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Social Security Workshop Presentation

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Presentation by Heather Majka, Tennessee's only Social Security Claiming Strategist on Social Security planning and upcoming changes in 2017. This presentation gives scenario planning tips for a variety of ages when dealing with Social Security. The Knox County Office on Aging sponsors this series of seminars due to the high volume of questions they receive about Social Security benefits.

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Social Security Workshop Presentation

  1. 1. Senior Financial Group Changes in Social Security 2017 Will It Be There for Me? OFFICE ON AGINGKNOXVILLE-KNOX COUNTY COMMUNITY ACTION COMMITTEE P.O. BOX 51650 KNOXVILLE, TN 37950-1650
  2. 2. My Promise to You  No Sales & No Obligation  Your questions will be answered  No individual help we have to paint with broad strokes  You will be overwhelmed  Free consultation if you choose www.sfgmedicare.com
  3. 3. What are your concerns? www.sfgmedicare.com
  4. 4. What We do & How you can help OFFICE ON AGINGKNOXVILLE-KNOX COUNTY COMMUNITY ACTION COMMITTEE P.O. BOX 51650 KNOXVILLE, TN 37950-1650
  5. 5. Who is Senior Financial Group?  Founded in 1983  2000 Licensed Life & Health Insurance Agents in 46 states  Represent over 35 of the most reputable Companies  Offer Medicare plans, Life Insurance, Dental, Marketplace, LTC, & more  Educate & Guide Clients for FREE  Enroll in Government Programs www.sfgmedicare.com
  6. 6. Heather Majka, CPCU, CSSCS  25 Years of insurance experience  With Senior Financial Group for 10 years  Oversight of agents, training, compliance, education, and customer Service  Certified Social Security Claiming Strategist www.sfgmedicare.com
  7. 7. 1950 • 68 Average Life Expectancy • $17,000 Average income • $29 per month Average SS Check • 33% Labor force women 2015 • 81 Average Life Expectancy • $39,000 Average Income • $1348/$1166 per month Average SS Check • 57% Labor force women Then VS Now
  8. 8. Did you know? 65.1 million people received benefits from programs administered by the Social Security Administration (SSA) in 2015. 5.4 million people were newly awarded Social Security benefits in 2015. 61% of aged beneficiaries received at least half of their income from Social Security in 2014. 55% of adult Social Security beneficiaries in 2015 were women. 53.9 was the average age of disabled-worker beneficiaries in 2015.
  9. 9. What we will cover Baby Boomers want to know: Will Social Security be there for me? When should I apply for Social Security? How much can I expect to receive? I regret how I filed earlier, can I change it? What happens if I keep working?
  10. 10. Social Security Question #1 Will Social Security be there for me?
  11. 11. OASDI Trust Fund still growing Source: Social Security Administration, Office of the Chief Actuary Trust fund balance on 12/31/15: $2.813 trillion 2016 results • Total income: $957 billion • Total expenditures: $922 billion • Net increase in assets: $ 35 billion Trust fund balance on 12/31/16: $2.848 trillion
  12. 12. Long-term projections: without reform, benefits fall to 79% in 2034 Source: 2016 OASDI Trustees Report OASDI Income, Cost and Expenditures as Percentages of Taxable Payroll [Under Intermediate Assumptions] Cost: Scheduled but not fully payable benefits Income Expenditures: Payable benefits = income after trust fund exhaustion in 2034 Cost: Scheduled and payable benefits Payable benefits as percent of scheduled benefits: 2014-2033: 100% 2034: 79% 2090: 74% Cost: Scheduled but not fully payable benefits
  13. 13. What would it take to restore solvency to the system? Reform proposals being studied  Increase maximum earnings subject to Social Security tax (currently $127,200 in 2017)  Raise the normal retirement age (currently 66 for individuals born between 1943 and 1954; 67 for those born in 1960 or later)  Lower benefits for future retirees (escalate benefits based on increases in consumer prices rather than wages)  Reduce cost-of-living adjustments (COLAs) for all retirees
  14. 14. The bottom line for baby boomers Your benefits are not likely to be affected by Social Security reform!
  15. 15. Social Security Question #2 When should I apply for benefits?
  16. 16. Factors to consider when deciding when to apply  Health status  Life expectancy  Need for income  Whether or not you plan to work  Survivor needs www.sfgmedicare.com
  17. 17. When to apply for Social Security key points to remember  If you apply early, your benefit starts lower and stays lower for life.  COLAs magnify the impact of early or delayed claiming. The longer you live, the more beneficial it is to delay benefits.  Decision impacts survivor benefits as well: delaying benefits may give surviving spouse more income.
