Slide 1 of Ed.01/2013 A Closer Look At Your Social Security Benefits Utpal Parekh, CFP®, ChFC®, CLU®, CASL®, LUTCF, MBA Financial Planner Prudential Annuities, its distributors and representatives do not provide tax, accounting, or legal advice. Please consult your own attorney or accountant.

Slide 2 of 39 This guide presents a general overview of certain rules related to Social Security and the ideas presented are not individualized for your particular situation. This information is based on current law which can be changed at any time.

Slide 3 of 39  Individual Benefits  Spousal Benefits  Social Security Maximization Strategies Agenda

Slide 4 of 39 Becoming eligible  40 quarters of wages that were subject to Social Security payroll taxes  Quarters do not need to be consecutive Benefits calculated based on average of the 35 highest years of earnings  $0 used in all years less than 35  Will result in a lower benefit Funding and Calculation of Benefits Source: SSA Publication No , ICN , February 2012

Slide 5 of 39 When Is My Full Retirement Age (FRA)? Date of BirthFull Retirement Age and 2 months and 4 months and 6 months and 8 months and 10 months 1960 and later67 Source: as of October 2012

Slide 6 of 39 AgeFRA % reduction 6325% reduction 6420% reduction % reduction 666.7% reduction 67full benefits Can I Take My Benefits Early? AgeFRA % reduction 6320% reduction % reduction 656.7% reduction 66full benefits Source: as of October 2012

Slide 7 of 39 Retirement Earnings Test Under Full Retirement Age (FRA) Give up $1 in benefits for every $2 you earn above a $15,120 limit In the year you reach Full Retirement Age (FRA) Give up $1 in benefits for every $3 you earn above a $40,080 limit If you are at Full Retirement Age (FRA) No penalty Taking Benefits and Working Source: as of October 2012

Slide 8 of 39 John is age 62 with a $12,000 annual benefit  Still working, earns $25,000 per year $9,880 over the earnings threshold Will give up $4,940 of benefits Receives only $7,060 in benefits this year  At full retirement age, no longer any benefit reduction Working While Collecting Social Security This is a hypothetical example for illustrative purposes only.

Slide 9 of 39 Benefits of Waiting Increase in benefits for clients with Full Retirement Age (FRA) of 66/67 AgeFRA % increase 6816% increase 6924% increase 7032% increase AgeFRA % increase 6916% increase 7024% increase Source: as of October 2012

Slide 10 of 39 Social Security Maximization Strategy Break even Points: Age 66 vs. 62: Age 76 Age 70 vs. 62: Age 79 Age 70 vs. 66: Age 81 This is a hypothetical example for illustrative purposes only. This assumes a full retirement age benefit of $24,000 a year, an annual cost of living adjust of 3%, and the client living to age 95.

Slide 11 of 39 Taxation of Social Security Benefits Provisional Income includes:  ½ Social Security benefits  Income from municipal bonds  Wages  Business income  Interest  Capital gains  Dividends  Traditional IRA distributions  Rental income  And more… Provisional Income does not include:  Tax-deferred build-up inside IRAs, 401(k)s and annuities  Income from Roth IRAs  Non-taxable income from life insurance Benefits may be taxable depending on the amount of your provisional income

Slide 12 of 39 Taxation of Social Security Benefits Benefits only taxable if provisional income exceeds: Single or Head of Household  $25,000 = Social Security not taxable  $25,000 - $34,000 = up to 50% taxable  Above $34,000 = up to 85% taxable Married Filing Jointly  $32,000 = Social Security not taxable  $32,000 - $44,000 = up to 50% taxable  Above $44,000 = up to 85% taxable Source: as of October 2012 Prudential Annuities, its distributors and representatives do not provide tax, accounting, or legal advice. Please consult your own attorney or accountant.

