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May 16, 2013 Joint C.E. Meeting Social Security: Planning, Calculations Taxation - 2013 Accepted by CFP Board of Standards for 1 hr CFP® #05162013; Approved.

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Presentation on theme: "May 16, 2013 Joint C.E. Meeting Social Security: Planning, Calculations Taxation - 2013 Accepted by CFP Board of Standards for 1 hr CFP® #05162013; Approved."— Presentation transcript:

1 May 16, 2013 Joint C.E. Meeting Social Security: Planning, Calculations Taxation - 2013 Accepted by CFP Board of Standards for 1 hr CFP® #05162013; Approved 1 hr Insurance C.E. credit #84351, offering #976743, 2-40 Health Combo/Intermediate Level, provider #697; registered for 1 hr CPE TB#0017037, and 1 hr CLE self-file

2 Special Guest Speaker *Frank Cummings, CFP®, MBA (561) 689-6775 * Frank is President-Elect of NAIFA – Palm Beaches, Inc.

3 Unauthorized Entities An entity that is required to be licensed or registered with the Florida Office of Insurance Regulation but is operating without the proper authorization is identified as an unauthorized insurer. All persons have the responsibility of conducting reasonable research to ensure they are not writing policies or placing business with an unauthorized insurer. Any person who, directly or indirectly, aid or represent an unauthorized insurer can lose their licenses or face other disciplinary sanctions. Please see section 626.901, Florida Statutes, to read the laws. Lack of careful screening can result in significant financial loss to Florida consumers due to unpaid claims and/or theft of premiums. Under Florida law, a person can be charged with a third-degree felony and also held liable for any unpaid claims and refund of premiums when representing an unauthorized insurer. It is the person’s responsibility to give fair and accurate information regarding the companies they represent.

4 Presentation developed for educational purposes only This presentation is intended to educate our members in the variables of Social Security Planning and Taxation in order to provide guidance to their clients. This is NOT for Public Presentation.

5 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? Will Social Security be enough to live on in retirement?

6 WHO IS ELIGIBLE? Individuals 40 credits and over Spouses Eligible dependents Dependents of deceased parent(s), who worked at least 6 of the last 13 quarters Ex-Spouses who were married at least 10 years

7 Social Security offers income you can't outlive 10 more years you'll receive a total of $304,256 in lifetime benefits 20 more years$673,622 30 more years$1,160,479 Assumes 2.8% annual cost-of-living adjustments If your monthly benefit is $2,000 today and you live:

8 Social Security offers annual inflation adjustments In 10 years Your monthly benefit will be $2,636 In 20 years$3,474 In 30 years$4,580 Assumes 2.8% annual cost-of-living adjustments If your monthly benefit is $2,000 today and annual cost-of-living adjustments are 2.8% :

9 Your benefit will depend on: How much you earned over your working career The age at which you apply for benefits

10 Example of benefit formula Baby Boomer born in 1950 Maximum Social Security earnings every year since age 22 AIME = $8,238 PIA formula: $767 x.90 = $690.30 $3,857 x.32 = $1,234.24 ($4,624 - $767 = $3,857) $3,614 x.15 = $542.10 ($8,238 - $4,624 = $3,614) Total = $2,466.64 PIA = $2,466.60 Amount worker will receive at full retirement age (66)

11 What if you apply after FRA? You will earn delayed credits If you were born between 1943 and 1954: Apply at ageBenefit will be % of PIAExample if PIA is $2,466 66100%$2,466 67108%$2,663 68116%$2,861 69124%$3,058 70132%$3,255 Note: COLAs are not factored into these amounts

12 Spousal benefits Spousal benefit = 1/2 the primary worker's PIA if started at full retirement age (35% if started at 62) 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)

13 Rules for spousal benefits Primary worker must have filed for benefits (but can suspend to build delayed credits if over FRA) Spouse must be at least 62 for reduced benefit or 66 for full benefit No delayed credits on spousal benefits after 66

14 Divorced-spouse benefits Same as spousal benefits if: Marriage lasted 10 years or more Person receiving divorced-spouse benefit is currently unmarried

15 Rules for divorced-spouse benefits More than one ex-spouse can receive benefits on the same worker's record Benefits paid to one ex-spouse do not affect those paid to the worker, the current spouse, or other ex-spouses The worker will not be notified that the ex-spouse has applied for benefits Divorced-spouse benefits stop upon remarriage

16 Rules for survivor benefits Couple must have been married at least 9 months at date of death (except in case of accident). Survivor must be at least 60 for reduced benefit (50 if disabled), or FRA for full benefit. Survivor benefit not available if widow(er) remarries before age 60. Divorced-spouse survivor benefit available if the marriage lasted at least 10 years.

17 When to apply for Social Security Key points to remember If you apply early, your benefit starts lower and stays lower for life. COLAs magnify the impact of early or delayed claiming. The longer you live, the more beneficial it is to delay benefits. Decision impacts survivor benefits as well: delaying benefits may give surviving spouse more income.

