AD09234 (8/09) Cat# 143971 AXA Advanced Markets For MCLE, CPE and Financial Professional Use Only. Not for Distribution to the General Public. Social Security.

AD09234 (8/09) Cat# 143971

AXA Advanced Markets

For MCLE, CPE and Financial Professional Use Only. Not for Distribution to the General Public.

Social Security Getting the Most Out of Your Benefits

Name: Mike Agan, CFP®, ChFC, CRC, CRA

Location:

Date:

AD09234 (8/09) For MCLE, CPE and Financial Professional Use Only. Not for Distribution to the General Public.

Understanding the Basics

Sources of Retirement Income Social Security

Pension plans

Personal savings


Social Security

Understanding the Value

Solvency

When to Begin Talking Benefits

Working and Receiving Benefits

Maximizing Benefits


Social Security: Understanding the Value

Social Security Value:Provides income your clients can’t outlive

Provides income that is inflation adjusted

Provides survivorship benefits

Provides more income than you may think:

2009 Max Monthly Benefit: $2,323

10 Years: $319,561*

20 Years: $749,026*

30 Years: $1,326,186*

*Assumes an average 3% increase each year for inflation.


Social Security: How it Works

Formula based on highest 35 years

Earnings indexed to inflation

Average Indexed Monthly Earnings (AIME)

Source: Social Security Administration

$4,483

Example:

AIME = $5,420

90% ($744) = $669.60

32% ($3,739) = $1,196.48

15% ($937) = $140.55

$2,006.63 Primary Insurance Amount (PIA)


Social Security: Estimating Benefits

Estimate Social Security Benefits with:

Annual Social Security Statement

www.socialsecurity.gov

www.ssa.gov Click on Estimate Your

Retirement Benefits for online calculators






Social Security: Spousal Benefits

A spouse can get 50% of primary worker’s benefits

A spouse will get the higher of their own benefit or the spousal benefit

Former spouses may be entitled to spousal benefits, but they must have been married for at least 10 years

Example: Bob and Sally Bob’s Benefit: $2,200

Sally’s Benefit: $700

Sally’s Spousal Benefit: $1,100

Sally will get $1,100


Social Security: Survivor Benefits

A surviving spouse will receive the higher of either their own benefit or their deceased spouse’s benefit

Example: Bob and Sally Bob’s Benefit: $2,200 Sally’s Benefit: $1,400 Bob passes away. Sally’s benefit will increase to $2,200.

Requirements:The surviving spouse must be at least 60 years old.

The surviving spouse must be at least 50 years old if disabled.

You must be married for at least 9 months prior to your spouse’s death.

There are exceptions for accidents.


Social Security: Solvency

2010: SSA pays more than it collects

2025: SSA taps principal

2037: Trust fund exhausted Collections continue

Projected 25% decrease in benefits after 2037

Payments

Collections

2010 2025 2037

SSA

Collection and Payment Comparison

Source: Social Security Report to Congress, 2009


Social Security: Solvency

Fixing Social SecurityRaise the retirement age.

Increase the cap on taxable earnings.

Lower benefit payments for future retirees.

Reduce Cost of Living Adjustments (COLAs) for all retirees.


Social Security: When to Start

Rethink conventional wisdom: Age 62

Permanent reduction of nearly 25%

Increased longevity

Normal retirement age = 100% of benefit

Age 70: nearly 130%

Determine the break even age


Social Security: When to Start

What if your clients have already started taking benefits?SSA Form 521: “Request for Withdrawal

of Application”

Interest free repayment Possible Strategy:

– Elect to take their benefits at age 62

– Invest those benefits

– Repay the benefits at age 70 Possible Risks:

– Dying early

– Money invested is not available

– Possible changes in the law


Social Security: Working While Receiving Benefits

Before Normal Retirement Age

2009 Limit: $14,160

Loss of $1 in benefit for every $2 over the limit

Triggered only by earned income

62Normal

Retirement Age




Bob is 63 and will semi-retire in 2009.

His normal retirement age (NRA) is 66.

He elects to receive benefits immediately.

His monthly benefit is $1,600 or $19,200 annually.

He will earn $25,000 in wages during 2009 and will have $10,000 in investment income.