Slide 13 of 39 Spousal Benefits

Slide 14 of 39 Married individuals can claim Social Security benefits based on  Personal earnings record, or  Spouse’s earnings record If electing based on spouse’s earnings record  Spousal benefit is up to 50% of their spouse’s Social Security benefit  Cannot claim spousal benefit until the spouse files for benefits Spousal Benefits Source: as of October 2012

Slide 15 of 39 How is the spouse’s benefit calculated?  Gary’s full retirement age benefit: $2,000  Amy has no earnings history Amy is entitled to the greater of:  50% of Gary’s benefit: $1,000  Amy’s own benefit: $0 Amy’s benefit is increased to $1,000:  The $1,000 increase is Amy’s spousal benefit Spousal Benefit

Slide 16 of 39 Age% Reduced FRA % spousal benefit % spousal benefit % spousal benefit % spousal benefit 6650% spousal benefit Taking Spousal Benefits Early Lower-earning spouse files for benefits before Full Retirement Age (FRA)  Own benefit reduced  Spousal benefit reduced as well Age% Reduced FRA % spousal benefit 6335% spousal benefit % spousal benefit % spousal benefit % spousal benefit 6750% spousal benefit Source: as of October 2012

Slide 17 of 39 Reduced Spousal Benefit Amy, the lower earning spouse, files for benefits before her full retirement age  Gary’s FRA benefit: $2,000  Amy’s FRA benefit: $0  Amy’s FRA spousal benefit is $1,000 What if Amy takes benefits at age 62?  At age 62, her spousal benefit is reduced to 35% of Gary’s FRA benefit ($2,000 x 35% = $700)  Receives $700 per month instead of $1,000 per month This is a hypothetical example for illustrative purposes only.

Slide 18 of 39 Surviving spouse can receive or step up to the benefit of the deceased spouse  If survivor is full retirement age, 100% of spouse’s benefit  Generally survivor benefits begin at age 60 Survivor benefits reduced if received before full retirement age – up to 28.5% Exceptions for surviving spouse with children who are under 19  Survivor can switch to his or her own benefits Advantageous if greater when full retirement age reached Survivor Benefits Source: as of October 2012

Slide 19 of 39  Government Pension Offset Affects spousal / survivor benefits if the spouse / survivor has a pension from a government 2/3 of what you receive from your government pension will be subtracted from your Social Security benefit  Windfall Elimination Provision If you work for an employer who does not withhold Social Security taxes from your salary, such as a government agency, any pension you receive based on that work may reduce your Social Security benefits up to 50% Pension from an employer where Social Security taxes were paid is not taken into consideration Social Security and Other Pension Benefits

Slide 20 of 39 Can I Collect Benefits from a Divorced Spouse? Possible to collect benefits from a divorced spouse  Survivor benefits  Retirement benefits Survivor benefits:  Marriage lasted for 10 years  At least age 60 or older  Cannot remarry until over age 60 Source: as of October 2012 Retirement benefits:  Your marriage lasted at least 10 years  Cannot be remarried  Your ex-spouse is entitled to Social Security

Slide 21 of 39 Social Security Maximization Strategies

Slide 22 of 39 Social Security Maximization Strategy Age Jen stayed home and raised the family, so she has no earned Social Security benefits of her own 85 Matt dies at age Jen dies at age Jen and Matt are married and both 62 years old This is a hypothetical example for illustrative purposes only. 66 Matt’s full monthly Social Security benefit at age 66 will be $2,000

Slide 23 of 39 Option 1: File Early At Age 62 Matt files, lives 23 years Social Security Maximization Strategies This is a hypothetical example for illustrative purposes only.  Reduced benefit of $1,500 month / $18,000 year for 23 years Jen files, lives 30 years  Reduced spousal benefit of $700 month / $8,400 year for 23 years  Survivor benefit of $1,500 month / $18,000 year for 7 years

Slide 24 of 39 Option 2: File At Full Retirement Age Matt files at 66, lives 19 years Social Security Maximization Strategies This is a hypothetical example for illustrative purposes only.  Receives $2,000 per month / $24,000 per year Jen files at 66, lives 26 years  Receives $1,000 per month / $12,000 per year for 19 years  Survivor benefits of $2,000 month / $24,000 year for 7 years

Slide 25 of 39 Option 3: Matt Files & Suspends Matt files at 66, lives 19 years, suspends benefits until age 70 Social Security Maximization Strategies This is a hypothetical example for illustrative purposes only.  At age 70 receives $2,640 per month / $31,680 per year Jen files at 66, lives 26 years  Receives $1,000 per month / $12,000 per year for 19 years  Survivor benefits of $2,640 month / $31,680 year for 7 years

