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Social Security Maximizing Benefits Under The “New Rules”

Discover how to maximize your Social Security benefits under the "New Rules" with expert guidance from certified advisors. Learn about income optimization strategies, claiming rules, and filing options for married couples. Understand the calculation of benefits, delayed credits, and spousal benefits. Find out about the impact of early or late applications, annual earnings test, and survivor benefits. Explore optimization strategies for different scenarios and the implications for same-sex couples and divorced individuals. Take control of your Social Security benefits to secure a financially stable future.

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Social Security Maximizing Benefits Under The “New Rules”

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  1. Social Security Maximizing Benefits Under The “New Rules”

  2. What we do: • Social security income maximization planning only • Not involved in sales of any financial products • Advisor certifications: • National Social Security Advisor (NSSA) • Certified in Social Security Claiming Strategies (CSSCS) • Working with clients/customers of CPA firms, Law Firms, Banks, Associations and Corporations

  3. Ash Ahluwalia, MBA, CFP, NSSA, CSSCSPresidentNational Social Security Partners, LLC • 2016 National Social Security Advisor (NSSA) of the Year Award • MBA, Wharton Business School • CA, Chartered Accountant • CFP, Certified Financial Planner • Certified in Social Security Claiming Strategies (CSSCS) • 25+ years in the financial services industry • Partner, Atlas Advisory Group, LLC

  4. Will You Receive Your Maximum Social Security Benefits? • Over 90% of recipients get less money than they are entitled to • There are over 2,700 rules governing social security • Married couples have over 567 filing options • Social security agents are prohibited from offering advice • Don’t lock yourself into a permanently lower benefit!

  5. Baby boomers want to know: • Will Social Security be there for me? • How much can I expect to receive? • When should I apply for Social Security? • How can I maximize my benefits?

  6. Social Security offers annual inflation adjustments If monthly benefit is $2,000 and annual cost-of-living adjustments are 2.7% : Assumes 2.7% annual cost-of-living adjustments

  7. Social Security offers income you can't outlive If monthly benefit is $2,000 and you live: Assumes 2.7% annual cost-of-living adjustments

  8. How Social Security benefits are calculated • Highest 35 years of indexed earnings are averaged (AIME) • AIME is divided by two “bend points” to determine your primary insurance amount (PIA). This is the amount you'll receive at FRA. • Benefit “may” be increased each year by cost-of-living adjustments (COLAs)

  9. Full Retirement Age (FRA) Year of BirthFull Retirement Age • 1943-5466 • 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 later67

  10. What if you apply for early benefits? You receive a percentage of your PIA

  11. What if you apply after FRA? You earn 8% annualdelayed credits

  12. Annual earnings test • $1 withheld for every $2 earned over $15,720 from age 62-65 • $1 withheld for every $3 earned over $41,880 in the year you turn 66 • Benefits adjusted at FRA, if “clawed back”

  13. Highlights: “New” Social Security Rules 4 Basic Categories of Filers: • Current recipients • Age 66 by May 1, 2016 • Age 62 by January 1, 2016 • Age 62 after January 1, 2016

  14. Spousal benefits Spousal benefit = 1/2 the primary worker's PIA if started at FRA 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)

  15. Spousal Benefits • Example: • Husband age 66 • Wife age 63 has Alzheimers

  16. “Maximum vs. Optimal” Example: • John, 63, PIA= $2,600, working • Mary, 60, PIA= $2,400, retire • “file and suspend” not an option • Maximum Lifetime Benefit Strategy: • Both defer to 70 • Maximize Individual Benefits at 70 • Is this is the “Optimal” Strategy?

  17. “Maximum vs. Optimal” Maximum Lifetime Benefit Strategy: - Both defer to 70 - Cumulative Lifetime Benefit = $2.1 million Optimal Strategy: - Mary files at 62 (minimum benefit) - John takes spousal at 66; own at 70 - Cumulative Lifetime Benefit = $1.95 million

  18. “Maximum vs. Optimal” Maximum Strategy generates $150,000 of additional lifetime benefits BUT… Optimal Strategy: • Starts payments earlier: Mary’s 62, John 66 • Generates $230,000 before Max Strategy makes first payment at age 70 • Still maximizes “survivor benefits” • Less risky…

  19. Same-Sex Couples • Supreme Court Ruling June 26, 2015 • Same-sex marriage legalized nationwide • Afforded all the same spousal, divorce, survivor benefits as heterosexual couples

  20. Divorced-spouse benefits Divorce rate still high: • First marriage _______? • Second marriage _______? • Third marriage _______? • Government research on divorce…

  21. Divorced-spouse benefits Same as spousal benefits if: • Married 10 years or more • Currently unmarried • You and ex-spouse are at least age 62 • Divorced more than two years

  22. Divorced-Spouse Benefits • Clients #1 and #2: • My dentist, age 63; divorced and still unmarried • My doctor, age 61; divorced and still unmarried (affected by “New Rules”) • Client #3: • Divorced after 9 years and 9 months of marriage

  23. Entitled vs Eligible • Ex-wife, 66, collecting ex-spousal benefits • Boyfriend, 64, divorced, still working • Could they get married without losing ex-spousal benefits?

  24. Survivor benefits Example: • Joe and Julie are married. Both are over FRA. • Joe's benefit is $2,000 • Julie's benefit is $1,200. • Joe dies. • Julie’s $1,200 benefit is replaced by her $2,000 survivor benefit.

  25. Survivor Benefits • Client Scenario: • Joe, age 63, widower • Girlfriend, Laurie, age 59, widow • Decide to get married now….

  26. Self-Employed Business Owners Client Scenario: • Husband, 66, Income= $300 • Wife, 64, Income= $100K • Q. Should the husband file now (at FRA)?

  27. College Funding? Client Scenario: • Husband, 66, PIA= $2,600 • Wife, 56, Earned Income= 0 • Child, 14 • Q. Should husband file now to fund a 529 plan?

  28. Child & Child-In-Care Benefits Client Scenario: • Ex-husband dies, age 58 • Ex-wife, 30, no earned income • Marriage lasted 6 years • Their child age 5 • Q. Any eligible survivor benefits?

  29. Estate Planning/Charitable Giving Client Scenario: • Husband, 66, PIA= $2,600 • Wife, 66, PIA= $1,600 • Net Worth= $80 Million • 3 Children, 5 Grandchildren • Q. When should they file for benefits?

  30. Factors to consider when deciding when to apply • Health status • Life expectancy • Need for income • Whether or not you plan to work • Survivor needs

  31. Taxation of Social Security benefits *Provisional income = AGI + one-half of SS benefit + tax-exempt interest

  32. Maximize Benefits/Minimize Tax Income Goal = $70K @ 62 @70 Social Security $38 $67 Other Income 32 3 Provisional Income 51 36.5 Total Taxable SS 12 2.3 Net AGI 44 5.4

  33. Maximize Benefits/Minimize Tax Note: • Defer SS to 70: higher taxes 62-70 but lower taxes in retirement (20+ years?) • SS tax planning: should be part of overall retirement income planning • Risks in delaying: SS rule changes, pre-mature death, tax law changes etc.)

  34. Consider Social Security in the context of: • Pensions • IRAs and 401(k)s • Required minimum distributions at age 70-1/2 • Investment portfolio • Work

  35. You have questions… We can help! • NEW RULES: What am I now eligible for? • DEADLINES: Which ones affect me? • When should I apply for Social Security? • What if I've already applied? • How can I coordinate spousal/divorce benefits? • What do I do next?

  36. Social Security: too important for guesswork! Let us help you protect your nest egg and maximize your income in retirement.

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