1

Top 10 Social Security

Questions Asked by Baby

Boomers . . . And How To

Answer Them

By Elaine Floyd, CFP®

Director of Retirement and Life Planning,

Horsesmouth, LLC

2

Elaine Floyd, CFP®

Director of Retirement and Life Planning

Horsesmouth, LLC

Question #1

I applied for early benefits and now

regret the decision. Is there anything I

can do?

3

The unintended consequences of

early claiming

• Lower lifetime benefits

• Earnings test

• Limited spousal strategies

4

How to rectify the mistake of early

claiming

• Withdraw and repay (within 12 months) • If you change your mind:

http://www.socialsecurity.gov/planners/retire/withdrawal.html

• Go back to work

• Suspend at FRA

5

Question #2

Can I file and suspend and collect a

spousal benefit?

6

Answer: No

• To receive a spousal benefit while your own benefit

builds delayed credits, you must file a restricted

application for your spousal benefit.

• You must NOT file for your own benefit

7

Question #3

Can I claim my spousal benefit at 62 and

switch to my own benefit at 70?

8

Answer: No

• Deemed filing rule: If you file before FRA, you must

file for all the benefits you are entitled to (except

survivor)

• This means you will be paid your own reduced

benefit first

• To receive a spousal benefit while your own benefit

builds delayed credits, you must file a restricted

application for the spousal benefit at FRA or later

9

Question #4

Can I claim my own small benefit at 62

and jump up to 50% of my spouse’s

benefit at FRA?

10

Answer: No

• If you claim your own benefit at 62 and your spousal

benefit at FRA, you will receive a combination

benefit comprising your own reduced benefit and a

spousal add-on

• Example:

• Jill’s PIA is $800. Jack’s PIA is $2,600

• Jill files at 62 and receives 75% of $800 = $600

• At FRA Jill files for her spousal benefit. She will

receive the difference between her PIA and one-

half of Jack’s PIA: $1,300 - $800 = $500

• Her combination benefit: $600 + $500 = $1,100

11

Question #5

What happens if I keep working?