Slide 26 of 39 Matt and Jen Claim at 62  $414,000 in his benefits  $193,200 in spousal benefits  $126,000 in survivor benefit Total Payout: $733,200 Matt and Jen Claim at 66  $456,000 in his benefits  $228,000 in spousal benefits  $168,000 in survivor benefit Total Payout: $852,000 Matt Files & Suspends at 66  $475,200 in his benefits  $228,000 in spousal benefits  $221,760 in survivor benefit Total Payout: $924,960 This is a hypothetical example for illustrative purposes only. Social Security Maximization Strategies

Slide 27 of 39  Increases benefits for couples who retire at different ages  Things to remember Married couples are eligible for benefits based on their earnings history or their spouse’s earnings history You cannot collect on your spouse’s earnings history until your spouse files for benefits You can file for benefits and immediately suspend receiving those benefits Spouse who suspends the benefits continues to receive delayed retirement credits (DRC) “Suspending” spouse must have reached full retirement age File and Suspend This is a hypothetical example for illustrative purposes only.

Slide 28 of 39 Social Security Maximization Strategy Age 85 Adam dies at age Meghan dies at age 92 This is a hypothetical example for illustrative purposes only. 62 Adam and Meghan are married and both 66 years old Meghan’s full monthly Social Security benefit at age 66 will be $1,500 per month 70 Adam is looking to retire at age 70, his Social Security benefit will be $2,640 per month 66

Slide 29 of 39 Social Security Maximization Strategy This is a hypothetical example for illustrative purposes only. Option 1: Meghan files and Adam waits Meghan files for benefits at age 66  She receives $1,500 per month / $18,000 per year for 19 years  Survivor benefits of $2,640 month / $31,680 per year for 7 years Adam files in four years at age 70  Adam receives $2,640 per month / $31,680 per year for 15 years

Slide 30 of 39 Option 2: Adam files a Restricted Application  Entitled to 50% of Meghan’s benefit  In the first four years he receives $750 per month / $9,000 per year  At age 70, he switches to his own benefit  Over the next 15 years, he receives $2,640 per month / $31,680 per year At age 66 Adam files a Restricted Application Social Security Maximization Strategy This is a hypothetical example for illustrative purposes only. Meghan files at 66, her benefits are unaffected

Slide 31 of 39 Meghan Files At 66 / Adam Files At 70  $475,200 in his benefits  $342,000 in her benefits  $221,760 in survivor benefit Total Payout: $1,038,960 Adam Uses Restricted Application  $36,000 in spousal benefits  $475,200 in his benefits  $342,000 in her benefits  $221,760 in survivor benefit Total Payout: $1,074,960 This is a hypothetical example for illustrative purposes only. Social Security Maximization Strategies

Slide 32 of 39  Increases benefits for couples with their own earnings history who may be retiring at different ages  Things to remember Individuals can collect spousal benefits and allow their personal earnings history benefits to receive delayed retirement credits You cannot collect benefits on your spouse’s earnings history until your spouse files for benefits You cannot file a restricted application until you have reached full retirement age Restricted Application This is a hypothetical example for illustrative purposes only.

Slide 33 of 39 Retirement Income – Then and Now “Social Security is the largest source of income for most elderly Americans today, but Social Security was never intended to be your only source of income when you retire. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire.” Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 75 cents for each dollar of scheduled benefits.* “Social Security is the largest source of income for most elderly Americans today, but Social Security was never intended to be your only source of income when you retire. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire.”

Slide 34 of 39 Retirement Income – Then and Now

Slide 35 of 39  Monitor your Social Security statements Statements are now available online. Go to socialsecurity.gov to create a secure user account and view your statement  Evaluate impact of commencement dates on your retirement plan  Work with a Financial Professional to review your income sources and evaluate options for retirement income flexibility Summary

Slide 36 of 39 Questions?

Slide 37 of 39 Annuities are issued by Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of New Jersey), Newark, NJ and distributed by Prudential Annuities Distributors, Inc., Shelton, CT. All are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations. This material was prepared to support the marketing of variable annuities. Prudential, its affiliates, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any tax statements contained herein were not intended to be used for the purpose of avoiding U.S. federal, state or local tax penalties. Please consult your own independent advisor as to any tax or legal statements made herein. © Prudential Annuities, Prudential, the Prudential logo, the Rock symbol, and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Disclosures Ed.01/2013 [WO# ML MSA RJ1212]