Centric Financial Group Social Security Presenation May 2016

Products and financial services provided by
AMERICAN UNITED LIFE INSURANCE COMPANY®
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Optimizing Social Security and
Lifetime Income in Retirement

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Disclosures
This material is provided for overview or general informational
purposes only. These concepts were derived under current tax and
social security laws. Changes in the tax or social security laws may
affect the information provided. This is not to be considered, or
intended to be legal or tax advice. For answers to specific questions
and before making any decisions, please consult a qualified attorney,
tax advisor, or the Social Security Administration.
Not affiliated with or endorsed by the Social Security Administration,
the Centers for Medicare & Medicaid Services, or any governmental
agency.
HealthView and [insert agency] are not affiliates of American United
Life Insurance Company® (AUL) and is not a OneAmerica company.

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Presenters
Jon P. LaFramboise, CLU®
Investment Advisor Representative
Centric Financial Group, LLC
Registered Representative of and securities offered through OneAmerica
Securities, Inc., Member FINRA, SIPC, a Registered Investment Advisor,
4016 Townsfair Way, Suite 202, Columbus, OH 43219, 614-824-6100.
Insurance Representative of American United Life Insurance Company®
(AUL) and other insurance companies. Centric Financial Group, LLC. is not
an affiliate of OneAmerica Securities or AUL and is not a broker dealer or
Registered Investment Advisor .

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Agenda
• Retirement Facts
• Social Security Basics
• Filing Strategies and Recent Changes
• Wrap Up & Q&A

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Retirement Facts

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Retirement Concerns
7
Source: LIMRA

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Fast Facts
•Average Life Expectancy (if healthy)
•Average Length in Retirement
8789
20years
over
Source: HealthView, 2015 RETIREMENT HEALTH CARE COSTS DATA REPORT

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The Retirement Income Stool
• Social Security
• Personal Savings/
Retirement Accounts
• Pension / Defined
Benefit

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Retirement Expenses
Non-discretionary expenses (things you MUST cover)
Food Taxes
Debt Transportation
Housing Health Care

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Retirement Expenses
• Discretionary expense (things you may WANT to cover)
Legacy Hobbies
Travel Gadgets

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What’s Discretionary?
Contributions to a 529 for a grandchild?

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Helping a child who has not made the best
decisions?

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decisions?
That family vacation for kids and
grandkids you always talked about?

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decisions?
That family vacation for kids and
grandkids you always talked about?
Tithing?

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What to Expect
• How will you generate lifetime income for
20-30+ years of retirement?
• Most retirees know how much money
they have. Many don’t know how much
income they can expect from that
retirement

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For use with financial professionals only. Not for public distribution.
Social Security Basics

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Test Your KnowledgeTest Your Knowledge
How many years of earnings are included
in Social Security benefit calculation?
What is the earliest age a person who is single,
married or divorced is able to file for benefits?
If you are 62 or older, what is your FRA?
What percent of retirement benefit income do
you lose by claiming Social Security at 62?
How much do benefits increase for waiting
to claim past full retirement age (FRA)?

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Social Security Basics:
How it Works

• While working, employees contribute 6.2% of
earnings to Social Security
• Up to $118,500 (maximum in 2016)
• Paycheck deduction: “FICA”
• Employers match this amount
• Self-employed workers pay 12.4% (6.2%x2)
• Contributions are paid forward to current retirees

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• Three elements govern Social Security benefits
received:
• Your earnings history
• When you claim your benefit
• When you pass away
• All three affect us, but we can only control two of
them
How it Works

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Americans can qualify for benefits one of two ways:
1. On your own record:
– Worked and contributed to Social Security for 40
quarters
2. On your spouse’s record:
– Married to someone who worked and contributed to
Social Security for 40 quarters
• May include an ex-spouse or late spouse
Who Is Entitled?

