Social Security. What to Expect when your turning 62. Presented by: Gary Adkins, Ben Davis, and Gable Adkins Select Pointe LLC

Transcription

1 Social Security What to Expect when your turning 62 Presented by: Gary Adkins, Ben Davis, and Gable Adkins Select Pointe LLC

2 Who Are We? 2 Select Pointe LLC Franklin, TN Agents in TN, AR, MS Medicare Income in retirement Long Term Care Health Insurance Reform

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4 What we are going to talk about today 4 Social Security Strategies Spousal and Divorce Strategies Other strategies not covered: Disability Benefits Survivor Benefits Government pension offset Etc.

5 What we are NOT going to talk about today 5 Stocks Bonds Investments Pensions 401(k)s, IRAs Etc.

6 Want do you want to know? 6 1. When should I apply for Social Security? 2. How much can I expect to receive? 3.How can I maximize my benefits? 4. Will Social Security be enough to live on in retirement? 5. Will Social Security be there for me?

7 How To Qualify 7 40 credits to qualify. You can earn up to 4 credits a year. Credits based on total wages/ income during the year. Highest 35 years of earnings (missing years count as zeroes) PIA

8 When Most People Take SS 8 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% According to the SSA, 72% of current recipient receive reduced benefits because they started their benefits prior to FRA Men Women

9 Who should apply at 62 9 Poor health? Need the income?

10 Applying Before Full Retirement Age 10 Birth Year Full Retirement Age % and 2 months 25.83% and 4 months 26.67% and 6 months 27.50% and 8 months 28.33% and 10 months 29.17% 1960 and later % Benefit Reduction at 62

11 Reason you should delay 11 If you start getting benefits at age * Multiply your Full Retirement Benefit by % % % % 70 or later 132.0%

12 Meet Barb and Bill 7 Couple both 61 and both earn $60,000 a year. % of income replaced at 62, 66, 70 50% 40% 30% 20% 10% 0% SS Income Replacement 32% 23% %

13 Meet Barb and Bill 13 Couple both 61 and earn $60,000 a year. Added earned income if both retire at 62, 66, 70 $1,067,088 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 $0 $502,

14 Social Security Re-do 14 Withdraw SS and payback claim SS allows you to payback up to 12 months worth if you change your mind.

15 Social Security Do-Over 15 Husband entitled to $2,000/ month SS at FRA. However, elected to collect $1,500/ month at age 62 instead. At 66, due to husband s enlightened concern over longevity, he wants to make up his lost retirement SS from filing his SS too soon.

16 Social Security Do-Over 16 Can the husband voluntarily suspend his benefits and resume them in the future? Yes Can his same aged wife claim spousal benefits from the husband at any time from his initial claim through age 70 (and beyond)? Yes

17 Social Security Do-Over 17 Retirees can voluntarily suspend SS benefits at any time. But only once. You can have several forced suspensions.

18 Step 1: When Should I Apply? 18 Health Status Need for Income Life Expectancy Whether or not you plan to work Needs for Spouse/ Survivors

19 When Should I Apply? Life Expectancy

20 Most Uninformed Comment 20 My mother/ father/ grandparent only lived until age 73, so I should probably die around 73. Only 25% of Life expectancy is based on family history.

21 Chances of a 65 Year Old Living to 21 Various Ages Age Married Male Female % 68% 80.6% % 49.3% 65.3% % 29.5% 44.5% % 13.4% 23.0% % 4.2% 8.6% For the purpose of retirement planning, the most relevant statistic is not one s life expectancy at birth, but rather their life expectancy during

22 Spousal First then Own 22 Husband and Wife age 62 Both Retired Can the lower earner take spousal SS benefits at age 62 then switch to his/her own benefits at a later Date? NO Lower gets the higher of his/hers Spousal is the same as applying for your own if under FRA

23 Spousal First then Own 23 Husband age 66 & wife age 66. Both Retired Can the lower earner take spousal SS benefits at age 66 then switch to his/her own benefits at a later Date? Yes (½)

24 Spousal First then Own 24 At or after full retirement age, a married spouse may have the option to claim the spousal benefit and subsequently claim his/ her own benefit later to maximize SS benefits. This option is not available if the spousal benefits are claimed before FRA, because under the deemed filing rule an individual filing before FRA is treated as claiming both benefits, if eligible.

25 Step 2: How Much Can I expect to Receive 25 Previous Earnings What is your FRA When you take Social Security Still Working

26 What if you file at 62 and still work? 26 Under FRA, $1 is deducted for every $2 earned above the annual limit annual limit is $15,120. The year of FRA, $1 is deducted for every $3 earned above the different limit earnings before FRA is $40,080.

27 File and Switch 27 Wife 62. Lower earner. Drawing her SS. Husband 63. Higher earner, still working. Can the wife claim her SS (as early as age 62), and after her husband retires (as late as age 70), receive a higher spousal benefit? YES (½)

28 File and Switch 28 Wife 62. Lower earner. Drawing her SS. Husband 63. Higher earner, still working. If wife delays claiming spousal benefits until she reaches age 70 (instead of his/her FRA), will she receive higher spousal benefits? NO

29 File and Suspend 29 Couple: Husband 66 higher earner, and wife 62 lower earner At FRA his benefit is $2,200 At 66 he files and immediately suspends At 62 she is entitled to spousal benefit $1,100 At 70 his benefit will be $2,904

30 File and Suspend 30 The higher-earning spouse files a restricted application for SS retirement benefits at full retirement age. The lower-earning spouse also files for spousal benefits based upon the earning records of the higherearning spouse (½). SSA, Retirement Planner- Benefits for you Spouse, SSA.gov

31 File and Suspend 31 Higher-earning spouse then withdraws SS application and repays any benefits received (limited 1 year). Can request an immediate suspension. Do not have to actually receive any SS Even though the higher-earning spouse withdraws his application, the spousal benefit continues.