  18. 18. When to apply for Social Security Key points to remember  The earliest you can apply for benefits are age 62  You can file 3 months prior to your 62nd birthday  If you apply early, your benefit starts lower and stays lower for life.
  19. 19. Benefits for Bob & Betty  Scenario 1 (Maximum): Bob claims at 70; Betty claims spousal at 67 (after Bob files)  Scenario 2 (Earliest): Both claim now: Betty at 63, Bob at 66
  20. 20. What Social Security personnel can and can’t do  They CAN:  Estimate individual benefits  Tell you the amount you are entitled to now  They CAN’T:  Project future benefits through scenario planning  Help with innovative strategies designed to maximize benefits  Give advice of any sort (can answer closed ended questions, answers tend to vary)
  21. 21. Social Security Question #3 How much can I expect to receive?
  22. 22. Your benefit will depend on:  How much you earned over your working career  The age at which you apply for benefits  Who you are married to now and/or who you were married to previously www.sfgmedicare.com
  23. 23. How Social Security benefits are calculated  At age 62, each year’s earnings are tallied up and indexed for inflation  Highest 35 years of earnings are averaged  Estimated benefits assume you will make a certain amount until you reach full retirement www.sfgmedicare.com
  24. 24. Your statement • Retirement benefit estimates quoted in order of:  Full Retirement Age (FRA age 67 in this example)  Age 70  Age 62 • Monthly benefit amount is reduced for claiming prior to FRA • Monthly benefit amount is increased for claiming after FRA Estimated Retirement Benefits Senior Financial Group
  25. 25. • Credits awarded based on your earnings and Social Security tax payments • General qualification is 10 years of work with 40 Social Security credits • In 2017, every $1300 of earnings equals one credit with a max of 4 credits per year • Your benefit is calculated based on your highest 35 year earnings average • Not all employees work in jobs covered by Social Security Qualifying for Social Security Retirement Benefits
  26. 26. Full Retirement Age (FRA) Year of Birth Full Retirement Age  1943-54 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 and later 67 www.sfgmedicare.com
  27. 27. Average Illustrative FRA Monthly Payment Monthly Payments by Claiming Ages $1,006 $1,073 $1,163 $1,251 $1,341 $1,448 $1,556 $1,663 $1,770 75% 80% 87% 93% 100% 108% 116% 124% 132% 0% 40% 80% 120% 160% $0 $500 $1,000 $1,500 $2,000 62 63 64 65 66 67 68 69 70
  28. 28. How to estimate your Social Security benefits  Obtain your annual Social Security statement at www.socialsecurity.gov/mystatement OR  Go to www.socialsecurity.gov click on "Estimate Your Retirement Benefits“ OR  Use one of the calculators on the SSA website: https://www.ssa.gov/planners/benefitcalculators.html www.sfgmedicare.com
  29. 29. Examine your earnings record from your latest Social Security statement, available online at: www.socialsecurity.gov/mystatement Is it accurate? Any missing years? Can you improve it by working longer? Your Earnings Record
  30. 30. Spousal benefits Spousal benefit = 1/2 the primary worker's PIA if started at full retirement age Example:  John's PIA is $2,000  Jane's PIA is $800  If Jane applies at FRA, her benefit will be $1,000 (50% of John’s PIA) www.sfgmedicare.com
  31. 31. Rules for spousal benefits  Primary worker must have filed for benefits  Spouse must be at least 62 for reduced benefit or 66 for full benefit  No delayed credits on spousal benefits after 66 www.sfgmedicare.com
  32. 32. Divorced-spouse benefits Same as spousal benefits if:  Marriage lasted 10 years or more  Person receiving divorced-spouse benefit is currently unmarried  The ex-spouse is at least age 62  If divorce was more than two years ago ex-spouse does not need to have filed for benefits www.sfgmedicare.com
  33. 33. Rules for divorced-spouse benefits  More than one ex-spouse can receive benefits on the same worker's record  Benefits paid to one ex-spouse do not affect those paid to the worker, the current spouse, or other ex- spouses  Divorced-spouse benefits stop upon remarriage of spouse collecting benefits (not upon remarriage of primary worker spouse) www.sfgmedicare.com
  34. 34. Survivor benefits Survivor benefit will depend on:  The age at which the deceased spouse originally claimed his benefit (the “original benefit”) If he claimed before FRA, survivor benefit will be limited to the higher of the deceased spouse’s benefit or 82.5% of PIA If he claimed after FRA, the survivor benefit will include delayed credits  The age at which the widow claims the survivor benefit (the “actual benefit”) If the claim is before FRA, survivor benefit will be a fraction of the original benefit (e.g., 71.5% of PIA if claimed at 60) If claimed at FRA or later, survivor benefit will equal 100% of the original benefit
  35. 35. Rules for survivor benefits  Couple must have been married at least 9 months at date of death (except in case of accident).  Survivor must be at least 60 for reduced benefit (50 if disabled), or FRA for full benefit.  Survivor benefit not available if widow(er) remarries before age 60 (or 50 for disabled survivor), unless that marriage ends.  Divorced-spouse survivor benefit available if the marriage lasted at least 10 years. www.sfgmedicare.com
  36. 36. Real Case Scenario My Grandmother, Clara AKA Claire
  37. 37. Baby Boomer Social Security Question #4 I regret how I filed earlier, can I change it? www.sfgmedicare.com
  38. 38. Change your Mind?  If you change your mind you can withdraw your retirement benefits for up to 12 months  SSA does not like to process these so you may get push back  You must repay benefits paid to you  There is a Form you complete, OMB No. 0960-0015 www.sfgmedicare.com
  39. 39. Social Security Question #5 What Happens if I keep working?