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Bob’s Social Security Benefit

• Bob made a pretty good living throughout his working life
• Typically earned above-average salary, just shy of the Social
Security maximum earnings ($118,500 in 2016)
• To calculate Bob’s Social Security benefit:
– Adjust all of Bob’s annual earnings to 2016 dollars
– Average the highest paying 35 years ($97,000)
– Divide by 12 (months) to get Bob’s averaged adjusted monthly earnings
$8,083: Average Adjusted Monthly Earnings
Any individuals used in scenarios are fictitious and all numeric examples
are hypothetical and were used for explanatory purposes only.

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Bob’s Social Security Benefit (cont’d.)

• From that $8,083…
• The first $856 is multiplied by 90%
• $856 x .90 = $770.40
• Every dollar from $856 to $5,157 is multiplied by 32%
• $4,301 x .32 = $1,376.32
• All remaining income from $5,158 up is multiplied by 15%
• $2,925 x .15 = $438.75
$770.40 + $1,376.32 + $438.75 = $2,585
$2,585: Bob’s Primary Insurance Amount
(PIA)
Any individuals used in scenarios are fictitious and all numeric examples
are hypothetical and were used for explanatory purposes only.

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Where To Discover Benefit Entitlements

ONLINE OR IN MAIL

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Available Benefits

• Worker Benefit
• Spousal Benefit
• Ex-spousal Benefit
• Widow/Widower/Survivor Benefit
• Dependent Child Benefit
• “Young Parent” Benefit
• Disability Benefit

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Social Security Basics

Information Required to Determine Benefits:

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Social Security Basics: In the Report

Basic information and
assumptions are used to
generate results for you
and your situation in each
report
This report provides broad, general guidelines and strategies which may help you determine your Social Security income. This report is
provided for educational purposes only and you should not rely on it as the primary basis for your insurance, investment, financial, retirement
or tax planning decisions.

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Filing For Benefits

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Filing For Benefits
Possible Claiming Ages

• Earliest (for most): Age 62
• Unmarried Widows/Widowers: 60
• Full Retirement Age: Between 66 and 67
• “Latest”: Age 70
• Decreases and increases to annual
benefits are permanent

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Full Retirement Age (FRA)

• Social Security Administration
(SSA) uses the term “Full
Retirement Age” or FRA
– Based on individual’s year of birth
• At FRA, SSA recognizes you as
qualified to collect “full” Social
Security benefits
Year of Birth Full Retirement
Age
1937 or earlier 65
1938 65 and 2 months
1943 to 1954 66
1960 or later 67

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Full Retirement Age: In the Report

FRA details, as well as
other helpful information,
can be found within your
personalized report

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Filing For Benefits

Impact of Claiming Age on Monthly Benefit Amounts
Another Way To Look At It
Reduced Benefits FRA Increased Benefits
Age
62 63 64 65 66 67 68 69 70
Monthly Benefit Paid $1,200 $1,280 $1,387 $1,493 $1,600 $1,728 $1,856 $1,984 $2,112
% of PIA Paid 75.0% 80.0% 86.7% 93.3% 100% 108% 116% 124% 132%
PIA
MAX
BENEFITS

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Benefits of Waiting
Increase in benefits for clients with Full
Retirement Age (FRA) of 66/67
FRA: 66
Age Benefit Increase
67 8%
68 16%
69 24%
70 32%
FRA: 67
Age Benefit Increase
68 8%
69 16%
70 24%

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Filing For Benefits

• Mary:
• 50 year old single
woman
• PIA of $1,600
• Life Expectancy: 89
• Optimal Claim Age: 70
The Impact of Life Expectancy

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• Mary:
• 50 year old single woman
• PIA of $1,600
• Life Expectancy: 74
• Optimal Claim Age: 62
Filing For Benefits
The Impact of Life Expectancy

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Filing For Benefits: In the Report
Year-by-year benefit
projections show impact of
life expectancy and
“breakeven” point

