Social Security Anna’s Baseshop Training For Financial Professional use only
Jan 01, 2016
Life Expectancy Considerations
Life Expectancy Upon Retirement at 65
Male age 6550% chance of living to 85
25% of living to 93
Female Age 65 50% chance of living to 87
25% chance of living to 95
Couple of age 65
At lease one person has a 50% chance of living to 93
At lease one person has a 25% chance of living to 97
Source: Annuity 2000 Mortality Table.
Just the Facts73% of those collecting Social Security Retirement benefit are receiving reduced
amounts
>76% of all women
>71% of all men
15.5% increase over the past 5 years in those over age 85 collecting benefits
>4.8Million
In 2006
>1,203,834 recipients age 90 or older
>256,319 recipients age 95 or older
>45,000 recipients 100 or older
-39,000 women
-6,000 men
Source: Social Security Administration's annual statistical supplement 2008
Millions Face Shrinking Social Security Payments
The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.
Social Security Taxes Wages
To be fully insured, a worker needs 40 credits. A maximum of 4 credits can be earned per year
It takes approximately 10 years of working to become fully insured.
3 Months before your birthday, you should received a Social Security Statement estimating what your retirement benefits will be
You should verify the earnings record to ensure its accuracy since your benefit is based on that.
When Should Benefits be Collected
Individuals can elect to receive: Reduced benefits at as early as age 62 Full benefits at fully retirement age –or- Increased benefits, if benefits are delayed beyond
fully retirement age.
Full Retirement age is increasing to age 67. Depending on the year of birth, your client’s full retirement age can be anywhere between age 65 and 67
Year Born Full Retirement age
1937 or early 65
1938-1942 65+2 months for every year after 1937 until 1953
1943-1954 66
1955-1959 66+2 months for every year after 1954 until 1960
1960 and later 67
Early Retirement Benefits: If Clients are fully insured, they can collect Benefit as early as the first full month the recipient attains age 62
What’s the cost
Fully Retirement age Monthly Benefit reduction
65 20%
66 25%
67 30%
What if the Client Works During Retirement?
2009 Limit
Under full retirement age >$1 of benefits withheld for every $2 in earnings above the limit
$14,160/year
Year individual reaches full retirement age
>$1 of benefits withheld for every $3 in earnings above the limit for months prior to attaining full retirement age
$37,680/year
Month individual reached full retirement age and beyond
>Reduction no longer applies
Unlimited
Only own wages are considered. Spouse’s wages are not considered.
Request for Withdrawal of Application
Complete Withdrawal of Application form Indicate reason for withdrawal request
Wait for SSA approval
Repay all benefits, including spousal benefits, paid to date (If work again)
Reapply when ready to begin collecting benefits
Delayed Retirement Credit
Year of Birth Yearly Increase to age 70
1939-1940 7.0%
1941-1942 7.5%
1943 or later 8.0%
If you delay collecting benefits beyond your full Retirement Age, you Will Receive an increase in your Primary Insurance Amount.
This DRC is in addition to the Cost of Living Adjustment. 2008 COLA: 5.8%
Spousal & Survivor Benefits
>Spouse is eligible to receive the higher of whatever benefit he/she may haveEarned on his/her own record, or half of Primary Worker’s Primary InsuranceAmount (PIA)>Spouse cannot collect on Primary Worker’s record until the Primary files for Benefits. (The Primary can file and elect to suspend benefits).>A Surviving spouse will receive 100% of the primary’s benefit at full retirementAge. However, reduced benefits can begin s early as age 60
Age Monthly Benefit
Age Monthly Benefit
Spousal Benefit
Adjusted Spousal Benefit
Survivor Benefit
62 $416 62 $1,614 $406 $1,862
66 $552 66 $2,257 $1,129 $577 $2,257
70 $729 70 $3,042 $400 $3,042
Wife’s Earning History Husband’s Earning History
Strategically Taking Social SecurityTwo High Wage Earners
Wife’s Earning History Husband’s Earning History
Age Monthly
BenefitAge Monthly
BenefitSpousal Benefit
Survivor Benefit
62 $1,650 62 $1,682 $1,879
66 $1,353 66 $2,277 $1,139 $2,277
70 $1,786 70 $3,048 $3,048
If the wife waits until FRA to collect benefits, she can file for spousal benefits onlyAnd allow her own to continue to grow. She would receive $1,139. Than at age 70.She would apply to start collecting her own benefit in Lieu of Spousal, and Receive $1,786.
Alternative Strategies
High Wage Earner Unmarried with Deceased Spouse
Deceased Husband’s
Benefit Amount
$2,481
Age Own Monthly Benefit
Survivor Benefit
60 $0 $1,774
62 $1,682
66 $2,277 2,481
70 $3,048
Wife’s Earning History
Wife could file and collect a survivor benefit at age 60. It would be reduced by28.5%. She would continue to allow her own benefit to grow, and file at age70 to start collecting her own benefit of $3,048
What if the Individual has Younger Children?
Who can collect benefits when you retire?
You Your Spousal Your Unmarried Child
Age 62 or older 1. Age 62 or over
2. Any age, if caring for your child who is under 16 or disabled before 22
Under 18, or up to 19 if in high school, or any age if disabled before 22
Divorced Spouse A divorced spouse can apply for benefits on a
work’s record if Had been married to worker for at lease 10 years Has been divorced for at lease 2 years* Is at lease age 62 Is unmarried –and- Not eligible for an equal or higher benefit on his or her own
record, or on someone else’s record.The ex-spouse has to be at lease age 62, but not required to
have filed.
* 2 years does not apply if the individual was eligible for spousal benefit at the time of divorce.
Taxation of Social Security Benefit
Single or Head of Household Married filling Joint
Base amount $25,000 Base amount $32,000
$25,000-$34,000=up to 50% taxable
$32,000-$44,000=up to 50% taxable
Above $34,000=up to 85% taxable
Above $44,000=up to 85% taxable
1. Formula: ½ Social Security Benefit plus modified adjusted grossincome (mAGI). This is often called “provisional Income”
2. If this amount exceeds the base amount, benefits become taxable
Government Pension Offset (GPO)
If your are covered by a pension under the civil retirement system rather thanSocial Security, your spousal and/or survivor benefits will be reduced throughA Government Pension Offset.
Spouse benefits and Survivor benefit will be reduce by 2/3 of the amount of Your pension.
Wife’s Pension
Monthly Pension
$1,500
Gov’t Pen. Offset
$1,000
Age Monthly Benefit
Spousal Benefit
Adj. Spousal Benefit
Adj. Survivor Benefit
62 $1,614 $862
66 $2,257 $1,129 $129 $1,257
70 $3,042 $2,042
Husband’s Earning History