  40. 40. If you claim benefits before FRA and work, your benefits will be withheld. We call this the “earnings test.” Let’s discuss.
  41. 41. Annual earnings test  If you apply for Social Security before full retirement age and you work:  $1 in benefits will be withheld for every $2 you earn over $16,920 in 2017  Benefit will be adjusted at full retirement age  Don’t let annual earnings test discourage you from working  To avoid the earnings test, wait until full retirement age or later to apply for benefits www.sfgmedicare.com
  42. 42. Little-known rules about the earnings test  It applies to all benefits received before FRA: Retirement, spousal, and survivor  It may cause your spouse’s benefits to be withheld  Let’s say John and Jane are 62. John files, and Jane files for her spousal benefit. If John goes back to work, Jane’s spousal benefit will be withheld.  If you are self-employed you may be subject to extra scrutiny www.sfgmedicare.com
  43. 43. If Everyone Were Jumping Off the Bridge, Would You? Social Security Initial Claiming by Age: Average 2014 38.2 6.5 6.5 10.9 14.2 17 2.7 2.5 0 5 10 15 20 25 30 35 40 45 62 63 64 65 to FRA FRA DI Conversions* 67 to 69 70 or older Percentage Age (FRA Is Full Retirement Age)
  44. 44. Real Case Meet Sarah  Sarah decided to file for Social Security at 62, she was 63 in 2016  Sarah still works in addition  Sarah only works part time from her home  For 2016 she earned $21,000  Sarah’s benefit is $800 per month  Sarah earned $5,280 over  Social Security overpaid her $2640 or 3.3 months of 2017 benefits  Sarah will not receive a benefit check for the first 4 months of 2017
  45. 45. Minimize taxation of benefits
  46. 46. Taxation of Social Security benefits Filing status Provisional income* Amount of SS subject to tax Married filing jointly Under $32,000 $32,000 - $44,000 Over $44,000 0 Up to 50% Up to 85% Single, head of household, qualifying widow(er), married filing separately & living apart from spouse Under $25,000 $25,000 - $34,000 Over $34,000 0 Up to 50% Up to 85% Married filing separately and living with spouse Over 0 85% *Provisional income = AGI + one-half of SS benefit + tax-exempt interest
  47. 47. Ways to minimize taxes on Social Security benefits  Reduce other income with tax-advantaged investments (but not municipal bonds!)  Anticipate IRA RMDs, which may put you in a higher tax bracket; consider drawing down IRAs before 70-1/2  Convert traditional IRA to Roth  Purchase Life Insurance  Delay Social Security: reduces number of years benefits are subject to tax  Reduce expenses: pay down debt, adopt simpler lifestyle  Continue to manage taxes throughout retirement
  48. 48. What We Covered Will Social Security be there for me? Yes When should I apply for Social Security? Depends How much can I expect to receive? Depends I regret how I filed earlier, can I change it? Yes What happens if I keep working? Don’t file hastily, keep working if you want to and can www.sfgmedicare.com
  49. 49. Knox County CAC Office on Aging 865-524-2786 knoxseniors.org SHIP 1-877-801-0044 (State Health Insurance Assistance Program) ssa.gov SS 1-800-772-1213
  50. 50.  VISIT US ON THE WEB AT http://sfgmedicare.com/social- security-changes/  Like us on Facebook at www.facebook.com/sfgmedicare  Like the Office on Aging  http://facebook.com/knox.ooa  Subscribe to our YouTube channel  Tell friends & family about us Stay up to date & thank us www.sfgmedicare.com
  51. 51. Q & A www.sfgmedicare.com

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