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Spousal Benefit Calculation Amount Paid At FRA
Higher wage earner’s PIA $2,400
Lower wage earner’s PIA (spouse) $1,000
Calculate spousal benefit (50% of high wage
earner’s PIA)
$1,200
Subtract spouse’s PIA from spousal benefit to
determine spousal supplement
$ 200
The Spousal
Benefit Consists
of Two Parts
Own Benefit: $1,000
Spousal Supplement: $200
Total Benefit: $1,200
Spousal Benefits

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Ex-Spousal Benefits

• Benefits are essentially the same as current spouse,
if client meets below criteria:
• Unmarried*
• Age 62 or older
• Divorced at least two years
• Marriage lasted 10 years or longer
*Can be married if remarriage took place at age 60 or later

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Widow/Widower/Survivor Benefits

• Can file for survivor benefits as young as age
60
• No increase in benefits for delaying past
FRA
• Benefit is 100% of deceased spouse’s benefit
• If spouse had claimed
• Benefit deceased was receiving
• If spouse had not claimed
• PIA of deceased

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Filling the “Survivor Gap”

DELAY higher earner benefits as
long as possible because higher
earner covers two lives
1,6001,067
PIA PIA
Combined
$2,667

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Filling the “Survivor Gap”

DELAY higher earner benefits as
long as possible because higher
earner covers two lives
1,6001,067
PIA PIA
Combined
$2,667
$1,067
less
EVERY
month
1,600

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Spousal Options After FRA: In the Report

All possible claiming
options are reviewed, and
the “Selected” and
“Optimal” are highlighted

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Filing Strategies and
Recent Changes

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Filing Strategies
File For Benefits
Strategy: File For Benefits
Who Can Do It: Anyone eligible for Social Security benefits
When Can It Be Done: Anytime from 62 to 70
What Happens: Client receives his or her benefit

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Before The Recent Budget Deal:
Strategy: File A Restricted Application
Who Can Do It: Any married person eligible for Social Security
that has achieved his or her Full Retirement Age (FRA)
When Can It Be Done: Anytime from FRA to 70
What Happens: Client delays his or her own benefit, and
instead receives 50% of his or her spouse’s benefit (includes
divorcees)
Filing Strategies
File Restricted

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Effective Immediately:
Strategy: File A Restricted Application
Who Can Do It: Any married person eligible for Social Security that has
achieved his or her Full Retirement Age (FRA) who turned 62 by 2015
When Can It Be Done: Anytime from FRA to 70
What Happens: Client delays his or her own benefit, and instead receives
50% of his or her spouse’s benefit as long as spouse is receiving benefits
Filing Strategies
File Restricted

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Other Factors
to Consider

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Cost of Living Adjustment (COLA)

• Annual percentage increase in
benefits
• Helps offset increase in
retirement expenses
• Trustees’ projections:
• 2016: 3.1% Increase
• 2017 and beyond: 2.7% increase

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COLA: In the Report

Benefit increases due to
COLA are accounted for in
all projections

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Child and “Young Parent” Benefits
A Family Affair

• Requirements:
• Child under 18
• Dependent child of
Social Security claimer
• Benefits:
• 50% if parent is alive
• 75% if parent is deceased
• Note: Unclaimed spouse of worker may be eligible
for benefit (50%) if child under is 16

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WEP And GPO

WEP and GPO may reduce or
eliminate benefits based on public
sector work and public pension
•WEP: Windfall Elimination Provision
•GPO: Government Pension Offset
•Benefit may decrease due to:
• Years in public/private sectors
• Pension value

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Rising Cost of Health Care
• Rising cost of health care primary concern of:
– 82% of Baby Boomers
– 72% of Gen X and Gen Y
Source: Massachusetts Financial Services (MSF), “MFS Investing Sentiment Insights Survey, 2014