12

13

Benefits based on highest 35 years of

earnings up to taxable maximum

Table of maximum earnings

Year Maximum

earnings $ Year

Maximum

earnings $ Year

Maximum

earnings $

1968 7,800 1984 37,800 2000 76,200

1969 7,800 1985 39,600 2001 80,400

1970 7,800 1986 42,000 2002 84,900

1971 7,800 1987 43,800 2003 87,000

1972 9,000 1988 45,000 2004 87,900

1973 10,800 1989 48,000 2005 90,000

1974 13,200 1990 51,300 2006 94,200

1975 14,100 1991 53,400 2007 97,500

1976 15,300 1992 55,500 2008 102,000

1977 16,500 1993 57,600 2009 106,800

1978 17,700 1994 60,600 2010 106,800

1979 22,900 1995 61,200 2011 106,800

1980 25,900 1996 62,700 2012 110,100

1981 29,700 1997 65,400 2013 113,700

1982 32,400 1998 68,400 2014 117,000

1983 35,700 1999 72,600 2015 118,500

14

Average Indexed

Monthly Earnings

(AIME) for baby

boomer born in 1953

Maximum earnings

since 1975

$3,807,775 in total indexed

earnings ÷ 420 months = $9,066 AIME

Year Age Nominal

earnings

Indexing

factor

Indexed

earnings

1975 22 14,100 5.2008546 73,332

1976 23 15,300 4.8651447 74,437

1977 24 16,500 4.5900542 75,736

1978 25 17,700 4.2523714 75,267

1979 26 22,900 3.9103024 89,546

1980 27 25,900 3.5871901 92,908

1981 28 29,700 3.2591181 96,796

1982 29 32,400 3.0890585 100,085

1983 30 35,700 2.9455642 105,157

1984 31 37,800 2.7820245 105,161

1985 32 39,600 2.6683390 105,666

1986 33 42,000 2.5914228 108,840

1987 34 43,800 2.4360641 106,700

1988 35 45,000 2.3217165 104,477

1989 36 48,000 2.2332918 107,198

1990 37 51,300 2.1346872 109,509

1991 38 53,400 2.0579948 109,897

1992 39 55,500 1.9571545 108,622

1993 40 57,600 1.9404660 111,771

1994 41 60,600 1.8897469 114,519

1995 42 61,200 1.8169181 111,195

1996 43 62,700 1.7322040 108,609

1997 44 65,400 1.6367009 107,040

1998 45 68,400 1.5552987 106,382

1999 46 72,600 1.4731997 106,954

2000 47 76,200 1.3960010 106,375

2001 48 80,400 1.3634733 109,623

2002 49 84,900 1.3499350 114,609

2003 50 87,000 1.3177228 114,642

2004 51 87,900 1.2591861 110,682

2005 52 90,000 1.2147385 109,326

2006 53 94,200 1.1613589 109,400

2007 54 97,500 1.1109424 108,317

2008 55 102,000 1.0859609 110,768

2009 56 106,800 1.1025887 117,756

2010 57 106,800 1.0771307 115,038

2011 58 106,800 1.0444059 111,543

2012 59 110,100 1.0127813 111,507

2013 60 113,700 1.0000000 113,700

2014 61 117,000 1.0000000 117,000

15

Primary Insurance Amount (PIA)

• Baby Boomer born in 1953

• Maximum Social Security earnings every year since age 22

• AIME = $9,066

• PIA formula:

• $826 x .90 = $743.40

• $4,154 x .32 = $1,329.28 ($4,980 - $826 = $4,154)

• $4,086 x .15 = $612.90 ($9,066 - $4,980 = $4,086)

• Total = $2,685.58

PIA = $2,685.50

Amount worker will receive at full retirement age

Answer: Your earnings record will

continue to be updated

• Impact on benefit will vary

• If you already have 35 years of high earnings the

impact will be minimal

• If you replace zero or low earnings years with

higher earnings, your benefit will increase

• If you work part time or at a low salary, there will

be no effect

16

17

Effect of working longer

if more than 35 years of earnings

Maximum earner born in 1953 – age 62 in 2015

If he works until age:

Years of earnings used in benefit computation

Age-70 benefit

62 1980 – 2014 $4,318

66 1984 – 2018 $4,382

70 1988 – 2022 $4,488

Question #6

I’m divorced. Can I collect Social

Security off my ex-spouse’s record while

my own benefit builds delayed credits?

18

Rules for divorced-spouse benefits

• Marriage must have lasted at least 10 years

• Claimant must be currently unmarried

• Ex-spouse must be at least 62

• If divorce occurred over 2 years ago, ex-spouse

does not need to have filed for own benefit

• Benefit = 50% of ex-spouse’s PIA if claimant files at

FRA

• Both ex-spouses can claim divorced-spouse

benefits on each other!

19

Optimal strategy for divorced client: Claim

divorced-spouse benefit at FRA and switch to

own maximum benefit at 70

20

Question #7

My husband has died. Can I take a

survivor benefit now and switch to my

own benefit later?

21

Optimal strategy for high-earning widows: Take

reduced survivor benefit at 60 and switch to

maximum retirement benefit at 70

22

Question #8

I am 66. My wife is 45. We have two

young children. Can my wife and kids get

Social Security benefits?

23

Rules for dependent benefits

• Worker must have filed (can suspend if over FRA)

• Children can receive benefits to age 18

• Spouse can receive child-in-care benefits until

youngest child turns 16

• Each benefit = 50% of worker’s PIA

• All benefits are limited by the maximum family

benefit $4,200 MFB

-2,400 subtract worker’s PIA

$1,800 amount available to family members (evenly divided)

24

Question #9

I don’t qualify for Social Security

because in my teaching job I paid into an

alternate retirement system. Can I get

spousal benefits?

25

Government Pension Offset (GPO) reduces

spousal and survivor benefits by two-thirds of

the non-covered pension

• Example

• Teacher receives a pension of $3,000/month

• Spousal benefit = $1,200 (50% of $2,400)

• Two-thirds of pension is $2,000

• $1,200 - $2,000 = negative number

• Therefore no spousal benefits

26

Question #10

How can I maximize my

Social Security benefit?

27

28

Strategy #1

for maximizing Social Security benefits

Work longer, earn more

29

Strategy #2

for maximizing Social Security benefits

Apply at the optimal time

30

Full retirement age

Year of birth Full Retirement Age (FRA)

1924 - 37 65

1938 65 & 2 mos.

1939 65 & 4 mos.

1940 65 & 6 mos.

1941 65 & 8 mos.

1942 65 & 10 mos.

1943 – 54 66

1955 66 & 2 mos.

1956 66 & 4 mos.

1957 66 & 6 mos.

1958 66 & 8 mos.

1959 66 & 10 mos.

