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Getting the Most from  Social Security
Agenda Know Your Benefit Understand Your Options  Maximize Your Benefit Getting Started
Know Your Benefit Sources for retirement income for average income earners  to sustain 80%  –  100% of pre-retirement inco...
Know Your Benefit
Source: 2011 Social Security Administration, ssa.gov/retire2/. Know Your Benefit Full Retirement Age Social Security Full ...
Receive benefits earlier Higher monthly check No penalty for employment Highest monthly paycheck No penalty for employment...
Electing your benefit — early vs. late Working while collecting your benefit Examining your tax situation Considering your...
Understand Your Options Early vs. Late 130% 120% 110% 90% 80% 70% Early vs. Late Benefit Election Assuming Full Retirement...
Working While Collecting Understand Your Options * Income from work, W-2, and self-employment income. ** At FRA your benef...
Examining Your Tax Situation Understand Your Options Note: State and local taxes may differ. * Provisional Income is Adjus...
Consider Spousal Benefits Understand Your Options Option 1 Individual Benefit Option 2 Spousal Benefit Option 3 Survivor B...
Consider Spousal Benefits Understand Your Options Sam and Ann, both age 62 Full Retirement Age: 66 Social Security Benefit...
Maximize Your Benefit 1  Benefit will be reduced if not at Full Retirement Age. Both individuals must have filed for Socia...
Calculate expected Social Security benefit  Determine your plan to maximize your benefit  Apply for retirement benefits Ge...
<ul><li>Most recent Social Security statement  </li></ul><ul><li>Most recent tax return </li></ul><ul><li>Most recent pay ...
<FP Name>  <FP Firm Name>  <FP Contact Information> Questions?
Investors should carefully consider a fund’s investment objectives, risks, charges, and expenses prior to investing. A pro...
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Getting the-most-from-social-security

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Getting the most from Social Security

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  • Welcome. My name is ___, and I’m going to talk to you today about how to maximize your Social Security benefit.
  • We will start with a quick definition of Social Security and discuss how to identify your Social Security benefit. Then, we’ll focus on the options available to you, and discuss ways to maximize your Social Security benefit... and how to get started.
  • What is Social Security? Put simply, it’s a retirement benefit that replaces approximately 40% of the income you will need in retirement, if you are an average earner trying to sustain 80%-100% of your pre-retirement income. What you already know is that you have been paying into Social Security all of your working years. Now it is time for you to reap those benefits.
  • To learn the details of your Social Security benefit, the best thing to do is consult your Social Security statement or use the Social Security Retirement Estimator on the Social Security website, which provides estimated benefits in absence of the statements. The statement provides you with important information, including: • Confirmation of your eligibility to receive a Social Security benefit • A record of your year-by-year earnings • Your estimated benefit When reviewing your Social Security statement, be sure to verify your year-by-year earnings. This determines your Social Security payments. INTERESTING FACT: The first recipient of monthly Social Security benefits was a woman named Ida May Fuller – from Ludlow, Vermont. The payment amount was $22.54 and dated January 31, 1940. She paid for 3 years a total of $24.75, lived to be 100, and collected $22,888.92 in benefits.
  • One important factor in determining your Social Security benefit is your “Full Retirement Age.” This age is based on the year you were born, and determines when you can begin collecting full Social Security benefit payments. Find your birth year on this chart. Were you aware of your Full Retirement Age?
  • While your Full Retirement Age must be reached to collect your full retirement benefit, you can begin collecting Social Security benefit payments as early as age 62. It is important to know that if you elect to begin receiving your benefit at age 62, you will be collecting a reduced amount – which could be even less if you continue working. Electing before Full Retirement Age may reduce your benefit by 20-30%, while electing after Full Retirement Age may increase your annual benefit by 7-8%. INTERESTING FACT: In 2009, 74% of Americans (nearly 32.3 million people) received reduced benefits because they elected to begin taking their benefit payments before Full Retirement Age. Source: Social Security Administration Annual Statistics Supplement, 2009.
