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What Everyone Should Know About Retiring [PRESENTER NAME] [PRESENTER TITLE]

A Little History Created over 75 years ago, Social Security was originally designed to help senior citizens avoid poverty during the Great Depression. It was created as a self-financing program that would collect payroll taxes from workers which would immediately be paid out in benefits to retirees. Millions of Americans depend on Social Security as their primary source of retirement income.

Lifetime Income : Provides what every retiree wants: an income that never runs out. Predictable, Steady Income : After qualifying, the income you receive is set and does not change. Inflation-adjusted Income : Every year, Social Security benefits are increased for inflation purposes. These cost-of-living (COLAs) are a big help to seniors. Survivor Benefits : Even after a spouse dies, their benefits are paid to surviving spouses and dependents. Major Benefits of Social Security

How Are Benefits Calculated?  When you turn 62, your exact amount is calculated. Annual earnings are indexed to account for wage inflation.  After every year’s earnings are indexed, the government tallies your highest 35 years of earnings. If you worked less than 35 years, any missing years are counted as zeroes. Every year of earnings are totaled and divided by 35 which gives you your “indexed monthly earnings”; also known as AIME.

Calculating Benefits Cont’d Every year, the maximum wages subject to Social Security Tax has increased. The government takes your inflation-adjusted indexed monthly number (AIME) and applies a 3-part formula to arrive at your primary insurance amount or PIA calculation. This PIA is your guaranteed monthly benefit. There are tools available online to determine PIA at the government’s Social Security web site.

Receiving Benefits  Full retirement age for people born between 1943 and 1954 is 66 – the age you can begin receiving your full, unreduced primary insurance amount (PIA)  Early eligibility begins at 62 but reduces benefits  Timing is one of the most crucial aspects of Social Security planning  “The bread winner will delay” is an important concept that means the longer the primary earner (individual or married) delays, the larger the monthly income will be but it depends on every client’s situation.

Social Security Eligibility  You become eligible for Social Security by working in a Social Security-covered job for at least 10 years  To be more precise, you need 40 credits  You can earn up to 4 credits per year by earning a certain minimum dollar amount  If you earn 4 credits every year for 10 years, you accumulate the 40 credits needed

Receiving Benefits Cont’d  Benefits can increase approximately 8% “guaranteed” for each year you wait.  Timing depends on each client, each situation and the client’s retirement plans. If one is not working and has limited funds, they may have to take Social Security. Everyone’s situation is different.  First, it is important to understand the impact of what Social Security terms Full Retirement Age (FRA).

Full Retirement Age  FRA is based on your birth year, and can gradually move from age 65 to 67.

Applying Early for Benefits  If you apply when you first become eligible at 62, your benefit will equal 75% of your PIA.  So if “Boomer Bill” has a calculated PIA of $2,466 for example, and applies in 2012 when he turns 62, his monthly benefit would be 75% of his PIA or approximately $1,850.*  This is the amount he would receive for the rest of his life, only increased by COLAs annually. *To understand how to calculate PIA, visit

The Power of Timing: Applying After FRA  At age 66, you obtain your full retirement age. Now you can start receiving your full, unreduced PIA.  However, if you delay the onset of benefits past age 66, you will earn what are called delayed actuarial credits.  Delayed credits are the first step to increasing your income in order to maximize retirement planning.  For each year you delay the start of your benefits, your benefit will increase by 8% per year up to age 70.  So if Boomer Bill waits until age 70 to apply, his $2,466 PIA will increase by 32% to $3,255 (excluding COLAs)

Delayed Credits and Spousal Benefits  This is the key area for retirement planning  Leveraging the delayed credit system allows you to optimize spousal benefits through two key “switch strategies”  By using these two strategies, pre-retirees can maximize benefits and then redirect these additional funds into a tax-deferred annuity as one valuable option.

Social Security Taxation  Depending on your earnings, you are responsible for paying income taxes on a portion of their benefits.  The IRS adds half of an individual's Social Security benefits plus all other income (such as pensions, CD/bond interest or capital gains) to calculate the income taxes owed  In fact, up to 85% of your benefits could be taxed…

Social Security Taxation

Yes, But What of Other Solutions  Other solutions like bank CDs, savings accounts and money market accounts are safe and earn interest – no doubt.  However, you would have to pay taxes on your interest earnings yearly.  Annuity & Life Insurance interest earnings are tax- deferred until withdrawn.

Avoid the Social Security Tax Trap  It’s important to know that deferred annuity & life insurance interest is not included in the year it is earned. It is only included in the year it is withdrawn.  By repositioning your assets into annuities & life insurance you can defer the interest earnings until they choose to withdraw them, you could save thousands and thousands of dollars.  You’ll be able to defer income taxes on your interest earnings and reduce or eliminate income taxes on your Social Security benefits – a double win for you.

What is Long Term Care?

What is Long-Term Care? Long-term care covers a wide range of services but generally falls into two categories: skilled care and personal care.  Skilled care is provided when recovering from an illness or injury.  Personal care helps maintain the activities and functions of daily life.

What is Long-Term Care Insurance? Just like your automobile, homeowners, or health insurance, long-term care insurance is another way to help guard against risk. It allows you to help protect your assets and maintain control by providing you with long-term care alternatives. For many, it may be an economical way to pay for long-term care

Medical and Long-Term Care Costs  $19 per hour for homemaker services  $21 per hour for home healthcare  $67 per day for services in adult day healthcare center  $3,293 per month for care in an assisted living facility (one-bedroom unit)  $6,235 per month for a semiprivate room and $6,965 for a private room in a nursing home Society for Financial Awareness 21 The average costs of long-term care: From 2015 to 2121, healthcare spending is projected to grow at an average annual rate of 6.2% Source:

How Does Long-Term Care Insurance Work? Long-term care insurance is designed to help pay for services for those who need help with activities of daily living (ADL’s)- those everyday activities of caring for yourself such as getting dressed, eating, or moving from a bed to a chair. Someone with a cognitive impairment (such as Alzheimer’s disease or senile dementia) may need constant supervision and reminders to do simple daily tasks.