1960 & later 67

31

Effect of early or delayed claiming

Age % of PIA if

FRA = 66

Benefit in today's dollars if PIA is $2,685

Benefit adjusted for

annual COLAs*

62 75 2,014 2,014

63 80 2,148 2,206

64 86.67 2,327 2,454

65 93.33 2,506 2,714

66 100 2,685 2,987

67 108 2,900 3,313

68 116 3,115 3,654

69 124 3,329 4,012

70 132 3,544 4,386

*Assumes age 62 now; 2.7% annual COLAs

32

Effect of early or delayed claiming

Age % of PIA if

FRA = 67

Benefit in today's dollars if PIA is $2,685

Benefit adjusted for

annual COLAs*

62 70 $1,880 $2,326

63 75 2,014 2,559

64 80 2,148 2,804

65 86.7 2,327 3,119

66 90.5 2,506 3,450

67 100 2,685 3,796

68 108 2,900 4,211

69 116 3,115 4,645

70 124 3,329 5,099

*Assumes age 54 now; 2.7% annual COLAs

33

Simple breakeven analysis

34

Strategy #3

for maximizing Social Security benefits

Coordinate spousal benefits

35

Spousal Strategies

• “File and suspend”

• One spouse files for own benefit at FRA to entitle other spouse to spousal benefit

• First spouse suspends benefit to earn DRCs to age 70

• Important: Must be FRA to suspend

• “Claim now, claim more later”

• One spouse files a restricted application for spousal benefit at 66 (other spouse must have filed for own benefit)

• Switches to his own benefit at 70

• Important: Must be FRA to file restricted application

How to decide: Customized scenario planning for each couple based on individual ages and benefit amounts

36

Example of scenario planning

Andy & Alice

Both age 62

Andy’s PIA = $2,600

Alice’s PIA = $1,200

Which strategy will give them the most in lifetime benefits?

37

Scenarios for Andy & Alice

• Scenario 1

• Andy and Alice both file now, at age 62

• Scenario 2

• Alice files for her own benefit now, at 62

• Andy files for his benefit at age 70

• Scenario 3

• Alice files and suspends at 66

• Andy files a restricted application for his spousal benefit

• Both switch to their maximum benefit at age 70

• Scenario 4

• Andy files and suspends at 66

• Alice files a restricted application for her spousal benefit

• Both switch to their maximum benefit at age 70

38

39

Strategy #4

for maximizing Social Security benefits

Maximize survivor income

40

41

Strategy #5

for maximizing Social Security benefits

Minimize taxes on benefits

42

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 Up to 85%

*Provisional income = AGI + one-half of SS benefit + tax-exempt interest

43

Tax planning strategies

• Start drawing down IRAs before age 70-1/2 to reduce

RMDs

• Convert traditional IRAs to Roth

• 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

44

What is Savvy Social

Security Planning?

45

Savvy Social Security Planning is

Teaching

baby boomers through seminars,

workshops, and individual consultations

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?

• Will Social Security be enough to live on in

retirement?

46

Savvy Social Security Planning is

Helping

baby boomers

avoid common mistakes

• Applying too early

• Not understanding the interplay of earned, spousal, and survivor benefits

• Failing to understand the long-term impact of decisions made today

47

Savvy Social Security Planning is

Guiding

clients’ decisions through

in-depth scenario planning

• Shows year-by-year income and cumulative benefits using clients’ actual ages and benefit amounts

• Enables clients to make their own decisions; you provide guidance, but the ultimate decision is theirs

• Shows income shortfalls that will need to be made up from other sources, leading to comprehensive retirement income planning

48

Establishing yourself as an

expert on Social Security

• Learn the rules and stay on top of the literature and

new developments

• Identify a niche:

• Boomers approaching age 62

• Women

• Married couples

• Communicate and educate: seminars, workshops,

newsletters

• Develop a referral strategy

49

Opportunities abound for advisors

knowledgeable about Social Security

• Baby boomers are turning 62 at the rate of 10,000

per day

• Social Security is more complicated than people

realize

• Decisions made early in the process have far-

reaching impact

• The strain on Social Security personnel will increase

• Advisors who understand Social Security will be in

great demand

50

How we can help

Send your questions to

10questions@horsesmouth.com

Advisor Training

51

Webinar Orientation Series

52

12 CE Credits for CFP®

53

Quick Reference Guide

54

Powerpoint Slides and Script

55

Templates for invitation, brochure, press

release

56

50 copies of high-quality laminated

handout

57

58

Client Article Reprints

59

Planning

Calculators

60

61

Ongoing Training and Education

Bi-weekly Newsletter

62

Newsletter Archives

63

Post a Question . . . Get an Answer

64

65

www.horsesmouth.com/ssdem

888-336-6884

http://www.horsesmouth.com/ssdem