  • Awareness of key decisions is a critical first step to maximizing your Social Security benefit. So, just being here today can help ensure that you get the most from your benefit. Let’s take a look at the potential impacts of 1) electing benefits early versus late, 2) working while collecting your benefit, 3) examining your tax situation, and 4) considering your spouse’s Social Security benefit.
  • When it comes to collecting your Social Security payments, you have three basic options: 1.) Begin collecting a reduced benefit as early as age 62. A reduced benefit means lower monthly payments. In general, the earlier you begin collecting, the lower your monthly payments will be. 2.) Collect your full benefit at your Full Retirement Age. 3.) Delay receiving your benefit up to age 70 and receive higher monthly payments.
  • Another key consideration is whether or not to continue working after you have elected to receive your benefit. If you are collecting the benefit while working, and you have not yet reached your Full Retirement Age, your benefit may be reduced. Once you reach your Full Retirement Age, you can work with no reduction to your Social Security benefit. If you do have benefits withheld, your benefit at Full Retirement Age will be adjusted to compensate for the reduction.
  • Your tax situation is another important factor to consider. A portion of your Social Security benefit may be taxed, depending on your Provisional Income. Provisional Income is Adjusted Gross Income plus tax exempt income plus 50% of Social Security benefits, so you should talk with someone to determine your Provisional Income amount. This chart provides general tax rates by income level. Because taxes vary based on your earnings and location, you will want to consult with &lt;me/your financial professional/your tax advisor&gt; about this.
  • If you are married, and both eligible to collect Social Security benefits, it is important to assess your age and benefits together. A lower-earning spouse may be eligible for up to 50% of the higher-earning spouse’s benefit. Understanding your options can help you to maximize your household Social Security benefit. Review chart.
  • The “spousal benefit&amp;quot; provision enables a married person to take his or her own benefit, or 1/2 of their spouse’s benefit, whichever is higher. For the spouse to be eligible for 1/2 of the benefit, the other spouse must have filed for their personal retirement benefit. Spousal benefits are based upon the spouse’s Full Retirement Age, but will be reduced if the spouse elects benefits early. This provision provides a flexible option to help couples generate income. The benefits of both spouses should be considered before electing this provision. In this example of married couple Sam and Ann: at age 66, Ann can claim a higher benefit by electing her spousal benefit ($1,035) rather than her individual benefit ($900).  Be sure to consider age and benefit amounts for both you and your spouse to determine maximum benefit. INTERESTING FACT: The smallest Social Security payment ever made was for 5 cents.
  • Social Security offers several provisions that can have a big impact on your overall financial plan for retirement. Understanding these provisions may help you increase your benefit.  Claim and Suspend Some retirement-age individuals may decide to work longer or to re-enter the work force. A married couple over the Full Retirement Age, where the higher wage earner elects to continue working, has the option to increase their Social Security benefits using the Claim and Suspend strategy. The Claim and Suspend provision allows individuals (typically the higher wage earner or one-earner couples) who have claimed benefits to suspend their benefits. This allows the spouse to receive half of the working spouses’ suspended benefit. When full benefits are reinstated down the road, the couple will receive a higher benefit amount, potentially enhancing the value of their lifetime benefit. Claim Now/Claim More Later allows married couples at Full Retirement Age to claim one-half of their spouse’s benefit, delay taking their own benefit so it earns delayed retirement credits, and then claim their higher personal benefit at a later age. This provision only applies to married couples, and they both must have an earning history. Depending on longevity and the age each spouse elects to receive benefits, the Claim Now, Claim more Later provision may provide the highest level of lifetime payments. In addition, if one spouse becomes eligible to receive a survivor benefit, it automatically increases to the highest benefit being paid between the spouses. Do-Over allows individuals to change their earlier claiming decision. For example, you can halt your current benefits and start receiving the higher amount, but must pay back the benefits you’ve received.  The Social Security Administration has recently made two significant changes to this provision, so you’ll want to consult with your financial professional to make sure you have the most current information.  As of December 2010, a withdrawal or Do-Over decision must be made 12 months of original election.  And you are only granted one withdrawal per lifetime.  Social Security has typically adjusted each year to rise with inflation; however, there was no Cost of Living Adjustment (COLA) for Social Security in 2010 and there is not one in 2011. Cost Of Living Adjustment is tied to inflation, and is not guaranteed.