________

$25,000-$14,160$10,840

$10,840 ÷2

$5,420

Earned IncomeEarnings LimitAmount Over Limit

Amount Over Limit$1 Benefit Reduction for Each $2 Over Limit Reduction in annual benefit

________



Before Normal Retirement Age The Good News!

Benefits are not lost, only deferred. At normal retirement age, Bob’s benefits will be recalculated to recoup lost benefits prior to age 66.

The Bottom Line. If you want or need income,

early benefits = OK!


Social Security: Increasing Benefits

Maximizing Benefits for Clients and Spouse

The Challenge:

Women live 5 to 6 years longer than men1

The majority of men are two or more years older than their wives1

The majority of women ages 75-84 are widows2

¹ Source: US Bureau of Census, 2000

² Source: American Community Survey, 2006


What is a Variable Annuity?

A variable deferred annuity is a long-term financial product designed for retirement. Simply stated, an annuity is a contract between you and an insurance company that lets you pursue the accumulation of assets through asset allocation and customized investment portfolios, and an optional guarantee. Asset allocation helps spread your investment dollars across different asset classes, to help manage risk and enhance returns. Through customization you choose according to your risk tolerance. The goal is to select a mix of asset classes that will help you meet your long-term investment goals. Your portfolio is professional managed and closely monitored, including your portfolio’s performance and remains consistent with your investment goals. Ultimately, you pay an insurance company and in turn, the company agrees to provide lifetime income or a lump sum from your accumulated assets.


What You Should Know about Variable Annuities

There are fees and charges associated with variable annuities, which include mortality and expense risk charges, administrative fees, investment management fees, withdrawal charges and charges for optional benefits. In addition, annuity contracts have exclusions and limitations.

Withdrawals are subject to normal income tax treatment. Early withdrawals may be subject to withdrawal charges, and, if taken prior to age 59½, a 10% federal income tax penalty may apply.

Withdrawals will reduce the death benefit, living benefits and cash surrender value. Withdrawals will come from any gain in the contract first for federal income tax purposes.

Variable annuities are subject to investment risks, including the possible loss of principal invested.

Guarantees described herein are subject to the claims-paying ability of the issuing company and do not apply to the subaccount investment options.


What is a Guaranteed Minimum Income Benefit?

It is an annuity feature available for an additional cost that can provide the annuity owner with a predictable future income*

regardless of investment performance.

*Generally 4-6% of benefit base (The benefit base generally starts as the initial account value. As the contract allows, if the Benefit Base can roll up the allotted percentage (4-6%) on each contract anniversary date if elected by the contract owner. )

Why use a Guaranteed Minimum Income Benefit?

It may provide some assurance that Tom will be able to make the withdrawals and withstand a potentially negative market performance.

Guaranteed Minimum Income Benefits



Maximizing Benefits for Client and Spouse

Leveraging A Wrinkle: Maximizing income and survivorship benefits when both

spouses are covered under Social Security

A husband, at normal retirement age, can elect to receive 50% of his wife’s benefit and defer taking his own – he gets higher income benefit and wife gets higher survivorship benefit


Social Security: Strategy for Increasing Benefits

Leveraging A Wrinkle: Maximizing income and

survivorship benefits when both spouses are covered under Social Security

A husband, at normal retirement age, can elect to receive 50% of his wife’s benefit and defer taking his own – he gets higher income benefit and wife gets higher survivorship benefit

Example:

• Sally, 62 gets a reduced benefit of $1,200 (if she waited until 65 she would get $1,500)

• Bob, 66, gets $2,000 if starts now

• Bob elects 50% of Sally’s & gets $750

• Bob is “short” $15,000 a year

• $300,000 in VA @ 5% = $15,000

• Bob @ 70 gets approx $2,600

• Bob’s break-even age is 80-81

• Sally’s survivorship benefit based on Bob’s higher benefit from waiting

Maximizing Benefits for Client and Spouse



Example: Sally, age 57, and Bob, age 61, are

married and plan on taking Social Security in 5 years:

Bob decides to take 50% of Sally’s benefit and defer taking his own until age 70

Bob is “short” $15,000 a year In order to replace the $15,000/yr,

he decides to invest $250,000 in a VA @ 5%* †

At age 70, Bob begins taking his full benefit, approximately $2,600

His break-even age is 79-80 Sally’s survivorship benefit will be

much higher because it’s based on the higher benefit received by Bob at age 70

$75050% of Sally’s

normal retirement age benefit

SallyAge 62

BobAge 66

$1,200Benefit (reduced)

$2,000 Benefit

at age 66

OR

†All guarantees including optional benefits are based on the claims-paying ability of the issuing insurance company and do not apply to the subaccount investment options.*Assumes VA grows to $300,000 in 5 years, which is not guaranteed.