32 File and Suspend 32 Higher-earning Spouse Much Lower-Earning Spouse Applies for SS At FRA Applies for Spousal SS Benefits Suspend SS And Repays SS Benefits Received Continues Spousal SS Benefits

33 Step 3: How Can I Maximize My Benefits 33 Are my records accurate? Any missing years? Apply at the optimal time Coordinate spousal benefits

34 Taxation of SS Benefits 34 Filing Status Provisional Income Amount of SS subject to tax Married filing jointly Under $32,000 $32,000-44,000 Over $44,000 Single, head of household, qualifying widow(er), married filing separately & living apart from spouse Married filing separately and living with spouse Under $25,000 $25,000-34,000 Over $34, % 85% 0 50% 85% Over 0 85%

35 Withdraw Now, Withdraw More Later 35 First-retiring spouse applies for own SS retirement (as early as age 62). The later-retiring spouse at or past FRA (e.g. age 66) applies for spousal benefit. At age 70 (or sooner), later-retiring spouse applies for his/her own SS retirement benefit based on own higher benefits SSA, Retirement Planner- Benefits for you Spouse, SSA.gov

36 Withdraw Now, Withdraw More Later 36 First-Retiring Spouse Later-Retiring Spouse Applies for Spousal SS Benefits at FRA Applies for SS At age 70 (or when retires) Applies for his/her own full SS benefits

37 Step 4: Will Social Security be Enough to Live On 37 Probably Not Other sources of income Pensions IRAs 401(k)s RMDs at 70 ½ Investments Work

38 Retirement 38 Most retirees believe their expenses will decrease after retirement. Most retirees discover that their expenses actually increase after retiring. Medical costs Long Term Care

39 Cost of Care 39 According to the WSJ 7 out of 10 people 65 and older will be faced with an expense of $120,000 to $210,000 during retirement. $41,000/yr for home care in TN $73,000/yr for nursing home care in TN The national average for care is $80,000

40 Long Term Care 40 With the cost increasing at 5% a year, the cost of a semi-private room in 2030 is estimated to reach $190,000 a year.

41 Divorced Spouse s Benefits 41 Divorcee, age 62, previously-married to ex-spouse more than 10 years. Can she claim spousal benefits at age 62 even if the ex-spouse has not claimed SS benefits? Yes, must be divorced more than 2 years.

42 Divorced Spouse s Benefits 42 Assume she has remarried. Can she claim spousal benefits if the spouse has not applied for SS benefits? No, he hasn t filed yet.

43 Divorced Remarried Benefits 43 Married new spouse at age 60. From whom can divorcee s benefits be claimed? A. Self B. Current spouse if spouse claiming SS benefits. C. Deceased ex-spouse s benefits. Any of the 3

44 File and Suspend with Make-up 44 If the higher-earning spouse filed and suspended at FRA, planning not to collect until age 70, but at age 69, discovered he had terminal cancer, his options are: A. Immediately activate his SS. B. Postpone activating his SS until age 70. C. Notify SS he wants to request a lump sum payment of all his SS from date of his suspension. Any of the 3

45 The Viagra Family 45 Husband age 66, planning to work until age 70. Wife, age 48. Daughter, age 8. SS strategy: Husband upon obtaining age 66, files and suspends SS. Daughter becomes eligible for child benefits until age 18. Wife eligible for caregiver benefits until youngest child reaches age 16 This strategy is subject to family $ maximums (50-80% of father s FRA benefits).

46 What is a Child? Biological child 2. Adopted child 3. Stepchild 4. A dependent grandchild The parents of grandchild must be deceased or disabled, or grandchild adopted by grandparent. 5. Dependent parents age 62 or over

47 The Child Can Receive Benefits 47 Child must be: 1. unmarried 2. under age Between age and a full time student (no higher than grade 12) 4. age 18 or older and disabled from a disability that started before age

48 You & Me & Baby 48 A 62 year old woman, was a victim of a series of unfortunate life events. When she was 18 she became pregnant through an ill-fated encounter with the school playboy. DNA analysis led to a shotgun wedding and 6 months after the birth of their daughter, their baby died and so did her only marriage. He later became the CEO of a Fortune 500 company. The death of her little baby and the rejection by the baby s father led her into a life of depression, disastrous relationships, substance abuse and mental rehab. Now she has reached age 62 in poor health, unemployed, small nest-egg, and a very low SS PIA.

49 You & Me & Baby 49 What are her SS options? A. She can claim her own SS benefits B. She can claim spousal benefits from the playboy s PIA. C. She can claim her own SS now and later claim higher spousal benefits from the playboy? Any of the 3

50 What is a Spouse? 50 Social Security and Medicare Answer Book 4 th Edition: A person is a husband or wife if he/she: Is the father or mother of the worker s son or daughter.

51 Other Strategies 51 Many of the Strategies can be combined. Objective: Maximize your benefit

52 Step 5: Will Social Security Be 52 There for Me Pay as you go system Benefits are funded out of current payroll taxes SS Trust Fund 2033 surplus will run out Back to pay as you go It will still cover at least 75%

53 Bottom Line for Social Security 53 Your benefits are not likely to be affected by Social Security reform At the current pace, no changes would be required until 2033 at a minimum

54 The End Gary Adkins, Ben Davis, and Gable Adkins Select Pointe th Ave N Franklin, TN Some information provided by the Annexus Group and Rex Voegtlin