  • As we wrap up our time together, I want to be sure you understand that the key to success is to plan carefully – and that there are actions you can take right now to help ensure that you maximize your Social Security benefit. &lt;I/Your financial professional&gt; can provide guidance as you: • Evaluate what you expect to receive from Social Security • Determine your plan to maximize your benefit • Apply for retirement benefits Working through this process with &lt;me/your advisor&gt; is a great way to ensure that you consider all of your options. I’d like to meet with each of you to help get you started, and will be in touch to schedule a meeting time that works for you. OPTIONAL (depending on availability of approved resource): I have provided several tools to help you get started. The Social Security Investor Guide is a tool you can take with you that provides information similar to what we covered during this session. I encourage you to review it and call me if you have questions or when you are ready to start planning. Within the guide is a worksheet to help you outline monthly retirement income calculations and scenarios. I can help you complete this worksheet as a first step in your planning process. It can be very helpful to review different scenarios. Please turn to the back page of the Investor Guide. You’ll find a tear-out sheet that requests some basic information. I’d like you to tear this out, complete it... and then hand it to me as you exit.
  • When we meet, please bring these items to our appointment: Most recent Social Security statement Most recent tax return Most recent pay statement from employer Latest statements from all retirement plans Latest statement from mutual funds Life and disability insurance policies Annuity contracts Wills and trust document(s)
  • I’d like to thank you for coming today. I appreciate your time. Now, if there are any questions, I’d be happy to answer them.
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  • Transcript of "Getting the-most-from-social-security"

    1. 1. Getting the Most from Social Security
    2. 2. Agenda Know Your Benefit Understand Your Options Maximize Your Benefit Getting Started
    3. 3. Know Your Benefit Sources for retirement income for average income earners to sustain 80% – 100% of pre-retirement income Employer-Sponsored Retirement Plan and Personal Savings Social Security Source: Social Security Administration, Office of Policy. Office of Research, Evaluation Statistics, Fast Facts and Figures About Social Security, 2010.
    4. 4. Know Your Benefit
    5. 5. Source: 2011 Social Security Administration, ssa.gov/retire2/. Know Your Benefit Full Retirement Age Social Security Full Retirement Age Birth Year Full Retirement Age 1943-1954 66 1955 66 + 2 months 1956 66 + 4 months 1957 66 + 6 months 1958 66 + 8 months 1959 66 + 10 months 1960 and later 67
    6. 6. Receive benefits earlier Higher monthly check No penalty for employment Highest monthly paycheck No penalty for employment Smallest monthly check Potential reduction penalty for employment No interim benefits Receive benefits later 62 70 AGE PROS CONS Full Retirement Age Know Your Benefit Your Age and Your Benefit
    7. 7. Electing your benefit — early vs. late Working while collecting your benefit Examining your tax situation Considering your spouse’s benefit Understand Your Options
    8. 8. Understand Your Options Early vs. Late 130% 120% 110% 90% 80% 70% Early vs. Late Benefit Election Assuming Full Retirement Age at 66. Source: Social Security Administration. 100% 62 63 64 65 67 68 69 70 Take Benefits Earlier Take Benefits Later Retire at age 66 with full monthly benefit
    9. 9. Working While Collecting Understand Your Options * Income from work, W-2, and self-employment income. ** At FRA your benefit amount is adjusted to accommodate for the earlier reduction. Age 2011 Earned Income* Limits Considerations Under Full Retirement Age $14,160 For every $2 over the limit, $1 is withheld from benefits In the year Full Retirement Age is reached $37,680 For every $3 over the limit, $1 is withheld from benefits until the month in which full retirement age is reached At Full Retirement Age or older** No limits on earnings None
