Understanding Social Security and evaluating the best approach for you! Grow, protect, and enjoy your Orange Money™ for retirement. CN /30/2015

What is Social Security? A U.S. federal program of social insurance and benefits About 158 million Americans pay Social Security taxes 59 million collect monthly benefits in 2014 Approximately one in four households receive income from Social Security

History of Social Security 1795 – Thomas Paine in his writings proposed a social insurance program for the young American Republic – Germany became the first nation to adopt an old- age social insurance program – Social Security Act became law – Ida M. Fuller became the first person to receive an old-age monthly benefit check under new Social Security law. Resource:

Ida M. Fuller She was born on September 6, 1874 She paid in a total of $24.75 between 1937 and 1939 At age 65, her first check dated January 31, 1940 was for $22.54 She lived to age 100 She received a total of $22,888 in benefits Resource:

Social Security provides a foundation 45% 16% 19% 17% *Source: Social Security Administration, Office of research, evaluation, and statistics, Income of the Aged Chartbook, 2010, issued March Key sources of retirement income for households with incomes of more than $57,957 per year. This chart is for illustrative purposes only. Social Security

Qualifying for retirement benefits Eligibility: 40 credits (10 years of work) 1 credit a quarter Quarters do not need to be consecutive In 2015, you receive one credit for each $1,220 of earnings, up to the maximum of four credits per year Benefits are calculated based on average of the 35 highest years of earnings $0 used in all years less than 35, which will result in a lower benefit

What is your full retirement age Year of BirthFull Retirement Age 1937 or earlier and 2 months and 4 months and 6 months and 8 months and 10 months and 2 months and 4 months and 6 months and 8 months and 10 months 1960 and later67

Cost of living adjustment In 1973, legislation enacted a cost-of-living adjustment, also known as COLAs Help keep pace with inflation Have been in effect since1975 Any adjustments are announced in October Increases are payable starting January of following year

History of COLAs Inflation by percentage Source:

Life Expectancy? Male age 65 Can expect to live on average until 84 Female age 65 Can expect to live on average until 86

The longevity challenge

When to start receiving benefits When is the right time for you to receive Social Security benefits? The answer: It depends Factors to Consider: Timeline for retirement Health status Life expectancy Other income sources

Cost of collecting early Under Full Retirement Age (FRA) Give up $1 in benefits for every $2 you earn above a $15,720 limit In the year you reach Full Retirement Age (FRA) Give up $1 in benefits for every $3 you earn above a $41,880 limit AgeFull Retirement 66AgeFull Retirement % Reduction6230% Reduction 6320% Reduction6325% Reduction % Reduction6420% Reduction 656.7% Reduction6513.3% Reduction 66Full Benefits666.7% Reduction 67Full Benefits Source: Age 66 Age 67 Collecting early and working

Benefits of collecting after AgeIncome Amount 66100% 67108% 68116% 69124% 70132% AgeIncome Amount 67100% 68108% 69116% 70124% Full Retirement at 66 Full Retirement at 67 Source:

Benefit payments will differ Age 62 $750 Age 70 $1,320 Age 66 $1,000

Spousal benefits Spouse is entitled to a greater of the benefit based upon their own benefits or 50% of the spouse’s benefit. Example #1: Dawn and Adam both have reached FRA. Adam’s benefit is $1,200 and Dawn’s benefit is $1,400. Both would receive their own benefit amount. Example #2: Steve and Sue have been married for 35 years. Steve never worked and does not qualify for Social Security. Sue’s benefits is $1,800. At FRA, Steve’s spousal benefit would be $900. Steve could begin receiving benefits at age 62, but would be reduced since he is not at FRA. Example #3: Jerry and Mary both have reached FRA. Jerry’s benefit is $800 and Mary’s is $1,800. Since half of Mary’s benefits equals $900 that is greater than Jerry’s benefit of $800. In this example Jerry would be entitled to $900 instead of his own benefit of $800.

