SOLVING THE SOCIAL SECURITY PUZZLE · Delayed Retirement Credits •For every month beyond your...

SOLVING THE SOCIAL SECURITY PUZZLE

What You Need to Know Before

You Claim Oscar Garcia Your Social Security Strategies (210) 421-1125 [email protected] yoursocialsecuritystrategies.com

mailto:[email protected]

mailto:[email protected]

http://yoursocialsecuritystrategies.com

© Social Security Solutions, Inc. All rights reserved. Social Security Solutions, Inc. is not affiliated with or endorsed by the Social Security Administration.

Disclaimer

The information presented today does not constitute financial, legal or tax advice and should be used for informational purposes only. Since individual circumstances vary, you should consult your legal, tax, or financial advisors for specific information.

Neither “Your Social Security Strategies” nor “Social Security Solutions, Inc.” is affiliated in any way with the Social Security Administration.

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A Strategy for Social Security?

There are many options one can use in claiming Social Security retirement benefits. Making the best choices for your circumstances can make a significant difference in the amount of cumulative lifetime benefits you receive. While you may be able to learn about Social Security and make a good decision, you need help to make the best decision for your situation.

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Common Questions

Will Social Security be enough to live on in retirement?

How much will I receive?

What’s the best time and way for me to claim benefits?

What should I know about the recent changes?

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Will Social Security be enough to live on? Probably Not


Retirement Spending for the Average Retiree*

Source: U.S. Consumer Expenditure Survey, U.S. Bureau of Labor Statistics, 2014 * Retirees aged 65 to 74 with a reported spending average of $45,968

Shelter/Utilities $11, 967

Transportation $8,214

Clothing $1,287

Food $5,793

Healthcare $5,540

TOTAL “BASIC” EXPENSES = $33,057 (don’t forget taxes)

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How much will my benefit be? IT DEPENDS….


How Much Will I Receive? Your benefits are determined by a combination of factors:

→How much you earned over your working lifetime →The age at which you apply for benefits →Your marital status →How well you use the rules to maximize your benefits

If you start to collect at: 62 66* 70

Your monthly retirement benefit is:

Your minimum At least 1/3

more At least 3/4

more

$1,980 $2,639 $3,483

*Assumes FRA of 66 Source: Social Security Administration, 2016

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Meet Joe and Mary

At age 66, Joe claims his $2,018/month retirement benefit

At age 66, Mary claims her $1,267/month benefit

Joe plans to live until age 80, and Mary until age 90

If they live to those precise ages, they will collect about:

$813,566 in benefits

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Source: Social Security Administration, 2015


How Benefits are Calculated

• Formula includes your highest 35 years of earnings (years with no earnings are averaged in as zero)

• Earnings are indexed for inflation and averaged

• Your benefits are based on your Primary Insurance Amount

• Benefit is increased in some years by cost-of-living adjustments (COLAs)

www.SSA.gov/mystatement


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http://www.ssa.gov/mystatement


Impact of Filing Early

Apply at age Benefit will be % of PIA Example if PIA is $2,230

62 75.0% $1,672

63 80.0% $1,784

64 86.7% $1,933

65 93.3% $2,080

• If you file before full retirement age, your benefit is reduced

• If you were born between 1943 and 1954, FRA is 66

Age 66 Age 65 Age 62 Age 63 Age 64

From age 66 to 63, reduction is 5/9% of PIA From age 63 to 62,

it’s 5/12%

Think Backward:


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Delayed Retirement Credits • For every month beyond your full retirement age that you wait to

claim, you will get 2/3% more!

If you were born between 1943 and 1954:

Apply at age Benefit will be % of PIA Example if PIA is $2,230

66 100% $2,230

67 108% $2,408

68 116% $2,363

69 124% $2,765

70 132% $2,943 Source: Social Security Administration, 2015

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When and how should I claim my benefits? WITH A GOOD CLAIMING STRATEGY


When Should I Start Benefits? Depends on a lot of factors:

• Marital status

• Age

• Life Expectancy

• Total assets available

• Need for income

• Desired standard of living

• Planning to continue work

• Survivor needs

You need a STRATEGY that considers all of these factors!

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What is a Claiming Strategy?

Using all of the complicated rules of Social Security to your advantage.

This may involve combining and/or postponing certain benefits at a particular time.