    10. 10. Examining Your Tax Situation Understand Your Options Note: State and local taxes may differ. * Provisional Income is Adjusted Gross Income including any tax-exempt interest plus 50% of Social Security benefits . Source: 2010 Social Security Administration, http://www.ssa.gov/pubs/10035.html . Single Filing Provisional* Income Benefits Subject to Tax Under $25,000 0% $25,000 - $34,000 Up to 50% Over $34,000 Up to 85% Married Filing Jointly Provisional* Income Benefits Subject to Tax Under $32,000 0% $32,000 - $44,000 Up to 50% Over $44,000 Up to 85%
    11. 11. Consider Spousal Benefits Understand Your Options Option 1 Individual Benefit Option 2 Spousal Benefit Option 3 Survivor Benefit Lower-earning spouse collects his or her own individual benefit Lower-earning spouse may collect a higher spousal benefit (up to 50% of their spouse’s full benefit) if the spouse has filed A widowed spouse may collect survivor benefits (up to 100% of their deceased spouse’s benefit)
    12. 12. Consider Spousal Benefits Understand Your Options Sam and Ann, both age 62 Full Retirement Age: 66 Social Security Benefits Name Age 62 Age 66 Age 70 Ann $675 $900 $1,180 Sam $1,562 $2,071 $2,733 Spousal Benefit $724 $1,035 $1,035
    13. 13. Maximize Your Benefit 1 Benefit will be reduced if not at Full Retirement Age. Both individuals must have filed for Social Security benefits. 2 Effective December 2010, the Social Security Administration published new rules regarding the withdrawal but has not released a final ruling. Visit ssa.gov for the most current information. Social Security Strategy Definition Benefit Claim and Suspend Individuals at FRA or later who have claimed benefits then suspend the benefits. When benefits are reinstated down the road, they will receive a higher benefit amount. Allows spouse to claim spousal benefit, while the higher wage earner can continue to accrue benefits. Can increase the overall lifetime benefits. Claim Now, Claim More Later A FRA individual may claim one-half of their spousal benefit, delay taking their own benefit. 1 Earn delayed credits and then claim their higher personal benefit at a later age or may help spouse to receive greater survivor benefit. Do-Over 2 Individuals are allowed to change their earlier claiming decision. Provides flexibility to cease taking benefits if life situation changes.
    14. 14. Calculate expected Social Security benefit Determine your plan to maximize your benefit Apply for retirement benefits Getting Started Maximize Your Benefit
    15. 15. <ul><li>Most recent Social Security statement </li></ul><ul><li>Most recent tax return </li></ul><ul><li>Most recent pay statement from employer </li></ul><ul><li>Latest statements from all retirement plans </li></ul><ul><li>Latest statement from mutual funds </li></ul><ul><li>Life and disability insurance policies </li></ul><ul><li>Annuity contracts </li></ul><ul><li>Wills and trust document(s) </li></ul>Bring Getting Started Maximize Your Benefit
    16. 16. <FP Name> <FP Firm Name> <FP Contact Information> Questions?
    17. 17. Investors should carefully consider a fund’s investment objectives, risks, charges, and expenses prior to investing. A prospectus containing this and other information can be obtained by contacting a financial professional, visiting principalfunds.com, or by calling 800-222-5852. Read the prospectus carefully before investing. A mutual fund’s share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost. The content of this presentation is based upon reliable source material and is believed to be correct as of the time of creation; however it is subject to change at any time without warning. Investors should consider consulting with their tax professionals prior to making decisions due to their unique circumstances. While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal ® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc., member of the Principal Financial Group ® . Principal Funds Distributor, Principal Shareholder Services, Principal Management Corporation and its affiliates, and Principal Funds, Inc. are collectively referred to as Principal Funds. MM4787Q-01 | 04/2011 | t11040604e4 ©2010 Principal Financial Services, Inc. WE’LL GIVE YOU AN EDGE ® Disclaimers
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