Social Security Taxation

Will my Social Security benefit be taxable? If Provisional Income is over base amount, a portion of your

benefit will be taxable

You have the ability to reposition assets to reduce tax liability



Provisional Income Calculation

Provisional Income

MAGI

+ Tax-Exempt Income

+ ½ Social Security Benefits



Filing Status

BaseAmount

Additional Amount

Single $25,000 $34,000

Qualifying Widower $25,000 $34,000

Married/Jointly $32,000 $44,000



Opportunity to reposition assets

Can reposition unproductive taxable assets

Tax-deferred investments not part of provisional income calculation


Important Point About Medicare

If clients elect to delay Social Security benefits you still need to file for Medicare at 65

Medicare is a federal health insurance program

There is no early option for Medicare


Social Security: Working With Your Clients

You can’t look at Social Security in a vacuum

You need a comprehensive retirement income plan

You need to coordinate and integrate:Social Security

Pensions

Personal Savings

Investments

Taxes

Succession and Estate Planning


Social Security: Summary

Understanding Value

Solvency

When to Begin Taking Benefits

Working and Receiving Benefits

Maximizing Benefits


Important Information

A deferred variable annuity is a long-term financial product designed for retirement purposes. In essence an annuity is a contractual agreement in which payment(s) are made to an insurance company, which agrees to pay out an income or a lump sum amount at a later date. Typically, variable annuities have mortality and expense charges, account fees, investment management fees, administrative fees and charges for special contract features. In addition, annuity contracts have exclusions and limitations. Early withdrawals may be subject to surrender charges.

All guarantees including optional benefits are based on the claims-paying ability of the issuing insurance company and do not apply to the subaccount investment options.

Variable annuities are sold by prospectus only which contains more complete information, including investment objectives, risks, charges and expenses. Investors should read the prospectus carefully before investing or sending money.

Amounts in the annuity’s variable investment options are subject to fluctuation in value and market risk, including loss of principal. Withdrawals may be taxable as ordinary income and, if taken prior to age 59 ½, an additional 10% federal income tax penalty may apply. Withdrawals reduce annuity contract benefits and values.

If you are purchasing an annuity contract as an Individual Retirement Annuity (IRA) or Tax Sheltered Annuity (TSA), or to fund an employer retirement plan (QP or Qualified Plan), you should be aware that such annuities do not provide tax deferral benefits beyond those already provided by the Internal Revenue Code. Before purchasing one of these annuities, you should consider whether its features and benefits beyond tax deferral meet your needs and goals. You may also want to consider the relative features, benefits and costs of these annuities with any other investment that you may use in connection with your retirement plan or arrangement.

Please be advised that this presentation is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed, and clients should seek advice based on their particular circumstances from an independent tax advisor.

Representatives of AXA Distributors, LLC do not act as investment advisors to your variable annuity under the terms of your contract, unless there is a separate client agreement between you specifically assuming that role. These representatives are not responsible for giving ongoing investment advice, including but not limited to reallocation and rebalancing, in the absence of a separate agreement.

Variable annuity products are issued by AXA Equitable Life Insurance Company, and are co-distributed by AXA Advisors, LLC, and AXA Distributors, LLC located at 1290 Avenue of the Americas, New York, NY, 10104.

Variable Annuities: Are Not Deposits of Any Bank Are Not FDIC Insured Are Not Insured by Any Federal Government Agency Are Not Bank Guaranteed May Go Down in Value.

ML09-5091A

AD09234 (8/09) Cat# 143971 AXA Advanced Markets For MCLE, CPE and Financial Professional Use Only. Not for Distribution to the General Public. Social Security.

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