What is the goal?

maximize total benefits

maximize survivor benefit

begin income at a specific time

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Spousal Benefits

The spousal benefit is based on 50% of the other spouse’s Primary Insurance Amount (PIA)

As the spouse of an insured worker, you are generally eligible to receive spouse's insurance benefits if you meet these conditions:

Your spouse has filed for retirement benefits. You are not receiving a higher benefit. You have filed an application for spousal benefits. You are over 62

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Facts About Spousal Benefits

• Spousal benefits do not earn delayed retirement credits

• Only one member of a couple can receive spousal benefits at a time

• Once you’ve “opened your own record,” you cannot claim a spousal benefit unless it’s bigger than your own benefit

• You must have been married for a full year to collect a spousal benefit

• Divorced Spousal benefits are possible

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What Should I Know About The Recent Changes?


• The Bipartisan Budget Act of 2015 create changes to Social Security

• The ultimate effect is that 2 common ways to claim benefits no longer exist

• Social Security is still confusing

• There are plenty of strategies you can use to maximize benefits

• Some of you may have a window in which they can continue to use these strategies

Recent Changes to Social Security

Source: Bipartisan Budget Act of 2015


If You Were Born Before May 1, 1950

• If you or your spouse were born before May 1, 1950, you are in a “transition” period between old rules and new rules

• You have until May 1, 2016* to take advantage of old rules that can result in thousands of dollars more for you

• These “old” rules refer to the “File and Suspend” strategy

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*Dates are subject to change based on further interpretation of the Bipartisan Budget Act of 2015.



If You Were Born Jan. 1, 1954 or Earlier

• If you were born Jan. 1, 1954 or earlier, you may be eligible for a different set of “old” rules

• These were known as “filing a restricted application”

• Those born Jan. 2, 1954 or later cannot use this strategy

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Recap Of The Recent Changes:

• If you or your spouse was born before May 1, 1950…

• If you were born Jan. 1, 1954 or earlier…

• You have a limited window in which to take advantage of special grandfathering in the new law

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Remember Joe and Mary? Joe: PIA of $2,018 | Mary: PIA of $1,267

If each begins own benefit at 66, lifetime cumulative = $813,566

Here’s their optimal strategy if they live exactly to 80 and 90:

Mary will claim her benefits a little early at age 63 and 10 months. With her reduction in benefits, she’ll collect about $1,084 per month.

At his full retirement age, Joe will collect a small spousal benefit of $634 from Mary’s record. This is called “filing a restricted application” and is only available if grandfathered.

Joe claims his own benefit at age 70 when it has grown to $2,664.

The lifetime cumulative payout is $921,047 – $107,481 more!

This is general and hypothetical. It is not a guarantee of specific results. Individual circumstances vary.

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Joe and Mary fall

under the

“grandfathering”

and can use the old

rules.


What If You Can’t Use the Old Rules?

• Social Security is still very complex

• There are still rules that can help you maximize your benefits (DRCs, benefit recalculation due to continued work, annual earnings test)

• There remain many strategies that you can use to optimize your benefits for your particular situation

• The best strategy for you can only be determined by comparing strategies side-by-side and analyzing tradeoffs

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“Primary or Best” Strategy:

• Abigail begins her benefits at 64

and 7 months

• John begins his benefits at 70

• Abigail adds a spousal benefit

Cumulative benefit: $996,378

John & Abigail – New Rules John & Abigail

John: Abigail:

Age 61 Age 59

PIA of $2,365 PIA of $1,178

Life expectancy 80 Life Expectancy 90

25 This is general and hypothetical. It is not a guarantee of specific results. Individual circumstances vary.


The Power of Compare

Cumulative difference

between Primary and

Early: $163,293!

Survivor benefit

difference:

$1,171/month for the rest

of Abigail’s life

26 This is general and hypothetical. It is not a guarantee of specific results. Individual circumstances vary.


Summary

When you claim benefits matters.

The rules are STILL complicated and voluminous.

There are many combinations of options that can help you maximize your benefits.

Some of you have a small window to take advantage of grandfathering rules.

Give your Social Security benefits the attention they deserve.

Seek expert advice

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How “Your Social Security Strategies” Can Help

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Full Social Security Analysis

• Personalized report • Recommended claiming

strategy to maximize benefits • Compare other strategies • Specific claiming instructions • Colorful graphs • Educational information about

benefits

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