your nest egg and maximize your income in retirement.

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