What Services Are Covered? Over 20 years ago, the first long-term care insurance policies only covered nursing home care for individuals. Today, there are many long-term care alternatives, and insurance policies emphasize care in the home and support of caregivers. Some long-term care policies even provide “Cash Benefits” which pay regardless of what type of services are received.

Covered Services….. continued Institutional Care Nursing Home Adult Foster Home Assisted Living Services Facility Residential Health Care Facility Bed Reservation Respite Care Hospice Care Home Care Adult Day Care Home Health Care Homemaker Personal Care Some policies cover

What Does Long-Term Care Insurance Cost? Many people do not know the actual cost of long-term care insurance and mistakenly believe it is unaffordable. Although actual premiums may vary, the cost of NOT having long-term care insurance could be much higher. Many of us underestimate the costs of long-term care services and could end up depleting our retirement savings and income.

Step 1 – Understand the Need Where will the money go? UNDER 65OVER 65 HospitalHealth InsuranceMedicare Part A Medigap Insurance DoctorHealth Insurance Medicare Part B Medigap Insurance Long-Term Care YOU

Step 2 – Consider the Options ASK family members or friends but first consider the demands on their lives. RELY on Medicaid but first consider the strict financial limitations of this program and the primary focus on nursing home care as opposed to home care. REMAIN self-insured But first consider the risks to your assets and standard of living. TRANSFER the risk to insurance To help retain control of your care choices and protect everything you’ve worked for. You can…

Medicare Pays the First 20 days  Medicare provides limited help: Covers Skilled Care Only Pays less than 25% of cost* *Congressional Budget Office, Financing Long-Term Care for the elderly, Washington, DC, April 2004 

Step 3 – Plan for the Costs

Making an informed decision e/T036-C000-S002-long-term-care- rate-hikes-loom.html e/T036-C000-S002-long-term-care- rate-hikes-loom.html

You Pay For WHAT? Too many times families pay for a long term care policy only to drop the plan before it starts paying benefits!

Die and Never use the Benefits This really isn’t a bad option from one point of view But from a Financial Point of view it is HORRIBLE!

Might as well throw your money down the toilet.

What makes it worth it? First of all, the contract would have to guarantee the rate to NEVER CHANGE! No unexpected rate increases!

Secondly A Guarantee that I will at least get my money back if I die and don’t need Long Term Care.

Consider this not that… Life Insurance with a Chronic Illness rider. A Guaranteed Universal Life Insurance policy 1. Premiums are level and guaranteed never to increase. 2. If you die, the death benefit pays to your heirs. 3. If you need long term care, use your death benefit to pay these costs. (Riders differ by company)

Definition… Unable to perform at least two Activities of Daily Living (ADLs) 2 or Severe Cognitive Impairment 3 2 Activities of Daily Living include bathing, continence, dressing, eating, toileting or transferring. 3 Severe Cognitive Impairment means the insured requires substantial supervision by another person to protect him or herself from threats to health and safety due to a severe cognitive impairment.

Retirement It’s what you keep that counts!

Trying to grow your money in the Stock Market without a Safety Net is Risky! Over 7 years to recover Over 6 years to recover The market has averaged a downturn once every four years! In the past 56 years (1954 – 2012) it has had 14 down cycles. From 2000 to 2013 the S&P has had NO GROWTH!

Does your current retirement strategy guarantee you will Never lose money when the stock market goes down? The Risk Trap Question

The S&P 500 Average Returns YearsAverage % Return History of Stock Market Returns

-50% Return In Year 1 +50% Return In Year 2 What would be the Average return? If you had an account that experienced:

The Average return would be…

Beginning of Year 1 = $1,000 (-50% Return) End of Year 1 = $500 (+50% Return) End of Year 2 = $750 What is the actual (REAL) Return?

Which return do you think most mutual fund companies use to advertise to the public? Average %Real % Year Average vs. Real History of the S&P 500 Returns

Moneychimp.com Here is a website that you enter any range of years and see the average vs. the actual return.

Even one year of negative return will cause these two averages to differ. What’s the only way these two averages will ever be equal? Why the Difference?

Year Initial Investment $100,000 Annual Change in S&P 500 Rate of Return % % 28.68% 10.88% 4.91% 15.79% 5.49% % 26.46% 15.06% 2.11% 16.00% Ending Balance $88,110 $68,640 $88,320 $97,930 $102,740 $118,960 $125,490 $79,060 $99,980 $115,040 $117,470 $136,260 Total Rate of Return 3.63%

Year Initial Investment$100,000 Annual Change in S&P 500 with Growth Cap & Growth Floor Rate of Return 0.00% 13.50% 10.88% 4.91% 13.50% 5.49% 0.00% 13.50% 2.11% 13.50% Ending Balance$100,000 $113,500 $125,850 $132,030 $149,850 $170,080 $193,040 $219,100 $223,720 $253,930 Total Rate of Return 7.71% Difference 86%

The advantages of “No” Market Type Loss and an Annual Reset Design 140K 120K 100K S & P 500 Index Credits Hypothetical Example – “demonstrates” Annual Reset Design only.

Compare for Yourself

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