18 Strategy #1 for maximizing your benefits Examine your earnings record from your latest Social Security statement: Is it accurate? Any missing years? Can you improve it by working longer? Improve your earnings record

19 Strategy #2 for maximizing your benefits Consider: Your income needs, both now and in the future Your life expectancy Your spouse’s life expectancy Apply for Social Security at the optimal time

20 Annual earnings test age 62-65 If you apply for Social Security before full retirement age and you work: $1 in benefits will be withheld for every $2 you earn over $15120. Benefit will be adjusted at full retirement age Don’t let annual earnings test discourage you from working To avoid the earnings test, wait until full retirement age or later to apply for benefits

21 “File and suspend” At FRA, higher-earning spouse applies for his benefit and asks that it be suspended Lower-earning spouse files for spousal benefit Higher-earning spouse claims benefit at 70 Example: Bob and Barbara are 66 Bob’s PIA is $2,000; Barbara’s PIA is $800 Bob wants to delay his benefit to age 70. Barbara wants to file for her spousal benefit now Bob “files and suspends” at 66. This entitles Barbara to her spousal benefit while Bob’s benefit continues to earn delayed credits Caution: “File and suspend” may not be done before FRA

22 “Claim now, claim more later” At FRA, higher-earning spouse restricts his application to his spousal benefit (lower-earning spouse must have filed for benefits on her record) At 70, higher-earning spouse switches to his own maximum benefit Example: Mike and Mary are 66 Mike’s PIA is $2,000; Mary’s PIA is $800 Mary files for her benefit at 66 Mike files for his spousal benefit at the same time and begins collecting $400 (half of Mary’s PIA) When Mike turns 70, he switches to his maximum benefit of $3,293 Caution: Higher-earning spouse may not do this before FRA Only one spouse may do this (both spouses can’t receive spousal benefits on each other’s record at the same time) Spousal planning analysis can determine which of the various spousal strategies will work best for your situation

23 Taxation of Social Security benefits Filing statusProvisional income*Amount of SS subject to tax Married filing jointlyUnder $32,000 $32,000 - $44,000 Over $44,000 0 50% 85% Single, head of household, qualifying widow(er), married filing separately & living apart from spouse Under $25,000 $25,000 - $34,000 Over $34,000 0 50% 85% Married filing separately and living with spouse Over 085% *Provisional income = AGI + one-half of SS benefit + tax-exempt interest

24 Baby Boomer Social Security Question #5 Will Social Security be enough to live on in retirement? Answer: Probably not.

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

26 You have questions. We can help. When should I apply for Social Security? What if I want to keep working? What if I've already applied? How much will my benefit be? How can I coordinate spousal benefits? What's the best long-term strategy for my situation? What do I do next?

27 Case Study #1 A couple currently age 57 & 59. She is older than him by two years. He is the major bread winner. Can & should she apply at 62 for benefits on her work record & then switch to his when he decides to collect (62, 65 or 70)

28 Case Study #2 66 year old as of May 2013. 2012: W-2 ($90,000) & 1099 ($20,000). Question: If I start social security draw in May 2013, am still working, will that reduce social security benefit?

29 Question #1 Explain how and when social security is subject to taxation.

30 Question #2 Explain use of Social Security Maximization (using social security to fo fund life insurance)

31 Thank you special guest speaker: Frank Cummings, CFP®, MBA (561) 689-6775 Social Security is too important for guesswork.

32 Slides in this presentation Copied from Horsesmouth client presentation: “Savvy Social Security Planning: What Baby Boomers Need to Know to Maximize Retirement Income” Copyright © 2011 Horsesmouth, LLC. All Rights Reserved. Horsesmouth is a daily, online service that helps financial advisors succeed by getting more clients and growing their businesses. Each day, you will receive action-oriented, how-to features from leading experts and successful advisors, showing you exactly what to do to have an immediate, positive impact on your business. You will also gain access to a growing database of more than 4,500 articles on sales, marketing, business development, practice management, financial planning and investing. As a NAIFA member, you receive a 90-day free trial—plus a second 90-days free with your annual Horsesmouth Membership of $189 a year (15 months for the price of 12—a savings of $75). And your annual Horsesmouth membership includes your own copy of Horsesmouth's ground- breaking action research report, “Automatic Referrals: How to Instill Discipline in Your Referral Strategy and Guide Your Clients to Deliver Perfect Prospects Every Time.” Sign-up for your 90-day free trial today. For additional information, call 888-33-MOUTH and tell Horsesmouth you're a NAIFA Member. Sign-up

33 Elements for Your Success for more information visit or Increase Your Knowledge with the Recognized Leader in Continuing Education and Professional Development Journal of Financial Service Professionals: Bimonthly issues of the award- winning Journal of Financial Service Professionals features groundbreaking articles and research in all areas of financial services—a $90 value! Journal of Financial Service Professionals Audio Conferences/Webinars/Podcasts: Online Archived Audio Conferences offer education 24/7 focused on cutting-edge concepts presented by qualified experts in their field. Members receive one archived audio conference free with membership and have the option to view others or participate in live programs at discounted member prices.Archived Audio Conferences Online eDiscussion Groups: FSP e-mail discussion groups connect you with peers and experts from across the country. These online forums enable you to discuss technical concepts, exchange practice management ideas, give and get opinions or insight on new planning techniques or hot industry topics—even help those who may need a trusted referral for relative or friend in another part of the country. There are nine eGroups to choose from, one for each Professional Interest Section.e-mail discussion groups


35 Next C.E. LTCI NAIC 4 hr Refresher Course Thursday, June 6, 2013 8:30 a.m. to 12:30 p.m. Comerica Bank Community Room Boca register:

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