Jerry and Mary’s benefit options Mary could take her benefit of $1800 Mary could increase her benefit amount by deferring up to age 70. At age 70 her benefit amount would be $2448 Mary’s Benefit $1,800 $ 1800 divided by 50% = $900 Half of Mary’s Benefit $900 Jerry can either take his benefit of $800 Jerry can take half of Mary’s benefit which is $900 Jerry’s Benefit $800

Survivor benefits Widows and widowers can begin taking benefits based on their own earnings history and later switch to survivors benefits or vice versa. Survivor benefits can be taken even if the surviving spouse files before full retirement age. This allows the survivor to take a benefit at age 60 based on the deceased’s earning history and allow their own benefit to grow until age 70. Survivor benefits are equal to full retirement benefit the deceased would have received.

Survivor benefits Widow or Widowers Earliest to Begin (Reduced) Benefits 60 50, if disabled Maximum Benefit 100% of deceased worker’s Benefit If Spouse Has Not Reached Full Retirement Age, Takes Benefits And Continues Working Benefits will reduce by $1 for every $2 you earn over that year's limit If Deceased Worker Started Benefits Prior To Full Retirement Age The maximum benefit is limited to what the deceased was receiving if they were alive

Survivor benefits Widow or Widowers Typical SituationsA widow or widower, at full retirement age or older, generally receives 100 percent of deceased worker's basic benefit amount A widow or widower, age 60 or older, but under full retirement age, receives about percent of the deceased worker's basic benefit amount If You Re-MarryMust be unmarried when you file for (widow or widower's benefits or your new marriage must be one that Social Security can disregard Can continue to receive benefit if re-marry after age 60 or age 50 if disabled

File & suspend An option that married couples might find valuable is “file and suspend” Example: Kris and Katie have just turned 66. Katie wants to retire, but Kris wants to continue working until 70. Kris’ monthly benefit would be $2,000 and Katie’s would be $900. If Katie can claim spousal-benefits, her monthly benefit would be $1,000. Taking advantage of the file and suspend option. Kris can file for benefits at age 66 and immediately suspend receipt of those benefits. His monthly benefit as a result will continue to grow until at 70. Katie can then claim spousal benefits of $1,000 a month while letting her own retirement benefits grow until age 70. At age 70 her monthly benefits, because of delayed retirement credits will be $1,224. At age 70 she can claim the higher benefits on her own record.

Kris & Katie’s options Kris could take his benefit of $2,000 Kris could increase his benefit amount by deferring up to age 70. At age 70 he would receive a benefit of $2,642. Kris’ Options Katie could take her benefit of $900 Katie could take half of Kris’ benefit which is $1,000. Katie’s first two options Katie could claim spousal benefits or $1,000 a month until age 70. At 70 she can claim her own delayed benefits of $1,224. Katie’s other option

Social Security online resources Social Security Administration Website: SSA Website Resources/Calculators: Earnings Test Calculator Retirement Age Calculator Estimate Your Retirement Benefits Estimate Your Life Expectancy Other Benefit Calculators

Social Security online resources

Timeline for retirement planning Source: Begin making catch-up contributions, an extra amount that those over age 50 can add to 401(k) and other retirement accounts. Check your Social Security Statement online every year for earnings accuracy and to learn what your estimated benefits will be. Earliest age to collect Social Security retirement benefits; however, claiming before the full retirement age results in reduced monthly benefits Earn Social Security Delayed Retirement Credits, which increase monthly benefits for each month claiming is delayed between the full retirement age and age No more tax penalties on early withdrawals from employer-provided retirement savings plans such as 401(k) plans and other individual retirement accounts, but leaving money in means more time for it to grow. Also, withdrawals will be taxed as regular income. 65 Start taking minimum withdrawals from most retirement accounts by this age; otherwise, you may be charged penalties in the future. Receive Social Security full benefits, depending on your birth year. Sign up for Medicare and Medicare Part D / /2

What is the best approach for me? 45% 16% 19% 17% 2% It really depends on your situation: Can you afford to delay taking benefits? When do you plan to retire? How much income do you need in retirement? What other sources of income are available to you in retirement?

Thank you! Grow, protect and enjoy your Orange Money TM for retirement