2014 03-27 Social Security Strategies

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2014 03-27 Social Security Strategies

  1. 1. Thrive. Grow. Achieve. Social Security When Should You Start Receiving Retirement Benefits? Jason Schwab - ING Evan Beach, CFP®, AWMA - ING Thursday, January 16, 2014 ING Financial Partners 1595 Spring Hill Rd, Suite 100 Tysons Corner, VA 22182
  2. 2. Social Security When Should You Start Receiving Retirement Benefits? Presented By: Jason Schraub Evan Beach CFP®, AWMA ING Financial Partners 1595 Spring Hill Rd, Suite 100 Tysons Corner, VA 22182
  3. 3. When Should You Start Receiving Retirement Benefits? Before your full retirement age? At your full retirement age? Age 66-67 As early as age 62 As late as age 70 After your full retirement age?
  4. 4. There’s no one-size-fits-all answer. It’s a personal decision. Why Is It an Important Decision?  When you take benefits can significantly affect your overall retirement income  If you’re married, timing can also affect spousal/survivor’s income
  5. 5. What Should You Consider?  Your full retirement age and benefit calculation  Amount of your future benefit and effect of early or delayed retirement  How long you expect retirement to last based on life expectancy  Whether you plan to continue working  Other sources of retirement income  Income taxes  How spouse might be affected
  6. 6. What Is Your Full Retirement Age? Your full retirement age is the age at which you can receive a full (unreduced) Social Security retirement benefit. If you were born in… Your full retirement age is… 1943-1954 66 1955 66 and 2 months 1956 66 and 4 months 1957 66 and 6 months 1958 66 and 8 months 1959 66 and 10 months 1960 or later 67
  7. 7. How Is Your Benefit Calculated? As you approach retirement age, your highest 35 years of earnings are indexed then averaged, and a formula is applied to determine your benefit at full retirement age.
  8. 8. How Much You’ll Receive: Taking Benefits Earlier  Can start benefits as early as age 62  Benefit reduction--you’ll receive 25% to 30% less at 62 than at full retirement age  Benefits received for a longer period of time
  9. 9. How Much You’ll Receive: Taking Benefits Later  You receive delayed retirement credits, up until age 70  Benefit is increased 8% for each year you postpone receiving benefits past full retirement age
  10. 10. Monthly Benefit Comparison: 62, 66, 70  Benefit at age 70 is 76% more than benefit at age 62  But cumulative benefits from age 62 to 70 equal $129,600
  11. 11. According to the SSA,** 1 out of 4 retirees will live past age 90 and 1 out of 10 will live past age 95. ** SSA website, www.socialsecurity.gov, February, 2013 How Long Will Retirement Last? According to the National Vital Statistics Report,* a 65-year-old man can expect to live, on average, to 83 and a 65-year-old woman to 85. *Volume 61, Number 6
  12. 12. Do You Plan to Continue Working? Are you under full retirement age? Have you reached full retirement age? Earnings from a job will reduce your Social Security benefit. Earnings from a job will not reduce your Social Security benefit.
  13. 13. How Working Affects Benefits $1 for every $2 that earnings exceed annual limit-- $15,120 in 2013 Before full retirement age Year you reach full retirement age At or after full retirement age $1 for every $3 that earnings exceed annual limit-- $40,080 in 2013 Earnings will not affect your benefit
  14. 14. What Retirement Income Will You Have? Social Security Job Earnings Pension Benefits Savings and Investments
  15. 15. Will Your Benefit Be Taxable? *Combined income = adjusted gross income + nontaxable income + ½ of Social Security benefit income Up to 50% of benefit may be taxable if your combined income* is: $25,000 to $34,000 and you file as single $34,000 to $44,000 and you file as married filing jointly Up to 85% of benefit may be taxable if your combined income* is: Over $34,000 and you file as single Over $44,000 and you file as married filing jointly
  16. 16. How Will Your Decision Affect Your Spouse?  How can you maximize household income and survivor’s income?  What’s the appropriate combination of claiming ages?
  17. 17. Retirement/Spousal Benefits  Retirement benefits based on your earnings record--at full retirement age 100% of your full retirement benefit  Spousal benefits based on your earnings record--as much as 50% of your full retirement benefit  Reduction for filing for spousal benefits early-- spouse can’t file until retired worker files
  18. 18. Survivor’s Benefits  Surviving spouse generally receives the greater of the retirement benefit the worker was receiving or his or her own benefit  Survivor’s benefits may be payable as early as age 60, subject to reduction
  19. 19. Income Strategies for Married Couples: File and Suspend  At full retirement age, you file, then suspend, retirement benefit application  Allows your eligible spouse to file for spousal benefits  Also allows you to delay collecting benefits and receive delayed retirement credits  Potentially increases retirement and survivor’s income
  20. 20. File-and-Suspend Example Tony is 66 and wants to begin collecting his retirement benefit at 70 Carla is 66 and wants to begin collecting her spousal benefit at 66 Tony files and suspends his benefit Carla collects her spousal benefit Tony collects higher retirement benefit at age 70 Carla collects higher survivor’s benefit in the event of Tony’s death
  21. 21. Income Strategies for Married Couples: Restricted Application  One spouse files first for retirement benefits on his or her own earnings record  The other spouse files a restricted application for spousal benefits  Later, that spouse switches to his or her own benefit
  22. 22. The Choice Is Yours  You need Social Security income right away  You want to invest your monthly benefit  You want to delay having to take funds from other retirement vehicles  Your spouse wants to delay taking benefits  You want a higher monthly retirement benefit  You want to maximize survivor’s income  You plan to work longer  You’re able to file for spousal benefits first, then switch to your own benefit later You may decide to take benefits earlier if: You may decide to take benefits later if:
  23. 23. Contact the Social Security Administration  Get benefit estimates and a copy of your Social Security Statement from the Social Security website, www.socialsecurity.gov  Contact the Social Security Administration to discuss your options at least 3 months before you reach age 62  Apply online, by phone, or in person
  24. 24. Conclusion I would welcome the opportunity to meet individually with each of you to address any specific concerns or questions that you may have.
  25. 25. Disclaimer Registered representative of and securities offered through ING Financial Partners, Member SIPC. This information was prepared by Forefield Inc. and has been made available for ING Financial Partners' representatives for distribution to the public for educational information only. Forefield Inc. is not affiliated with nor controlled by ING Financial Partners. The opinions/views expressed within are that of Forefield Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.
  26. 26. Page 21 Thank you! Jason Schwab, ING Direct: 703-677-9311 E-mail: jschraub@ingfp.com Evan Beach, CFP®, AWMA Direct: 703-677-9311 E-mail: ebeach@ingfp.com
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