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The Medicare Alphabet
Part A
Hospitalization
Part B
Medical Coverage
Part D
Drug Coverage
MediGap
Supplemental
Policy
Out-Of-Pocket Costs
Copays, deductibles, etc.
Free*
Surcharges
Paid by Social
Security
deduction
Premiums,
Surcharges
Paid Via Social
Security
Not Paid Via
Social Security

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Medicare Means Testing Brackets
Means Testing Thresholds
Income Bracket Individuals Couples % Change in Cost
1st
<$85,000 <$170,000
2nd
$85,001-$107,000 $170,001-$214,000 37%
3rd
$107,001-$133,500 $214,001-$267,000 93%
4th
$133,501-$160,000 $267,001 - $320,000 149%
5th
$160,000+ $320,000+ 204%

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Medicare Means: The Impact
Jane (Single 65 year old woman)
$186.42 – Monthly Medicare Part B and D Premiums
$135,000 - Annual Income
Because of her income, she is placed in the 3rd
surcharge bracket (4th
overall) – adding a 150%
surcharge throughout retirement.
$476.92 – Actual cost of Medicare Part B
($186.42 + $290.50 surcharge)
Both of these are deducted from Jane’s Social Security
check.

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Modified Adjusted Gross Income (MAGI)
Increases MAGI
•Social Security
•Salary/Wages
•Pension
•RMDs
•Dividends
•Capital Gains
•IRA Distributions
Does notDoes not increase MAGIincrease MAGI
•Life Insurance
•Non-Qualified Annuity*
•Health Savings
Account
•Roth 401(k)
•Longevity Insurance*
•Reverse Mortgage
*To the extent that income is excluded, based on the exclusion ratio

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Managing Retirement Income Streams
by Tax Asset Category
1. Pension and IRA income
2. Interest income
3. Dividend income
4. Capital gain income
5. Real estate, oil & gas income
6. Annuity income
7. Tax-exempt income
8. Social Security income
9. Roth IRA and life insurance income
10.Loan cash flow
11.Health Savings Account (HSA)

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Why is it important to manage tax-
asset categories during retirement?
• Higher taxable income leads to:
– Higher marginal ordinary income tax brackets
– Phase-out of personal exemptions
– Phase-out of itemized deductions
– 3.8% excise tax on income in excess of non-indexed thresholds
added by the Affordable Care Act
– Income tax on Social Security benefit
– Medicare Part B surcharges
All of these items increase the taxes that you will pay on
your retirement income and Medicare.

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The Key
• The key to managing tax asset category
income streams during retirement is to
position in those categories before
retirement
• Diversification can be not only based on
time horizon, risk, and traditional
measures, but also based on tax asset
class

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Wrap Up &
Moving Forward

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Lifetime Value ofLifetime Value of
Social SecuritySocial Security
Average Earner Couple
$719,617
Max Earner Couple
$1,416,156
“Today’s Dollars”

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Social Security Summary
• Significant form of retirement income for many
Americans
• Earnings history, current age, claim age among
most important variables
• Life expectancy can have major influence on
optimal filing age
• Deferring Social Security benefits can allow you to
have a larger safety net of inflation-adjusted lifetime
income
• Important factors such as WEP/GPO, COLA,
Medicare, and taxes should be considered
Note: When to begin Social Security is a very personal decision and beginning earlier may make
sense for you, e.g., you are not in good health, have a family history of shorter than average life
expectancy, etc.

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Social Security Decision Making
• Social Security is not a decision meant to be
made independently
• Other retirement factors and variables must be
considered in conjunction with Social Security
– Desired retirement age
– Life expectancy
– Taxes
– Medicare
– Other retirement income

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Decision Making: In the Report
Customized Action Plan
explains the “how” and
“when” of filing

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Optimizing Your Retirement
Income Starts With:
Optimizing Social Security,
Optimizing Retirement Income
and Protecting Against Longevity

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Thank You! Q&A Time

Centric Financial Group Social Security Presenation May 2016

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